Monday, October 31, 2011

Pagan fertility chant in Early Middle Ages

Earth, Earth, Earth!  O Earth, our mother!
May the All-Wielder, Ever-Lord grant thee
Acres a-waxing, upwards a-growing,
Pregnant with corn and plenteous in strength;
Hosts of grain shafts and of glittering plants!
Of broad barley the blossoms,
And of white wheat ears waxing,
Of the whole land the harvest...
Acre, full-fed, bring forth fodder for men!
Blossoming brightly, blessed become!
And the God who wrought with earth grant us gift of growing
That each of the all the corns may come unto our need.
—Eileen Power in
Medieval People (1963).  Page 28 of the 2000 Dover reprint. This was a “charm” (pagan chant intended to have worldly impact) a farmer would recant as he began plowing and placed a little bread-cake under the soil, hoping to increase the fertility of the field.  During early Middle Ages.  This farmer may have to admit to the chant during confession, and do penance.

Friday, October 28, 2011

Electro-Shock Therapy and Placebos

Halloween is near, and the streets will undoubtedly be walked by a Frankenstein or two.  However fictional Mary Shelley's book may be, her idea to have electricity bring dead flesh to life was grounded in [what people thought to be] science.  In the beginning of the 19th century, many scientists thought that animal muscles were powered by electricity, as electrical currents applied to the body of a frog or a decapitated human would cause its muscles to move.  Given this, it didn't take much imagination to imagine a lightning bolt bringing Frankenstein to life.

This generated considerable interest in the interaction between electricity and the human body.  Could electric shocks to a shaven head cure someone of a major depression?  This was attempted on a twenty-seven year old man named Luigi.  The first sessions delivered a mild shock, but the intensity of the shocks increased at each session.  Luigi, it is said, improved with each session and was eventually cured of his depression.  Life was worth living again.  Remember, this was the early 19th century, and this idea of treating mental disorders evolved to modern electro-shock therapy (used by Carrie Fisher, it turns out).

Back then, a patient recovering from depression through electro-shock therapy was considered evidence that the therapy works.  Today, we know there is the placebo problem to deal with.  It is easily possible that the personal attention everyone gave Luigi before and during the electro-shock therapy was what cured him, not the electric shocks.  Acupuncture or an ancient pagan healing ritual might have been equally effective, as long as people were talking to him, showing that they cared for him, and listened to him.

To prove the efficacy of the therapy, we would need to randomly sample willing participants, randomly place them into a treatment and control group.  Researchers would apply electro-shock therapy in the treatment group.  In the control group someone would simply sit down with the subject and talk to them.  Only then would electro-shock therapy pass modern criteria for a proven medical therapy.

Perhaps this has already been done.  I doubt it, though.

"Who was the real Dr. Frankenstein?"  Stuff You Missed in History Class podcast.  October 19, 2011.

"Placebo."  Radiolab podcast.  May 17, 2007.

Thursday, October 27, 2011

Keynesian Multipliers and the Perpetual Intellectual War

The recent EconTalk podcast concerned Keynesian multipliers (like, if the multiplier is 1.2, an increase in government spending of $1 increases total national income by $1.20), and within the podcast the interviewer did what many libertarian economists have been doing for three years: mocking the use of decimal points in multipliers.

For example, the Congressional Budget Office used a multiplier of 1.52 (I'm pretty sure, that's what Dr. Roberts at EconTalk has said) to appraise Obama's fiscal stimulus.  Are macroeconomists being arrogant, or ridiculous when they use a multiplier of 1.52 instead of 1.5, when everyone knows these type of estimates can in no way possess a precision warranting two decimal places?  The Cafe Hayek blog has frequently mocked macroeconomics for this, as if Keynesians do not understand the complexity of a real economy, but the libertarian does.

But what if we hesitate in our attack, and instead try to understand why such decimal places are used?  My guess is that macroeconomists (especially when they represent the Congressional Budget Office) want to communicate that these numbers are not guesses: instead, they are the result of intense econometric estimates.  When you hear the multiplier of 1.52, you are more likely to believe that rigorous data-crunching was involved in the estimate, even if the estimates are not precise. However, if they simply said a multiplier of 1.5, it sounds like a casual estimate, derived from no data or statistical estimation.

It is my sincere wish that economic blogs from different political parties would seek to sincerely understand the reason for their opponent's views, rather than stay on the attack perpetually.  True, their readership might decline.  But I would learn more.

For example, just imagine how much we could learn if, when libertarian bloggers attack Paul Krugman for his inconsistent statements over the last fifteen years, they try to understand what in the economy has changed which induced Dr. Krugman to alter his remarks.  Instead, libertarian bloggers attack him, asserting that Krugman was once an economist but is now a progressive columnist--that he has sold out!

After all, are university economists educators, or political pundits?

Tuesday, October 25, 2011

Spinoza and the Enlightenment

Actually, to become a professor or a clergy member in Europe even a hundred years following Spinoza’s death, you had to have your denunciation of him ready.  That was part of the oral exam, knowing where he’d made his mistakes.  And this meant that everyone was reading Spinoza; they had to read him in order to denounce him, so he was radicalizing Europe, and in about a hundred years they were ready for the Enlightenment.
—Rebecca Goldstein’s acceptance speech for the 2011 Humanist of the Year award.  Published in The Humanist.  November-December, 2011.  Pages 12-16.

BTW: Spinoza is the only person I have heard of that was excommunicated permanently.

Theory of Virtue and Sin

“Group selection,” he said, “brings abut virtue, and—this is an oversimplification, but—individual selection, which is competing with it, creates sin.  That, in a nutshell, is an explanation of the human condition.
—Howard W. French quoting E.O. Wilson. “E.O. Wilson’s Theory of Everything.”  The Atlantic.  November, 2011. Pages 70-82.

“Within groups, the selfish are more likely to succeed,” Wilson told me in a telephone conversation.  “But in competition between groups, groups of altruists are more likely to succeed.  In addition, it is clear that groups of humans proselytize other groups and accept them as allies, and that that tendency is much favored by group selection.”  Taking in newcomers and forming alliances had become a fundamental human trait, he added, because “it is a good way to win.”
—Howard W. French quoting E.O. Wilson. “E.O. Wilson’s Theory of Everything.”  The Atlantic.  November, 2011. Pages 70-82.

Excerpt from Grand Pursuit

I wonder if this will not also describe the Great Recession of 2008-present well?  Except for the fact that investors were not panicky when they "sold", but simply realized they had been wrong about the value of mortgages.  When they sold they sold because of long run economic fundamentals—not panic.

Most economic historians agree that not only did no one predict the Great Depression on the basis of any previous depression, but no one could have predicted it on the basis of any existing theory.  In retrospect, modern scholars put the primary blame on mistakes by the Federal Reserve, the collapse in confidence and spending by consumers and business, and the wave of selling into falling markets by increasingly panicky investors, but as David Fettig at the Federal Reserve Bank of Minneapolis has observed, “In the end, if the Great Depression is, indeed, a story, it has all the trappings of a mystery that is loaded with suspects and difficult to solve, even when we know the ending; the kind we read again and again, and each time come up with another explanation.  At least for now.
—Sylvia Nasar in Grand Pursuit.  Chapter 10.  Page 320.

A Remark On Keynesian Models

After the recent financial crisis and recession there has been a renewed interest in Keynesian models of the macroeconomy (e.g., see the many posts by Don Boudreaux at the excellent blog Cafe Hayek). Many of these are criticisms, pointing to the seemingly queer assumptions which must be made for a fiscal stimulus to be effective.  Keynesian models, it seems, does not make sense.  They certainly don't to me.

However, that criticism has a weakness.  Keynes developed his theory during a prolonged worldwide recession—a recession that also did not make sense. There is no good reason for why the depression was so deep and so long. The Great Depression does not make sense. It certainly doesn't to me.

Keynesian models don't make sense, but neither did the economy during the Great Depression. Yet, we know the Great Depression actually happened, so perhaps Keynesian models adequately described the economy at the time?

Note: I used to subscribe to Robert Higg's view of the Great Depression, which stipulated that the depression was so severe because many businessmen lacked the confidence to invest. Higgs described a survey in 1941 showing 37% of businessmen believed America would become a "semi-socialized society with little room for private economy." It is a fact worth pondering, but I'm wondering if causality couldn't run the other way? Perhaps businessmen saw so little room for capitalism because the Great Depression proved that capitalism failed? They lacked the confidence to invest, because they lacked confidence in capitalism.

Analogy for tariffs

The Qin dynasty was the first empire to unite all of China, though it only lasted fourteen years.  But in those fourteen years the Qin administrative system sought to standardize everything; including how areas were ruled, how weights were measured, coinage, and the size of cart axles—this last item I believe provides an excellent analogy to international tariffs.

The length of cart axles differed across states, and this is important because a cart may not be able to be pulled on a road whose ruts were carved by an axle of smaller or larger length.  This meant that if goods were exported from one state to another, as you approached the border of the new state you had to unload your goods from one cart and load them onto a different cart whose axle-length corresponded to the country you just entered.  As you can imagine, this increased the cost of exporting and importing goods considerably, and did so without changing the quality of the good being traded.

A tariff does the same thing.  It makes it more expensive to trade the good while not enhancing the good's quality.  Now, all of us can imagine the wealth resulting from standardizing axle lengths, as goods can now be traded with more ease.  However, the non-economist has trouble understanding the wealth generated from eliminating a tariff—but they are the same thing, conceptually!

And that is what makes the axle-length issue in ancient China such a great analogy for metaphors.

Kenneth J. Hammond
From Yao to Mao: 5000 Years of Chinese History
Lecture Six: The Hundred Schools
The Teaching Company

Sunday, October 23, 2011

Monasteries for Protestants

I always wondered why Protestants never developed their own version of the monastery. But they did--they are called the Shakers.

Friday, October 21, 2011

In love with a book

I am in love with Sylvia Nasar's book: The Grand Pursuit. If I taught a graduate course in economics I would require it as a reading, for it would not only give the student a unique perspective on some of our greatest economics (I had no idea what a magnificent and lovely man Alfred Marshall was) but it would do something traditionally relegated to undergraduate classes only: inspire!

Wednesday, October 19, 2011

Enough is enough

It is time the world commits to writing book reviews that do not contain the phrase "tour de force."

Tuesday, October 18, 2011

Something you wish you never said

"...risk to the government from a potential default on GSE debt is effectively zero."
Joseph Stiglitz, Jonathan Orszag, and Peter Orszag in a paper written for Fannie Mae.

GSE = government sponsored entity, that is, Fannie Mae

If I had said that, I certainly wouldn't be present at the Occupy Wall Street protests telling the protesters they have the right to be indignant about the private financial sector.  At the same time, I wouldn't be terribly embarrassed about the statement (not that Stiglitz is, I don't know).  That's what almost everyone thought, except for the others, who thought you can't estimate probabilities of that sort.

Mark A. Calabria.  October 15-16, 2011.  Notable & Quotable.  The Wall Street Journal.

The Bayesian Mind

A recent Science News (October 8, 2011) summarized psychological research showing that the human mind thinks in valid probabilities, and specifically, using something like Bayesian statistics.  I cannot tell whether these studies assert that the mind behaves just like the mathematics of Bayesian statistics, whether they simply assert that people change their minds when they experience new things, or a mix of the two.   

It is the first psychological study I have seen in a while providing evidence for a rational mind.  I guess after three decades of research suggesting we are imbeciles who can only prosper under the rule of a benevolent behavioral economist, a study showing a functional human mind is once again a novel finding.

Selected narratives.

People's behavior closely mirrored what Bayesian math predicted, the team reported.

In a way, it's self-evident that humans rely on existing knowledge.  A brain that didn't rely on its experiences would be a pretty pathetic brain.  "You could argue that it would be a little strange if we were bad at it," Geisler says.

If babies act Bayesian, then they may have been born that way.

"As early as we can test, babies are using things that are consistent with probabilistic models," she says.  "Babies are sensitive to the statistics of the environment."

Instead of looking for signs of probabilistic reasoning in young humans, some scientists are looking for signs in other species.  A recent study in owls suggests that aspects of their brains also follow Bayesian rules.

"Biological systems are not accidental," Simoncelli says.  "We believe that evolution shaped them, and shaped them to be good at what they do.  And we have a lot of evidence that that's true."

Sanders, Laura.  October 8, 2011.  "The probabilistic mind."  Science News.

Nothing New Under The Sun: Daoism and the Law of Unintended Consequences

Economists love the Law of Unintended Consequences, illustrating how ambitious politicians can often make her constituents worse off in her appeal to enhance their lives.  In my textbook, I use the example of air pollution in Mexico City, where a law requiring each car to remain idle one day each week resulted in more older cars being driven, which resulted in worse air pollution.

I had only encountered this law in economics, yet I recently discovered there is nothing new under the sun that economists can offer.  Between the 6th and 4th centuries B.C., Chinese philosophy of governance consisted largely of two camps: Confucianism and Daoism.  We have all heard of Confucius, but Daoism?  

Basically, Daoism asserts that our understanding of the world is limited, that everything that happens, happens for a reason, and when we attempt to employ our limited knowledge to control the world we often destroy institutions and activities that serve a valid purpose, and in the process, become ineffective leaders.  That is, in essence, the Law of Unintended Consequences.

Dr. Kenneth J. Hammond
From Yao to Mao: 5000 Years of Chinese History
Lecture 5: Confucianism and Daoism
The Teaching Company

The P-Values Of The Gods

Most ancient cultures seem to have participated in some sort of "lot casting" as a way of communicating with the gods, something similar to asking a god if you should invade Babylon, and if you rolled a pair of dice and the sum was greater than six, that meant you should invade.  In these instances, there is no such thing as chance.  Every event that occurs is a direct manifestation of god's will, and if his will seems confusing, then it must be you who is in error.

I find that fascinating, because it describes a world so different than my own, yet still inhabited by the exact same species of people.  Consequently, I was enthralled to learn of a culture where god's will was discovered by a mix of determinism and chancegod's will was discovered by p-values (a statistical term communicating the probability a hypothesis is wrong).

The Shang dynasty in China existed around 1500 B.C., and in their pursuit of the gods used the shoulder blades of cattle or the shells of turtles as "oracle bones."  Questions would be carved into the bonesquestions asked of ancestors of the present king, who were the gods of interest.  The bones would then be cracked such that the cracks either pointed up or down, constituting a yes or no answer.

But there is more.  Questions were asked sometimes on a daily basis, and many of the questions had answers which could be later verified (e.g., is the harvest going to be good this year?), and the bones would be stored so that future generations could assess the accuracy of a certain king's ancestor.  Yes, the people did verify to determine whether the oracle bones gave accurate answers—what audacity!

But there is more.  Rather than asking a question once, they may ask the question 5, 10 times to determine whether the answer is clear or ambiguous.  If roughly half the answers were yes and half were no, then the gods essentially did not answer.  If there were eight yes answers and two no answers, then the gods' answers were an official yes.  After all if 80% of the time an answer is yes, it is more likely that the gods' true answer is indeed yes.

But there is more.  Today we know (or, I believe) the outcome of the oracle bones is random, and thus the answers are random.  If the gods consistently gave accurate answers, the present king has a true and authentic heavenly mandate because his ancestors are powerful gods.  If the gods seem to know nothing about the future, the present king is a farce, his ancestors are no gods, and the king must be replaced.

The laws of probability asserts that as time goes by, there will be some rulers whose ancestors happen to predict the future well.  And consequently, the rule of a king depended on chancethe rolling of the dieas much as his quality as a ruler. Kings ruled by the power of the p-value.

Note: One might initially think that a modern statistician, if transplanted to the days before Christ, could use the power of mathematics to prove the existence or non-existence of gods. This would be wrong. The statistician might prove that only X% of the time will the oracle bones give correct answers, but the ancient Chinese would simple say this means only X% of the time communication with the gods was possible. As a rule of thumb, it is impossible to have an intelligent conversation about the existence of free-will or god. The same goes for this case.

Dr. Kenneth J. Hammond
From Yao to Mao: 5000 Years of Chinese History
Lecture 2: The First Dynasties
The Teaching Company

Friday, October 14, 2011

Confusing Correlation and Causation (Modern India Edition)

See Byzantium Edition
See Greek and Roman Edition

Sometimes you learn something interesting and then you see it everywhere you look.  Earlier, I had remarked upon a theory of evolving culture and belief based off the confusion of correlation with causation.  First I'll provide another anecdote from modern India, and then I'll outline this theory of culture, a theory not meant to exclusively explain all cultural artifacts, but one with some validity.

Source:  Akash Kapur writing in The New Yorker.  October 10, 2011.  "The Shandy: The cost of being a cow broker in rural India." Pages 72-79.

Background:  Ramadas is an Indian cattle broker whose son was killed in a accident while riding is bike.  His family and friends are Hindu, so many might not approve of his job helping to sell cattle.  Varun is his other son and Malligeswari is his wife, and in this New Yorker article, both are suggesting the gods may have killed Ramadas' other son as a punishment for the father's occupation.

   Varun hesitated.  I could see that he was trying to decide whether to say something.  Then he said it: "When my brother had his accident, some relatives said it was because of my father's job.  They said he died because of the work my father did."
   "How did that make you feel?"
   "I felt very bad.  I felt very bad that people were talking that way."
   "But did you believe it?"
   Varun glanced at his father; he looked as if he were asking his father a question.  "Maybe," he said, and he nodded.  "Maybe something in me believed that that was why it happened."
   I asked Malligeswari if she felt the same way.  "I did wonder,"  she said.  "I had to wonder, and sometimes I still wonder if that's why my son died."

Ramadas, the father, is an atheist.  Nevertheless, when his son died he participated in all the religious burial ceremonies.  Not because he "got religion", but because he didn't want people to think he didn't love his son.  The confusion of correlation for causation changes the behavior of even those who were not confused.

Now to an interesting explanation of how assuming correlation is causation gives rise to certain cultural norms.

Theory of Social Norms Derived From Assuming Correlation Implies Causation

  1. Before the modern age, determining what caused tragedies was difficult to decipher.
  2. You cannot live your life without responding to your environment, so when tragedy ensues, one must react.  Thus, better to believe everything in the world happens for a reason, than to believe everything happens for no reason.
  3. Because so much of the world seemed to be a manifestation of a greater power (the tides, the waxing and waning moon, the flirtatious sun, dizzy tornadoes, rotting disease, thriving spring, magical conception and the miracle o birth), it only makes sense that all things are deliberately caused by a greater power.
  4. Consequently, when something bad happens, one should observe what was going on shortly before, and assume that activity elicited punishment from the gods.
  5. Tell the story of your sins and punishment to your children, so they will not suffer like you.  Knowing little else, they believe you willingly.
  6. Thus evolves norms about how people should live.
  7. Because everyone in a village suffers for the sins of the individual (disease and tornadoes are imprecise and reckless) everyone enforces these norms fiercely—not out of hatred, but out of love of their family.
To the extent that tragedies are not punishment from gods, these cultural artifacts are ostensibly irrational, but not necessarily invaluableif they have externalities, such as reinforcing social bonds and encouraging ethical behavior.

Thursday, October 13, 2011

Quotes about life's mysteries

Geshe Rabten told us to subject the texts we studied to rational scrutiny and critique, but he also insisted that the authors of those texts were fully enlightened beings.  It dawned on me that we were not expected to use logic and debate to establish whether or not the doctrine of rebirth was true.  We were only using them to prove, as best we could, what the founders of the tradition had already established to be true.
—Stephen Batchelor in Confessions of a Buddhist Atheist

“What,” I asked, “within the very depths of us, moves us to religion?  It is because life presents itself as an unresolved question.  Existence strikes us as a mystery, as a riddle.  This experience reverberates through us, issuing in the sounds, 'Why?' and 'What?'  The various religions of the world are systematic formulations of the answers to these questions.”
—Stephen Batchelor in Confessions of a Buddhist Atheist

Different Perspective On China's Currency Manipulation

Some Americans share the belief that because lots of Chinese yuan's exist out there, they have a competitive advantage in the export market, and are making a killing selling their products to America.  However, it is not the number of yuan's that matter, but the change in yuan's over a given time period, and whether those changes were expected.

To illustrate, would our trade flows be any different if, instead of the yuan, China used a different currency called the screw-US, and if there were two times as many screw-US's in this new world than there are yuan's in the real world?  Surely, an American dollar would purchase more screw-US's than it can yuans, but does that mean Chinese products will be cheaper?  Of course, not, because the price of Chinese goods in screw-US's would be twice the current price of those goods in yuan's.

It is not the amount of yuan's that matter, but the unexpected changes in the yuan.  If the Chinese government prints more yuan's without telling their citizens or the world, the exchange rate would indeed change such that more U.S. dollars bought more yuans, and Chinese products would become cheaper--temporarily.  However, unless everything I know about the world is wrong, that increase in yuan's will eventually translate into higher Chinese prices, and Chinese goods will no longer be so cheap.

Moreover, if everyone knows how many additional yuan's will be printed in the next month, that expected rise will be manifested in higher Chinese prices, a lower exchange rate (more yuan's for every dollar), and there will be no change in trade flows.

I say all that to say this:  if it is only the unexpected change in yuans that matter, and if we forced China to reduce its yuan's by a certain amount--an amount known with certainty--how would that benefit us?

It would not, and that is why trade policy is better understood from a public choice perspective.

Wednesday, October 12, 2011

Quotes About Huey Long's Politics

I think he came to the conclusion, uniquely among our politicians, that you could not do the good that he wanted to do, with the services that he wanted to deliver, and to free people from the exploitation as he wanted to: you cannot do that in a that, Long, in my judgment ultimately despaired of Democracy and turned to the rather dictatorial methods that he used in the later years of his life
—interviewee on the PBS special about Huey Long.

I represent the good citizens of Louisiana.  We are tired of the rule in our state of a dictator.  We feel that it is time for this dictatorial business to end.  We feel that Huey P. Long has controlled our state long enough, and he does not have the interest of our people at heart.  He is a selfish dictator, and we will fight and fight, and we want him dead politically but not dead physically.
—interviewee on the PBS special about Huey Long.  Long was eventually assassinated.  

You look around and you see what is happening, you can see the sudden social goods being done—being delivered—but this is true of all authoritarian states.  Mussolini or Hitler, or anybody else...they all do that.  You cannot have a tyranny without a paying-off for it.
—interviewee on the PBS special about Huey Long.

He became as close to a dictator as anyone in the United States.  He stole.  He used force against his opponents.  He destroyed local government in the state of Louisiana.  He motto was “everyman a king,” but only one man wore a crown.
—interviewee on the PBS special about Huey Long. could say Mussolini made the trains run on time, Mussolini made the trains clean: are you for Mussolini?
—interviewee on the PBS special about Huey Long.

Quotes about anthropology and the universality of human nature

...nowhere in the ethnographic literature is there any description of what real people did that is not shot through with the signs of a universal human nature...anthropologists routinely conduct research that can only be done because in crucial ways the differences between us and the peoples we study are not in fact very great; yet because everybody likes to hear that “they” are different from “us”, anthropologists dwell on the differences.
—Donald E. Brown in Human Universals, page 5.

...From 1915 to 1934 American anthropologists established three fundamental principles about the nature of culture: that culture is a distinct kind of phenomenon that cannot be reduced to others (in particular, not biology or psychology), that culture (rather than our physical nature) is the fundamental determinant of human behavior, and that culture is largely arbitrary.
—Donald E. Brown in Human Universals, page 6.

Is local government always better?

I used to think so, and while I haven't changed my mind, I am wondering...

(a)  What if you took into account monitoring and reporting of government activities by interest groups?  The primary bulwark against corruption.  Suppose you have a federal government charged with detecting and curbing environmental pollution.  This is one branch of government who must coordinate its efforts across a vast collection of regions, political districts, and people.  However, it is relatively easy for environmental interest groups (and, say, libertarian groups concerned that the power to mitigate pollution is being abused) to hone in on this one organization and criticize it brutally in the public arena.
     Now suppose each U.S. county is charged with detecting and curbing environmental pollution.  Wouldn't it be hard for interest groups to observe the tens of thousands of government agencies, and wouldn't it be impossible for an interest group to form in each U.S. county?  Wouldn't the county-level agencies be easier to corrupt?
(b)  Now let me ask you whether local or federal government is more inclined towards corruption?  What is your impression?  Can the wealthy and corrupt better control a city council, or a federal agency?
(c)  One final question: take examples of undeniable political corruption in the U.S., and ask yourself whether that power was wielded at the local or national level?  There is only one person in the U.S. I believe was a de facto dictator: Huey Long, in Louisiana (as portrayed by the character Willie Starks in the movie All The King's Men).  This guy exploited the pauperism of Louisiana citizens during the Great Depression and had almost the entire state in his hands.  Nothing of the sort has emerged at the national level, that I know of, at least.  Certainly, if FDR could have acquired Long's power, he would have.  But he was watched and attacked by too many people to be so corrupt.

Just a thought...

Do you learn more in more challenging classes?

I used to think so, but am changing my mind.  Frankly, I'm beginning to think the fewer topics I cover, the more they actually learn.  Every year, I reduce the number of topics I cover and force my students to revisit the same type of problems over and over.  Each year, I feel like I facilitate more learning.

When you ask OK State undergraduates about their more challenging courses, challenging becomes confused with "hard", and they describe courses whose professors are bad communicators and dislike students.  If you ask them which courses they learn the most from, they are also the courses where a higher grade is easier to achieve.

Tuesday, October 11, 2011

Old-School British Communism

England began a grand experiment in 1649, after it executed its king and began governing as a commonwealth (read: Cromwell dictatorship).

Yet some English wanted a more extreme experiment.  Called the Diggers, this was a group of English who renounced all property and espoused communism long before the word would be invented.

Because there was no religious rule, it was not a monastery/nunnery.

It did not last.  In fact, it is very difficult to find any commune or socialist system which lasts other than monasteries/nunneries.

Will Participatory Economics Be Mandatory?

Leave it to NPR's Planet Money to provide the only decent coverage of the protests on Wall Street in their recent podcast.  What was particularly interesting was their interview with economist Robin Hahnel, who for forty years has been developing a system of economic harmony titled participatory economics.

My impression is that the system replaces money with bartering through democratic meetings.  Households would have to plan one year in advance the goods and services they "need", request these through local democratic meetings, and through the efforts of benevolent economists and a mathematical algorithm, some people would be "asked" to produce X amount of Y, which would then be taken and delivered to a consumer who requested it a year earlier (forgive me Hahnel, as there is no way I can do you justice in one paragraph...believe me when I say I tried).

Books could be written regarding how participatory economics fares in its ability to transmit information and provide incentives for production, but I think the theory is best confronted with one question.

My question to Hahnel: Suppose Americans did not want to adopt your system of participatory economics (and I do not believe they would). If you were able to acquire total power, would you then force Americans to adopt your system?

If the answer is yes: you become a dictator
If the answer is no: Americans would continue with its mixture of markets and legislation.

This is why Russia and China became a dictatorship, and the U.S. and western Europe became a mixed economy.  One was forced upon its people, the other voluntarily adopted.

P.S.  A great teaching activity would be for students to read about participatory economics and then critique it.

Monday, October 10, 2011

Confusing Correlation and Causation (Greek and Roman Edition)

See Byzantium Edition

...the daily recurring phenomena, which to us, who know them to be the result of certain well-ascertained laws of nature, are so familiar as to excite no remark, were, to the early Greeks, matter of grave speculation, and not infrequently of alarm.  For instance, when they heard the awful roar of thunder, and saw vivid flashes of lightning, accompanied by black clouds and torrents of rain, they believed that the great god of heaven was angry, and they trembled at his wrath.  If the calm and tranquil sea became suddenly agitated and the crested billows rose mountains high, dashing furiously against the rocks, and the threatening destruction to all within within their reach, the sea-god was supposed to be in a furious rage.  When they beheld the sky glowing with the hues of coming day they thought that the goddess of the dawn, with rosy fingers, was drawing aside the dark veil of night, to allow her brother, the sun-god, to enter upon his brilliant career.  Thus personifying all the powers of nature, this very imaginative and highly poetical nation beheld a divinity in every tree that grew, in every stream that flowed, in the bright beams of the glorious sun, and the clear cold rays of the silvery moon; for them the whole universe lived and breathed, peopled by a thousand forms of grace and beauty.
—E. M. Berens in The Myths and Legends of Ancient Greece and Rome

Beautiful quote about economics...

...and leave it to a non-economist to say it...

The notion that man was a creature of his circumstance, and that those circumstances were not predetermined, immutable, or utterly impervious to human intervention is one of the most radical discoveries of all time.  It calls into subject the dictates of God and nature.  It implied that, given new tools, humanity was ready to take charge of its own destiny.  It called for cheer and activity rather than pessimism and resignation.  Before 1870 economics was mostly about what you couldn’t do.  After 1870, it was mostly about what you could do.
—Sylvia Nasar in The Grand Pursuit, page xiii-xiv.

Augustus Wisdom

Hearing that Alexander the Great had been at a loss about what to do next after his vast conquests, the princeps remarked: “I am suprised the king did not realize that a far harder task than winning an empire is putting it into order once you have it.”
—Augustus Caesar, as quoted in Augustus: The Life of Rome’s First Emperor by Anthony Everitt

Perhaps the most instructive aspect of Augustus’ approach to politics was his twin recognition that in the long run power was unsustainable without consent, and that consent could best be won by associating radical constitutional change with a traditional and moralizing ideology.
—Anthony Everitt in Augustus: The Life of Rome’s First Emperor

The Nobel Prize in Economics goes to...

...not me.  Once again, I was passed over in favor of economists who published in "prestigious journals" and are "cited" by other economists.

I thought for sure this year it would either go to me, Al Gore, or President Obama.  Or, maybe to Paul Krugman a second time.

The Merciful Universe

The universe allows us to experience both misery and merriment,  as the latter cannot exist without the former, and for this the universe is benevolent.  Because we eventually become desensitized to merriment but not misery, the universe must slay us even as we beg to live.  For this, the universe is merciful.
—author unknown

Sunday, October 9, 2011

To protect the wealthy

Government actions to benefit the wealthy may be counter-productive if they result in the type of protests we are seeing in NY.

Class Warfare

Our current tax code gives the poorest among us money and takes roughly 1/3 of the wealth from the richest.

Is that class warfare? It must be, if a very small change at the expense of the rich is class warfare (and for many people, it is).

Bad argument against the protesters at Wall Street

The excellent blog Carpe Diem made what I believe to be a poor argument against those protesting at Wall Street (see picture below).

The Americans protesting against what they believe to be corporate corruption--presumably brought about by lax regulation--cannot be ridiculed for owning goods produced by the private sector, because they can adroitly criticize libertarian bloggers for their consumption of public goods like roads and police.

Friday, October 7, 2011

Quote regarding unemployment

“Jobs” are deals between workers and employers, and so “creating” them out of unwilling parties is impossible.  The state, though, can outlaw deals, and has.
—Deirdre McCloskey, in Reason magazine.  November, 2011.  Page 29.

Though an insightful quote, it should be noted that government can be an employer, and that public goods do exist.

Byzantium Stimulus

History professors often describe large-scale projects by emperors as stimuli.  Dr. Kenneth W. Carl remarks  that in the Byzantium Empire, Constantine V established numerous, large-scale public works projects in Constantinople, forcibly relocating thousands of laborers and craftsmen to rebuild the aqueducts, churches, and other infrastructure.  These projects are described by Dr. Carl as a stimulus to the Byzantium Empire.  Is it?

Certainly, when you force people to work on your aqueduct, renovate your palace, and beautify your church, those particular areas will see an increase in economic output.  However, if the workers were relocated from another place, there is a concomitant decrease in output in those other areas, and a stimulus would have to show the rise in output in Constantinople is of greater value than the output lost in other areas before it should truly be called a stimulus.

Professor Carl also remarks that forcing people to live in cities and work for the government induces people to utilize money to a greater extent, and the efficiency of money may cause overall output to rise.  This may be the case.  When a government establishes or improves new institutions (like money) that enhance productivity, real wealth increases may be realized.  This is an innovation in money, though, not a stimulus.

We should also add that as the Byzantium government put a greater number of citizens under its protection within Constantinople, this protection may have given them the economic confidence to invest and spend in ways they were reluctant too in the sparse and unprotected country. This concerns property rights and rule-of-law, though, not a stimulus.

Moreover, public goods like aqueducts may increase the productivity of all citizens, in which case this "stimulus" is really just an investment in public goods.

For these reasons, historians would be on sounder footing if they describe these government projects as public good investments, rather than a stimulus, as the modern-day stimulus describes an increase in confidence brought about by government spending, such that new economic output more than pays for the stimulus spending.

Professor Kenneth W. Carl
World of Byzantium
Lecture 15: Life in the Byzantium Dark Age
The Teaching Company

Dictatorship of the Proletariat (Part 2)

Dictatorship of the Proletariat (Part 2)

Remember also that it was the poor who gave Hugo Chavez to acquire his autocracy, not the middle class, as they oppose him vehemently.

in the latter half of the eleventh century AD, the noble class of the Byzantium Empire was doing all it could to take land from the peasants and combine the lands into large estates, whereby the lower classes would become more like serfs than peasants.  Fortunately, the lower classes were protected by Emperor Basil II and other like-minded Macedonian emperors, who passed a series of laws making it difficult to take the peasants' land away.  These peasants would have wanted to give Basil II complete and total power, because more power to the emperor meant more power to the peasant.  If  you asked Byzantium peasants whether they would like a Greek-style democracy, they would have probably said no.  If you asked if Basil II should be considered a demi-God with unapproachable control over the empire, they probably would have said yes.

This helps us understand why, today, many would love to give Congress and the President more power, because they believe for every increase in power by politicians there is a concomitant decrease in power by the wealthy (including corporations).  This may not be the case in America, as many libertarians would say politicians with more power distribute these benefits to the wealthy, not the working class.

This helps us understand why people like Michael Moore proclaim America needs to become more "democratic", while at the same time making politicians more autocratic.

Thursday, October 6, 2011

What opposition to usury really represents

   As a college student I was taught that usury simply denoted market interest rates, where the riskiness of a loan increased the interest rate charged.  Restrictions on usury thus represented a traditional price ceiling, which could only harm borrowers because it reduced the amount of money loaned, all of which would increase the welfare of the borrower and lender.
   I now believe usury is a more complex phenomenon, and that forbidding usury was more than a simple price ceiling.  I think the historical novelist Edward Rutherfurd represents this well in his excellent novel Sarum: A Novel of England.

   The meeting went well, and after less than an hour, Forest concluded the deal.  Its terms were simple.  The Fleming was to act as exclusive agent for the new venture; Forest would finance any other dealings he wished to undertake.  He would also pay off the merchant's debts, taking his house in Antwerp as security.  In effect, by the end of the afternoon, Forest owned him.
   "And the secret of him is," young Shockley had confided to Forest beforehand, "he likes to live well and he spends his money as fast as he makes it: he'll never pay off his debt to you."

—Edward Rutherfurd in Sarum: A Novel of England

A similar sentiment is expressed in the movie Anthony: Warrior of God, where the climax shows a Franciscan monk, weary from his extreme fasting but intent on fulfilling God's will, mounts a table to warn the "usurs" against their offense to God. It wasn't that the interest rate was just "too high", but that the destitute were only saved from perishing if they lived the rest of their life as virtual slaves, and that those who cannot manage their lives well (e.g., gamblers) are exploited instead of helped.
Think about the old-time mining towns where the workers were manipulated in various ways such that, as Johnny Cash sung, "I owe my soul to the company store."
I am tempted to say, "When we teach usury in class, if we are to teach it honestly it must be characterized by both an interest rate corresponding to risk and an ethical dilemma." However, I do not have good sources for these assertions: only a book and movie which I believe reflect history honestly. Though that is not enough, for now, it is all that I have.

Dictatorship of the Proletariat

Until recently I thought that the wealthier classes would favor dictatorship and the poor and lower-middle class would favor democracy, but I am considering abandoning that position. This is the new position I am considering.

A ruler with the ability to dispense large sums of money, but can only do so with the consent of the voters, may be more sensitive to the desires of the campaign contributors (most of whom are relatively wealthy) than the lower income citizens. The democratic ruler is thus tethered to the wealthy, whereas in a dictatorship, the wealthy are tethered to the ruler, allowing the dictatorship to respond to those who cannot fund campaigns—something he could not before do.  This is why the poor often desire autocrats, while the wealthier classes espouse the benefits of democracy.

From where did this new position arise? Various instances. In 23 B.C., during severe food shortages Roman citizens pleaded with Augustus to "seize absolute power openly and unambiguously."

"The panic-stricken and angry mob did not trust old-style republican politicians to govern effectively and called for Augustus to be appointed dictator. It besieged the Senate House and threatened to burn it down with the senators inside if they did not vote for the appointment."
Everitt, Anthony.  Augustus: The Life of Rome's First Emperor.  Chapter 15.  Page 194 of paperback.  2007.  Random House.

After the Russian Tsar abdicated in 1917, Russia began installing a modern democracy, mimicking both American and British democratic systems.  Eventually, though, the large class of peasants changed their politics and helped install a man named Vladimir Lenin, who was openly calling for a Dictatorship of the Proletariat.

Moreover, throughout most of Russian history from Peter the Great to the last Tsar, the Russian peasant loved their Tsar, though they hated the nobles to whose land they were tied.  They might rather have a monarchy than a democracy controlled by the nobility.

Americans who espouse giving greater consideration to the working class and poor tend to favor government coercion over voluntary consent.  I'm thinking here of minimum wage and union supporters, and the very poor on welfare and food stamps.

I'm sure there are some examples to the contrary I have not found.  It is just an idea, one that five years ago I would have considered absurd—I no longer do.

Wednesday, October 5, 2011

Quote: Prices, Perceived Value, and Self-Delusion

Sometimes we don't know if the stuff we're buying is historically significant, but because the prices are so high, we need to believe they're important.
—Howard Rachofsky, art collector, from The Wall Street Journal (April 1, 2011; D2).

Quantitative Easing: Augustus Style

When Octavius (later renamed Augustus) beat Marc Anthony and Cleopatra and took Egypt for his own, he shipped the vast stores of bullion back to Rome, constituting a tremendous increase in Rome's money supply.

Consequently, the interest fell from 12% to 4%.  Much of the money was used to purchase farm land for retiring Roman soldiers.  Not surprisingly, land values doubled.

Everitt, Anthony.  Augustus: The Life of Rome's First Emperor.  Chapter 15.  Page 194 of paperback.  2007.  Random House.

Confusing Correlation and Causation (Byzantium Edition)

Here is a recent narrative about confusing correlation and causation in the Dark Ages I have presented to my regression class.

These examples, silly as they may seem, serve as stark reminders to our ignorant past, and the myriad ways we allowed the universe to deceive us.  Looking back at human history, however rational an individual human may seem, the masses of humans kill each other and throw their families into misery for no good reason.  We create wars and strife over what should be trivial concerns.  When correlation was confused with causation, the consequence was the shedding of human blood.  This is illustrated best in religion.  
The word “Trinity” is not once mentioned in the Christian Bible.  Nevertheless, it is one of the more important Christian doctrines.  At the core of Christian belief is the idea that “God” is comprised of the father (the Hebrew God), the son (Jesus), and the Holy Spirit.  Though Jesus certainly claimed to be the son of God, and remarks of the Holy Spirit are made in the Bible, at no place does God explain the essence of the Trinity.  Was Jesus an actual human, and if so, how could he also be God?  If Jesus was human, does that mean he carries original sin within his flesh?  Was Jesus perhaps a demigod: half man, half God?
If God never took the time to explain the Trinity, then surely humans should not fear their lack of understanding, and surely humans would not be punished if the Trinity remained a mystery.  Nope.  People feared that if they worshiped the wrong way they would be punished.  Consequently, when a flood, tornado, or disease struck, Christians evaluated their style of worship to see where they erred, because natural disasters were thought to only occur as punishment for sin (remember Noah).  Even today, people like Pat Robertson believe disasters like hurricanes are caused by sin like being gay (I’m not kidding...Google it).
Most people today do not believe that natural disasters are punishment for sin, but they were correlated with certain things in the past, and the correlation was confused with causation with horrid consequence.  When Rome was sacked by barbarians, perhaps it was due to their misconceptions of the Trinity, suggested the Byzantium Empire.  When Byzantium found itself surrounded by Muslims, the Pope suggested it their doctrine at fault.
Consider also the Iconoclastic Controversy within in the Byzantium Empire, where those against praying before icons—before icons, not to iconsargued against those who did.  The arguments in favor or against the praying before icons was based on observed correlations, as the historian Kenneth W. Harl states, “I’ve always been of the opinion, and again I can’t prove it, because we don’t have the evidence, that in the dark age crisis, if you had prayed to the saints—to the icons in your town—and the Arabs had sacked your town, you probably would question the validity of this type of worship.  On the other hand, if you were lucky to be in Thessalonica or Odessa and you had paraded your icon around and the invaders left, well then you were probably inclined to see that the icons worked.  And it probably came down to such considerations for many people in dark age.”
People slaughtered each other over the Iconoclastic Controversy, and a Catholic Pope even excommunicated a Byzantium Emperor over this seemingly silly debate.  And the reason is that the ignorance pervading the dark ages caused people to confuse correlation and causation, making the tiniest and abstract disagreement a cause for murder.

Blog Archive