Showing posts from February, 2013

What Is This So-Called "Air" Thing of Which You Speak?

I put on the radio and found I was in the midst of a talk show. Two guys are agreeing that the Hagel confirmation is a defeat for the Israel Lobby. One Margaret Hoover (who turns out to be the great-granddaughter of Herbert) pipes in and says, "Israel lobby? I don't even know what that means!"

Well, Margaret, if you really don't even "know what that means," you should not bother writing books on public affairs. On the other hand, if what you meant was "I don't think there is such a thing," you might want to visit this web site. There you will encounter an organization that boasts that it is "America’s leading pro-Israel lobby," and boasts of how it lobbies Congress to ensure the United States continues to give Israel a $3 billion gift each year. The organization has roughly a $70 million dollar budget it uses to influence American policy towards Israel.

That would be part of the lobby of which the gentlemen were speaking, Margaret. …

How a king may go a progress through the guts of a beggar

Or, how a freight locomotive may go a progress through the guts of the capital structure:
the life history of a freight locomotive of the vintage, say, of 1890. It began in heavy main-line service. After a few years, the improvement in the new locomotives available and the development of the art of rail-roading made the unit obsolete for that service, which was taken over by more modern power. It was thereupon relegated to branch-line duty where the trains were shorter, the speeds lower, and the annual mileage greatly reduced. For some years it served in that capacity, but better power was continually being displaced from main-line duty and 'kicked downstairs' onto the branch lines, and eventually our locomotive was forced out at the bottom, to become a switcher in one of the tanktown yards along the line. But the march of progress was relentless, and, in the end, thanks to the combination of obsolescence and physical deterioration, it wound up on the inactive list. For some …

Maybe "Subjective" Was Not the Best Choice of Words

Here is Lachmann:

"We have said that the formation of expectations is incidental to the diagnosis of the situation as a whole in which one has to act. How is this done? We analyse the situation, as we see it, in terms of forces to which we attribute various degrees of strength. We disregard what we believe to be minor forces and state our expectations in terms of the results we expect the operation of the major forces to have. Which forces we regard as major and minor is of course a matter of judgment. Here the subjective element of interpretation is seen at work." -- Capital and Its Structure, p. 24, emphasis mine

But what is really meant here is not subjective, but personal. (We follow M. Polanyi here in adopting this term.) The entrepreneur is not saying to herself, "Gee, just any old expectations I form will be as good as any others, because it is all just subjective." No, she is striving to make her judgment of what are minor and what are major forces as obj…

Is Iran Scary?

Or, should it be, to us? Pat Buchanan thinks not:

"On Monday, Rubin declared that America’s 'greatest national security threat is Iran.' Do conservatives really believe this?

"How is America, with thousands of strategic and tactical nuclear weapons, scores of warships in the Med, Persian Gulf, Arabian Sea and Indian Ocean, bombers and nuclear subs and land-based missiles able to strike and incinerate Iran within half an hour, threatened by Iran?

"Iran has no missile that can reach us, no air force or navy that would survive the first days of war, no nuclear weapons, no bomb-grade uranium from which to build one. All of her nuclear facilities are under constant United Nations surveillance and inspection."

Jennifer Rubin must be the morally ugliest columnist in a major paper today.

And My Pill Probably Could Cure Budget Crises as Well!

A medical researcher was on the radio during my commute yesterday. She said (I quote from memory), "I see no reason that we couldn't one day develop a drug that treats all of the effects of aging: dementia, arthritis, osteoporosis... but now, with these upcoming budget cuts, this research will have to stop."

If we only gave her another hundred million, I'm sure her pill would cure bad manners to boot.

Lachmann on Sraffa

"[Sraffa] developed the notion of own-rates, without actually coining the word, in an appropriate setting of forward markets, though unfortunately he considered these in isolation and thus failed to realize how, in a system of intertemporal markets, the market forces tend to re-establish equilibrium once it has been disturbed. He came to interpret Wicksell's 'natural rate' as an average of 'actual' own-rates as they would exist, side by side, in a barter economy, and not as the result of the operation of market forces. He thus substituted a statistical device for an analysis of market relationships."-- Capital and Its Structure, p. 76-77

And in a footnote to this passage, Lachmann writes: "Evidently Mr. Sraffa failed to see how in a barter economy intertemporal arbitrage would tend to bring the various 'natural' rates into conformity, thus tending towards establishing the 'equilibrium' rate."

Lachmann understood Sraffa perfectl…

I Survived the Tet Offensive, and the Angolan Civil War

Reading the Wikipedia page on Terence Hill, I came across the following:

"As a child, he lived in the small town of Lommatzsch, Germany from 1943 to 1945 during World War II, surviving the Dresden Bombing."

Well, yes, living in an actual different town than Dresden no doubt helped him survive that bombing.

FDR's Economic Bill of Rights

I was listening to a lecture on Roosevelt's program on my ride home today. This item from his economic bill of rights struck me as really bizarre:

"The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;"

Essentially, this simply removes farmers from the realm of competitive enterprise: no farmer may ever make a loss. (I guess they become like large investment banks today.) And without restricting entry (which Roosevelt may have planned to do), the amount of farmer's can just keep piling up way beyond what is needed, and they are guaranteed to keep making money.

Had anyone in the administration thought this through?

I Am Reviewed

Here. An excerpt:

"With these considerations in mind, it was with a great deal of excitement that I read Gene Callahan’s new book, Oakeshott on Rome and America, which is a well-written examination of Oakeshott’s own work, but also a novel application of Oakeshott’s critique of rationalist or ideological politics to American constitutional history. Callahan argues quite convincingly that Oakeshott’s analysis of the errors of modern rationalism is both acute and accurate and that the American constitutional tradition has been informed by a highly rationalistic rhetorical style from the beginning."

Interestingly, the reviewer never mentions Rome at all! Perhaps I should have skipped  those chapters.

Every Change Is for the Better

Or so it would seem:

The Wonders of Brooklyn

My car was smashed into this weekend by a hit-and-run driver while it was parked. The driver seriously bunged up the back and gave me a flat. I took the car to the tiny, Mexican-run tire shop my friend recommended. They got a new tire on my car in less than twenty minutes, and they did it in this "garage":

Yes, their entire "workspace" is defined by that orange garbage can outside their shop, with which they grab a parking spot on a very busy street. They won't move it unless you drive up and honk, and then tell them you are their customer. The guy replacing the tire today then moved the can about a foot outside that solid white line you see above: and that defined his working room. He changed my tire with the traffic passing about two feet behind his back.

I don't think that meets OSHA regulations, and the grab of a parking spot certainly is outside the letter of NYC parking regulations. But the Brooklyn police are remarkably tolerant of such arrangements:…

A Curious Contention

"In equilibrium, where, by definition, all values are consistent with each other, the use of money value as a unit of measurement is not necessarily an illegitimate procedure." -- Ludwig Lachmann, Capital and Its Structure, p. 2.

Lachmann does not offer further explanation of what he is thinking, at least at this point. Certainly, out of equilibrium, the price of capital goods will change. Furthermore, there will be disagreement about the price of various capital goods. So two entrepreneurs, or two economists, might not reach agreement about the amount of capital in a firm or in a nation. But as long as one recognizes this, so what? As Mises noted, this valuation problem is no different for land or labor: all three are valued for the future income streams they will produce, and out of equilibrium those are always uncertain.

If this is all Lachmann means, I agree with him, but I can't see why he calls using the estimated monetary NPV of a capital to "measure" i…

I Don't Care Whether the Keynesian Cross Is Realistic

when I go to teach it. Why not?

For the same reason I wouldn't care that there are no frictional surfaces if I were teaching physics. I am trying to teach my students how to use a model, and how models do (and don't) relate to reality.

Really, any simple model would do. I very explicitly tell my students, "I am not trying to convince you that the economy works this way... or that it doesn't. I am trying to teach you how to use a model of the economy in order to think about the economy."

I think in beginning physics we could use Aristotelian models, just to get them going, and no real harm (and maybe some good) would be done.

On Praxeology

Austrians often get a lot of grief for Mises' "extreme a priorism" and his notion of "praxeology."

In fact, much of mainstream microeconomics is just praxeology done with mathematics: it is working out the logic of optimizing decisions. Now, if Austrians were more cognizant of that fact, it would help them to not get so much grief: They'd realize that Mises, Hayek, Friedman, Krugman, Stiglitz, Becker, etc. are all neoclassical economists.

None of the above should be taken to mean that there is no difference between the Austrian neoclassical approach and the more mainstream one.

The Economic Incidence of a Tax...

Is not the same as its legal incidence. The government can decree from whom a tax is collected, but not who will really pay it.

Let us say legislators place a special $5 million tax on any professional basketball player making over $25 million per year. This tax will fall solely on Kobe Bryant. But we can also imagine that Lakers fans have an intense desire to see Kobe play, and will pay much more to see the team with him playing than without him. Meanwhile, Kobe is on the verge of retirement, and says he will quit unless he can make roughly the same amount he made last year.

What we would expect in this case is that most of the tax will fall on Lakers fans and other workers in the organization. It might turn out the guy who cleans the team's towels takes a bigger hit (as a percentage of his income) than does Kobe. As Mises put it, "It is the operation of the market, and not the government collecting the taxes, that decides upon whom the incidence of the taxes falls and how …

The Marginal Efficiency of Capital

"More precisely, I define the marginal efficiency of capital as being equal to that rate of discount which would make the present value of the series of annuities given by the returns expected from the capital-asset during its life just equal to its supply price..

"Now it is obvious that the actual rate of current investment will be pushed to the point where there is no longer any class of capital-asset of which the marginal efficiency exceeds the current rate of interest. In other words, the rate of investment will be pushed to the point on the investment demand-schedule where the marginal efficiency of capital in general is equal to the market rate of interest..

"There is, to begin with, the ambiguity whether we are concerned with the increment of physical product per unit of time due to the employment of one more physical unit of capital, or with the increment of value due to the employment of one more value unit of capital. The former involves difficulties as to th…

The Mouth of Truth

Once in a while I get a tin-eared commenter who complains about the blog title, and about how "arrogant" I am to claim this title for myself.

If you are inclined to do this, look over to your right on the screen. A little further. See that photo? That is a chintzy fortune-telling machine that was down the street from where I stayed in Siena. You'd pump in a Euro, and it would tell you you were going to meet a tall, dark stranger, or whatever. It was called "Mouth of Truth." (Yeah, no "the": I'm not sure why not.)

So the goal with the title was to be funny. If you think the joke failed, OK. But at least realize it was an attempt at a joke and not a serious claim. (Of course, I try to write the truth, but I am sure I often fail. Just not on "own-rates.")

Why I Love Language Log

They often demonstrate how unbearably stupid are many pieces of popular writing advice. For instance, today, Geoffrey Pullum notes how many adverbs are used in a pop-writing piece advising everyone to remove all adverbs from their writing. Similarly, most pieces condemning the passive voice repeatedly use it, and so on.

One learns how to write well by reading great writers and emulating them, not from following a bunch of made-up rules devised by inferior writers.

Sraffa and "Own-Rates"

I own the only salt mine in our area. Salt is a very widely used commodity, but it is not yet money, as it is not universally accepted in essentially all trades. (J.P. Koning might say it has a high degree of "moneyness.") As such, I have opened a side-business: I buy and lend-out all sorts of commodities by paying for them in salt, and when they are returned to me I trade them back in for salt.

It is February, and I am looking at two possible loans. One borrower wishes to borrow tomatoes for six months, and the other ice. When I consider the tomato deal, I realize that in August tomatoes are plentiful and will fetch much less salt. In fact, although a pound in February fetches two pounds of salt, I expect that in August a pound of tomatoes will trade for only a pound of salt. Meanwhile, ice is in the reverse circumstances: in the winter, I can get only a pound of salt for a pound of ice, but in August the same amount of ice will fetch two pounds of salt.

Since I do my acco…

OK, Anti-FRBers, What Do You Make of This?

I think you're going to have to work to outlaw Ripple, since it can effectively create money "out of thin air."

(I've noted before that I find that complaint bizarre: if someone managed to create steak or smart phones or sweaters out of thin air, we would think it was fantastic. Why is it supposed to be bad if someone can do the same with money?)

Land, Labor and Capital

"Wicksell had already recognized serious problems with the marginalist approach to capital theory. Essentially, whereas labor and land can each be measured in terms of its own technical unit (man-hours, acres, et cetera) heterogeeous capital in the aggregate must instead be expressed in value terms -- how, otherwise, to sum a railroad and a sewing machine?" -- Goodspeed, Rethinking the Keynesian Revolution, p. 25

Assuming Goodspeed has Wicksell right here, Wicksell is mistaken. Of course, we can measure labor in man-hours and land in acres, and for some purposes those measures are useful... but not for economic analysis. In economical terms, land and labor should be "measured" exactly as capital is: by the discounted value of the future income streams they are expected to produce. An acre of land in Manhattan is in no economic sense the same as an acre in Antarctica, and a man-hour of Joe Blow's labor is not economically identical to an hour of Kobe Bryant'…

Eugen's Big Mistaken, Adventure

Ever since my parents named me after Eugen Böhm-Bawerk, I have had a soft spot in my heart for the man. But that does not prevent me from realizing that his postulating time as a factor of production, so that land and labor have higher yields the longer they are invested, was a terrible derailment of capital theory. In fact, Böhm-Bawerk got this exactly backwards: it is not that investing for a longer period of time creates higher returns, it is that one will only invest in a longer production process when it has greater yields than a shorter one.

If the error had disappeared with Böhm-Bawerk, it would not be worth noting. But it has continued to plague capital theory since, and created confusions for many subsequent capital theorists. Fortunately, Böhm-Bawerk's greatest student was able to escape the mare's nest Eugen had created:

"The length of time expended in the past for the production of capital goods available today does not count at all. These capital goods are v…

Isaac's Eye

On the CBS radio I hear a reviewer talking about a new play called Isaac's Eye. He notes that the play is about Sir Isaac Newton and his "obscure rival," who probably "invented the telescope and microscope." ("No," I'm thinking, "please tell me he's not talking about who I think he's talking about...") He goes on to say, "The playwright has the characters talk in anachronistic terms, using words like 'cool' and 'beast.' Pretty funny, huh?"

OK, first of all, the reviewer was not being sarcastic at the end: he actually thinks it is "retty funny" to write a play where Isaac Newton says "cool" a lot.

When I looked up the play, and yes... he was talking about Newton's "obscure rival" Robert Hooke. First of all, Hooke is not that obscure. Sure, he's not as famous as Newton, but we do have things like Hooke's Law around to remind us of him. But what was even worse, the…

False Start

(Hat tip to Kizito Kiyimba.)

Rethinking the Keynesian Revolution

I'm reviewing Tyler Beck Goodspeed's book for The Review of Political Economy, and... boy, I think this is going to be fun! Some initial quotes:

"since the merger of Irving Fisherwith Walrasian general equilibrium, by Robert Lucas and the 'New Classicals,' all mainstream schools of macroeconomic thought... have adhered to a Walrasian approach" (p. 2).

"not only did Keynes and Hayek both adhere to the Wicksellian approach, but also... the Wicksell 'connection' was, as a result, responsible for a fundamental convergence of their respective theories of money, capital, and the business cycle during the course of the 1930s" (p. 3)

"Money, therefore, is intimately related to the second element of the Wicksell connection, namely, the identification of intertemporal coordination as the central problem in macroeconomics" (p. 6). (As I noted.)

"Critical to the Wicksellian approach, therefore, is the notion that producers, consumers, an…

The Church Is Far More Fun Than I Had Thought

So I was trying to figure out when Lent is over. My wife looked it up and said, "March 30."

"Wait a second! That's way more than 40 days. There is some trickery afoot!"

She researched further. "Ah, I see: Sundays are not part of Lent. In fact, Christians are not allowed to fast or do other penitence on Sundays."

I sat stupefied for a moment. "Wait... you mean if I gave up alcohol for Lent, I am actually not allowed to not drink on Sundays?"

"Well, I don't think they mean..."

"No, that pretty clearly is the meaning of that regulation. Well, sorry, dear, I've got religious obligations to fulfill. Back before midnight."

Had Isaiah Berlin Never Read Augustine?

Isaiah Berlin suggests that before Machiavelli, it was a "fundamental belief of Western political thought" that "it is only because of lack of skill or stupidity or bad fortune that we have not so far succeeded in discovering the solution whereby all interests will be brought into harmony."

But I don't think Aristotle or Polybius ever thought this, and I'm quite sure Augustine didn't: the city of man cannot be turned into the city of God by any means.

What a strange contention from Berlin!

Sunk Costs and Subjectivism

As I have mentioned, I am using Heyne, Boettke, and Prychitko as my textbook for Micro I. I was just reading the section on sunk costs, and I sensed some tension between the way these are treated and methodological subjectivism. And, frankly, I believe the same tension is present in Economics for Real People, so don't think I am pointing fingers!

The problem is that the discussions of sunk cost often seem to become normative: the reader is being told he ought not to worry about sunk costs. But how does one fit that in with subjectivism? Imagine this conversation between a subjectivist economist and a student:

ECON [Handing back a quiz.]: Son, you ain't doing so well on these here tests. Perhaps you oughtta be considering dropping this here course. [I don't know why the economist talks like Foghorn Leghorn: I'm just listening to him and writing down what he says.]

STUDENT: No, I'm determined to finish the course: otherwise the $3000 I spent to enroll is wasted.


I KNEW I Was Right!

My wife's efforts to stabilize my personality have been pointless all along.

D. D. Wanted

I'm trying to lay off the booze for Lent. So far so good. But today I had a problem: I was making a braised short rib ragù with red wine. There was about a glass left in the bottle, and I really couldn't add anymore to the sauce. As I worked in the kitchen, I could hear the remaining wine whispering softly, "Gene, I'm lonely over here: come keep me company, big guy."

Luckily, a friend showed up. "Joe, have a glass of wine," I pleaded. He accepted... and the danger on the rocks was surely passed.

And then I realized what I need for the next 36 days: a designated drinker! I can still go to bars. When my buddy says, "Gene, let me buy you a shot," I say, "Sure thing! Thanks." After it is poured, I hand it off to Joe (say), who slugs it down for me. I can still invite my wife out for a nice candlelit dinner with a bottle of champagne, toast to our marriage... and then hand the glass off to Joe.

In the old days, I could have even had Joe …

Why Do People on TV Sleep Like That?

With their heads propped up at a forty-five degree angle by their pillows? I have never seen anyone sleep like that in real life. Any of you?

I suspect it is to get a better camera angle on the actors face.

The Science of Science of Science Policy Policy

How to Win Arguments about Economics

The current state of the art in economic theory is largely pro-market, but can be used to make a case for various interventions. Whether you are a free-market ideologue or an interventionist ideologue, this is rather unsatisfactory. What is the solution?

Learn to toggle!

Let's say you are an interventionist ideologue. Here is how to proceed:

When someone who has gotten through micro I says "Any effective minimum wage must cause unemployment," you respond with a sophisticated argument about monopsonistic competition. But if an economist makes the case for unrestricted free trade, you come back with "You head-in-the-clouds economists! Just ask any businessman what he thinks of your argument! See what a poor farmer in India who can't get buy makes of your model!"

For a free-market ideologue, simply reverse the above positions: on the minimum wage issue, say "Ask any businessman about this so-called monopsonistic competition: he'll spit milk through h…

Is It Logically Possible for a Higher Minimum Wage to Increase Employment?

Of course it is.

A simple exercise by which you can easily convince yourself of this:
Draw a supply and demand diagram. Imagine the current price is below the equilibrium price. Now imagine a price floor is set anywhere between the current price and the equilibrium price. What happens to the quantity exchanged of that good at the new price? Of course the above is not an argument for a minimum wage or an increase in a minimum wage. First of all, it completely ignores any moral case for or against a minimum wage. Secondly, before we could use the above to justify a hike in that wage, we would have to show that it is likely the current wage is below the equilibrium wage. Then we might ask, "Why is it so?" We might find it is better to handle that reason directly.

Personally, I think the minimum wage is a rather clumsy way to try to help low-wage workers even if the above conditions were true in the case in question. I prefer addressing more fundamental, structural issues if p…

When the Buildings Take Over

My wife can't turn the lights in her office on or off. Or, perhaps, she can do so, but only by moving a lot or a little. If she sits still thinking for to long, the lights go off. If she wants them off and jumps up to answer the phone, they go on.

This was a trend in building design that really got rolling -- in what, the 50s? The 60s? The basis of the design philosophy was, "Screw what you, the user of the building, thinks! We know what you really need. You thought you'd like a bit of fresh air? Forget it! We are bringing you perfectly filtered air! [Except, of course, when their machines fail, leaving the person stuck in an office with foul air and no way to correct the problem.] Heating and cooling? We will keep your office the perfect temperature constantly! [Except in unanticipated weather, or a power outage, or if you have lower than normal heat or cold tolerance.] Lighting? We know what light you'll need! [Except if you are trying to get in a quick nap, or are…

So Why Not Drink 800 HUNDRED Glasses of Water a Day?!

Over at Kids Prefer Cheese, Angus mocks a very silly argument: "Finally, I'd like to ask my conservative friends to stop making the 'if a higher minimum wage is good why stop at $9, why not make it $90 and everyone would be rich' argument.

"It's just silly."

Yup. Here is an equivalent argument: "Oh, you doctors say to drink 8 glasses of water a day: Well, if water is so good for you, why don't we just drink 800 glasses a day?"

Well, because it is quite possible that some amount of x is good, but a much, much larger amount of x is bad, hey? (At a high enough dosage water becomes a poison that will kill you. But no water will kill you just as surely!)

The above, of course, doesn't prove that a slight raise in the minimum wage is good. But it does show how bad that oft-repeated argument against it is.

UPDATE: Don Boudreaux, no minimum wage advocate, agrees that "Why not $90?" is a bad argument.

As I've Been Saying

Many business cycle models are not really cycle models at all. That does not mean they are wrong: it might be the people who say there is a business cycle who are wrong. But I think it is good to distinguish between theories with actual cycles in them and those that explain away what they see as there mere appearance of cycles.

And in a side note, Smith agrees with my evaluation of Minsky: Minsky's theory contained an actual cycle.

Does the Roman Empire Still Exist?

Ask anyone on the street. "Of course not," they will reply (unless they are Philip K. Dick). "That ceased to exist centuries ago."

"How about dinosaurs? Do they exist today?"

"Are you nuts? They went extinct millions of years ago."


"Well, no, it blew up."

"All right then: Napoleon?"

"Well, if you believe in an immortal soul, perhaps but as a human being: no."

You go on and on like this, for hours. Finally, you say, "So, you then would agree with Oakeshott and me: the past does not exist?"

But no! Even though it is "simple, common sense" to say that all of the things that made up the past no longer exist, apparently it is absurd to note that rather obviously, then, the past, emptied of all those things, has ceased to exist as well. Kekes, in fact, writes, "Oakeshott's view of history... is obscure and often appears to be absurd, as, for instance, in claiming that th…

Mea Culpa

Comments were a bit backlogged. I went to accept a whole batch of them, and... well, the delete button is only a few pixels from the accept button, and about ten comments just bought the farm, accidentally.


Current Working Pile



I found myself with time to kill in Brooklyn Heights and so took the chance to indulge one of my guilty pleasures: fried chicken at Popeye's. As usual when I eat there, I was today, again, the only white person in the dining area. And that made me think of the last time I was there:

I was eating and reading when I hear, "Yo, yo." I look up to see a couple of black guys at a table in the far corner of the room. I realize that one of them is calling me, so I answer.


"Listen: I got this soda with my meal" -- he holds up an empty cup he is entitled to fill -- "and I don't want it. You could have it."

"Thanks a lot, but I don't drink soda."

The funny thing was there were a dozen diners between us, and the offer was made all the way across the room to me.

What I pictured was the two guys talking at the table a moment before:

"Will you look at that: there's a white guy, eating in Popeye's!"

"Holy spi…

No, You Kuehn't Do That!

This is the sort of thing with which I will not put up:

"Not the childish asking if I'm obtuse part... it's not as common from Gene, but it happens. I mean his willingness to take up the Rumsfeld/Bush line on how critical uniforms are for treating soldiers like soldiers:"

1) Childish? Someone who does not recognize the difference between shooting at a Pennsylvania resident who is carrying a gun in a battle wearing a Confederate uniform, and blowing up some guy driving along in his family wagon in Yemen because it is alleged he is al Qaeda is either being unintentionally obtuse or deliberately obtuse. Since I know Daniel is a very bright guy, I'm giving him the credit of thinking he is being deliberately obtuse, because he likes Obama. I can't see why in the world it is "childish" to note there must be some sort of obtuseness involved in this.

2) Did I make uniforms the critical thing about whether one can shoot back? No, I wrote, "If some guy…

Why Gold?

Most people who wished to return to a commodity standard talk about gold. But why?

"We have become so accustomed to regarding gold as the natural monetary metal that we have forgotten that silver was a far more important monetary metal than gold for centuries, losing first place only after the 1870s." -- Milton Friedman, Money Mischief, p. 122

And when gold did replace silver, it was due to legislative action, in both the UK and the US. Contra the Richter Report and many other goldbugs, gold became money because the government chose it as money. (Not to say that no market society ever chose gold as money, only that the era of the gold standard was created almost entirely by fiat.)

It would be more historically justified to advocate a return to the silver standard if you want the commodity that markets picked.

Quid Pro Quo

Did you know that in Italian, a quid pro quo is an error? Of course, in English, it means an exchange or a deal of some sort.

How could this happen? Well, the phrase itself in Latin means "this for that." In English, it came to mean giving a this for a that, while in Italian it evolved into mistaking a this for a that.

Just thought you wanted to know.

The Importance of the Word "Expressly" in Constitutional Interpretation

The tenth amendment to the United States Constitution reads:

"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

When this amendment was being drafted, the "states' rights" advocates kept putting the word "expressly" in before delegated. Madison kept taking it out. The reason he did so is that he thought the federal government should have the power to do what was not expressly delegated to it, but which was only implied in its expressly delegated powers.

As a result, what passed was an ambiguous compromise: the states' rights people could say the amendment meant what they thought it should, and that "expressly" was implied. The "consolidationists" could interpret it their way, in which it meant the federal government could do anything that aided it in achieving the ends the Constitution explicitly set for it.


When the Machines Take Over

I eject a CD from the player in my car. Then I spend a little time searching for the one I really want to put in. But, if I spend just a second too long... I lose! The player sucks the CD back in.

What the fark? I deliberately ejected the thing. What the heck should it matter how long I want to leave it sitting half in the drive? But I guess my CD player knows better than me: if I leave t he CD sitting there for twenty seconds, I must really want to hear it again, after all!

Teaching Your View Versus the Consensus View

What would you do about this? Let us say you hold a minority view in economics: say, you are convinced Marx's theory of the business cycle is correct. How much do you teach Marx's view versus the more standard ones?

I'm not sure, but tentatively I am embracing the following: for lower level courses, a teacher is largely obligated to teach the consensus view, although it is fine to note that you dissent from it, and to explain why. The place to present heterodox views at length is in a graduate seminar or something of the sort, where one can expect students already have learned the "standard model" of whatever is being discussed.

Anyone differ from me on this? Why?

Dear Teaching Company

Your new CD cases are quite nice. Not only do they hold the CDs quite compactly, today I found that, in a pinch, they make a damned decent scraper for getting the snow off of one's windshield.

Well done!

Exogenous But Truly Cyclical Theories

"One group of theories, which includes the writings of W. S. JEVONS, H. S. JEVONS, and H. L. MOORE, seeks to account for the periodicity of business cycles by establishing the existence of a similar periodicity in agricultural output. The chain of causation runs from cosmic influences to weather conditions, from weather conditions to harvests, and from harvests to general business." -- Gottfried Haberler, Prosperity and Depression, p. 151

This type of theory fills in the box for "truly cyclical but also exogenous." These are true cycle theories: there is a real causal explanation of the economy coming around to what is in some ways the "same" state: the economy cycles because, say, for W.S. Jevons, sunspots cycle. But obviously sunspots are about as exogenous as a cause of economic events can be.

By the way, just what constitutes a cycle, in the sense of going back through the "same" states, is going to be somewhat in the eyes of the theorist. …

A Little Scare

I saw an good friend of mine yesterday. When we met, he looked dreadful. In fact, he broke down in tears.

"What's wrong?" I asked.

For a moment he couldn't speak. Finally, he managed to force out the news: "I just found out I have high blood pressure and need to go on medication."

"High blood pressure?" I said. "That's it? The way you looked, I was sure you were going to tell me something absolutely terrible, like your mom died, or you had just seen a bad review of Oakeshott on Rome and America."

A World of Existence Outside of Expierence

Blackadder is flummoxed: "I confess I find Oakeshott's statement mystifying. What is self-contradictory about the idea of there being a world of existence outside experience?"

This is a tricky question to answer. To an extent, I view it as similar to one of those trick pictures, where you can see either a lady or a rabbit. If someone just doesn't see the rabbit, there is no "argument" you can make that will convince them it is there. (And once they see it, they need no argument.) But perhaps you can give them hints that can lead them to the viewpoint where they do see it for themselves. In any case, no harm in trying.

So let us begin by assuming that there is an objective world standing totally apart from experience. If we can imagine that there is such a world with many objects in it, it is surely even easier to imagine such a world with only one object in it. So let us do that: we posit a world containing only one, solid sphere of "stuff" (whate…

Confusing Ontology with Epistemology

Once the subject-object distinction is taken as absolute, then, as we have mentioned, epistemology becomes a pressing, indeed, I would say, insoluble, problem. Given that situation, it is natural for anyone who has made such a move to think that anyone doing fundamental philosophy must be trying to solve the epistemological quandary in which they find themselves. Therefore, when an idealist claims "Reality is a world of experience," the dualist quite understandably thinks he is encountering an epistemological argument along the lines of, "I can't know about the existence of things I can't know about; therefore, what I can't know about doesn't exist." (This is pretty much how Stove interpreted idealism, and how several commenters here have understood my posts.)

But look at (a small part) of Oakeshott's argument: "The view that objectivity signifies independence of experience must be rejected because the notion (which it implies) of a world …

An Early Critic of Judicial Review

An Anti-Federalist, RobertYates, writing as Brutus in 1787, makes a couple of interesting points in the passage I include below. First of all, he notes, I have pointed out, that "Most of the articles in this system, which convey powers of any considerable importance, are conceived in general and indefinite terms, which are either equivocal, ambiguous, or which require long definitions to unfold the extent of their meaning."

Again, this was deliberate: when faced with a highly contested issue where it was very hard to achieve consensus, the framers solution was generally to write the thing up so vaguely that everyone could think their interpretation might prevail. This is obviously a real problem for those insisting we look to the original intent of the framers: How can we do that when the original intent was all over the place?

The second fascinating thing in Yates is his prediction that a Supreme Court established per the U.S. Constitution would have a tendency to inter…

Online Advertising: Getting There

I heard on the news today that Google is promising that soon they will be able to display an ad for a business on a web page only if the viewer is within a certain distance of the business and the business is open.

Well, they certainly are getting pretty good at targeting their audience. Again and again, I am seeing an ad for a particular book that is exactly in my area of interest. Pretty impressive.

But they still have a ways to go: They haven't yet worked out that I wrote the book in question, and don't really need to order it from Amazon.

Stupid Is as Stupid Does

Hans Hermann-Hoppe says the right way to debate Paul Krugman is to be an idiot and pretend you don't understand even the simplest arguments. Hermann-Hoppe has also defeated heliocentrists in debates the same way, by just continually asking them, "How can a big thing like the earth move? How? Nobody can explain that!"

Mama mia, that was some fast driving!

I just saw some translator take the Italian for 180 kilometers per hour and render it as "180 miles per hour." This changed a plausible but fast speed (around 111) into a completely absurd one for highway driving.

Why Idealists Are Not Flummoxed By Perceptual Errors, Hallucinations, and So On

In the comment section of another post, Hume worries how idealism can survive an encounter with illusions, perceptual errors, hallucinations, the movement of the earth despite its apparent lack of movement, and so on.

The idea seems to be that we need some reality independent of experience to correct these errors. We are like children who have filled in tests, and now slip them into a tube in our classroom (the world of experience) and send them off to a reality that is totally outside the world of experience to be graded. Somehow, we know not how, the tests are marked up and returned to us for us to absorb the right answers. This is roughly the correspondence theory of truth: our ideas are true when they "correspond" to some reality that is not ideas at all: although how an idea can "correspond" to something lacking all mental character whatsoever is beyond my comprehension!

Of course, the above is not at all how we actually recognize we were in error about what …

The Worst Argument in the World Is Stove's Own

David Stove famously rejected idealism as being based on the "worst argument in the world." He said this argument runs as follows:

You cannot have trees-without-the-mind in mind, without having them in mind.
Therefore, you cannot have trees-without-the-mind in mind. Now, it is not really that Stove's case against the above is bad. It is that no idealist (that I know of) ever made the above argument. All Stove as demonstrated is that he does not understand Berkeley or idealism.

Here is a version of an actual idealist argument for the interdependence of mind and reality:

The view that objectivity signifies independence of experience because the notion (which it implies) of a world of existence outside experience is self-contradictory. If what is real is what is objective, what is objective must stand for something other than merely what is not subjective -- that which is untouched by consciousness, that from which experience has been withdrawn. For, in the first place, wh…

Did You Know That Drop Side Cribs Are Now Illegal?

And Lenore Skenazy describes all sorts of other child safety madness. The drop side cribs were involved in three infant / toddler deaths per year. Meanwhile, stairs are involved in 1300. I guess we have to ban stairs as well.

This stuff makes me ill, and glad that my kids are old enough we won't run afoul of these laws. But how about my grandkids?

What's with That Habit?

No elevator call button that I know of records and channels urgency. You press it once, and the elevator will come when it comes: you can't hurry it along by pressing more. But people do.

Why? This article explains the phenomenon in a very succinct fashion.

Urban Experiment #23

While riding the subway, take out your wallet and glance inside. Then let out a long whistle, followed by a cry of "Holy s*%t, I must have like a thousand dollars in there!" Count and record the number of people who follow you when you leave the train. Repeat at various stops.

The Division of Labor Is Limited...

By the extent of the market. In Brooklyn, it is extensive enough that one can specialize in making just grilled cheese sandwiches:

Babe Ruth and Regression to the Mean

Before Babe Ruth, the highest number of home runs hit by any major league player in a season was 16. When Ruth hit 29 home runs in 1919, it would have been quite sensible to predict that he would regress to the mean and hit fewer the next season. But if he had, "regression to the mean" would not have explained how many home runs he hit. That could only be explained by analyzing each at bat that season, and understanding why Ruth was or was not able to drive a ball out of the park during that at bat. (Of course, we could have a more general explanation as well, e.g., "Ruth was ill," or "Ruth was going blind.")

In fact, the next season Ruth hit 54 home runs. Wow, now he really "ought" to have regressed to the mean, and dropped way, way down.

Instead, the following season he hit 59 home runs. What was happening was the Ruth was ushering in a new era of home run hitting, such that 16 home runs (the previous all-time high before Ruth) would come to …

Living Like a Reptile

My school has a heating, ventilation and air conditioning department. They handle all complaints about temperature-related problems in the college's buildings. The way they handle these is by letting the person with the complaint know, "There is nothing we can do about that."

Therefore, my office will apparently be between 78 and 80 degrees until they switch from heating to AC in May, after which it will be between 58 and 60.

As a result, I have taken a cue from my pet turtle. Once I start to overheat, I take my phone and wander outside with no jacket on for five or ten minutes to make a few calls. Good and chilled to the bone, I return inside and bask for half an hour.

Next semester, in order to achieve a more comfortable work environment, I think I will pitch a tent on one of the campus's fields.

True, Aggregates Can Conceal...

as many Austrians are fond of noting. A focus on global average temperature may conceal the cold winter in Scotland, say.

But they can also reveal: For someone who refuses to think in terms of global temperature, global warming is inconceivable. Similarly, for someone who refuses to think in terms of aggregate demand, an aggregate demand shortfall is inconceivable.

Idealism in Verse and Picture

"Penny Lane is in my ears and in my eyes
There beneath the blue suburban skies" -- Paul McCartney and John Lennon

"Wake up to find out that you are the eyes of the world
The heart has its beaches, it's homeland and thoughts of it's own.
Wake now, discover that you are the song that the morning brings,
The heart has its seasons, its evenings and songs of its own." -- Robert Hunter and Jerry Garcia

And finally, Chagall, "The Village and I":

Regression to the Mean Is Not an Explanation!

Daniel Kahneman treats regression to the mean as a form of explanation. (See Thinking, Fast and Slow, pp. 178-183.) He also says that when we see regression to the mean, what we are seeing has "does not have a causal explanation" (p. 178).

I say both these contentions are nonsense. (Once again, let me put in my usual caveat: I greatly admire Kahneman's work as an experimental psychologist. But here he is doing philosophy of science: he has left his area of expertise and is forwarding ideas which [I contend] he cannot defend,  and which certainly cannot be decided by any experiment. And I will also note that citing regression to the mean is fine as a way of justifying a prediction.)

Why is regression to the mean not an explanation of any empirical fact? Because it is a tautology, and tautologies never explain empirical phenomena. In particular, in this case, regression to the mean always holds, because something won't be the mean unless it is regressed to. Let us say…

The Halftime Show I Want to See

Phil Lesh and Friends: They Will just be ending the improvisational intro to their first tune when their time is up.

Alternate: A top reggae act, who will only arrive at the stadium late in the third quarter.

Liveblogging the Superbowl Ads

OK, the Volkswagen ad, where the managers are upset, then they go for a ride with the man speaking all irie, and the two guys who went with him come back all cheerful and speaking yard style as well: we're supposed to be picturing they all shared a spliff on the ride, right?

Liveblogging the Superbowl Commercials

The one featuring ySheldon Richman and the goat was pretty amusing.

Someone Is Unfamiliar with the Law of Karma

Chris Kyle, who shot and killed 160 people during his career as a sniper, was shot and killed yesterday. His co-author comments:

"It just comes as a shock and it's staggering to think that after all Chris has been through, that this is how he meets his end..." said Scott McEwen, who wrote the book with Kyle.

Idealism Rejects the Problem of Epistemology

This is my dissertation adviser:

"The point idealist wanted to make was that the world is unintelligible without mind and that there is mutual inclusivity. This mutual inclusivity can only be understood, however, by rejecting the question of epistemology that arises when we assume a duality between the mind and its objects. If we begin by assuming that experience is an undifferentiated whole, then the question becomes one of ontology, that is, how out of this unity do we explain the multiplicity of modes of understanding..." -- David Boucher, A Companion to Michael Oakeshott, p. 54

An analytical philosopher is likely to leap upon "the world is unintelligible without mind" and say, "See: he is just mistaking ontology for epistemology!" Well, no, it ignores Hegel's dictum that "the real is the rational," and assumes away the whole idealist starting point and assumes the Cartesian subject-object split back into its place. This says a lot more …

Hugo Chavez Does an End-Around

I just saw a Citgo ad boasting how a struggling New York family was given fuel assistance courtesy of "Citgo, the people of Venezuela, and Hugo Chavez."

I have never seen a foreign leader publicly offering welfare services to Americans before.

Supply Is Demand, Just from a Different Viewpoint

Let us imagine a place were oranges are the medium of exchange. Then, when we draw a supply and demand diagram for bananas, the price in oranges goes on the vertical axis and the quantity supplied of bananas on the horizontal one. (If you don't know where this is leading, it is worth drawing this.) The demand curve for bananas slopes downward, and the supply curve upwards, just as though the medium of exchange was dollars.

But imagine that tomorrow, people decide bananas make a better medium of exchange. This will reverse our axes: the price in bananas now goes on the vertical axis, and the quantity supplied of oranges on the horizontal one. (Again, you might want to do this.) And now it ought to be clear: the supply curve for bananas in the first diagram just was the demand curve of banana buyers for oranges. And the demand curve for bananas was the orange producers' supply curve, in so far as they were supplying in order to get oranges.

Making the medium of exchange gold or…

Epistemological Problems Arise from Bad Metaphysics

As idealists, we start with undeniable reality: the concrete whole of experience. We note that within that concrete whole, we can distinguish, say, 'experiencing' and 'what is experienced'. But we remember that 'Experiencing and what is experienced are, taken separately, meaningless abstractions; they cannot, in fact, be separated.'* But many people forget this: they take what is an analytical distinction to be a real difference: there are subjective experiences, and there is the objective world, and they are two truly separable realms. Once that has occurred, epistemology rears its head as a terrible difficulty: given the belief in this ultimate separability, how can we be sure our subjective experiences have anything to do with the objective world at all? How do we know we are not just "brains in a vat"? It is as though, in thought, we had created a gulf between the head of a coin and the tail, and are now puzzling over how we can ever rejoin the t…