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Showing posts from March, 2013

Thoreau Notes the Two Great Faults College Lecturers Can Committ

Here: "More significantly, I appreciated the person on page 147 who complained that the lectures were basically the same as what was in the textbook.  The only complaint more common than that, in my experience, is 'The lectures are different from the textbook.'"

Why Does This Nonsense Persist?

Consider this:

"In the Middle Ages, wine was commonly drunk (at least in wine-growing areas), but it was a weak concoction and popular mainly because - unlike water - it was safe.

Did any of you ever forget a glass of wine on the counter for a couple of days? (Hey, if you haven't, then your benders just haven't gone on long enough, OK?) It gets pretty moldy, doesn't it? A weak dilution of wine in water is totally insufficient to make infected water safe for drinking. Yet people write such nonsense over and over again.

Sigh

"They do not remember what Plato said in Book Three of The Republic, that a society filled with students of law and medicine is already a sick society. Many students continue to think that more law and more medicine will cure what can only be cured by a reform of their own souls."-- Here.

Why doesn't the iPhone link appointments and contacts?

This would seem to be the most natural thing in the world: when I enter an appointment with "Bob (socialist-Sraffa-loving) Murphy," why isn't there doesn't iOS (or the calendar app) offer me the opportunity to link to the aforementioned person in my contacts? Is there some way to trigger this that I have simply been missing, or is Apple missing a very obvious app synergy here?


Risk Averse Bidders in Auctions

I am very puzzled: in a lecture course on game theory, I heard the lecturer state that "risk averse" bidders will not behave as standard theory says they should: they will bid too high since they are averse to the risk of not winning the auction.

But wait: why is that called risk averse, rather than being averse to the risk of paying too much for an item? This seems arbitrary. Any explanations?

Mountains Are *Not* Caused by Valleys!

Scott Sumner writes: "Bubbles are caused by asset prices crashes, just as mountains are caused by valleys." Sumner's contention is thatwe only see "bubbles" when NGDP crashes, and leads to a steep price decline in the asset class that we then declare to have been in a bubble.

Well, first of all, mountains aren't caused by valleys! The land surface of the Earth would not be a 29,000 plateau if not for those pesky valleys: tectonic plates collide, and lift up mountains. So the metaphor is bad, but what about the economic analysis? Sumner says:

"The 1920s and the Great Moderation both saw relatively stable NGDP growth. So why the big bubbles? Because NGDP growth crashed in 1929-30 and 2008-09. In 2008-09 NGDP growth slowed by 9% relative to trend, nothing like that happened in the 1970s. It was the crash that (partly) created the bubble. Without the crashes, we wouldn’t even be talking about the great stock bubble of 1929, or the great housing bubble o…

Who pooped it?

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When I got to my house in Pennsylvania I discovered literally hundreds of these little turds covering my driveway and front lawn. Does anyone have any idea what varmint did this?




UPDATE: My son, who walked the yard with me, heard me posting this, and said, "Not hundreds, Dad: more like a hundred."

Brooklyn Law

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You know those fancy law offices you see on screen in LA Law? They've got nothing on us:



It's the garbage bulging out from under the "reception" desk that I think is the nicest feature.

If Julius Caesar's friend had been named Fay

He could've invented a famous Cajun dish.

Why?

Hayek, too, abandoned the lengthening of the structure of production as a meaningful concept

I must admit I have not yet tackled the Pure Theory of Capital. So I was surprised to see that Hayek had followed my lead 70 years before me, and dropped the idea of an average period of production from his capital theory:

"By Pure Theory of Capital, however, Hayek has jettisoned the average period entirely, denying both the validity of such a construction and its usefulness." -- Goodspeed, Rethinking the Keynesian Revolution, p. 122

Why Does Every Search of My Blog from My iPhone Fail?

Without fail, if I search La Bocca using the browser in my phone and the sites own search function, I always get "No results found." But from any PC, the search function seems to work fine!

How could this be? The only thing I can think of is that the browser on my phone somehow mangles the search string I type before passing it on to the site. Has anyone else tried this? What results do you get?

How Hayek solved Sraffa's own-rate problem

It turns out it is the same way that Keynes solved it:
But Hayek had indeed, like Keynes, absorbed the lessons of the Sraffa exchange, and accordingly acknowledges that whereas the rate of increase of the physical amount of anyone input invested at an earlier date and the physical amount of the same input obtained at a later date may, and indeed will, differ for any two commodities, "the value equivalence in terms of the 'numéraire' at the two dates must bear the same ratio to one another for all commodities...

This elucidation, we should note, is precisely the same as Keynes's own-rate setup in chapter 17." -- Tyler Beck Goodspeed, Rethinking the Keynesian Revolution, p. 120-1 The fact that Keynes, Hayek and Lachmann all see Sraffa's own-rate challenge as having been answered, and by the same answer that I see as meeting that challenge, gives me a fair amount of confidence I am on sound footing here!

The World of Science Is an Abstraction

"To many, no doubt, this process is simply the gradual discovery that the real world is different from what we expected, and the old opposition to Galileo or to ‘body-snatchers’ is simply obscurantism. But that is not the whole story. It is not the greatest of modern scientists who feel most sure that the object, stripped of its qualitative properties and reduced to mere quantity, is wholly real. Little scien­tists, and little unscientific followers of science, may think so. The great minds know very well that the object, so treated, is an artificial abstraction, that something of its reality has been lost." -- C.S. Lewis, The Abolition of Man

Modernism Is So Old-Fashioned!

Per Kenneth Arrow: "I am old-fashioned enough to retain David Hume's view that one can never derive 'ought' propositions from 'is' propositions."

What a weird thing to say! Hume's disjunction would have been considered nutty by most of the people living in most times and places before Hume. It is quite a bit more "old-fashioned" to recognize that one can derive oughts from ises than it is to believe the opposite.

What is individually rational can be collectively suicidal

It can be perfectly sensible for any particular couple to have only one child. But when all the couples in an entire culture does so, that culture is going extinct. If the practice continues, in twenty generations a city of a million people will only have one person left in it.

Roger Scruton on Same-Sex Marriage

Here.

I really don't know whether same-sex marriage is a good idea or not. What I do know is that I am often stunned by the utter childishness of the many people who think we can change this fundamental social institution and then... absolutely nothing else will be affected.

UPDATE: Another example. Sullivan says all opponents of SSM have is Bible-thumping "or a tortuous reinvention of natural law."

Sullivan is supposedly a Catholic. Why doesn't pointing to scriptural passages condemning sodomy carry any weight with him? Silence. Why is what is going on a "reinvention" of natural law rather than a use of it? Silence.Why is it "tortuous"? Silence.

This is argument by name-calling: only really mean people could possibly oppose me!

The Classical Labor Market and the Fallacy of Composition

In an economy with full employment, if I am asking too high a nominal wage for my labor, I can reduce that request and find work. That truth is behind the classical labor-market model.

That the above is true does not mean that all workers can reduce their real wage requests and find work. First of all, workers cannot directly negotiate real wages. They can only lower their nominal wage requests. And if all workers do so, this will surely lower nominal aggregate demand. Which, in turn, can lower real output, so that the new nominal wage level is still "too high," and unemployment persists.

The Solicitor General

That post must have been very different during the Kennedy administration, right?

Methodological subjectivism

What an economist should say is that "in our model we treat value as entirely subjective," not that value is entirely subjective. Methodological subjectivism is a postulate, not an empirical or a priori truth.

The Cost of Automatic Grading

We have automatic grading machines at my school. But they have a cost, I think. After hand grading 50 tests in the last couple of days, I realize that doing so gives me an intimate sense of what the students are not getting. I don't think I would garner the same knowledge even from a detailed statistical breakdown offered by a grading machine.

I understand Keynes completely now

At least his comment about how he could only understand material in written German that he to some extent already understood well. My Italian is about at that point now. When I read an Italian newspaper, I can understand a story about Obama's trip to Israel pretty well, since I know the topic already. But the articles on Italian politics I really don't get at all. I think this is just the sort of thing of which Keynes was speaking.

Endogeneity and Me, Are Pretty Good Company

In an interesting discussion of exogenous versus endogenous this money, Nick Rowe writes:

"If we are being *very* strict about terminology, things are never 'exogenous' or 'endogenous' in themselves, but only within the context of a given model. E.g. weather is exogenous in economics models, but endogenous in meteorological models."

I think Nick is being overly instrumentalist here. To me it seems perfectly accurate to say that a bird's heartbeat is endogenous to the bird, and not merely to our model of the bird, and that the arrow I shoot at the bird in order to have it for dinner is exogenous to the bird, and not merely to our model of the bird. (But that the arrow is endogenous to my plan for getting dinner.)


Of course, "the bird" is itself an abstraction from all else around it, but I assume Nick is not shooting for absolute idealism here.


(Hat tip Murphy.)

Yo yo I'm high-tech now

So, I'm trying to dictate blog posts now using a Bluetooth headset and the voice recognition capabilities of the iPhone. So far so good, although, of course, everything needs to be checked over carefully after it's been dictated — Siri still makes a lot of errors.

Oddly enough, but I first cut when I first dictated the above sentence, what came out on my phone was "Windows still makes a lot of errors." When I tried to dictate it again, Siri stopped recording and said, "No Dave, you don't want to say that."

Buying an A and the signaling theory of higher education

I just watched a show containing a grade buying scandal. Let us say that you could get away with buying A's in your courses without any risk of getting caught. Per the signaling theory of higher education, isn't this a great way to send a signal to employers they really do care about your success? For someone who is a moral utilitarian and buys the signaling theory, is there any reason to recommend against this?

Just Where Could I Discover a Fact Like That?

For some reason my son was on the Wikipedia page for Jeff "Skunk" Baxter, formerly of Steely Dan and the Doobie Brothers, where can discover that Jeff is now a defense consultant and chair of a Congressional advisory board.

But in the talk section, someone posted a comment, questioning whether Baxter was really an original member of Steely Dan, because the poster didn't think he had played on their first album. Hmm, now where would one have to go to discover if that memory was accurate? If only there were a huge, encyclopedic web site, chock full of just such facts, where someone could go to look that up!

An obvious case of a negative externality

Every morning, when I go to work, I see a fellow tossing advertising circulars at the brownstones in the neighborhood. In our lobby we often find 30 or 40 of them stacked up in the foyer. Almost every one of those gets thrown away. I have no doubt that the people advertising in the circular Would not do so unless they found it profitable for them to do so. However, this profit calculation takes no account of the time it takes for the residents to throw out all this rubbish, or the environmental cost in terms of carbon footprint for these things to be created.

Wouldn't banning this practice be an obvious gain for everyone?

How Labor Markets Really Work

Bob Murphy asks Daniel Kuehn:

"Do you think there are at least 1000 workers in the United States who produce more than $20/hour for their employers, yet they are only earning minimum wage?"

My guess would be: "Certainly."

Too many economists have no idea how companies hire people. I have done it at several places. Here's what happens:

Someone higher up in the company decides some task needs to be done. They give you the task. You say, "Well, OK, but I'll need a couple more programmers."

"How much will they cost?"

"Good Java programmers get around $100,000 per year."

"Hmm... can you get by with one full-timer and one part-timer?"

"Yeah, I guess so..."

"OK, do it."

Most likely, no one in the company has any real idea how much this project is worth. No one has any real idea what the value of the output of these 1 and 1/2 programmers is. All that matters is whether the higher up is pleased with the …

The Most Shocking Thing about the Bakke Case

It wasn't, for me, anyone's view on affirmative action: It was that, in 1978, Bakke's B+ average was considered "outstanding"! And people with C+ averages were getting into medical school.

Nixon's Choice of Burger...

was usually mushroom-Swiss.

I kid, of course: I mean Nixon's choice of this Burger. But wasn't perhaps Nixon himself kidding around with the rest of us a bit? He was replacing someone named Earl Warren, and he replaced him with someone named Warren Earl?!

It's Always Nice to Get Support from Thomas Nagel

As noted by Ed Feser, Thomas Nagel pins the tail on the exact same donkey I have in some recent posts:
The modern mind-body problem arose out of the scientific revolution of the seventeenth century, as a direct result of the concept of objective physical reality that drove that revolution. Galileo and Descartes made the crucial conceptual division by proposing that physical science should provide a mathematically precise quantitative description of an external reality extended in space and time, a description limited to spatiotemporal primary qualities such as shape, size, and motion, and to laws governing the relations among them. Subjective appearances, on the other hand -- how this physical world appears to human perception -- were assigned to the mind, and the secondary qualities like color, sound, and smell were to be analyzed relationally, in terms of the power of physical things, acting on the senses, to produce those appearances in the minds of observers. It was essential …

Markets in everything

The market is a wonderful, wonderful thing. So is a Swiss Army knife. However a Swiss Army knife is not a very wonderful thing to use for changing your baby. The idea of "markets in everything" is a form of idolatry, holding forth a single ideal as if it applied to all of human experience.

An Irony Supreme

Because of the Miranda case, when Miranda finally got out of prison (he was convicted in the retrial the Supreme Court ordered), and was murdered, his killers were read their Miranda rights.

A modern shopping list

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First I pile the empties on a counter near the door. Then I photograph them:
When I get to the store, I pull out my phone and look at the photograph. Then, as I walk around the store I forget almost everything I saw in the photograph and go home without most of the things I put on the counter.

John Marshall's Magical Feat

I'm not necessarily against it, but the logic of it is essentially the following:

1) John Marshall: The Supreme Court is the ultimate arbiter of the U.S. Constitution.

2) Critic: Who says?

3) JM: The Constitution itself.

4) Critic: Hey, Article III, the one setting up the Court, certainly does not say that in so many words. On what authority are we to read the Constitution that way?

5) JM: Please pay closer attention to step 1.

It is very similar to the way the Pope became infallible.

You got a fight for your right...

to park close!

I pulled into the faculty and staff lot this morning and there was a truck hauling a dumpster sitting in the middle of the driveway between the rows of spaces. I just pulled into a space about ten back from this setup: what if he was going to back up? Easiest just to stay clear: it takes about five seconds to walk ten parking spaces, right?

Well, the woman who pulled in behind me would have none of this. She pulled up as close as she could possibly get to the dumpster, then carefully squeezed past it to the closest spot it was physically possible to reach. She was getting out of her car when... the truck hauling the dumpster moved! She climbed back into her car, started it back up, and reversed the car into a new spot that previously had been blocked... and was about three spots closer to the nearest buildings. At this point, I was looking back, already arriving at the cafeteria. She was literally parked about ten or fifteen seconds walking time closer to the buildings…

A Tip on Makeup Quizzes

It is always a pain-in-the-neck to generate a new quiz for that one student whose car broke down, grandma died, etc. and missed the quiz on the date it was given. But you can make it easier by realizing that you don't need to change everything on a multiple choice makeup quiz. You only need to change enough so that the student who is trying to get by solely based on knowledge of the first quiz is unsure of when you have and haven't, say, reversed the meaning of a question, or when a change in the facts of an example change the correct answer. So, turn a few questions into their opposite by, e.g. changing "demand increased" into "demand decreased," introduce a couple of brand new questions, and change the facts of a few examples, e.g., turn "bananas and oranges" into "wheat and rice."

If the student doesn't know the material, this will make it essentially a brand new quiz. The better prepared student will recognize the shifts as mino…

That's Not What *I* Mean by Anarchy!

"When I say anarchy, I don't mean a situation in which there is no ruler and a bunch of groups fight to become the ruler. What I mean is there is no ruler and everyone peacefully gets along!"

Yes, this vision is lovely. I understand that what we typically actually see when there is no ruler is different from what you want: (almost) no one is asking for civil war. But if, in fact, that's what we will get, it doesn't really matter if anyone asked for it or not.

Keynes was an "Austrian" economist

Today's neoclassical mainstream tends to look at the economy as a series of shifts from one equilibrium state to another. Of course, all of the best neoclassicals recognize this as an idealized abstraction, but they largely think of it as an abstraction that largely captures what really occurs in an economy.

Keynes, in common with Austrian economists, saw that while the market process generates a tendency towards equilibrium, it is never, or almost never, in an actual equilibrium state. Market participants do not have before them a neat little supply-and-demand diagram telling them just what the new equilibrium price will be when supply or demand changes. Instead, they must engage in a discovery process searching for the new "correct" price. Keynes's "vision" was based upon his realization that, in such uncertain conditions, buyers and sellers would be likely to make quantity adjustments as well as price adjustments to the new situation. (In contrast to th…

A strange anarchist argument against Hobbes

Civil War England of Hobbes time, the anarchist says, was not actually an example of anarchy. You see, he continues, the factions fighting were each trying to establish themselves as the state.

Well yes, that is what occurs under anarchy. How in the world is that supposed to be a refutation of Hobbes?

Does Austrian Business Cycle Theory Depend Upon a Lengthening of the Structure of Production?

No, it does not:

"But now the drop in interest rates falsifies the businessman's calculation. Although the amount of capital goods available did not increase, the calculation employs figures which would be utilizable only if such an increase had taken place. The result of such calculations is therefore misleading. They make some projects appear profitable and realizable which a correct calculation, based on an interest rate not manipulated by credit expansion, would have shown as unrealizable. Entrepreneurs embark upon the execution of such projects. Business activities are stimulated. A boom begins.

"The entrepreneurs embark either upon lateral expansion of production (viz., the expansion of production without lengthening the period of production in the individual industry) or upon longitudinal expansion (viz., the lengthening of the period of production). In either case, the additional plants require the investment of additional factors of production." -- Mises…

How Scott Sumner Will Triumph, and That Triumph Will Be His Defeat

He will triumph because, in the past, stabilizing NGDP would have been a cure for many macroeconomic woes.

This will be his ultimate defeat, because once NGDP is the target of policymakers, it will no longer function as it did in the past.

An analogy: a high fever has been a good sign that someone is very sick from an infection and might die soon. If the fever subsides, that has been a good sign the person is getting better.

But, if people begin to target the patient's temperature, then very sick patients will be put in ice water, etc. The temperature will cease to function as an accurate gauge of health precisely because it is now being targeted directly.

A Good *thought* Relevant to the Natural Rate of Interest Debate

"The market rates of interest on loans arc not pure interest rates. Among the components contributing to their determination there are also elements which are not interest." -- Mises, Human Action, p. 536

Note: I did not say "some good sentences" -- the sentences are not particularly eloquent. It is the thought behind them that is important.

The Worst Thing That Can Happen to the Church?

"BERGOGLIO: It is what De Lubac calls «spiritual worldliness». It is the greatest danger for the Church, for us, who are in the Church. “It is worse”, says De Lubac, “more disastrous than the infamous leprosy that disfigured the dearly beloved Bride at the time of the libertine popes”. Spiritual worldliness is putting oneself at the center. It is what Jesus saw going on among the Pharisees: “… You who glorify yourselves. Who give glory to yourselves, the ones to the others.”

This is exactly what my primary Buddhist teacher, Chogyam Trungpa, warned about all the time.

Many paths up the sides, but one mountain.

(Hat tip Dreher.)

Paleofantasy

Europeans ate grains 30,000 years ago. More here.

Garrison and the lowering of interest rates

(Part three of an examination of Garrison's business-cycle  theory as an over-investment theory: part two is here.)

It is true that lowering of the interest rate will raise the net present value of a long-term investment by more than it will reduce the net present value of a short-term investment. However, this does not mean that a lowering of the interest-rate will make it more likely that I will undertake a new long-term investment the new short-term investment. The fact is, what I will look at is the yield on my Investment versus my cost of borrowing to finance the investment. If the investment returns 5%, the interest rate was 6%, and it is been lowered to 4%, the investment now looks profitable to me, whether the investment is a one-year investment or 30 year investment. Thus, what we will see is more investment projects being undertaken, whatever the length of the project. (And of course, less saving.)

But doesn't the greater increase in the net present value of a long-…

Workers and employers cannot reach real wage bargains

If the lowering of nominal wages creates deflation, the real wage may remain high despite the lower nominal wage. In any case, it not determined exclusively by wage bargaining between employer and employee.

This point, of course, is from Keynes.

Keynes versus the Classicals

'In Keynes' theory, then, the homeostatic mechanisms postulated by the classics are neither "out of order" nor just missing.' -- Leijonhufvud, On Keynesian economics economics of Keynes, p. 161

Theory hiding in the aggregates, part two

'Aggregation implies abstraction — certain particularistic features of the elements of the aggregates are suppressed, while "representative" characteristic subsume exclusive significance. The aggregation procedure is, therefore, as important in determining the properties of an economic model as the assumptions made about relationships between the aggregates. Yet, economists eventually pay far more attention to specifying and defending the qualitative relationships among the aggregates of their models than to giving the reasons for the particular choice of aggregates. The aggregates used tend to become professional conventions which are seldom examined.' -- Leijonhuvud, On Keynesian economics and the economics of Keynes, p. 111


Filming in front of my building

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I think what they're interested in is catching a shot of me at 6 AM, to go along with the news clip saying, "Gene Callahan actually wakes up and goes to work at 6 AM!"





Reactionary!

I've written here before that the word "reactionary" acts as a warning sign to me that the person using it probably shouldn't be taken seriously on the point in question. I saw an example of that today listening to a history of the Supreme Court by Prof. Peter Irons of USCD. Commenting on the Supreme Court case of Adkins versus Children's Hospital 1923 Irons says that the decision of the court to strike down a minimum-wage law was "so reactionary that even Chief Justice Taft dissented."

Now in the context of Marxist historical doctrine, the word "reactionary" makes some sense. But taken out of that context it is really little more than an equivalent of "yuck!" One calls whatever policies or positions that stand in the way of a leftward-moving agenda "reactionary." What is ironic in this case is that, of course, the legal regulation of market prices far, far predates the laissez-faire doctrine that the court was using in maki…

But If You Can't Ever Actually Find Any Truth...

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This poster implies that anyone who claims to have stumbled upon any truths is to be avoided. But, if finding the truth is illegitimate, what is the point of seeking after it?!

Why Keynes's Work Was a "General Theory"

"The revolutionary impact of Keynesian Economics on contemporary thought stemmed in the main, we have argued, from Keynes' reversal of the conventional ranking of price and quantity velocities. In the Keynesian model price velocities are not infinite; it is sometimes said that the implications of the model result from the assumption that money wages are 'rigid.' This usage can be misleading. Income-constrained processes result not only when price-level velocity is zero, but whenever it is short of infinite." -- Axel Leijonhufvud, Keynesian Economics and the Economics of Keynes, p. 67

In other words, the classical theory of markets, as we still present it to students today, posits that when faced with a disequilibrium price, the market will make infinitely fast price adjustments, so that no quantity adjustments will ever occur. That, certainly, is a very special theory: in reality, price adjustments can never be infinitely rapid, so there will always be some quan…

How Say's Law May Encounter Difficulties

"The fact that there exists a potential barter bargain of goods for labor services that would be mutually agreeable to producers as a group and labor as a group is irrelevant to the motion of the system. The individual steel producer cannot pay a newly hired worker by handing over to him his physical product (nor will the worker try to feed his family on a ton-and-a-half of cold-rolled sheet a week)." -- Axel Leijonhufvud, Keynesian Economics and the Economics of Keynes, p. 90

Or, on the Other Hand...

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Perhaps a mind is actually like a house, and if you leave it open all the time, all sortsa varmints gonna wander in. Who wants a mind full of opossums and squirrels and pigeons and what not?

Op. Cit. = Pain in the Butt

People don't use the op. cit. form in referencing others' work much anymore: thank God! I'm reading Leijonhufvud, and I find "Arrow op. cit. pg. 54." I've scanned back about 30 pages so far and not found the op. being cit.ed... but of course, perhaps I missed it, so when I get back to page 1 I will have to start over.

Why in the world did this style ever prevail?

The Life of the Law

"The Life of the law has not been logic. It has been experience.” -- Oliver Wendell Holmes, Jr.

Is Garrisonian Over-Investment Theory Still "Austrian"?

I suggested here that Roger Garrison's business cycle theory should be disentangled from its Hayekian-triangle encrustations and show itself as a theory of how low interest rates can produce temporary movements beyond the PPF (where the PPF is understood to represent sustainable combinations of investment and consumption production). What that would do would be to free the theory up from its (I think) unnecessary ties to the shaky notion of a "lengthening structure of production." Long before the Cambridge capital controversy highlighted the reswitching problem, no less an esteemed Austrian than Mises had declared, "The 'average period of production' is an empty concept" (Human Action, p. 522).

So if we eliminate that feature and rely instead on Garrison's idea of movements beyond the PPF, is there something distinctively "Austrian" left in the theory? I think so: it is the notion of a capital structure. We must take that into account in …

Almost Done with *That* Project

My wife said, "Let's put on a movie."

"OK."

"But first I have to finish the laundry."

"All right then. I'll keep reading the Internet. I think I'm almost done."

"With what you're reading tonight?"

"No. With the Internet. I've read just about all of it. I think I have just a couple of more pages left. Let me go see."

Annoying Cowen Tics

I've already complained about Cowen using commas as sentence separators, which he does all the time, if you're beginning a brand new sentence, you should use a period, he seems to do this for no apparent purpose at all.

But "sentences of interest" or "very good sentences" is really starting to grate on me as well. First of all, it's not like it is usually really well-constructed sentences he is noting; it is the ideas that are of interest. But secondly, the last two times he did this it was just a single sentence, and yet in the post title "sentences" is still plural.

Theory Hides in Aggregates

"it sometimes proves difficult to trace... theoretical conflicts to assumptions which have been explicitly stated. This is partly because we habitually concentrate on making those assumptions explicit which specify the relationships between the variables actually appearing in the model. The immediately antecedent stage in model-construction, i.e., the selection of aggregates, is often the stage where implicit theorizing enters in.

"The behavioral assumptions underlying a particular mode of aggregation are, however, just as important as the behavioral relationships assumed to hold between the variables defined." -- Leijonhufvud, On Keynesian Economics and the Economics of Keynes, p. 38-39

Obama's Best Friend?

Mises Sought to Unite Value Theory and Monetary Theory

As did...

"Keynes envisioned and grand synthesis of the theory of value and the theory of money, as we have seen" (Axel Leijonhufvud, On Keynesian Economics and the Economics of Keynes, p. 31).

A Notable Economist Who Recognized the Importance of Cantillon Effects

His name started with "John Maynard," and ended with "Keynes":

"The basic contention [in the Treatise] is that a monetary injection (for example) will not impinge with the same force on all markets and all prices." -- Axel Leijonhuvud, On Keynesian Economics and the Economics of Keynes, p. 23

Garrison's Business Cycle as an Overproduction Theory

In my continually rethinking of cycle issues, I have come to the conclusion that Roger Garrison's cycle theory ought to liberate itself from its Hayekian triangles and stand on its own as a theory of a temporary movement beyond the production possibilities frontier.

Garrison defines his PPF as a sustainable combination of output. How can we move beyond that? A story as simple as this will do: Let's say we own a factory that produces some investment good. Our normal schedule is to run the machines in the factory 20 hours per day, allowing four huors for them to cool down and to be repaired. But the good we produce becomes in great demand for some consumption good it is used to produce. We could invest in more machines, but instead we decide to "make hay while the sun shines": we run our machines 24 hours a day, with no maintenance or cool down periods.

For some time, the production of both investment and consumption goods may rise. That is the "boom." But t…

By Left We Mean...

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That other left, the one to your right:

Green Beans?

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Yes, the short,round kind.

OK, *Now* Explain This

A while back I wrote that I was curious about restaurants and so forth that have single seat toilets but still segregate them by sex. Commentator Scott responded that this was part of the natural order of things, and people would feel very uncomfortable sharing a public toilet with those of the other sex... despite the fact we all do this in our homes, and on trains, and airplanes.

Well, today, I was in such a restaurant and the men's room was occupied. A waiter nearby told me, "Just use the women's room!"

So, they have signs up saying "Men's" and "Women's," even while encouraging patrons to use whichever they want.

Explain that, will you!


Hooray for Rand Paul

Here.

Soon a certain friend of ours will doubtlessly argue that it is humanitarian for the government to use drones to kill Americans as they drive home from work or play softball, and so Paul should just stop being a pest.

UPDATE: He beat me to it.

If Obama begins arresting people for criticizing these policies, I'm quite sure Kuehn will tell us he can "read the constitution for himself" and that it certainly doesn't prevent a president from shutting up nuisances.

Does Lachmann Make a Case for Technical Analysis Here?

Technical analysis hasn't much of a reputation in academic circles, having been compared to astrology, but Lachmann seems to make a case for why it might be effective, although the following passage never mentions technical analysis explicitly:
Let us suppose that on a market a 'set of self-consistent expectations' has had time to crystallize and to create a conception of a 'normal price range'. Suppose that any price between £95 and £110 would be regarded as more or less 'normal', while a wider range of prices, say from £80 to £125, would be regarded as possible. We thus have two ranges, an 'inner range' from 95 to 110 reflecting the prevailing conception of 'normality', and an 'outer range' associated with what is regarded as possible price change. Many economists have started their study of expectations with the notion of a 'range', usually in the form of a probability distribution, but only to discard it at the …

Our Nation Faces Many Challenges and Problems

Steak on the Eye?

I was watching Don Matteo the other night. The protagonist receives a blow to one eye that leaves it raw and swollen. His housekeeper brings a steak out of the fridge... and he slaps it on the wound! Oy vey.

First of all, steak is good to eat... but not after its been on a raw sore. Even worse, though, is that the reason we cook steak is... bacteria. Uh-huh, nothing better for a raw sore than to have a festering boatload of bacteria pressed up against it. After the steak, Don, maybe try a baby's soiled diaper... or something like that.

The punctuational theme for this post is... ellipses.

We're Number 91! We're Number 91!

Or so Amazon was telling me today, at least in the category "Metaphysics"! (Metaphysics looks like a complete holdgepodge to me.)

Archers Worked for the Scythians, So...

Perhaps they would have worked against the Wermacht as well?

Noahopinion details an interesting debate between Robert Waldmann and David Glasner. What I find most fascinating is that neither of them seems to consider the true state of affairs: there is no single, simple truth about whether or not monetary policy works at the zero lower bound. It may have worked in Ruritania in 1968 and utterly fail in Strackenz in 1988. Why? Well, for one thing, expectations are a key factor in all economic processes. People learn, and on the basis of their learning form new and different expectations than they had before. Faced with those new expectations, a policy that worked perfectly well in one time and place may fail utterly in another.

The social sciences really are different than the physical sciences.

The Perversity of Airline Pricing

My wife bought my son a ticket from New York to London to Lisbon for $850. She then tried to get a ticket for herself for just the London to Lisbon leg, since her employer would fly her to London. If the whole 4400 mile trip cost $850, how much do you think that last 984 miles will run you?

$1100.

Well, at least on American Airlines, which is where she got my son's ticket. But she noticed the last leg was operated by British Airways. So she tried again with them.

$300.

The exact same seat on the exact same flight, purchased on the exact same day, was almost 300% more expensive purchased from one airline than from another.

Yes, Virginia, There Is a Unique Natural Rate of Interest

"Fisher, himself, in Appreciation and Interest (1896) had introduced something like an own-rate analysis in discussing how the same real rate could be expressed equivalently as different nominal rates, depending on the choice of numeraire or unit of account; Keynes’s analysis in chapter 17 of the General Theory is merely a generalization of Fisher’s analysis, leading to a similar conclusion, that a unique real rate can be expressed equivalently in terms of many different nominal rates, each one depending on a different choice of numeraire or unit of account. So although it is possible to identify a unique real natural rate of interest, there is no unique nominal natural rate of interest, because, as Fisher certainly understood, the choice of a numeraire rising in value over time would imply a lower nominal interst rate than the choice of a numeraire stable or falling in value over time." (Emphasis mine.) -- Glasner and Zimmerman, "The Sraffa-Hayek Debate on the Natural…

Wicksell-Keynes-Hayek

"Hayek and Keynes could be said to have merely been theorizing on opposite sides of the same Wicksellian coin." -- Goodspeed, Rethinking the Keynesian Revolution, p. 119

I had been groping towards this conclusion myself: Keynes is concerned with what happens when the money rate of interest is above the natural rate, and Hayek with what happens when it is below the natural rate.

This Should Drive Sales...

Through the roof, from a copy per month to as many as two copies per month!