There are a number of important economic concepts illuminated by the excellent My Little Pony: Friendship is Magic episode “The Super Speedy Cider Squeezy 6000″ (season 2, episode 15). I want to talk about them here, but warning, there are some pretty heavy spoilers within.
Filed under: Uncategorized
Recently, Krugman wrote that if you think the iPhone 5 will boost the econonmy, then you believe in the Broken Window theory. The Broken Window Theory, more accurately described as the Broken Window Fallacy, is the belief that destruction can boost the economy, as people, companies, and governments spend to replace them. Krugman is a big proponent of this plan, even going as far to argue that spending to prepare against a space alien threat would be good for the econonmy, even if it turned out to be false.
But I’ll focus here on Krugman’s iPhone argument. He writes:
If the iPhone 5 boosts the economy, and I believe it probably will, it’s because consumers feel it will create more value for them than the other uses they may have for their money. The “destruction” Krugman refers to people’s previous phones. But their other phones are not destroyed!
They could sell their old phone, give it to a family or friend, donate it to charity, or any number of other options. But they find purchasing a new phone to be worth it. If their previous phone was so truly bad that it doesn’t have other uses anymore and the best thing to do is throw it away, then by definition nothing of value has been lost, so even in this case there is no real destruction as meant by the Broken Window Fallacy, where the owner of property suffers an involuntarily loss.
But suppose there was an involuntary loss. Let’s say their old phone broke down and was out of warranty. In this case there certainly was destruction, and the person is buying the new phone to replace their old one. Maybe this is the case that Krugman means, although I would argue this is small minority of the iPhone 5 purchasers. But if these people wouldn’t have bought an iPhone 5 if their broken phone still worked, is that really a boost to the economy in the aggregate? Only if you look at what is seen (buying the iPhone 5 and creating employment in that industry). But we also need to look at what is unseen: Not buying the iPhone 5 would mean spending that money on something else, which creates employment in whatever industry the money would be spent on otherwise. So really when the person’s old phone breaks, the economy is down one phone, which makes it worse off, not better.
Krugman attacks the Broken Window fallacy, as he doesn’t believe it’s a fallacy at all. But the truth is that economic growth created by the iPhone 5 will be because it creates more value for consumers than it costs them to buy it, not because of any destruction that is happening. For a more thorough explanation of why the Broken Window Fallacy is a fallacy, I highly suggest watching this video:
Filed under: Economic Theory
Comments: 3 Comments
A question to you of a chicken and egg sort.
If you have a group of people in a flat empty world with nothing in their possession, how do you get them to have things? Would you:
A) Give everyone pieces of paper with faces on them, call it money, and tell them to wait for someone to devise a way to accumulate those pieces of paper for himself, and hope that the means he devises results in people getting stuff?
B) Or would you give them tools, machines, and other various means to produce things they want? Would you give the knowledge and the means to make the tools?
The answer here should be obvious. Yet, I am always astounded to hear people say that the way to generate economic growth is to stimulate demand, or speak as if the money itself has some kind of intrinsic value. Demand is an artifact; it is a consequence of production, not its progenitor.
It wasn’t the vast network of highways that induced Henry Ford to start building cars. It wasn’t the airport runway that induced the Wright Brothers to put wings on a lawnmower. And it isn’t the existence of currency that induces people to make things. We make things because we want things. Money is merely the means by which we coordinate and communicate our individual desires and interests to others. If no one else is making anything, currency doesn’t communicate anything.
A currency is not a measure of the total demand. It is a measure of overall production. The dollar is the inch on this yardstick. I explained it this way the other day: If you have a length of rope, and you wish it were longer, you don’t make a longer rope by making more notches in your yardstick, and call the new divisions “inches”. You still have the same length of rope, just smaller units of measure. Your inches are shorter, and it is a deception to say that just because now it takes more “inches” to measure the same length of rope, that you have a longer rope.
So consider this when someone claims that the economy isn’t growing because no one has money, or that companies are hording it all. Well, that makes just about as much sense as saying you have a shorter rope because you’ve erased some notches and now your “inches” are longer.
Of course, there is a general kind of demand that the production takes advantage of, but this is a generic phenomenon that doesn’t change or modulate in intensity. A demand for the needs and comforts of life are not specific, and are always present. But the means by which they are satisfied are specific and can take an infinite variety of forms.
So it is not merely enough that humans will always want and demand ways to conserve their energy and save labor. That is a given. Nor can that kind of demand be stimulated by giving out pieces of paper.
Nor will handing out pieces of paper get you from point A, that generic, formless and inchoate sort of demand to something as specific as an internal combustion engine — the internal combustion engine being only one way that general demand can be satisfied. To perhaps borrow from Keynes’ interpretation of Say’s Law, the production of internal combustion engines creates a demand for internal combustion engines.
Filed under: Economic Theory
Just as the Kony 2012 phenomenon swept through the Internet earlier this year, so now does the current Chick-fil-A kerfuffle.
Don’t worry, this post isn’t about Chick-fil-A specifically, but instead about some things I’ve learned and observed over the past few weeks as I followed (and often commented upon) the controversy.
The comments Dan Cathy made about same sex marriage didn’t greatly disturb me apart from the notion that they were completely wrong-headed and just blatantly silly. After all, the president of the United States pretty much expressed the exact same opinions up until recently when we learned that his views had “evolved.” One can be cynical about that, as he is up for re-election and the timing of that “evolution” was, how do I put it, convenient. But, one can also be charitable about it. We tend to admire a person who is willing to change their mind on an issue.
Still, the comments in and of themselves were enough to dissuade me from doing business there. Truth be told, this was not anything near a huge sacrifice for me as I’ve only been a patron there less than ten times in my entire life.
When it came out that Chick-fil-A had given millions of dollars to groups who actively advocate for and use the power of government as a means to deny basic individual rights, it brought up the level of ire I had towards the company. If Chick-fil-A were to go out of business tomorrow, that would be just fine with me.
But, things rapidly got out of hand, as the issue became more inflamed. A call for a general boycott turned into calls for government action against Chick-fil-A. Various mayors and city council members vowed that they would not allow any new franchises within their cities. State-funded universities began campaigns to ban the stores from their campuses.
I must give credit where credit is due, as many liberal minded people opposed these actions. But there were (and are) plenty of people who support these measures.
This, of course, set off a counter-protest where people flocked to Chick-fil-A to show their support. I like to think of myself as a rather incredulous person, so I’m not overly impressed with many of the claims that this was a counter-protest in support of “free speech.” I’m sure there were people involved for whom that was their primary motivation, in that they were protesting an obvious overreach and stated threats from clueless and bumbling government officials.
No, this was a counter-protest that wrapped itself in the moniker of “traditional family values,” which the people involved believed were under attack.
The obvious point that needs to be made here is, one is not very credible if they say they are protecting “free speech” with one breath while advocating against another basic human right.
Thus, during and after the counter-protest, those who opposed Chick-fil-A began to ratchet up the issue. I received two private messages from friends on Facebook informing me that they noticed that I had “liked” Chick-fil-A’s page. They were sure, they said, that this was done in the past, but they wanted to point it out to me so I could correct that error.
Now things were getting downright creepy. It was then that several things occurred to me.
I witnessed very few people (on either side) being intellectually consistent about this issue. I decided to test this theory out by asking (on various threads and in person) this question, as can be seen in this blog post:
Only one person said yes to that question, and he made that decision long ago. The responses ranged from (and I’m paraphrasing, here):
It seems to me that these are very unsatisfying answers. My reply to these assertions would be:
Those are specific examples. The overall gist of the counter-arguments was that Romney will do all those things but also fight against same sex marriage, abortion rights, women’s rights, and financial regulation.
The counterpoint here is obvious.
The price that some people are willing to pay for same-sex marriage, abortion rights, women’s rights, and financial regulation is assassination, torture, deportation, murder, and misery elsewhere.
I rephrased the question:
I’ve received no answer to that question.
The inherent contradiction between the answers to those two question (though they are the same in every way, except for the people affected by the policies) is this.
People delude themselves in thinking that the first choice is at best virtuous, and at worst necessary, and recognize that the second choice is murderous.
But, in fact, both choices are murderous.
The last question I ask is, what’s the threshold? What act would the president have to do that would be so vile, so evil that you would not only withdraw your support for him, but actively oppose him?
If targeted, secret assassinations of American citizens by way of secret committee and operating a secret prison where people are tortured without due process on an island where no average American can ever visit isn’t enough for you to oppose him, where are you willing to draw the line?
I’m not overly optimistic about the answers I would receive to that question for this reason: Groupthink, identity politics, and the idea of “collective rights” makes us do incredibly stupid and evil things.
There are many people still alive who not only actively apologize for, but support the tens of millions of deaths that occurred under the Stalin and Mao dictatorships. There are many more who still claim that dropping two atomic bombs on Japan was “the right thing to do.”
Today, there are people who explicitly support assassinations, murder, and torture for ideological reasons. There are also many who implicitly support it because of their ideology.
Meaning, the concept of gay rights or women’s’ rights or class rights are more important to them than individual rights, namely the right not to be murdered or tortured. They are choosing the group they identify with over the individual. So long as the president perceived as working for these group rights, individuals elsewhere pay the price.
They are just as bad as the people counter-protesting in the name of “free speech” while advocating for the rights of Christian values. As long as Christian values are being upheld, the individual does not matter.
Groupthink clouds judgement. Mob mentality destroys it. The group infused with overwrought emotion and righteous indignation discourages dissent or reason.
I’ve known people in my life who have said bigoted things. Some of those people I love dearly. I know, to the deepest depths of my soul, that most of them are not bad, bigoted people. They have expressed mistaken views, which can change. If I didn’t believe that, I would not associate with them.
If I am intellectually honest, I must admit that others have the same qualities.
Acknowledging these simple things decouples you from what the group thinks and forces you to relate to individuals qua individuals. When you’re facing an individual rather than ideological groupthink, it tends to tamp down the anger a bit.
Which brings me to my conclusion.
The concept of rights based on identity politics is a ridiculous notion. I don’t believe in gay rights or women’s rights, or rights for the poor, rights for the rich, for the handicapped, men’s rights, transgender rights, American rights, terrorist’s rights, or for any other group rights.
There are only individual rights.
I fight for same-sex marriage not because I have many friends who are gay and have a personal stake in the matter. I fight for same-sex marriage because it’s a fundamental right, left up to only the individuals involved. I fight for the free movement of people across borders not because I identify as an immigrant, but because it is a fundamental individual right to go where you please, so long as you’re not hurting anyone. I fight for the rights of children not being murdered in Afghanistan, not because it gives me an ideological advantage over someone else, but because it is a fundamental human right not to be murdered from the sky.
I cannot and will not make a choice between them. I’m not willing to shrug my shoulders at one issue to gain an ideological victory on another issue.
People tend to get very indignant when I tell them I do not vote in national elections. Whatever reason I give them, it only makes them more angry. I’ve been told that I’m apathetic (clearly not true), that I have no right to complain (ironically ironic), that I am contributing nothing (obviously false) or that I should be ashamed (I’m not).
Countering these points almost always leads to more conflict.
That’s understandable. When it comes down to it, it’s a religious debate, and people tend to get very uncomfortable and defensive when their beliefs are challenged.
But the real reason I don’t vote is simple. I’m an individual. I try to face the world on those terms. I try to identify with everyone (regardless of gender, race, or country of origin) on those terms.
Voting is a mob action. Voting makes people view the world through a collective lens. It’s always an issue of “us” against “them.” When it’s “us” against “them,” the end result is always someone else suffering so you can get what you want.
Nobody should suffer because of my preferences. Nobody need die for abortion rights or the right to get married to whomever you please.
That’s why I am completely disengaged from the political process.
I don’t ever want to be put in the position where I hold the restaurant I eat at to a higher moral standard than the president I vote for.
Filed under: Culture, Foreign Policy, Public Choice
Comments: 2 Comments
According to a recent Gallup Poll, 46% of Americans believe in creationism over evolution. That is, they believe that the earth was formed roughly 10,000 years ago and was first inhabited by Adam and Eve. Another 32% of Americans believe that evolution was/is theistically guided; meaning that life took millions of years to evolve, but God guided the process. This fits in line with the intelligent design argument.
These numbers are often referred to with great shock and concern from the scientific community. Many on the left of the political spectrum are also very anxious about the implications. Evolution, after all, is a scientific fact. It’s been proven to a degree of certainty which leaves no serious scientist in doubt. We know via empirical evidence that the earth is billions of years old. We have a rough, but fairly good, understanding of how life was created. We understand the evolutionary process. Nearly every field of science confirms at some level that evolution is a hard fact.
When people get together and insist that creationism or intelligent design be given time in the classroom, there is always a loud and ferocious cry of protest. In recent history, nearly every single proposal to do so has been soundly defeated. Intelligent design took such a beating in the first decade of this century that it’s not seriously considered by much of anyone, anymore. Creationists have taken their education outreach to the confines of the Creation Museum in Petersburg, Kentucky.
Atheists, in particular, make a much concerted effort to pile onto creationists. They are derided, made fun of, insulted, mocked, slandered, and generally reviled at conferences, in various fora, etc. One need only make a brief visit to any serious atheist or left-leaning website to see what I’m talking about.
Now, it may be that creationists often overreach and deserve some of the criticism. There is, after all, the pretty well defined Exclusionary Clause of the First Amendment. Regardless of what people believe or don’t believe, people generally don’t want other people to push their beliefs on them or their children.
Being a creationist may also signal other intentions to people. You may be against stem cell research, or gay marriage, for example. People make assumptions. Some assumptions are right, and some are wrong. It all just depends.
Regardless, those who don’t believe, or don’t believe as strongly seem to view those who do as extremely irrational, if not just plain stupid. I suspect there is more than just a bit of class warfare going on, here, but the basic point remains. For the most part, nonbelievers loathe the irrationality of those who do believe.
I think atheists and those on the left often overstate their case for alarm on the issue. There is good evidence to suggest that even though 46% of people say they are creationists, a good portion of them don’t actually believe it. Here’s where it gets tricky. They may believe they believe it, but their actions often belie those beliefs. Many creationists are taking a literal interpretation of the Bible, after all, but clearly nobody actually literally follows the tenets of the Bible. You don’t see people taking and killing slaves, or murdering their children, or adhering to the abstinence of shellfish or woven cloth because the Bible dictates it.
If people actually literally believed in the tenets of the Bible or the Koran, then there would be an incredible amount of bloodshed, violence, and anguish in this world. Also, there would never be any such thing as “interfaith” dialogues. If your way is the only way to heaven, what’s the point in understanding other beliefs?
People like Sam Harris are extremely alarmed that the former head of the Genome Mapping Project and current head of the NIH is a person who has a “close personal relationship” with God. It seems to me, however, that Francis Collins is a brilliant doctor and scientist regardless of his personal religious beliefs. In other words, his belief in God has nothing to do with how he conducts his job, regardless of what Sam Harris thinks.
I perceive religion in America as something that’s been tamed. As Bryan Caplan says in The Myth of the Rational Voter:
There’s more to that quote, which I’ll reveal in a bit.
There was a time when I would have seen these poll results as extremely troubling, but not really anymore, given the reasons I’ve explained above. The problem isn’t usually with religion, but in how government sometimes favors religion over the individual.
Here are the results of another recent poll taken in New York State. Regardless of political allegiances, nearly 70% of voters from every region polled favored raising the minimum wage from $7.25 per hour to $8.50 per hour. Certainly more Democrats than Republicans agreed with the proposal, but even 58% of Republicans were in favor.
Just as with creationism (as pointed out above), the case against minimum wage laws has been definitively made. They don’t work. It has been empirically proven that minimum wage laws increases both unemployment and poverty. They adversely affect African Americans and teenagers the most. They quite literally shut people out of the workplace.
It can be argued that creationism is wrong and irrational, but in today’s modern society, you’d have a harder time proving that it was overly harmful. Contrast that with minimum wage laws, which are clearly very harmful.
My question is, why does one belief get so roundly derided by the public at large (even when the majority of the public believes in God), when the other belief gets pretty much a free pass?
In fact, it’s more than a free pass. People who believe in minimum wage laws are afforded an elevated social status. Don’t believe me? Go to work tomorrow and say the following: “Minimum wage laws hurt the poor, cause more poverty, and create unemployment.” What do you think the reaction will be? You’d be perfectly correct in saying it. Facts would be on your side. You could cite countless empirical studies and refer to most any economist (left or right) on the subject, and they would back you up.
Creationism is banned from the classroom, but incredibly harmful economic beliefs aren’t. Why?
I suspect it’s a bit of psychological projection. Voters may think they are being rational about a subject, but they most likely aren’t. As the rest of Bryan Caplan’s quote goes:
And if voters think that minimum wage laws are good idea, then minimum wage laws will be implemented, regardless of whether they actually work.
This is because voters have no incentive to be self interested in the voting booth. Votes are free, and a person’s chance of swaying an election one way or the other may be anywhere from one in millions to astronomical. This means that a person can vote socially and enjoy the social benefit of doing so.
If voters were really as self-interested as everyone insists, they would be spending much more time determining the truth of the matters they are voting on. For example, if a single vote cost a person $10,000 and only affected him and his loved ones, he’d probably get it right. Since votes are free, effect everyone equally, and have little to no chance of making a difference, you are free to skip self interest and vote socially instead. Minimum wage is popular, so that’s the way you go. Being against gay marriage is popular, so that’s the way you go.
As with creationism, it’s my opinion that even though people say they are enthusiastically in favor of minimum wage laws, they don’t actually believe what they say they believe. If minimum wage laws really did help the poor, helped alleviate poverty, and were inclusive for all minorities, they would be advocating for even higher wages. Why not more than $100 per hour?
Currently, we have very smart people like Sam Harris, Richard Dawkins, and Neil deGrasse Tyson advocating for income redistribution, the idea that robotics will eventually cause mass unemployment and poverty, a call for mass “investment” into NASA, and governmental health care reform.
These ideas go from pretty silly to economically horrible. Sam Harris shows little understanding or depth in his arguments. Neil deGrasse Tyson makes horrible errors in logic, and Richard Dawkins just gives us feel-good rhetoric without understanding the economic ramifications of what he’s espousing.
Compared to these ideas, creationism is the very least of my worries.
Filed under: Culture, Public Choice
Conor Gaughan makes a very good and salient point about Chick-Fil-A and the current controversy surrounding the company.
When gays get so angry about a chicken sandwich, it is because Chick-fil-A has given around $5 million to fight to discriminate against us. When we praise brave Eagle Scouts who give up their badges in protest of the Boy Scouts of America’s prejudice, it’s not about scoring political points; it’s because there are kids in dens who are being taught to believe that they are less than equal. When we rant about the pastor who preaches that gays should be thrown into a concentration camp, we scream out of fear. And our fears are justified — in the last seven days, a lesbian in Nebraska was carved with a knife, a gay man in Oklahoma was firebombed, and a girl in Kentucky was kicked and beaten – her jaw broken and her teeth knocked out — while her assailants allegedly hurled anti-gay slurs at her.
And right he is. This is precisely why I don’t give any money to Chick-Fil-A. It’s precisely why I gave up on the Boy Scouts and sent them back my Eagle Scout award over 15 years ago. I don’t like associating with bigots. I would rather not give them my time, or my money. To me, bigotry (whether it targets homosexuals, asians, African Americans, or any other group) is the most base form of collectivism.
Let me now write my own paragraph.
When people get so angry about the president, it’s because the office has given billions of dollars to prop up countries that actively kill homosexuals and other groups not in line with the regime. It’s because the president has admitted that it is pretty much he alone (along with a select, *secret* committee) that targets people for assassination by drone attack in various countries around the world. Thousands have been murdered thus, the majority of them innocent bystanders or children. To get around this, the president unilaterally pronounced that anyone near a drone strike was from now on labeled a viable military target.
We get angry because the United States has the highest prison population per capita in the world. The majority of which are non violent offenders. These people languish behind bars when a simple brush stroke from the president would at least set in motion the process of freeing them. So far, no word comes from the president. In fact, he has ordered the DEA to step up raids of marijuana dispensaries in states which democratically voted to allow them.
We get angry because this president has deported more people from the United States than any president in history. We get angry because GITMO is still open, and in fact is receiving a multi million dollar upgrade, despite his promise that the very, very first thing he would do would be to close it.
I emphatically make this point, and a dare anyone to refute it. The actions of the President of the United States over the past 3 1/2 years have had monumentally more ruinous effects on society than Chick-Fil-A could ever dream of achieving.
Chick-Fil-A actively gives money to people who spout hate? The president actively murders people half way around the world.
Now, let me ask a question. To all the people out there righteously angry at Chick-Fil-A. To all who are calling for a boycott (which I support), or encouraging municipalities and college campuses to ban them (which I do not support), or just generally chiding anyone they meet who dares eat at Chick-Fil-A (for whatever reason)…let me ask you…
Who will you be voting for this election?
Filed under: Foreign Policy, Freedom of Expression, Immigration, Politics
Comments: 1 Comment
In the It Doesn’t Mean What You Think It Means category, I’m having to add the terribly abused No True Scotsman fallacy. I’m starting to see this unfortunate abuse with ever increasing frequency.
Here is a short version of it [I know this isn't the full version, but for the sake of brevity...]:
Person A: No Scotsman dislikes haggis.
Now consider this:
Person A: All fruit is edible
What is the difference between the two?
In the first, a sweeping generalization is confronted with a counterexample. The response is to change the definition of the term. At first, a Scotsman is merely a native inhabitant of Scotland. Then when confronted with the counterexample, the term Scotsman mutates to become bound up definitionally with the practice of eating haggis, such that the very meaning of Scotsman is “one who eats haggis and is a native inhabitant of Scotland,” and only became so for the purpose of excluding that specific case.
What about the second? Why does it not suffer the same deficiency? Aren’t we changing the definition of fruit just to exclude fake fruit?
No, because edibility is intrinsic to the definition of the term fruit. (I am of course only speaking of the common literal use of the term. Not metaphorical uses like “the fruits of one’s exertions,” or scientific terms like fruiting body.) That’s why it must there be preceded by the qualifier “fake.” Eating haggis is not an intrinsic characteristic of the term “Scotsman.” When Person A says that all real fruit is edible, it is not the same as saying all fruit is red. To be fruit is to be edible.
I’ve noticed this tendency lately. Someone will make a strawman characterization of an opposing political view. Another will respond, asserting a correct or more complete definition. The first will then claim the second is committing the No True Scotsman fallacy.
Some clown with a website says, “libertarianism is always bound up in the continuation of systems of oppression such as racism, misogyny, christianism, nativism, and the like.” It is such an absurd caricature that anyone with even a modest acquaintance with its principles can see that those are not necessary and intrinsic characteristics of the philosophy. Not only that, but they are incompatible.
Someone responded by providing a list of libertarian writers who forcefully oppose those, and he is accused of committing the No True Scotsman fallacy, as if he is engaging in some ad hoc refinement of the scope of the term to include ONLY those writers.
If anything, it appears the converse is taking place. Instead of No True Scotsman, it is All True Scotsmen.
Person A: All libertarians are crazy fruitcakes who believe horrible things I find morally repugnat.
Filed under: Internet, Philosophy, Politics
To be clear, although I’d like to avoid the consumption of antibiotic-treated livestock as much as possible, I don’t think the FDA should ban it — a clear overreach of government power.
The lesson here, though, is that when a government agency is tasked with protecting the public interest, public-sector incentives make it a near certainty that the agency will eventually instead collude with special interests in working against the public interest. Instead of serving the one function that is clearly useful for industry oversight — education and advice to consumers who can then make a more informed choice — the FDA has become a legal arbiter of illusory safety.
If the FDA allows a product or practice, the public at large regards it as safe. If the FDA disallows something, society assumes danger. But instituting a top-down decision-making process to centralize the level of risk that consumers should be allowed to take leads to a system that serves nobody well. Life-saving drugs are barred from being used by people who are more than willing to accept their potential hazards. The sale of healthy food is criminalized because of the mere possibility that it could make somebody sick, despite the fact that people can and do get sick from the FDA-approved alternative. And, as shown in The Atlantic, because people trust that D.C. paternalists are looking out for them, they carelessly consume anything that the FDA has let slip through its otherwise iron grip.
A bureaucratic overlord is incapable of choosing the correct balance between risk and reward even for the people in his neighborhood, let alone for more than 300 million strangers scattered throughout the country. There is, however, an alternative, as Larry Van Heerden noted in The Freemam:
[Cross-posted at Shrubbloggers.]
Filed under: Corporatism, Drug Policy, Food Policy, Nanny State, Public Choice, Regulation
Comments: 1 Comment
There exist trenchant criticisms of the libertarian idea. Henry Sidgwick, in his The Methods of Ethics (seven editions, 1874-1907), provided a concise set of challenges to the doctrine as he understood it. Each of his points is well worth addressing. And yet when today’s major thinkers muster up their inner dialectician to rail against the freedom philosophy, they usually fall flat, get caught up in inessentials and absurdities.
Take Jeffrey Sachs. In “Libertarian Illusions” he attempts to unveil and discredit the ism behind the Ron Paul phenomenon. It’s a pretty lame attempt. Here’s his basic characterization of his target:
A well-educated liberal-leaning friend of mine gave the exact same rap years ago. He also referred to “liberty as a value,” so I’ve long pondered that odd phrasing. I think of liberty as a condition dependent on relationships (with other people). I don’t primarily think of it as “a value.”
I value liberty, yes, and will agree with Sachs that it is not my only value; I have many others. Nearly all freedom-lovers do. They have lives. Personal lives, communal lives, careers, hobbies, interests . . .
Yet, I do value liberty highest in the political and legal context. (more…)
Filed under: Philosophy
When I was a kid, I loved watching “Happy Days,” even at its shark jumpiest. A big part of the appeal was the adolescent power fantasy of Arthur Fonzarelli, a disco-era caricature of a 1950s motorcycle hoodlum-with-a-heart-of-gold. As the series progressed, Fonzie developed an almost mystical aura, becoming somebody who could make almost anything happen through the sheer power of his cool.
The Fonz could knock down doors with a slap of his hand, summon any girl with a snap, and most often on the show displayed his classic power of fixing the jukebox by banging on it. It’s a seductive fantasy that one might be able to fix a complex piece of machinery through an application of blunt force, without having to worry about the intricate mechanisms that actually allow the machine to work.
Unfortunately, this is the mentality that has reigned for decades in applied public policy.
Is the economy broken? Bang on it. That’ll get it chugging along again. Wait, that didn’t work? You didn’t bang it hard enough. Or maybe your leather jacket needs to be a little cooler next time. At any rate, it’s your fault. If you’d only smacked the economy the way that Fonzie showed you, it totally would have worked.
Economic prescriptions thereby stem from a non-falsifiable tenet of faith in a grown-up power fantasy.
This kind of magical thinking convinces many because it is accompanied by a veneer of rigorous thought. There are even equations! Surely, equations are scientific! But as economist Don Boudreaux pointed out at Cafe Hayek:
Keynesian macroeconomic variables lump heterogeneous goods and services into undifferentiated masses, no longer to be understood as the complex workings of a dynamic system of social cooperation. But just because you can gather a bunch of statistics and aggregate them into a variable doesn’t mean that the variable has a meaningful application to the real economy.
If you want to fix a jukebox in real life, a mechanic might be able to get the job done by tinkering with the machinery until each piece once again functions correctly. It’s easy for people who have a facility with physical forms of engineering to take a similar view of the economy, thinking that if only the right people were in charge, they could tweak policy here and there to ensure successful outcomes for everyone. Adam Smith explained why the economy can’t be successfully engineered in such a way:
Even though an economy can’t be planned, or even tailored, successfully from on high, that form of scientism is at least understandable. It at least takes into account a small measure of the complexity of decentralized economic activity, even if it doesn’t — indeed, can’t — consider the rest. Keynesian macroeconomics is far worse, shunning even the scientistic attempt to grapple with at least some heterogeneous microeconomic factors as being the causal source of economywide trends. Instead, they insist that policymakers expropriate as much cash as humanly possible and wallop the economy with it as hard as they can.
In the end, the economy is not a jukebox, and neither a mechanic nor Ben Bernanke in the coolest leather jacket ever made can save it from its turmoils. Instead, the economy is made up of hundreds of millions of people with billions of plans, many of which fail but some of which succeed. Nobody knows for sure which plans will pan out in advance — not the people making them, and certainly not their public officials.
Only by letting individuals, alone or in voluntary association with others, respond to local conditions with unique knowledge can the best plans be discovered, expanded, and replicated. That process is made much more difficult when they face continual interference from central planners who only pretend they can know what’s best.
[Cross-posted at Shrubbloggers.]
Filed under: Economic Theory, Efficiency, Government Spending, Market Efficiency, Regulation, Spontaneous Order, Unintended Consequences
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