Monday, August 24, 2009



You know, it would really make my life easier if all of you readers would get your brother to start reading. Then I could quit my day job and blog full time. As it is, I keep accumulating interesting tidbits until the width of each tab on Firefox bumps up against the Heisenberg uncertainty principle, and I am forced to issue another "Potpurri"...

* David Gordon saw my debate with Jeff Madrick, and sent along his review of Madrick's The Case for Big Government. Quick! Guess whether David liked the book.

* Robert Wenzel (who saw it on Mankiw's blog) emailed me this pretty funny description of publishing a negative Comment. People often ask me if I miss academia. Skim the link and guess my answer. BTW, I had formed some opinions about the type of guy who would write such a thing. I figured he had to be tenured, probably very well published, and also a bit odd on a personal level. Here's his homepage; you tell me.

* Yuri Maltsev actually lived under socialized medicine. No thanks.

* Scott Sumner proudly linked to this puzzle on opportunity cost, and explained that he (Scott) knew the "right" answer. But Scott, the answer is, cost is subjective and you can't make interpersonal utility comparisons. It doesn't make any freaking sense to ask how much something cost (in the opportunity cost sense) for Mary versus John. True cost isn't even realized, as Buchanan showed. Somehow I don't think that's what our Benthamite friend Scott had in mind. (Fortunately he is in China and so can't impose costs on me.) (And yes I know that you can't "impose costs" on somebody else.)

* Does Arnold Kling know he's an Austrian macroeconomist? Search your feelings, Arnold. You know it to be true. Join me, and together we will rule Jackson Hole.

* Not sure where to put your money? Stocks? Real estate? Gold coins? Postage stamps? I know, federally guaranteed green bonds! Woo hoo!

* Here's a great example of how you can prove anything you want in economics/finance, in order to make your boss happy. Incidentally, when I get suspicious of the BLS' inflation numbers, it's not that I'm imagining the analyst grunts doctoring numbers. No, I think they know what the "official story" is, and they (perhaps subconsciously) make decisions on how to adjust for hedonic changes, how many years back to look when calibrating the seasonal adjustment, blah blah blah, so that the answer is what their bosses want. You don't have to be pure evil to behave that way at work, and things (especially in economics/finance models) are so arbitrary that it doesn't even feel like lying. You don't view yourself as falsifying data, you rather view yourself as the hero who comes up with the best way to illustrate the story the team is working on. If you are shocked and don't have any idea what I'm talking about, then good for you. But I think anybody who has worked in an office knows what I mean.

Bob, Actually that was a mix-up. I could not find the opportunity cost question on the internet. All I could find was a blurb that said 79% of economists got it wrong. The question they reported is different, and seems rather silly to me. Sorry for the mix-up.

I had assumed the question was world famous by now, like the Alan Sokal hoax. In my mind it is the single most embarrassing thing that has happened to the economics profession in my lifetime. Far worse that not predicting the recession. Why is it so hard to find on the internet? Can anyone help me?
(And yes I know that you can't "impose costs" on somebody else.)

Really? So if I run a chemical plant, and dump the waste on your lawn instead of paying for safe disposal of the waste, that's not "imposing costs" on you?

(Oh, right, I forgot, I'm sneaking in a value judgment there, right? How dare I assume you had a right not to have 2,3,4-tri-chloromethylethyldethyl dumped on your lawn! It would be, *sigh*, such a hassle to dispose of the chemicals some other way, and then all the messy "prosecution", blah blah blah.)

Now I know why your head isn't on straight when it comes to pollution!

Do you have a delicious account? Maybe you can save time by just adding links of interest to delicious and those interested could just add you to their network and see whenever you've added a new link.
Scott, I still don't know what puzzle you mean.


Silas, you can impose harms or damages on somebody else, not costs. A cost is the subjective value you place on what YOU give up when YOU choose something. So only you can incur costs.

This is an anal economic theory point, not an opinion about externalities.


Martin, no I don't have such an account, and anyway I would then deprive 85% of the world of my brilliant commentary.
(I know the Sokal hoax Scott, but not the economics thing. I was not one of the polled economists.)
Oh, right, I forgot, economists defined away that difficulty. My apologies.
The famous Arrow-Debreu proof of general equilibrium of 1954 was rejected by one of its two reviewers, and ALL readers of the paper -- except the reader who rejected it -- admitted that they hadn't read the paper carefully, and flatly confessed that they had a prior faith in Debreu's mathematical genus -- and that was the basic ground for their belief that the paper deserved publication.

The paper was published without correction, and without acknowledgment of the negative review.

Weintraub recounts the details in one of his essays.
Re "proving anything you want" ...

It's not an accident that Krugman's formative experience as an economists was in the social construction of BS data & "projections" for the White House and other governmental bodies ...

His BS statistics in the NY Times are not the work an an amateur.
Re "proving anything you want"

The deep irony for the profession of economics is that guys like Friedman and Samuelson at one time thought that socially constructed "data" would settle all questions, ending debate and forcing everyone to agree on every question.

Samuelson openly admitted he was all wrong about what econometrics and "data" were going to achieve.

Friedman never gave up on the fantasy.
Hey Silas,

I was so mad at Tyler and Alex this morning that I literally could not read their actual posts. I'm not exaggerating; when I saw that they were actually giving economic reasons for the government bailing out banks and offering health insurance, I couldn't process their words anymore because my mind was racing for an analogy to rip them.

So I'm assuming that's what happens with you, when you read anything I write on climate change. OK I can't judge you since I do it myself with MR.

However, in this particular case, you are being silly. I'm not saying (here) that "there's no such thing as someone violating the property rights of others." What I'm saying is, it's incorrect to call that "imposing costs on them."

There's nothing in this thread about climate change, save what you brought in. You could just as easily have said, "Oh, so when the government tells a restaurant they have to install a wheelchair ramp, that's not imposing a cost?! Everyone, Bob's for the ADA!!"
Bob, first of all, when it comes to responding to someone's arguments without reading them, you pretty much wrote the book. Can you even remember the last time you *didn't* just pattern match my arguments on global warming to the nearest socialist strawman and then condescendingly refute it?

So spare me.

If you think that all I've done here is to swap out your words with the wrong meanings, then you're just not listening.

What I've established is economists let clever labeling exempt them from addressing serious issues. If you want to say that "passing costs on" has a specific meaning, fine. But once you pass the *lay* meaning of that term up through the transformation of economics terminology, you're still left with a valid criticism (which is that cost accounting in economics misses a serious issue), *and* you've revealed economics to use terminology plainly at odds common usage or usage in any other fields.

That would still be okay; it would just mean that any economic argument would have to be followed by an explicit re-transformation back to "normal" terminology, which I've never seen economists do. So it's plainly clear the field of economics is muddying its own waters.

Finally, unlike how you treat me, I have *never* equated admissions favoring the other side (like "the environment is scarce") as an endorsement of the other side. So even if I did accuse you of not thinking the ADA imposes costs, it doesn't follow that I would accuse you of endorsing the ADA.

If you're not going to play fair, don't bother playing.

Again: your very way of thinking precludes serious handling of pollution and many state interventions.
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