Articles - Journaltalk

John, I do not believe you understand my point. Computed as discrete changes, which is what you do, the percentage difference of the premia (college versus high school) is not equal to to the difference of the percentage premia (college versus base minus high school versus base). You are implicitly using a false assumption; it is the same false assumption made by the Mexican government in the example I cited: that the difference of the percentage changes (+50 – 33.3) is the percentage change of the difference. It causes you to greatly overestimate the education premium.

Hmmm. I entirely agree with the premise of this article: Uber is obviously an economic improvement and all efforts of the incumbent cartel to stymie it should be resisted. Admirably, all of the economists polled, regardless of political orientation, agreed. And indeed it would be nice if some of the more progressive of them spoke up about this. And any article taking Krugman’s ideological blinders to task is worth reading.

But all that said, it seems that faulting left-leaning economists for remaining silent about Uber on their blogs just goes too far. Maybe they are afraid of ideological reprisal and so keep quiet. That would be shameful.

But maybe they just feel that they have nothing particularly important to add to the economist consensus on Uber? That seems quite possible. For among the silent, are such as David Friedman, Greg Mankiw, Robin Hanson, and Steven Landsburg.

Would anybody suspect any of these of being afraid of left-wing political reprisals for as anodyne a policy as supporting Uber? Any of their readers can see them voluntarily waving much bigger red flags at Progressive bulls on a frequent basis.

In fact, their silence is some evidence that they just agree with the pro-Uber consensus. For any of these worthies had convinced himself that for some curious, clever reason Uber was the rare example where they oppose liberalized markets, they would have been sure to blog about it.

So, if we can attribute the silence of “conservative” econ bloggers to blameless reasons, why not give those on the other side the same courtesy?

That said, influential progressive Econ bloggers should be particularly encouraged to voice their support for Uber, even they have nothing novel or clever to add. A few such posts would do a great deal more for the common cause, than a hundred eloquent posts by econ bloggers on the other side of the spectrum preaching to the choir.

‘According to Paul Krugman (2010c), our paper—critically assessing the analysis of the U.S. economists in the 1990s and appearing in January 2010—was “spectacularly ill-timed.” We do not concur.’

Five years after this opening line, I eagerly await the authors’ follow-on article.

D’oh! It did happen, it was a bad idea, this largely political idea is clearly is failing. In any case, time and time again, austerity in a downturn is a bad, wrong, no good idea.

Are you aware of English language resources which make apparent the main schools of thought and areas of unresolved discussion in current religious and/or secular debates in Islamic entrepreneurship and/or finance?

Thanks for your comment, Eric! Let’s stick with the education example (discussing sin might take us too far from the original point): I think the concept of imperfect information solves the problem only partly.

Would you agree there is difference between a state ignorance in which “I know that I don’t know” (type 1) and a state of ignorance where “I don’t know I don’t know” (type 2)?

I think traditional economics deals only with the first type – people are rationally ignorant, because they decided they will not obtain further information on a certain problem. However, in the second case (type 2, “I don’t know that I don’t know”) one never makes such a decision – one is ignorant without knowing that one is ignorant (which will be the case of the malnourished person).

So, the point here is that an economist looking at the problem of an ignorant person would assume ignorance of type 1 (because his models do not allow for any other type), while in reality the person would suffer from ignorance type 2. And the policy conclusions will be different in each case: while in the first case, adding more information (in form of education) would not improve the situation of the (rationally) ignorant person, in the second case such improvement is possible.

Is the point clearer now?

To be sure, the birth of a child brings joy, but how is that incomparable with other sources of utility? People consciously make tradeoffs between having children and having more money for such things as vacations. And I wouldn’t say they have made the wrong tradeoff, if it would be their seventh baby and they can’t afford to own a car.

“My worry is that our methods may be encouraging us to see human beings as pieces on a chessboard whose motions and working we purport to understand. This in turn makes us prone to become men and women of system, with an overconfident vision of what will serve to improve the well-being of the chessboard we are managing.

The religious view, and the Smithian view, of man encourages a humbler approach to human welfare. We are complicated creatures, we human beings. The road to improvement isn’t as well mapped as we might like to believe. Recognizing the complexity of human motivation should make economists, and others, more humble about their ability to intervene in private choices in a way that is welfare enhancing.”

I like this point, but I don’t think it’s our methods that encourage us to think we know what government interventions are good for people. Rather, that’s the default way of human thinking. It takes a couple years of economics training to get someone to realize that the price controls he thought increased human welfare don’t work out as he’d thought they would.

In a diverse society, however, religion can help with that too. If you are religious, it is impossible to pretend that everybody agrees as to the summum bonum. You can no longer say, “Well of course littering is immoral. Of course it’s better if people are free from guilt. Of course there’s nothing wrong with putting a sick old person out of their misery. Of course nobody should listen to Rush Limbaugh. Of course everybody should go to church. Of course someone should be allowed to smoke marijuana.” You have to argue about what the goals are, and you may develop more appreciation of compromise and healthy doubt as to whether it’s a good thing to allow the people who control the government to impose their own preferences as to these various issues.

I do not share Eric’s confidence in perfectly and justly adminsitered providence.

If we want things to be better on earth, I do not think we should wait for providence. We may have to wait for a very long time, and poor, starving and vulnerable populations worldwide need out compassion and support today, not whenever providence thinks it is time to do it.

I found this to be a stimulating and useful article. However I find two major shortcomings. Firstly it could provide more substance to illustrate various religious taboos. Secondly it could examine beyond hard religion and look at social taboos/ tabus as projected by groups less formally spiritually aligned.

I am partial to the perspective shared by Harari in his recent book “Sapiens” (and before that by others) that like most human concepts and beliefs, religions are simply self-serving myths that either evolved or were constructed for various reasons – control and power, security, resilience, etc. Most of the mainstream, monotheistic religions – which the authors focus most closely on – arose out of various distillations of incorporated belief systems. For instance the Abrahamic faiths – Judaism, Islam and Christianity incorporated various beliefs and myths from other sources, as reflected by various branches of those religions. For instance Catholics consume fish on Fridays but Protestants are less likely to. Alligator is considered a fish by New Orleans Catholics, reflecting one of many local belief systems. These various belief systems are largely reflected by the various sects of the Abrahamic (and other) religions.

What is interesting for me, as a scholar of food, agriculture and diet, are the prohibitions, which can also be expressed as taboos in other non-Abrahamic cultural / spiritual beliefs, on consumption of various varieties of food, or the mixing of various foods.

This is particularly strong in the Jewish Kosher tradition, around shellfish, mixing of milk products with meats, consumption of pork and so on.

This prohibition is echoed in the Islamic fatwa against the consumption of pork as haraam (forbidden). If we consider why these particular foodstuffs have been forbidden, we can propose that there are good reasons for doing so. Pigs have long been considered dirty, although this is largely a condition of their domestication and scavenging nature. Imagine also, in the Middle East, pork would have been more likely to spoil, given the associated pathogens from its living in close association with humans, exacerbated by the hot climate.

Further, as scavengers pigs are prone to infection by various helminths (worms) such as tapeworm and roundworm, which are readily passed onto those who consume their meat, weakening and often killing people if not treated.

It is also interesting to consider the fact that pork, is said to be closest to human flesh (in Polynesia humans were called “long pig”) when cooked and consumed, so a further, obvious reason for taboo can be postulated.

Considering shellfish, why would these be forbidden? Look no further than dinoflagellate toxins (caused by so called red tides, a fairly common global event) that can cause paralysis and death – and are impossible to detect without modern laboratory equipment. Shellfish are also readily prone to spoilage if not kept properly without refrigeration. Crustacea such as crayfish, lobster and prawns are bottom feeders, literally and scientifically, consuming detritus at the bottom of the food chain. Crayfish and lobster, for instance are noted to congregate around sewer outfalls and are also prone to rapid spoilage.

Cholera outbreaks are associated with the consumption of raw shellfish, particularly in Peru, Chile and Ecuador (ceviche, etc.) where this is a common practice. So again, using religion to reinforce this absolute interdict, followers are protected and are more likely to survive than those who do not follow that religious belief. This provides an evolutionary as well as an economic advantage. Because the population will be less prone to infections, plagues or parasites, it is less likely to be unwell and able to be economically productive and to be able to contribute to the community, the church, the faith, etc. Therefore an evolutionary advantage emerges from such an interdict, providing increased resilience or a tendency to reinforce antifragility in individuals, in communities and in religions, benefiting all who subscribe to these interdicts. So while the religion may be based on a myth, the related interdicts and taboos reinforce the power of those who have logically and experientially curated and evolved the heuristics to improve on the lot of those who follow these shared belief systems. Those on the margins or those cast out or rejecting such systems would become prone to genetic and economic erosion and extinction.

I thought I would share these considerations with the authors as I believe they provide some useful practical examples of application of the sort of heuristics, expressed as a religious taboo or interdict, able to confer practical and real social advantages. Given the nature of this forum I don’t really want to go much further beside say that these examples can be extended to other foods, seeds, poison fruits, mixing of dairy and other foods, ways of food storage and treatment, etc. that have bearing on the how risk and religion are managed and analysed.

Shouldn’t the Okun regressions be done using IV estimation since U and GDP are endogenous?

I’m amazed that an article this nasty—‘Mistah Friedman’ the slave owner?—and easily shown to contain a false assertion that Friedman was a supporter of Augusto Pinochet, is even allowed into a legitimate scholarly publication.

Galbraith couldn’t bother to check his facts by reading ‘Two Lucky People’ before attacking Friedman? The editors should not allow his slander to go uncorrected.

Taxation may have indeed been higher in the 1950’s than it is today, at least with respect to Federal income taxes, but I must respectfully disagree that the 1950’s represented an era of greater regulation.

First, I would point to the greater number of laws that exist now (at Federal, State and Municipal levels) as compared to 60 years ago. Second, the number of occupational licenses that exist now is substantially greater than in 1950, and for licenses that did exist then, the barriers to entry are now much more expensive and/or difficult to overcome. Third, the relative size of the workforce employed by the government sector (Fed, state and local) is much greater now than it was in the 1950’s. More government employees, as a rule of thumb, leads to more government intervention in civilian affairs. Although I cannot measure it empirically, I would also submit the modern regulatory systems are protected by layers of complexity and incomprehensibility that would leave the average businessman of the 1950’s mortified. Modern day business can only survive by hiring vast armies of lawyers, accountants and consultants skilled at navigating the rules. In fact, these regulatory obstacles have successfully protected the biggest market participants from facing any serious competition from new entrants into the marketplace. If there is to be found any increase in liberty, it is within these regulatory moats, where the biggest businesses might enjoy increased freedom from marketplace competition.

George J. Stigler is criticizing that Adam Smith confine the self-interest analysis to the economic area. Even in Wealth of Nation, many examples testified that interest groups are pursuing self-interest by influencing public policy. It is not enough for Stigler who expect Smith “use self-interest as a general explanation fo legislation”(268).

Several Chicago economists have wrote about the inconsistency of Adam Smith’s point of views in Theory of Moral Sentiment and Wealth of Nation. Stigler intended to contribute his explanation of it, however, he overlooked the organon build in Theory of Moral Sentiment which has already explained the self-interest comprehensively. In Wealth of Nation, Smith avoid the non-commercial discussion just because he would like to focus on specific section, not that he fail to “consider systemically the role of self-interest in legislation”, as Stigler puts it (269). In Wealth of Nation, Smith merely treat political institutions as those “facilitating commercial society”(Adam Smith 214). Stigler judge him too soon “without recourse to the Theory of Moral Sentiment”(Viner 201). If he refer TMS, he’ll find it accounts for the the question he challenge Smith.

Beside, According to Stigler, failures are occurred sometimes when self-interest guides people’s behavior (Stigler 275). Stigler also lists several categories of failure. I: facts and anticipate; II: lack of self-serving conduct; III: fail to provide correct amount of goods (Stigler 275-276). He attribute most of the above to incomplete factual information. He frame the economic model of knowledge and information onto the Wealth of Nation but he should have developed further.

Miss Paganelli addresses an important topic among Smith scholars in her article, that of the Das Adam Smith Problem. There is a perceived contradiction between The Wealth of Nations and Smith’s less often read work The Theory of Moral Sentiments.

I wish to provide some clarification on a point that Miss Paganelli addresses indirectly. Theory of Moral Sentiments is the umbrella under which Wealth of Nations sits. When Smith addresses the role of sympathy he emphasizes its relevance among equals (see I.III.35, II.II.7, II.II.9, and VII.IV.26 as examples). The role of institutions is passive as opposed to active among equals. In the WoN the role of institutions is active. In fact, WoN can bee seen as Smith’s indication that involving the government, or dealing with a superior-inferior relationship as opposed to among equals breaks down the mechanics of sympathy.

On page 381 in Miss Paganelli’s closing paragraph she captures the key distinction to be made between TMS and WoN, that Smith shows the beneficial elements of self-interest in TMS and the dangerous side in WoN. In TMS our self-interest is checked by institutions and sympathy. In the WoN the institutions become tools for our self-interest.

“Das Adam Smith Problem” has been used to describe a fundamental inconsistency between Adam Smith’s two books, The Wealth of Nations and The Theory of Moral Sentiments. Many have claimed beginning with German scholars that the two books seem to present different views of human nature, self-interest, and the ultimate social result. Paganelli suggests contrary to the Adam Smith problem, both books account for self-interest and the Adam Smith problem never existed if we understand public choice concepts when reading the WN. Of the two books TMS demonstrates a much more favorable account of self-interest than WN.

The primary idea of the article is that the Adam Smith problem can potentially be solved by paying attention to the behavior and role of institutions. The two books present different mechanisms through which self-interest is restrained. In TMS, the restraint is natural. An individual will restrain excessive self-interest and its consequences are beneficial. Self-interest demonstrates the virtues of prudence, benevolence, etc. In the WN, the natural constraints break down because of the role of government and the incentives of bureaucratic and legislative officials. Government perverts the natural mechanisms that normally keep self-interest from exploiting the populace. The consequences can be ruinous.

TMS presents a picture of self-interest more closely resembling self-interest as traditionally presented in economics. When we pursue our individual self-interest through virtuous actions, both the individual and society are happier. The TMS version of self-interest is kept in check though our desire to be both praised and praiseworthy.

Paganelli introduces a few misinterpretations of Smith that serve as a distraction and detriment to an otherwise insightful article. She takes her premise to an extreme claiming that in the WN “self-interest cannot successfully constrained, leaving individual and society more susceptible to its abuses” (372). In TMS “self interest is always successfully constrained” (373). These claims ignore Smith’s acknowledgment of a proper role for government such as requiring party walls between adjacent dwellings (WN II.2.94), and self-deceit in TMS. She misconstrues the TMS China earthquake example suggesting that “we would naturally choose to save our little finger and snore placidly through the night” (372). Also in TMS self-interest is constrained when there is an equal-equal relationship, but not necessarily with a superior-inferior relationship. This essential point would have provided an important context to the entire article.

I agree with Mr. Byrd’s comment, but I would like to add what I consider to be the true significance of Dupont’s letter.

Much has been made of Adam Smith’s so-called concessions to State intervention. If you seek to use Smith’s work to advance the liberty principle you are met with resistance from those who declare that Smith was a realist, and that he favored government control of this or that area of economics life, e.g., the postal service, libel laws, differential taxation, etc. Thus you are left without a consistent system to defend against myriad ad hoc violations of the principle.

It is true that Smith included in his books, especially in The Wealth of Nations, more than a handful of concessions to government. Many liberty-minded readers would like to think these are anomalies, or that Smith had some ulterior motives in including these concessions.

Dupont’s letter reveals a possible motivation for Smith to include these concessions, even if he would not actually support them. Dupont asks Smith to “forgive the deficiencies of my work that are not unknown to me and some of which were voluntarily committed.” Is it possible that Smith engaged in the same strategic writing? If Dupont was willing to be so candid with Smith regarding his own work, it seems to me very likely that it was an accepted practice of those hoping to bring wide-ranging reform. If Smith was “neither … read nor heard,” he would have no effect on policy or public opinion. If he was “denounced and estranged from the government itself” he risked prolonging “by a decade ignorance and its deadly effects.”

If this was the generally accepted practice of the reformers of the day then I believe that many of Smith’s concessions can be read as an attempt to avoid “assaulting [the] eyes [of the public] with a bright light,” and “reconstitut[ing] their blindness.”

I certainly see this same pattern among randomista researchers in studies on interventions to improve access to and/or quality of health services and products .

The need to answer “big questions” or, pretend to policy relevance (and levels of external validity RCT they lack) means that RCT papers in health very frequently have conclusions that go (way) past the statistical findings. And to generate these conclusions, researchers mostly just pull up some scattered references to support their own biases.

A common one in health is: our analysis confirms that demand curves slope downward…SO government should provide (whatever) for free through it’s facilities/ supply system. So, similar to what James outlines wrt the Poor Econ chapter and education RCTs, there is a huge leap from the studies’ findings to policy prescriptions – and similarly manifesting a public-sector-solution centric view of the world (not to mention ignoring scarcity of resources…perhaps an even worse sin for economists!).

Thanks James for taking the time to elaborate these issues.

The misuse of significance tests in econometrics is part of the larger problem of formal criteria that have been imposed and must be respected if one wishes to publish, at least in a mainstream journal. For example, in macroeconomics one is expected to base ones model on the assumption of a rational, utility maximizing representative agent, even though there exists a vast literature that demonstrates that the representative agent cannot be justified by any plausible set of assumptions. The requirements change as research programs change, but they never have a scientific justification. In the post-WWII era for example, it was thought that a macro-econometric model, to be of any use, must have hundreds, perhaps more than one thousand equations.

I believe that the slave like adherence to absurd formal criteria is a consequence of the recruitment practices in economics over essentially the past half century. There was a vast expansion in the number of professional economist, while the principal criterion of admission was some degree of mathematical competence. A specific interest in economics was not required. Many who became professors of economics must have chosen this career in the same way as one chooses to become a dentist or a lawyer. Their education consisted essentially of learning to solve the problems that they were presented with, without much thought as to their relevance. This is how they continued to work as professional economists. If they had learned how to formulate and estimate, say a rational expectations model, including significance tests, then that is what they did and were expected to do in order to be able to publish in mainstream journals.

I think the problem viewed this way is rather simple, but unfortunately unsolvable, at least over the foreseeable future.

Claude Hillinger

And which econometrician will regard this blatant misrepresentation of the facts as proof that the economics profession has been hijacked by corporate speaking engagement fees and simplistic right wingers who have a criticism for everything, but reverence for only the practice of doing less (so the ‘free market’ can work its magic, don’t you see?) I really hope the state of economics improves to the point where people like Cushman and Mankiw will be held to account for their lies, but remembering Nial Ferguson’s hack journalism in Newsweek reminds me that their are lots more inane fact manipulating liars to go through first. Oh yeah, and Phil Gramm has something to say about the economy in the WSJ. I assume its not that we are still in a “mental recession” as this “nation of whiners” was in 2008? Jeez, the fact these people even get writing gigs anymore makes me want to steal things from 7 eleven.