Monday, November 30, 2009
Thursday, November 26, 2009
Monday, November 23, 2009
I propose that every bill that is voted upon first be read out loud, in its entirety, and in order to vote on a bill a congressperson must be present for, say, 90% of the reading. So not only do they have to learn how sausage is made, they have to have their eyelids pinned open and watch while each creepy element is put through the grinder.
I would love to watch around the time the budget is passed. "We're spending HOW much on WHAT?"
Perhaps I am wrong in thinking that public officials have shame, but I do know they value their time.
I also have at times thought the idea of a line-item veto would be useful, but I think that it might too often be used as a political weapon more than anything.
Any other ideas?
Saturday, November 21, 2009
I don't either, but I have a suggestion for those who do...Start eating them. Well, not quite. If private ownership of endangered species is no longer prohibited, and people figure out that animals like the spotted owl are pretty tasty, there will be an incentive for people to farm them and keep the species alive. Does anyone expect cows or chickens to go extinct?
I find it interesting that environmentalists seem more concerned with the survival of currently living plants and animals rather than increasing their population.
Wednesday, November 18, 2009
Buchanan's argument is made in a great 2005 article called "Cost, Choice and Catallaxy" (I hope the link works; otherwise you can just Google scholar it and it's on Google books). Before I present his argument, here's a nugget to chew on: "To cover costs and to maximize profits are essentially two ways of expressing the same phenomenon." (This is apparently from one of Coase's early articles.)
Buchanan and Coase agree on a whole lot; both think the reduction of transaction costs is valuable and neither believe in a zero-transaction cost world. Their disagreement comes from Coase being an 'objectivist' and Buchanan a 'subjectivist.' To Buchanan: "Coase is... an objectivist in the sense that, to him, 'efficiency' in resource use has an existential reality independent of the market exchange process." Basically, there exists efficiency outside of the subjective actors participating in exchange. On the other hand, Buchanan stipulates that we know trade results in a more efficient allocation of resources because we know that all voluntary trade is mutually beneficial - but we cannot say anything about transactions that do not take place. "Coase is able to place a positive value on the open trading process because it generates efficient results; I am able to place a positive value on the open trading process because only through such a process can we be assured that parties secure mutuality of gain." In the farmer-rancher example, we know that the outcome is efficient with the rancher paying the farmer for his damaged crop only because this transaction takes place. We cannot know how much the farmer values the non-addition of another steer if they don't trade; maybe the farmer would be willing to accept a payment to allow the steer, but he doesn't trust the rancher. This is a case where transaction costs can be lowered. Maybe he values his crop more than the added value of the steer. If the transaction costs cannot be lowered, no court can know if enforcing an agreement with these stipulations would be 'efficient.'
Or, in Buchanan's words "...the subjectivist cannot go beyond these limits [of mutual gains to trade] and discuss the prospective assignment of rights with a view towards minimizing transaction costs, even if possessed of an authority to do so." Or, "agreement remains the only test for efficiency."
There's a lot more in the essay; he doesn't just poke at Coase, he has a section where he posits a possible solution. And, of course, he agrees with Coase that we should kick poor old dead Pigou a few times for good measure. I think the most important aspect of this paper is that by using economic efficiency as a measuring stick for the law we're asking judges to be central planners, using information that they cannot possibly know to design efficient outcomes. We know how that usually turns out.
Thoughts? I came away from class yesterday thinking that cost-benefit analysis was a useful tool for the judiciary (though not to the monstrous level that Posner takes it) but I am now not so sure.
Monday, November 16, 2009
The former of these brings to mind a question - if Orstom's work is important enough to merit a Nobel, WHY have people in PhD Econ programs not read her? I think the answer lies in too much academic specialization. Specialization, as any basic micro class will teach you, is extremely important to the functioning of the economy. The same is true in academics, God forbid if to graduate with a PhD one need master not only their subject but many others. Now, Ostrom's PhD is in Political Science, not Economics. Therefore, it would seem to follow, the benefit from reading her work would be low for an Economist. Clearly, this is false. The reason is that all social scientists are trying to answer the same fundamental questions: how to people act, and how do people interact, given different environments? This is true for Economists, Historians, Sociologists, Political Scientists...
This means that overspecializing and only reading things by people who got their PhD in Economics means neglecting valuable resources.
I want to link to a great essay, titled The American Scholar, by Ralph Waldo Emerson. Here's a link. Emerson's prose is spectacular and his message pertinent. Being in a PhD program means becoming a Scholar first, seeking Truth wherever it is, and whatever you specialize in second. Otherwise, "the state of society is one in which the members have suffered amputation from the trunk, and strut about so many walking monsters, — a good finger, a neck, a stomach, an elbow, but never a man." (or woman)
(I got the essay recommendation and topic idea from McCloskey's "How to Be Human* *Though an Economist" I promise to post something and not mention McCloskey sometime soon...)
Sunday, November 15, 2009
1.) C. Romer has said that the government spending multiplier is 1.6. Government does not create wealth, it only redistributes it through taxation, debt, and inflation. This leads me to think that the multiplier could, at best in some magical world without leakages be equal to 1. Does perpetual motion exist in macroeconomics? If I am missing something in the whole multiplier calculation process, could someone enlighten me?
2.) Is all involuntary unemployment, with the exception of an individual being fired for incompetence, a result of government action? Examples are price controls, taxation, regulation, and labor contract enforcement.
3.) Is a system of voluntary government funding, a lottery for example, sustainable?
I know it's a short post...but I need to get back to the Macro hw.
P.S. Sam, thanks for inviting me to contribute!
Friday, November 13, 2009
Thursday, November 12, 2009
We as economists (or future economists) should be optimistic about most things not related to the expansion of government. If you listen to the popular idioms regarding economists - that they've predicted nine of the last five recessions, etc, heck, Economics's nickname is the Dismal Science thanks to the writings of the Reverend Malthus, and if you read the writings of the Reverend Krugman you might be inclined to think the definition is still valid. Really though, if you look at what Economics tells us, it's hard to think of it as anything BUT an optimistic science. The Fundamental Theorem of Exchange tells us that voluntary trade is mutually beneficial, which means that people, by the simple act of trading with each other can make everyone better. Ricardo teaches us that everyone - not just the rich, the powerful, the least ethical, so on, but everyone can be enriched by specializing in the thing they are comparatively best at. Economics even tells us that greed, that dirty vice that we're all supposed to resist, can be turned into a productive force.
Despite all of this, there is hardly a shortage of doom-saying Economists. If you took a poll of Economists writing for a public audience, they might say that the Mayans were unrealistic in believing that we would get to 2012. Certainly, when the economy is rocky people are more willing to listen to the people who think we're on a train to hell.
So what I want to do is highlight an economist who is telling us just the opposite - Deirdre McCloskey. McCloskey is, as maybe some have heard, my current academic crush. I recently read her latest book The Bourgeois Virtues: Ethics for an Age of Commerce. It is a book seemingly aimed at two audiences: first and more generally, it is aimed at those who think Capitalism is a force of amorality or immorality, and she argues that it is in fact conducive to a moral world. Her second target audience is the economist, especially the Utilitarian economist, and her goal is to preach the virtue of Virtues. Economics seems to have become a science where Prudence, or Utility, is king (if there is even anything else in play). She thinks we economists should remember and take into account ALL of the virtues when practicing our science.
She reaches back to Aristotle and St. Thomas Aquinas for these virtues, of which there are seven; the Pagan four, Courage, Justice, Temperance, and ol' Prudence, and the Christian three, Hope, Faith, and Love. As a side note, while previous sentence contains scary words like 'Saint' and 'Christian,' non-believers like me can take just as much from it (and heck, even Ayn Rand once said the only philosophers ever worth a damn were the three A's: Aristotle, Aquinas, and... you guess). Ever the economist, McCloskey actually has a chart of each of the virtues, with 'self vs community' on the x-axis and 'profane vs transcendent' on the y axis. So what does McCloskey qua virtue ethicist have to say to economists? Well, lots of things - this is a 600 page book and volume one of a conceived of six volumes - but the basic message is this: the economy cannot run on Prudence alone. Entrepreneurs require Courage and Hope and Faith (not just a low CRRA), workers and capitalists require a Love of their work and a love of those close to them, and a love of your fellow man doesn't always hurt. Society must be Just (something Pinochet didn't understand) and, yes, Prudence and Temperance are necessary for making things work.
Why the Bourgeois Virtues? Well, because we're all Bourgeois now. Even the detractors of Capitalism are all Bourgeoisie these days - how many Proletarians get to sit around for four years reading and learning how evil wealth is?
So let us Economists stay optimistic (Hope + Faith + Courage) and convince others that our science is anything but dismal.
Wednesday, November 11, 2009
Monday, November 9, 2009
A homemade sign by my house advertises, “Free truck and two men. $49!” I could use a free truck, so I called the number.
“Hello?” A man answers. He sounds slightly distracted. I hear a TV and conversation.
“Hi, I’m calling about the free truck.”
“Oh, yes!” I have his attention now, “a free truck and two men to help you move, only $49 for one hour.”
One hour? That’s not enough time to get to IKEA and back. “I’m not moving,” I explain, “I just need the free truck.”
“No, no. You pay for the men, and then you get the free truck.”
I think I’m beginning to grasp the free truck concept. “Ok then, tell me about the men. Are they tall?”
“They are tall enough to move anything in your house!” he enthusiastically assures me.
“I’m not moving,” I remind him. “Are they dark? Are they handsome?”
“Are you joking with me?” I sense some frustration. “Ya Allah!”
“Ya Allah,” I agree, a bit frustrated myself.
“You speak Arabic?” His tone changes suddenly. We are soon to be friends.
“Where are you from?”
“California.” I explain, “I learned Arabic in the army. Where are you from?”
“My favorite professor is from Lebanon! Someday I want to visit there.”
After telling me about some of the places I must see, my new friend eventually gets back to the original conversation. “For you,” he generously offers, “a free truck and one man, only $35.”
We’re finally getting somewhere. “But,” I reason, “if the two men are $49 and the one you’re offering me is $35, the other must be only $14. I’ll take him.”
He laughs, “You are very smart. Ok, $25.”
Now, I’m trying to be an economist, not a mathematician (as my other favorite professor can attest), but things don’t seem to be adding up, so I calculate aloud, “Two men together are $49, but one at a time they are $35 and $25 – a total f $60. Are you telling me you have a bulk discount on men?”
Friday, November 6, 2009
Thursday, November 5, 2009
First off, I only voted for three of the positions: governor, attorney general, and house of delegates. I guess that last one is like the state legislature or something? I really have no idea.
Well, leading up to the election, I was unsure as to whether I should vote for the D or the R guys. On the one hand, D is pretty close to B, which is the first letter of my first name. But on the other hand, R *is* R, the first letter of my last name. In the end, I chose to go for the R guys, and for reasons other than the first-letter-of-my-name thing.
Bob McDonnell’s competitor had put signs up all over Fairfax saying something to the effect that Bob wanted to get rid of schools. I’m not a fan of public schools, so if Bob is against them, he’s my guy. I just don’t understand why his Creigh Deeds would have gone around paying for a positive advertising campaign for his election competitor.
I voted for Bob McDonnell, and he won by 6%. It’s a good thing I voted for him, because without my vote, he would have undoubtedly lost.
The race for attorney general had a similar story. The guy running against Cuccinelli (I don’t even remember his (or her) name) has been playing ads all over TV saying how Cuccinelli once said that he wouldn’t enforce laws he didn’t agree with. Wow! What a strong endorsement!
Seriously, these Democrats are horrible at the PR game. You guys are supposed to advertise negative qualities about your competitors (or at least talk up the good points of your own business). No wonder Republicans owned the elections last night.
Well anyway, I voted for Cuccinelli. This was a much closer race — Cuccinelli only won by 1%! My vote really counted here.
So in case you’re not keeping track, my vote has counted in two of two cases.
However, there is still the general assembly election. There was no R in this race, only a D. Having run as a third party candidate in the past, I can empathize with the lower-ranked parties. So I voted for the Green Party candidate, Anna Choi. I mean, I like the color green, so why not? And I can tell by her name that she’s Asian, and I like Asians.
Furthermore, her website claims she is a fiscal conservative… which in conjunction with being a Green means she probably just favors raising taxes really high to offset government spending. But that’s ok, because I learned recently from doing my macro homework that in a Keynesian world (which we live in), an equal increase in government spending and taxes results in a net positive effect on the economy. What’s not to love about this kind of fiscal conservatism?
Unfortunately, Anna lost her bid to serve us. It went to the D.
But I refuse to let one bad race prevent me from enjoying my democratic freedoms in this country and knowing that, at the very least, my vote counted in two of the three races.