I wouldn't brag about it. Certainly not if the topic were international macroeconomics.
Regardless of where you are politically, I think that it is safe to say that when it comes to the relationship of savings and the trade deficit, Brad DeLong has still got his head screwed on right. I'm with him 100 percent in this dispute.
It's on other issues, when he gets outside his area of expertise and goes into loony conspiracy theory, that he trespasses against Nugent and Mosler's comparative advantage.
My essay on technologies that perennially disappoint.
- Micropayments
- E-books
- Speech Recognition
- Video Conferencing
- Social Networking Software
- Virtual Classrooms
In this essay, I draw parallels between the way Congress treats economists and the way the inquisition treated Galileo.
Imagine that you were invited to a party held at a bar. You show up, and you give $5 to the host. The host welcomes you, slaps you on the back, and asks "What'll you have?" After you give him your order, he heads off in the direction of the bartender. You think that he's going to use your money to pay for your order. But in fact, he is using it to pay for a drink ordered by someone else, who already has been here for an hour. When he orders your drink, the host is going to tell the bartender to "put it on our tab."And just how big a tab have we run up with Social Security and Medicare? What is the damage? Well, it turns out that the present value of the unfunded deficit in entitlements has been estimated by Jagadeesh Gokhale and Kent Smetters to be $45 trillion. Even if President Kerry or Edwards turned the rich people in the country upside down, emptying their pockets of all their financial assets, homes, cars, and everything else, that still could not cover the tab that Congress has run up on our behalf.
I wrote a longer essay on the topic.
If students today wish to protest to demand more "relevance" in their education, then I believe that they have a case. How can they face the twenty-first century if their academic leaders are oblivious to the nineteenth and twentieth?
Update: The Speculist has comments on this issue, including an attempt to channel Isaac Asimov. Also, in case you missed the trackback, Freedom-to-Tinker invited readers to submit lists of science books. Interesting that they turn out for the most part to be a bit too theoretical for my taste.
Doc Searls linked to this old essay, which was new to me. It's a good statement of what I might call geekonomics. The context is a critique of Ralph Nader, written almost four years ago.
Consumers — those poor victims Ralph is still fighting for — are starting to discover what they really are, which is customers. If they don't like what they find in the market, well, it has never been easier for them to go make those things themselves, or to draw the attention of smart producers to the presence of demand. In this new age, the threshold of enterprise is so low it verges on zero. The thresholds of creation and innovation aren't much higher, which is why product and service choices spread wide everywhere supply hears demand. And what choice does supply have but to listen? If they don't, somebody with better ears will get the business....Consumers and workers are rhetorical relics. The Net is uniting both, and they're throwing off their chains. Industrial communism and capitalism are both terminal. They can't survive in a networked marketplace, where We the People means exactly what it says.
To me, Searlsian Geekonomics sounds more like Hayekian libertarianism than Deanian re-regulationism. I don't think that the Dean campaign deserved such a strong Geekbone. To me, the logic of Geekonomics is to lead one to be skeptical of the Democratic Wing of the Democratic Party.
Anyway, back to Doc's essay. Read the whole thing.
I look at Bush vs. Russert and conclude,
Decision-making under uncertainty means living with probabilities, not absolutes. Tim Russert needs to take a class in AP Statistics.
I really hope that whoever wins the election in November, he does not get as demonized by the losing side as Bush has been by the Democrats. That is, I hope that if the Democrat wins, the Republicans don't engage in rage-aholic behavior, and conversely.
Why do we value collective benefits so highly? I express my puzzlement here.
The term "company benefits" is an oxymoron. When the company gives you "benefits," it takes away more than that in salary. Why, then, do so many people like to work for companies with "good benefits?" For example, if you could buy health insurance for $4000, then why would you want to have $5000 less in salary in order to have health insurance paid for?
Maybe the one bone that Bush threw to libertarians was on Social Security. Here is my analysis of privatization.
The real benefit of Social Security privatization is never discussed by either side in the debate. That benefit would be that Congress could no longer arbitrarily raise benefits and thereby increase the obligations of future taxpayers. Today, Congress can pass a benefit increase, such as the recently-enacted prescription drug benefit for Medicare, without specifying how to pay for it. The incentive will always be to expand benefits to the point where the system is bound to collapse.
Someone named "Wichita Boy" left this on Daniel Drezner's blog.
I'm in the high-tech sector myself and have been for over 20 years. I've been laid off three times in the last three years, so I agree with you on the pain issue. One thing though is clear: the party's over. There is structural change occurring in the economy right now and it is occurring so fast that it is almost too fast for the human mind to comtemplate. Structural change is never pretty or pleasant for those to whom it is happening. The high-tech job market is moribund and will only get worse. Why? Moore's Law. The jobs which couldn't be moved to India in 1980, when I first learned Unix, because computers were so expensive and could only be bought by Americans, are being moved there in droves now. And there's nothing you, I, Dean, or Krugman can do to stop this. I'm sorry, but you got a degree in the wrong field at the wrong time. Why not study buggy-whip making? The breath-taking structural change occurring in the computer industry is the interesting economic story, one which can never be captured by a superficial reading of any of the statistics and one for which the facile and childish political attacks are completely irrelevant.
Forty years after Tom Wolfe's classic essay, I write that Las Vegas is still a monument to wealth with proletarian taste.
As Wolfe pointed out, the appeal of Las Vegas comes from the way in which it expresses many people's dreams about the American rich. To the typical tourist, every hotel bill, restaurant receipt, theater ticket, store price tag, and casino chit says: You can't really afford this. But other people can! And they have sex with young beauties any time they want!
Something strange and important has happened to the system of picking presidential candidates. Influence that was supposed to move from political insiders to the broad public has been captured by activists, pollsters, pundits and fundraisers -- not exactly the people the reformers had in mind. The new system removes the useful peer-group screening that once operated but fails in its promise to give power to the people...It comes close to being the worst way possible to pick a president.
But the more I read about the Internet and Howard Dean, the more convinced I am is that his campaign is a rerun of the Internet bubble in the stock market that popped almost four years ago. The proponents (of the dotcoms and Howard Dean) proclaim a new populist revolution that David Broder types don't get.
During the Internet Bubble, I was one of the old fogeys who argued persistently that the numbers did not make sense and that not all of the laws of economics had been repealed. In the same way, I think that sometime in 2004 Howard Dean is going to be marked down to a level closer to his fundamental value. And, just as in the case of the Internet Bubble, that is going to leave a lot of people who drank the Koolaid in a state of disbelief and denial for quite some time.
Obviously, it depends a lot on where you stand. Some folks think it's a wonderful, populist surge fueled by the Internet. To David Brooks, it looks like an abdication by the Democratic establishment. To me, it looks like Weimar Germany.
Toward the end of the Weimar era, the German center collapsed, and politics degenerated into a battle between Communists and Nazis. It was literally a street fight, with beatings overtaking ballot boxes.On the Internet, too, the center is relatively weak. Instead, the political Web sites that draw enthusiastic crowds include the left's MoveOn, whose name derives from the Clinton-era anti-impeachment mantra; and the right's Free Republic, once described by Jonah Goldberg of National Review Online as "knuckle-scrapers," suggesting a picture of ape-like creatures walking with one hand brushing the ground and the other holding up a political placard.
Imagine a cell phone that gave you immediate and wonderful orgasms, as well as other services, this would be a huge quality boost of sorts.
Everyone expects better sex, and they are willing to pay for assistance. Personal sex therapy has the potential to be a mass-market service, and, yes, the boundary between this and that of the world's oldest profession may turn out to be fuzzy.
With tongue firmly in cheek, I assess the Presidential race from a libertarian perspective.
Uncomfortable with Chinese bras, the boobs in the Bush Administration decided to put on import restrictions...
I think that the mobility of labor is a good thing. I want the U.S. to come up with a more rational approach to immigration.
In economic terms, replacing a law against foreign workers with a guest worker program in which guest workers are taxed is the equivalent of replacing a quota with a tariff. A quota system restricts supply by putting up regulatory barriers. A tariff system restricts supply by raising the price. Tariffs are generally more efficient than quotas.
Quietly but with breathtaking speed, India and its millions of world-class engineering, business, and medical graduates are becoming enmeshed in America's New Economy in ways most of us barely imagine. "India has always had brilliant, educated people," says tech-trend forecaster Paul Saffo of the Institute for the Future in Menlo Park, Calif. "Now Indians are taking the lead in colonizing cyberspace."
I am just going to quote, without comment, three emails that I received from someone when I tried to suggest to the intellectuals at Crooked Timber that they actually read my one of my essays before denouncing them as illegitimate. No one else took up the challenge. This chap sent me an email, I responded, he replied, etc. I am including only his emails--not my replies--but he quotes my responses almost completely.
Here goes--with my words (that he quotes) in italics.
1. Following the pleas I recently saw from you in several fora discussing the TCS matter, I consulted one of your essays at random.
From 'TCS: Tech Central Station - America Is Crazy':
'Anyone who believes that we can afford collectively what we cannot afford individually is delusional. Based on my experience with the reader's feedback, this delusion appears to be untreatable. However, I think it is important to point out this peculiar mental illness.
Suppose that a group of friends is getting ready to go out for dinner. At first, they consider a fancy restaurant, but then it is pointed out that the price of a meal there is higher than anyone in the group can afford. Somebody pipes up and says, "That's ok. We can just split the check." Does that make sense?'
Surely you know that the situation is that the price of a meal is higher than *some* in the group can afford. Your "example" is pathetic. You transparently to try to paint those with a concern for the well being of all as idiots. What a greedy little bastard.
Aren't you glad you encouraged people to critique your work?
2.
Thanks for the comment. I am in favor of providing health care subsidies for the poor. What I object to is the notion that a middle class that supposedly cannot afford to pay for health insurance on its own can somehow magically tax itself to pay for health insurance.
Tax the upper class. Why don't they figure into your calculations? Are your usual readers stupid enough to be swayed by such foolishness? Do you really think "big government liberals" believe what you claim they do? (I suspect that you do: your imagined opponents are all idiots who can't appreciate your impeccable logic.)
How about establishing a government health insurance system to eliminate the 30% overhead that "entrepreneurs" typically extract? Despite libertarian cant about government inefficiency, government insurance programs get by with less than 3% administrative costs. Seems that might make health care a bit more affordable. (I know that fact will be hard to accept, since it contradicts the dogma you adhere to, but it's a hard world.)
Sorry that the point was unclear.It was indeed. Are you sure the obfuscation was unintended?
Thanks for taking the time to read the essay.
You're welcome. Wish I felt it had been better spent.
3.
I think I take a more dynamic view of the world than you do. If we think of the economy as static, then using government to transfer resources to the poor may seem like a good idea.
Ah, the magic word: dynamic. That explains why your opponents are so stupid. They don't appreciate the DYNAMIC nature of things. Let's say it again and again: dynamic, dynamic, dynamic.
I think of the economy as a dynamic, learning organism.
Like fascists of all ages.
A lot of the learning is trial-and-error. Both private and government initiatives can be successful, but government learns more slowly because it is slow to discard failures. Thus, even if at one point in time it appears that you could make things more efficient with a government monopoly, in the long run the absence of trial and error and the inability to discard failures will cause the government takeover to be less efficient.
So how do we account for 30% overhead in the dynamic, learning, private
sector vs. the <3% overhead in for government insurance?
Also, in a dynamic world, taxing the rich is a much less attractive proposition. It means that you tax those activities--thrift, hard work, and risk-taking--that contribute the most to elevating the standard of living in the long run.
Living on a shoestring teaches more about thrift, hard work and risk-taking than speculating with vast resources ever could. When the wealthy "take a risk" and fail, it means they may not be able to vacation in Majorca this year. For the poor, it means often means death. When the wealthy "work hard" they're not likely to be buried in a mine collapse. When the wealthy are "thrifty", they buy the Lexus, rather than the Jaguar.
I know you think of that as "dogma," but in fact a lot of it comes straight from Brad DeLong's macroeconomic textbook, as well as other works on economic growth.
Well if DeLong says so, it must be true. Can we say "argument from authority"?
Who has an unfair advantage in the media? Glenn Reynolds links to Jonah Goldberg's offer to swap the right-wing media for the left-wing media. Glenn writes,
Can I have Maureen Dowd's column?
More VRWC stuff, on drug price controls, from TCS and from Brother Lowe.
VRWC = vast right-wing conspiracy
I forgot to blog this essay from last week.
I really do not care if Japan "wins" in consumer electronics, or China "wins" in civilian space exploration, or South Korea "wins" in broadband connectivity. What I care about is earning a good return on investment in scientific research. If "winning" in one particular area requires spending money beyond the point where it is cost-effective to do so, then I would rather be the loser.
The question refers to a school of economics. I argue that in the information age, Austrian economics has gained relevance in some respects but lost it in others.
(A) Imagine a restaurant in which the menu includes some items that can be cooked quickly, using stir-fry and microwave techniques, while other dishes such as stews and roasts require longer and more roundabout cooking methods. In a well-functioning restaurant, the extent to which consumers are hungry now or are willing to wait determines the mix of food that is prepared. The waiters deliver the right information to the chefs about how much of each type of meal to prepare. However, like a bad waiter, a central bank can enter the picture and deceive the chefs into thinking that people want more stews and roasts than they truly desire. This leads to a boom in long-term cooking, followed by a bust later on.(B) Imagine a restaurant in which the chefs have many new recipes to try. Most of them will not be popular, but some will represent successful gastronomic progress. When the chefs become optimistic, they try many new recipes, which means a boom. When the chefs become risk-averse, there is a slump.
For reasons that baffle me, the Austrians prefer explanation (A). Explanation (B) is closer in spirit to Keynes, the arch-enemy of the Austrians.
My experience both in business and in economics leads me to prefer (B). I have never been in a business situation where a decision boiled down to a choice between two projects with known, predictable rates of return, with one project short-term and the other project long-term. Instead, the typical challenge has been to guess whether a new business idea will be successful or not, given uncertainties about feasibility, marketing, technology risk, and other factors.
Sorry about the light posting recently. Meanwhile, here is a reply I wrote to the Rumsfeld memo raising questions about the terror war.
Overall, this list suggests to me three Key Results Areas: intelligence, diplomacy, and morale. We need intelligence in order to be able to track terrorists and to provide security against a mega-terror attack. We need diplomacy in order to reduce hate-mongering and achieve better co-operation in shutting down terrorist groups. We need to maintain morale among those who oppose terror and lower the morale of the terrorist organizations.
Another reply to Rumsfeld comes from Oliver North.
Schools that teach math and science and the abilities needed for modern life -- as alternatives to the madrassas -- are the long-term solution to the problems of Iraq, and the answer to terrorism.
I couldn't help but think it was something straight out of The Cluetrain Manifesto. Finally you see someone not just being a talking head. Someone actually thinking and not spinning.
I make such an analogy, following my Pop!tech experience.
I would argue that barriers against ideas are to politics what barriers against trade are to economics. An import tariff on goods hurts both countries, but generally does the most damage to the country imposing the tariff. Similarly, when one side puts up barriers to listening to the other side's ideas, then both sides are damaged, with the side that refuses to listen suffering the worst.Open systems win. The Angry Left, because it is closed-minded, is in no condition to govern. Barring a catastrophe at home or abroad, I doubt that it will be given the opportunity to do so.
I'm at poptech. In my hotel, the Internet connection is down. In the conference site, my battery runs out of juice. So not much posting.
Meanwhile, you can read my latest essay on populism vs. economics.
