Showing posts from June, 2008

New Oil Scenario; Or, "My Bad, Tyler"

Well I've been pretty smug with my fellow economist bloggers on the oil speculation issue. But I think my sweeping pronouncements before were too strong (strident?), and that it's possible for speculators to drive up spot prices, without leading to inventory buildup and without forcing oil prices to be in contango. Rather than trying to give more general rules for what can and can't happen, let me just tell a little story, and you tell me if it sounds plausible (or even true!). The Fed has been doing CRAZY stuff trying to resuscitate the credit and real estate markets. And yet many traditional measures of irresponsible monetary policy aren't giving off warnings. (E.g. M1 and M2, long-term bond yields, CPI, and PPI.) So, to put it simplistically, where has all this new money been going? Let's say that the Fed really is injecting hundreds of billions, and that it hits the financial big players first. Where are they going to put it? Real estate? Stocks? B

More Quibbling on Economists Handling the Speculation Issue

Stefan Karlsson says in this piece that we must: Note further that commodity speculators can take both long position and short positions. This implies that commodity speculators may not in fact be contributing to higher prices. If speculators as a group have equally large long and short positions then they will have no effect on futures prices, and if they as a group have larger short positions than long positions then their speculations will in fact lower futures prices. Now I am only picking on him because my breakthrough finally was crystallized while reading his article; there have been plenty of apologists for capitalism making this same argument. In any event, as with the claim that the futures price is the market's "best guess" of the spot price at a future date, so too I think the economists here aren't really thinking this through. Let's say the spot price of oil right now is $140, and the futures price for June '09 delivery is $145. (I'm n

I Feel Bryan Caplan's Pain

I have been known to criticize Bryan Caplan , and in fact I have a forthcoming hatchet job, er thoughtful critique, on him. But in this post he asked a simple question regarding the ability to profit from superior knowledge if futures markets don't go out far enough. And then Tyler Cowen gave a hand-waving appeal to authority that was a non-answer . Arnold Kling dressed up Cowen's response , but check out the comments. JPC knocks Kling on his butt, then kicks him again when Kling tries to stand back up. What must really be frustrating for Caplan is that these answers imply that Caplan hadn't thought of such obvious "solutions." Caplan purposefully rigged his initial scenario so that these obvious techniques wouldn't work. I feel your pain, Bryan. The experts have been blowing me off for years too. Come join me, and together we can rule the blogosphere!

The Brains Behind the Vast Right-Wing Conspiracy

The Weekly Standard has a new piece that relies very heavily on my IER report on speculators . I wonder if they will heed my policy recommendation to reduce demand by pulling the troops out of Iraq and Afghanistan?* * The views expressed here do not necessarily reflect those of IER staff or management.

Sorry, Honey

I'm reading a very entertaining book by Walter Gratzer called Eurekas and Euphorias . It consists of quite a few, curious or amusing, short tales from the history of science. One of my favorites is about the absent-minded physicist Sir Nevill Mott. One day Mott, who had been a professor of physics in Bristol for many years, was riding the train from London to Bristol when three things struck him at at once: 1) He no longer lived or worked in Bristol, having been appointed Cavendish Professor at Cambridge; 2) He had driven to London that day; and 3) His wife had accompanied him.

Oh, His Last Name Is Working

I kept thinking Tyler Cowen was making grammatical errors in his references to a Holbrook Working Paper, until I realized that the economist's name is Holbrook Working . Does anyone else see the tremendous comedic possibilities? Suppose he had a son and named him Home: ============ Costello: Is Home home? Abbot: No he's working. Costello: I *know* he's Working. Is Working home? ============ Ahh, the misunderstandings and comedy ensue...

Booting What?

I flew on Delta from JFK to Gatwick last night, and the seat-front screens were having some difficulty. I was stunned to learn that that little screen (at least on Delta) is a (Red Hat) Linux box, as I got to watch Red Hat's re-boot sequence about a dozen times. And it was clear that my station had its own Linux copy, as I could see my seatmates version of Red Hat Linux at a different point of re-boot than mine was. Who knew?

Study (Guide) Break

I'm working on a study guide to Mises' Human Action . I just came across the below excerpt, and remembered why a lot of people love, and a lot of people hate, Mises: The treatment of probability has been confused by the mathematicians. (From Chapter VI, section 2.)

Trust Daddy or Act in Self-Preservation?

Well geez another milestone. My son (3.5 years old) used to love when I would throw him up in the air. (I caught him, too.) He would honestly have wanted me to do that for an hour straight. But inasmuch as my body is not nearly as honed as my mind, I would always quit after 5 minutes. Anyway, today we were having a good time and so I thought I'd throw him up in the air to celebrate. But now, he would lock his arms around my hands, so that I basically just swung him up and then down, like we were dancing. I am both disappointed that he no longer trusts me with his life, and proud that he is wiser.

A Clarification on My Views On Oil Prices

OK I have been going nuts over the Krugman/Cowen/Kling brouhaha. My overarching complaint is that such high-caliber economists keep talking past each other because they aren't defining terms and then being consistent. So you've got, for example, Kling proving that "speculation" about the nature of the universe always determines prices, and of course anyone who subscribes to subjectivist price theory agrees with that. But naturally that's not what Krugman and Congress are talking about. On the other hand, it does seem a bit crazy to say that oil has shot up so much in just a year, and this is all due to "fundamentals." Is that really what I'm saying?! Three points: (1) From mid-June 2007 to mid-June 2008, fully 15% of oil's tremendous nominal price jump can be explained by the dollar's fall against the euro. So right there I just took care of 15% of the issue. (2) China has been growing like gangbusters. Estimates vary, but people

Who's to Blame?

I continue to be annoyed and perplexed that anyone takes seriously writers like Michael Moynihan at Reason who insist that "the blame" for some event is an exclusive property of a single agent . Moynihan, in critiquing Pat Buchanan's Churchill, Hitler, and the Unnecessary War , writes: "Beyond the absurdity of implicitly blaming Churchill for the Holocaust—because that is what he is really saying when he writes 'no war, no Holocaust'..." I declare that what Moynihan "is really saying" when he writes this is that, if Buchanan holds Churchill responsible to any degree for the Holocaust, that he is saying Hitler had nothing to do with it. And that is utter rubbish. Any professional in science or ancient (i.e., politically uncontentious) history who took the view that "pundits" such as Moynihan do of "blame" (i.e., cause) would be laughed out of court for such simple-mindedness. That Caesar was "to blame" for the

Krugman 3, Free Market Economists 0

I am sorry to say that I still think Krugman is crushing all of the other econowizards on speculation and oil prices. To recap very quickly: Krugman originally said that if speculators were raising prices above the level justified by "fundamentals," then clearly there would be a surplus of oil on the spot market. This is possible, but it would require somebody to be stockpiling the oil. We don't see this in the inventory data. OK Tyler et al. come back and say, "No, it could be that producers hoard the oil in the ground, i.e. they pump less today and plan on pumping more in the future." Then Krugman can come back and say, "Right that's possible, but even in that case you would see futures prices higher than spot prices--i.e. contango. And yet the oil market has been in backwardation for long periods during oil's runup." Now here is where it gets ridiculous. Tyler actually said : [W]hen risk and liquidity premia are changing, the rela

Clarification on Futures Price and Market's "Best Guess"

A few posts ago I criticized economists who either explicitly or implicitly say that the futures price for a particular date is "the market's best guess" of what the spot price will be on that date. I wrote: You can see the difference pretty easily: We can always check whether we are in backwardation, since it is a snapshot thing between spot prices right now and "the futures price" right now. But in order to see whether oil prices decrease over time, you would actually have to wait a few months and watch. Although the above is true, it may have misled some people as to how deep my criticism was. From reading my first post, one might have thought that I was merely saying, "The futures price right now is a different thing from what the spot price in the future will end up being." Yes that's of course true, but that's not the extent of my point. To drive this home, I should relate that back when I was trying to get a job as a "quant&

I Assert, You Decide

I had a quick spot on Fox Business on Wednesday. Go to this link and scroll down to find it. (BTW, it's surprisingly difficult to know when the camera is first on you, and it's hard to maintain a big smile beforehand, with people all around the studio. So that's why I have the charisma of Al Gore in the beginning.)

Order of Praise: Toddler, Relative, CPS

This is an awful/wonderful story of a 2-year-old who survived 6 days alone in the house after his mom died. What annoyed me in the story is how everyone gushes over the Child Protective Services worker (who called police to break into the place and find the kid). But what is the big deal? The only reason the CPS worker even knew to check the house was that a concerned relative called them. And if the kid hadn't survived by eating cat food--everyone is calling it a "miracle"--then the CPS worker's approach would've led to his death! Does everyone get what I'm saying here? A concerned relative calls CPS and says, "Lisa has been very sick and I'm worried about Noah. Please check to make sure they're OK!" And it takes Noah being with his deceased mother for six days before the authorities actually help him. The concerned relative didn't bother breaking into the house, probably figuring, "Well I called the authorities, what els

Sorry to Have Been Away...

Our hosting service, Joyent, had a miassive bank of servers down for almost three days. Then, when they came back up, the last good backup they could find was from May 17 ! Luckily Blogger stores a copy of this blog as well, and I was able to re-publish. In any case, do not host with Joyent, folks !

A Subtle Misconception About Futures Prices

Even many economists subscribe to the mistaken belief that the futures price at any moment represents "the market's" best guess about what the spot price will be on that future date. But this simply isn't true. If the July 30 futures price of oil is $138, that doesn't mean people in the oil business expect the spot price to be $138 on July 30. All it means is that the people going long and short in the futures contract can know that they will swap oil and money at that price. There is no corollary that their best guess is that the spot price will also be in that neighborhood. (Actually, what I said is strictly true for a forward contract. A futures contract is marked to market periodically during its life, so that the spot and futures price really do converge at maturity. However, because their accounts will be credited or debited as spot prices move, the people exchanging the futures contract today can make their plans as if they will be exchanging oil f

A Model Discussion By Krugman

I hate to say it, but I totally agreed with Paul Krugman in this piece ( pdf ) for econowonks when he said: One of the problems in the debate over the role of speculation in oil prices is that hardly anyone, even among the economists, is writing down models. As a result, it’s not always clear what people are saying; and I’d argue that some of my colleagues aren’t clear on the implications of their own analysis. I think this issue about speculators and oil prices is perfect for neoclassical models, so long as the creator is familiar with Grossman's work as collected in The Informational Role of Prices . (Incidentally, that is a wonderful book that justifies the absurdities to which formal models may be put in most cases. Another example is Lucas' model of money demand, to which I can't find a link. If you're going to do it formally, that's the way.) Anyway, Krugman crystallizes the verbal reasoning I employed in this study , to rule out speculators from being

Two Opportunities on Murphy Books

Ilana Mercer has graciously allowed me to plug my Politically Incorrect Guide to Capitalism at her blog . If you enjoy Crash Landing but haven't yet bought my book, then I'm emailing Hans Hoppe with yet another example of a performative contradiction. In related news, Dick Clark alerted me to this amazing arbitrage opportunity involving my earlier book, Chaos Theory: Two Essays on Market Anarchy . (For the entrepreneurially challenged--general equilibrium theorists, say-- buy here and sell here .)

Don't Relax, They Still Want Another War

John Bolton thinks the Israelis might attack Iran (HT2LRC) after the election but before the inauguration. Now some people--such as the head of the IAEA--think this would turn the Middle East into a "fireball." But Bolton dismisses this wuss talk as scaremongering (not to be confused with Condoleezza Rice's talk of a "mushroom cloud" etc. regarding Saddam). In fact, Bolton thinks that if Israel bombs Iranian nuclear facilities, the Arab world will be "pleased." Now you might think that is an erroneous prediction, but we will never know one way or the other. Bolton covers himself: "It [the reaction] will be positive privately. I think there'll be public denunciations but no action," he said. It occurs to me that in Bolton's worldview, if a country doesn't launch a retaliatory attack, that is equivalent to endorsement. If people aren't willing to back up their views with weapons, then those views really aren't all

Running Commentary on the Gospel of Luke, part 1

I am reading the gospel of Luke and thought some readers might be interested in random comments that occur to me as I go through. If you are horrified by my violation of the separation of church and libertarianism, just skip these posts. One last caveat: I am going to adopt a literalist interpretation of the Bible when I post these comments. It's not that I necessarily think every passage of the Bible should be viewed as an excerpt from a history book, but I'm no scholar in such matters and for simplicity I take the text at face value for the purposes of this commentary. =============== In Lk 1:5-20, we learn the story of Zacharias the priest. The angel Gabriel tells him that his wife, though thought barren, will conceive a son who will turn many back to the Lord. In addition, the son (who shall be named John) will prepare the people for meeting the Lord. But because Zacharias questions how this can be possible, the angel tells him he will be mute until the predictions

Those French

My eight-year-old, Adam, and I were in Paris in April, looking out our hotel room window. Adam asks, "Daddy, what's that adult store over there?" pointing across the street. I respond, "Well, you know, they sell naughty movies and magazines, stuff like that." "OK, but then why do they sell toys there, too?" I shook my head and said, "The French... who can understand them? They eat frogs, and sell toys in adult stores..."

The Origins of Agency

Mises was, for some reason, reluctant to attribute agency to animals -- he called what animals do "quasi-action." I've argued against this in the past; Stuart Kaufman offers a detailed defense of my position in his new book, Re-Inventing the Sacred , in which he offers a semiotic definition of agency that extends that concept to single-celled creatures. To be a semiotic interpreter is to possess agency -- it is to interpret a sign and then act upon that interpretation -- in fact, in a sense, the action is the interpretation. To act is the characteristic distinction between life and non-life.

Carlin Critiques US Foreign Policy

Anthony Gregory posted this over at LRC's blog. I thought Carlin was exaggerating when I first heard this in high school, but now that I am older (and wiser?) I think it's pretty accurate.

Bob, Usher; Usher, Bob

I visited my younger brother over the weekend who is getting a PhD in math. He introduced me to Usher . I had actually heard some of the artist's performances in the past, though I didn't know the artist's name. It seems this musician has studied Rothbard. For example, he continually refers to "thugs in the club" in his poetry. I can only assume that this is a subtle reference to the employees of the US federal government, the biggest gang in the world. Usher's economics acumen is clearly on display when he refers in a patronizing way to "Shorty," an obvious dig at economics professor and former Clinton Labor Secretary Robert Reich . Bravo, Usher! I salute your keen insight as well as your gentlemanly discretion. Keep us guessing!

Should Peaceniks Root for McCain?

It occurs to me that if you want the US government to reduce its interference with the Middle East, then you might do well to root for a McCain victory, paradoxical as it sounds. I have two reasons for saying this: (1) McCain will be much more able to take risks in the quest for peace. In contrast, any little thing Obama does, will be denounced by Rush Limbaugh et al. for its "weakness." I.e., only McCain can go to Iran. (2) If things get really bad in the Middle East over the next 5 years, you don't want it blamed on "Democratic weakness." Just as those longing for fiscal conservatism should root for Obama--so that his excesses will be blamed on "liberal politicians" and not on the "conservative McCain"--by the same token, those longing for a humble foreign policy should root for McCain. We already know that Obama won't really do anything fundamental with US troop strength in Iraq , etc., and so if your overriding concern is fo

Murphy Twin Spin on Oil

Here is an Buffalo News op ed (that is a bit clunky in parts because of the editing process) on why oil prices are so high, and here is an IER study debunking Michael Masters' testimony about speculators causing price hikes.

Saudi Arabia to Pump More: I Told You So

Now I can't really know what motivates the players on the world oil market, but this is rather interesting. About a month ago the Saudis put the smack down on George Bush when he asked them to produce more. Now all of a sudden, the Saudis are promising to ramp up both current and future output from previously projected levels. What changed? Well, it's entirely plausible that the sudden shift in US sentiment for OCS and ANWR drilling made OPEC's new profit-maximizing output level in the near-future a lot higher than it had previously been. This is exactly the mechanism I've been arguing about over at the Environmental Economics blog.

Carlin Dead at 71

George Carlin died yesterday. I liked him more when I was younger--not sure if I changed or if he did--but George Carlin was a very influential comedian. (I can actually do a decent impression of him. Stay tuned for my Broadway opening. You scoff, but if Glenn Beck can do it , why not me?) Below is one my favorite routines. (If anyone can find the video for this one, let me know and I'll swap it in.) Warning: bad language.

Man the Microcosmos, Part II

Did you know that humans have about 2500 transcription-factor genes, which construct the roughly 100,000 different kinds of protein that exist in our bodies, or that the number of different possible settings of those genes, if they were simple on-off switches, is 10 750 , compared to the 10 80 particles in the known universe? (Source: Reinventing the Sacred , Stuart A. Kaufman.)

Two Zingers Regarding Oil Companies

OK, I realize I am not the most unbiased commenter on this, but c'mon, the recent talk about oil companies is just plain dumb. Even if the Democratic charges were true, then their policy recommendations would be terrible. CHARGE #1: Oil prices are really high because oil companies are making outrageous profits. RECOMMENDATION #1: The feds should levy a windfall profits tax on oil companies, and that will bring prices under control, ultimately providing relief at the pump to motorists. This is crazy. If oil companies can set whatever price they want, in order to achieve a profit objective, then a new tax will just be passed on to consumers. Once you admit oil companies can't simply pass on a tax and make the same profits as before, then you are forced to admit that maybe right now they are not "manipulating" oil prices either. ================== CHARGE #2: Oil companies already own leases on federal land on millions of acres that are not producing oil or na

Oh Those Kids

Clark just gave me two novel sentences, and even shot them out back-to-back. My pride was somewhat tempered by the content, though: Fix diaper! I mean it! ================ On a related note, it occurs to me that the adaptability and extraordinary good nature (or whatever you want to label it) of kids, are related. It's not that kids happen to good natured, happy go lucky, whatever, and that they also happen to be incredibly adaptable and resilient, especially considering their size and ignorance! Rather, those two things are intimately related. If we all acted like little kids (in terms of their ability to be happy in any circumstances), then we would learn the lesson of how little kids act in order to get along with people a lot bigger and smarter. (Let me put it to you this way: When we hear of a blind guy, we worry about people taking advantage of him. But why is it that when we hear about little kids, it doesn't seem nearly as widespread a threat? I.e. even th

Professor Callahan

is how you'll please address me from now on, as I've just been appointed adjunct professor of philosophy at Northampton Community College, where I'll be teaching "Death and Dying." If you live near Bethlehem, PA, come take my course!

Curiosity from the History of Science #17

The first modern natural philosopher to put forward a full theory of evolution, Lamarck , held that species never went extinct. The first modern natural philosopher to forward the idea that species go extinct, Cuvier , held that they did not evolve! (The Wikipedia page for Cuvier is not very accurate, by the way -- Cuvier certainly held that extinction was a fact, but did not establish it, if by that is meant "Convinced most other scientists." Nor was he a proponent of catastrophism.)

Caplan Notes Flaw in Bayesian Updating Theory

In his objection to the Austrian embrace of radical uncertainty, which Bob mentioned below, Bryan Caplan writes : "But if people really assigned p=0 to an event, than the arrival of counter-evidence should make them think that they are delusional, not than a p=0 event has occurred." What Caplan is relying on here is the theory of "Bayesian updating," which supposedly describes how rational thinkers change the probability they assign to a new theory in the light of new evidence. I don't want to go into the details here -- they are unimportant for my point -- but the basic idea is that you "start out" by assigning some "prior probabilities" to various theories about some phenomenon, or outcomes of some event, and then multiply those "priors" by a factor based on how much more or less likely new evidence makes the prior. For instance, you are a late 19th century physicist, and you are evaluating how likely it is the Newtonian mecha

The King Is Overthrown!

The habanero is no longer the world's hottest chile .

It Speaks for Itself

Electoral Landslide?

Right now, it looks like one for Obama .

Jimmy Dean and Steve McQueen

My friend Julian Velard has just released a great single .

New Pubs

Anyone with access to Springer publications online can read my two forthcoming Reiview of Austrian Economics articles," The challenge of akrasia for the theory of rational choice " and " Nassim Nicholas Taleb: The black swan: The impact of the highly improbable ."

Reply to Schweiger

Matt Schweiger's intriguing post --"A Realistic Assessment of How Many 12-Year-Olds I Could Beat Up Before They Overtook Me"--is a valuable contribution to an emerging new discipline. However, I think his conclusion--namely, seven 12-year-olds--is grossly pessimistic. Now to do a rigorous analysis, we would need to clarify our assumptions. E.g., exactly why is a group of 12-year-olds fighting me? Are they being paid? Have their parents been kidnapped and are being held hostage? Are the 12-year-olds amped up on Sunny Delight? These details matter. Putting all of that aside, however, I think Schweiger is focusing on tactics to the detriment of strategy (or something like that) when he writes: If it were an individual, king-of-the-mountain battle royale, I could endlessly pummel 12-year-olds without mercy. But we're assuming at least a sixth-grade education in a marginal public school as well as some exposure to kung-fu movies, so these kids would form a circle

More Landsburg Is Annoying Landsburg

On Marginal Revolution, Alex Tabarrok claims empirical validation for one of Steven Landsburg's sillier ideas. In his article and then book, "More Sex Is Safer Sex," Landsburg argues that one way to reduce the spread of HIV is for "sexual conservatives" to throw on Marvin Gaye and get their game on. In the comments at MR I repeat my objections to this view.

Polycentrism at the Playground

In the spirit of Landsburg's book , I have been meaning to remark that at the playground, there is a spontaneous polycentrism. Parents have different rules for what is safe/permissible for their kids, and generally speaking parents allow a situation to be resolved in the home court of the offending party. For example, today Clark decided to go up to a kid on the swings and grab him. The outraged kid (who was much bigger) was getting ready to push him away. By this point I had left the bench (where I was reading the WSJ) and yelling, "Clark! Hey, leave him alone!" My yelling alerted the mother of the kid on the swing, and she yelled, "Jimmy, just wait a minute." Not the Cuban Missile Crisis, I grant you. But yet another point for private law.

Rush Limbaugh Says I'm Great

...indirectly. If you go to this transcript and check the 9th moderate-to-big-sized paragraph from the bottom, you'll see he praises the Institute for Energy Research . I have to agree; those folks at IER have snatched themselves a veritable printing press on the cheap. Now if I could only get Sean Hannity to say that the folks at IER are great Americans...

Trump Wants to Handicap His Competitors

Ethical guru and all-around nice guy Donald Trump today called for government measures to penalize oil companies. His reason? They are making too much money. His exact words: I consider myself to be a great capitalist, but I think the oil companies have been ripping off this country and the world for a long time...I can see doing something against the oil companies. They're making numbers--nobody's ever seen numbers like this. They and OPEC and lots of people together are having a lot of fun. Trump also explained that he was using the depression in real estate to snatch up properties that would have been "absolutely impossible to buy" just a few years ago. What a guy. I hope in so doing he doesn't have a lot of fun or make numbers that no one will ever have seen before. But even if he does, he won't need to worry about this fan of capitalism saying the government should take his profits. I might suggest he do something about his hair though. Just

Countably Infinite

Is there a way I (or Gene perhaps) can track how many people visit this blog? Keep in mind that I am very green regarding this stuff; I don't know the difference between a unique visit / page view / etc. Also, is there a way I can cheat to make it seem more popular than it is?

Murphy vs. Zetland, part 340

David and I are clashing over "falsifiability" in our current views regarding federal efforts to mitigate climate change. I have challenged him to specify if there is any possible unfolding of events in which he would admit, "Whoa, that guy Murphy was right about this!" Now David understandably misunderstood me (I think). It seems he is interpreting my claim as something like, "Suppose we are overestimating climate sensitivity. Then we'll be mad that we produced too few SUVs when temperatures only rise 0.8C by 2050!" Although I am indeed concerned about the weight that many economists are placing in the IPCC best-guess, that's not directly relevant to my challenge. I have more in mind things like: the US goes on cap and trade, and the corruption is so rampant that US emissions targets keep getting pushed back, more permits are sold during the next recession, etc. etc., such that CO2 emissions don't diverge much at all from projected &quo

Env-Econ: El Guapo Says, "They are funny guys!"

"Just kill one of them." Here is a 6-year-old's drawing, which John Whitehead entitles "Environmental Policy."

More Weird Movie Conventions

1) Why do so few characters in the movies shut the door behind them after entering a house/flat? In real life, I've only seen someone fail to do this if: a) They are unloading a vehicle into the premises; or b) the place needs airing out for some reason. But notice (if you haven't already) how in movies and TV shows this practice is habitual, to the extent that I'd guess the door is left open more often than it is closed. Why would this be? The reason could hardly be to avoid losing time in advancing the plot! The act of swinging the door shut can be accomplished while walking through it. Does Hollywood have some vested interest in seeing lots of doors ajar? 2) Why does just about no one in the movies exhibit decent table manners? For instance, why does just about everyone in films keep stuffing food in their mouths and then mumbling through the mouthful while having a conversation? Certainly there are people who act that way, but if the intention is realism, then a fi

Bryan Caplan Asks an Impossible Question

As usual, one of us econ geek bloggers asks a question, and then the other econ geek bloggers have to respond in ways that show how smart we are. I hope I am not misrepresenting him, but Bryan Caplan is basically saying , "Austrians claim you can't model the future with probability distributions. But I am still waiting for an Austrian to model the future with probability distributions to clarify their claim." Tyler Cowen and Arnold Kling have the right instinct--namely, Caplan is being goofy--but they get into all sorts of sophisticated examples and analyses. No, the Kirznerian point is quite basic; you don't need to look at derivatives markets to see its implications. (My own, less wise-alecky answer is in the comments on Bryan's original post. HT2 Pepe for originally alerting me to this debate.)

Inexplicable Quote of the Day

As longtime readers know, in addition to taking out the trash and refilling the soap dispensers, one of my duties at Crash Landing is to ridicule other economist bloggers when I think they've said something patently absurd. Usually I pick on Tyler Cowen (I will stop when people think I am more important than him), but today's winner is David Zetland, who said on his blog : I am basically a free-market libertarian, but I am no fan of "unbridled" capitalism. (I've been to China). Now I can forgive David for placing the final period outside of the parenthetical sentence, but the idea that an officially communist country is now the paragon of unbridled capitalism? By all means, folks, tell me in the comments how in some respects Chinese businesspeople are freer than Americans. Fine. Don't tell me that China illustrates the results of pure capitalism. Pointing to Somalia as a Rothbardian world is unfair, but at least it makes sense; David's claim is non

Man: The Amazing Microcosmos

Who knew that, as per the ad I saw last night, the very same drug that can control your twitchy leg at night can also cause an extreme urge to gamble?

Thumbs Up for Landsburg's Fair Play

(Update below.) In the past, I have been known to criticize University of Rochester economist Steven Landsburg ( one , two , and three ). We can only speculate as to the source of my criticism; jealousy over Landsburg's column in Slate is surely a factor. I am happy to report that all is forgiven, because Landsburg's Fair Play is a remarkably radical book. The subtitle is "What Your Child Can Teach You About Economics, Values, and the Meaning of Life." The format of the book is Landsburg relaying anecdotes involving his daughter, and how these lessons/conversations relate to economic principles. In terms of fun analyses that will make an econ geek think, this book isn't as fruitful as his earlier book, The Armchair Economist . However, extreme libertarians will be pleasantly surprised at some of the positions Landsburg takes in FP. Rather than giving an official review, I'll just reproduce some of the better quotations below: [My daughter Cayley

My Bad Impression of Gene

Dang, I was going to try to beat Gene to the punch and spin this latest revelation in a way to show just how innoble Ron Paul is. But I'm having trouble. I can't see how discouraging a write-in vote is the proper play for a megalomaniac. I admit I'm being sarcastic above, but I really am trying to think of how a RP hater would spin this. Ah, I've got it! Ron Paul doesn't want to jeopardize donations by getting a paltry sum of write-in votes. This way, he can continue the fiction that there is actually a large group of people supporting him, the better to bilk the smaller group that support him. (Again, to clarify for newcomers to this blog: I am having a dispute, bordering on an argument, with another blogger here over whether we should think good or ill of the Ron Paul campaign and now "movement." So I am being "funny" by criticizing everything RP does or says before my colleague can do so.)

Murphy Answers Silas On Cap &Trade

Silas (aka Person) has been keeping me honest regarding my cap & trade op ed . He first criticized the piece on the Mises blog , and now more recently has carried his concerns over to the discussion of my critique ( pdf ) of Nordhaus. (BTW, even if you don't really care about my arguments with Silas, you might want to glance at the thread at Aguanomics. I am having trouble getting beyond first base with David Zetland, if you view a home run as changing the other's mind. Any suggestions [posted here on Crash Landing] as to how I can approach from a different angle are welcome.) Rather than try to quote and respond--which would get very tedious--I'll just point interested readers to the links above to see Silas' concerns in his own words. Below I offer some general responses: FIRST and most important: The cap & trade bill recently discussed, as well as any cap & trade bill that will be proposed in any remotely plausible future, will not be "a mar

Pacifist to the Rescue!

This story is awful; apparently some guy traveling with a toddler got out of the truck and beat the child to death before police intervened and fatally shot the guy. I don't know how old the other motorists were who "tried to help out"; at least one couple was elderly so presumably they couldn't do anything. I would like to think that if I saw a guy doing that I would either tackle him or grab the kid and run. I don't think it would take the cops showing up to stop it.

Two More Giants Fall

It's been a bad week for libertarianism. First Gene exposed the Ron Paul campaign for the fraud that it was--just a cynical ploy to raise money from gullible lovers of freedom. And to my horror I discovered today--I am an investigative journalist--that Cato and Reason are similarly corrupt. Is there no one who will fight for liberty for free? After all, if free market economics teaches us anything, it is that voluntary flows of money are a sign of perfidy. Be sure to see the Reason photo of a collapsing building with the caption, "Shaking Up Washington." You bet they've been doing that, since their founding in 1968! P.S. For those who have stumbled onto this blog as a newcomer, I should explain that I am being completely sarcastic. I am defending Ron Paul against (what are in my opinion) silly criticisms leveled by others at this blog. I am not criticizing Cato and Reason for asking for money.

McArdle and Mankiw on Regulation

Megan McArdle asks some good questions in this piece , but I think she too easily dismisses Greg Mankiw's great question. In response to a top Obama economic advisor saying this: "If you can borrow money from the U.S. taxpayer at a moment of crisis, that is a very sacred insurance policy underwritten by the U.S. taxpayer," said Mr. Goolsbee in an interview last week with Dow Jones Newswires. "We have the right to oversee anyone who is accessing that insurance policy."... Mankiw asked this: Here's a question for Austan: Can an investment bank avoid such regulation if it promises never to use the discount window? Or is this insurance-regulation combo a mandate? McArdle dismisses that great question by saying the bailout isn't to help the bank in question, but "the system" and so no bank can promise not to need a bailout in the future. But why not? Why can't banks opt out of the Fed's protective cocoon, and then everyone else kno

The Perfect Storm

I just endured a preview of Rob Schneider in The Hot Chick . I'm amazed that the combined density of the lead actor's stupidity with that of the script did not suck everyone who worked on the movie through a black hole and into another universe.

Why Rent Control Is Bad for California

I explain here .


get one free! (Mineralogy joke of the day.)

The Cynics Are Proven Right

Ron Paul's presidential campaign turns out to have been a means to get a huge mailing list for further fund raising after all.

Do Scientific Explanations Compete with Religious Explanations?

It is often imagined, by partisans of both science and religion, that those two domains are in rivalry for providing the "best" explanations of the nature of the world in which we find ourselves. If there is a valid scientific explanation for, say, the origin of life on Earth, then any religious understanding of the topic is rendered superfluous. The consequence is that many people who appreciate the accomplishments of science conceive religion to be merely an impediment to scientific progress, while numerous religious folk feel compelled to reject the possibility of scientific explanations in some realm that they see as intimately tied to their beliefs. The idea behind this supposed conflict is that "God" serves as a kind of default causal mechanism invoked to explain anything not yet understood scientifically. Thus, if current science has no explanation for the existence of living creatures, then that is seen -- superstitiously, according to one camp, or faithful

The Five Clocks

I commend to your attention a rare and unusual book, The Five Clocks , by Martin Joos (Harcourt, Brace, NY, 1961). It is rare: if you aren't connected to a good university library strong in linguistics--which many, perhaps all, of you are--you will need an interlibrary loan or a rare book dealer. It is unusual: Martin grew up on a cow farm in Wisconson, and consequently went on to a degree in Electrical Engineering. He served at Bletchly Hall in WWII (I learned most of what I know of cryptanalysis from him. I also learned about the bistability of a long chain hanging over two posts and lots of other catenary facts, and lots, lots else from him.) He ended up at U. Wisc. and finally U. Toronto. teaching linguistics. He wrote much about English, but his favorite language was Middle High German, for which he assembled a wonderful reader. He was, I think, sorely distressed by almost everyone's ghastly mispronounciation of MHG, about which one man, however dedicated, could do so li

Pair Share IV

Remember Pair Share ? It carries over seamlessly to triples. Let T be the set of all triples (m,n,p) such that mnp = m+n+p. (Digressing: notice that these triples are not sets, since if two numbers are the same, we can't let them fall together; also, they are not ordered triples or 3-vectors, since we don't distinguish between (m,n,p) and (m,p,n), etc. I believe that the technical term for this intermediate kind of entity is "bag.")(0,0,0) is in there, of course, but so is (1,2,3). Cool! Most pairs (m,n) allow one (m,n,p) in T, but not all. Can you find (m,n) that doesn't allow any (m,n,p)? Answer : (1,1) is a good choice (of very many). 1 x 1 x p = p; 1+1+p = p+2. Can you generate all and only the integer triples in T? Are there finitely or infinitely many of them? Answer : relying on analogy with the case of pairs, you might be tempted to bite me--er, no, I mean, you might be tempted to answer "finitely many." But triples have a dimension that pairs

I'm Voting Republican

The Roman Revolution: Tradition Fails to Save the Republic

Interested in what the history of Rome says about constitutionalism and about ideological politics? From my recent work on my doctoral thesis: ********** Here, we will examine how the Roman reliance on tradition fared during the period commonly known as the ‘Roman Revolution’, typically conceived as covering the years between the tribunate of Tiberius Gracchus in 133 BCE and the Battle of Actium in 31 BCE. The term ‘revolution’ must be understood as being used here in a idiosyncratic way. As Garrett Fagan notes, the Roman Revolution was not a planned event, like the Russian Revolution. Nor did it take place in a brief, dramatic coup. What’s more, many of the ‘revolutionary’ actions making it up were not even, strictly speaking, illegal—due to the traditional character of the Roman constitution they consisted, instead, of technically legal but unprecedented acts that flouted that tradition. ********** On ideological politics: The actions of the Optimates in this period and

Tom Woods Interviews Me

I already knew that Tom Woods could sell more books than me, but in this radio interview ( mp3 ) Tom shows off his superior radio guy voice as well. Tom hosts his show "Shock to the System" at 2pm EST every Tuesday, which you can hear live at Revolution Broadcasting . Despite the Ron Paul connection ("Revolution" isn't referring to a Beatles song), I graciously tell the listeners to buy Gene's book near the end of the interview.

"It's Been Standing So Long That....

it's pretty unlikely to fall down now!" That's another odd piece of reasoning I hear frequently -- I just ran across it this morning in a work of fiction, in reference to a house, but I've also had it said to me personally, regarding other engineered works. Of course, everything has "been standing" until the very day it falls, so this almost predicts nothing will ever fall. And, of course, everything collapses eventually, so it would be more accurate to say, "This is getting closer to the day it will collapse every minute!" I think the intuition is that, "If it's stood this long, it was built well." Now, it's true that if a bridge has held up for 80 years, that means it was engineered well enough to stand for 80 years! But the jury is entirely out, based on that fact, as to whether it was good enough engineering to keep it up for 80 years and 1 day. You could, of course, inspect the bridge and see if it's still sound, but th

"It's So Expensive That...

no one wants to live there!" Or so my protagonist on a bulleting board told me. He was trying to demonstrate how much better Dallas was than Brooklyn. (Hey, I know it's a stupid debate, but he was trolling a UConn board saying how Connecticut was the "armpit of the country," and I got sucked in.) I cited the much higher crime rates in Dallas than in NYC, and also the much higher real estate prices in Brooklyn. He jumped on that, and said that was another reason Brooklyn was worse. This was weird, because, of course, it's actually the very best evidence that Brooklyn is more desirable than Dallas -- people will pay a lot more to live here! Of course, if you could get everything that you desire in a city in Dallas, then the low price makes it a better option, just as not being able to tell the difference between Boone's Farms and Dom Perignon makes Boone's Farm a better bargain--but certainly not a better wine. And that's one thing funny about those

Pair Share III

Remember Pair Share ? It carries over seamlessly to triples. Let T be the set of all triples (m,n,p) such that mnp = m+n+p. (Digressing: notice that these triples are not sets, since if two numbers are the same, we can't let them fall together; also, they are not ordered triples or 3-vectors, since we don't distinguish between (m,n,p) and (m,p,n), etc. I believe that the technical term for this intermediate kind of entity is "bag.") (0,0,0) is in there, of course, but so is (1,2,3). Cool! Most pairs (m,n) allow one (m,n,p) in T, but not all. Can you find (m,n) that doesn't allow any (m,n,p)? Can you generate all and only the integer triples in T? Are there finitely or infinitely many of them?