Last Build Date: Fri, 21 Oct 2016 00:44:53 -0500Copyright: Copyright 2016
Fri, 21 Oct 2016 00:44:53 -0500In our debate, Robin bemusedly observed that I'm one of those odd people who wouldn't step into a Star Trek transporter. My actual view is more moderate: Before I'd use the transporter, I'd like to know how it works. Does it move my actual body? Or just create a copy out of new materials, and destroy the original?
Thu, 20 Oct 2016 19:13:19 -0500
I've been catching up on Wall Street Journal issues that piled up over the summer. One particularly good unsigned editorial (the Journal calls these "Review and Outlook") was the July 19 (July 20 print edition) editorial titled "What Has Congress Ever Done for Us?"
Here's a slice:
The talk radio crowd has so fed the narrative of GOP "betrayal" in Washington that even many Republicans believe Congress has accomplished nothing since they took the House in 2010 and the Senate in 2014. The truth is that while the GOP Congress can't match the Romans [in the Monty Python skit about what the Romans have done for us], it has achieved far more than the critics claim.
Start with everything the GOP Congress has prevented. Universal pre-K, gun regulation, a $15 national minimum wage, an ObamaCare bailout for insurers, equal pay regulation, more disclosure of campaign donations, "free" community college, a new "infrastructure bank," closing the prison at Guantanamo Bay, among many others. President Obama proposed each of those, often more than once, but they vanished faster than Martin O'Malley's presidential campaign thanks to the GOP Congress.
Rush Limbaugh, on his radio show, often talks about "low-information voters." He uses the term as a putdown of people who generally vote Democrat. That many of his listeners don't know about these accomplishments suggests that they also are low-information voters.
Of course, that's a problem with the political system in general. People simply have little or no incentive to get information.(3 COMMENTS)
Thu, 20 Oct 2016 13:20:17 -0500Most economists view the Fed as a sort of firefighter, an institution that pushes back against "shocks" that mysteriously arise in the private sector. Bob Hetzel and Josh Hendrickson have a different view. Here's Josh: The predominant difference between this view and the Taylor view presented above can be expressed in terms of whether the Federal Reserve can be seen as an inflation fighter or an inflation creator, as summarized by Hetzel (2008a). The inflation-fighter view suggests that ''inflation shocks are the initializing factor in inflation'' and ''explanations of inflation stress FOMC failure to respond aggressively to realized inflation'' Hetzel (2008a, 273). The inflation-creator view of monetary policy emphasizes that the central bank influences the price level through the control of a nominal variable. . . . According to the Taylor view, the change in post-1979 policy was the more steadfast commitment to respond to inflation. The Federal Reserve became an effective inflation fighter. The alternative view put forth in this paper suggests that the change in policy was not simply a renewed commitment to fighting inflation, but rather an acceptance of the Federal Reserve's role as inflation creator. The nominal variable that the Federal Reserve sought to control to influence the price level was expected inflation and the means of doing so was a commitment to low, stable rates of nominal income growth. I agree with Hetzel and Hendrickson. Alex Tabarrok and Saturos directed me to a Kevin Grier post: After the events of the great recession, it's just amazing to me that people think the economy is a steak, the Fed is a precision sous-vide machine, and all we have to decide is medium-rare or well-done. For the millionth or so time, the models implying the Fed can do this, completely and utterly failed during the great recession. There is also evidence that a large part of the good outcomes credited to the Fed during the great moderation were actually due to exogenous forces (i.e. good luck). Neither the Fed nor the President "runs" the economy. There is no stable, exploitable Phillips Curve / sous vide machine that lets us cook at a certain temperature. This Fed worship is more religious than scientific. The past 10 years should be enough to convince anyone with an open mind that the Fed's power over the economy is quite limited and tenuous. Let's start with the question of what it means to "control" an entity called "the economy". What does 'control' mean, and what is "the economy?" If the economy means real GDP (and that's usually what people mean when they say "the economy") then Kevin might be right. If 'control' means move RGDP where it wants, then he is clearly right. He's also correct that the Phillips Curve is not a useful model for controlling "the economy." That's why I oppose Yellen's suggestion that we might want to run the economy hot for a while to fix labor market problems. Please Fed, just refrain from causing more problems. You've done enough damage already On the other hand, while the Fed cannot control RGDP in the sense of moving it where it wishes, it can destabilize RGDP through unstable monetary policy. Fed policy during the Great Moderation did not stabilize the economy by fixing problems, or pushing RGDP to the right position, rather it reduced instability by refraining from introducing as many monetary shocks. While the Fed has only very limited ability to influence RGDP, one variable that it absolutely can control is expected growth in NGDP. Although the terms NGDP and RGDP sound similar to the uninitiated, they are actually as different from each other as a poem and a cement truck. One is a way of describing a vast real, physical economy, and the other is a way of describing the value of the medium of account. During the Great Moderation, the Fed made the path of expected NGDP much more stable than prior to the Great Moderation. As the following graphs show, this also made the path of actual NGDP much more st[...]
Thu, 20 Oct 2016 00:36:45 -0500Just posted the last item in my lost works of Michael Huemer series. In this essay, Huemer critiques the great John Searle's strange attempt to avoid both eliminative materialism and dualism.
Wed, 19 Oct 2016 15:14:59 -0500Monday I debated Robin Hanson for the Soho Forum on the following resolution:
"Robots will eventually dominate the world and eliminate human abilities to earn wages."Video will be available eventually, but you can enjoy my slides (in pdf format) now.
Robin appealed to something like definition #2. When challenged, he bit two bullets. First, he said that tractors already "dominate" in agriculture. Second, he denied that Mark Zuckerberg "dominates" Facebook. This is especially odd because, at least in his Age of Em, robots dominate by all three definitions. Indeed, as he eventually admitted in the debate, Robin thinks there's a 30% chance the ems exterminate mankind within a year of their creation, in line with my argument here. Now that's domination in its most horrifying form.
to have control of or power over (someone or something)
to be the most important part of (something)
to be much more powerful or successful than others in a game, competition, etc.
Wed, 19 Oct 2016 00:10:18 -0500I posted yesterday about Justin Amash's Cato University speech. Below is most of the rest of it. I'm putting his parts in block quotes. The italics are his. My comments follow where appropriate. I'll end with comments on Public Choice. We hear so often: "I'm only one person. What can I possibly do?" Well, I'm here to tell you firsthand that one person's efforts really can make a difference. But making that difference doesn't happen overnight. You have to lay the groundwork. In this case, it wouldn't have been possible if my staff and I didn't operate the way that we do--if we didn't believe strongly in following the Constitution, in reading every bill, in consistency and the rule of law. These things have earned me trust from my colleagues--especially on due process, civil liberties, and privacy--and respect from other offices for my staff. We do hear that. And my own view had been that while a U.S. Senator might have some power, a lone member of the House of Representatives could not. But he makes a good point: it's partly about brand name and reputation. A few weeks earlier, in mid-June, the Orlando shooting happened. The following week, a bill called the Homeland Safety and Security Act, H.R. 5611, appeared on the legislative calendar. It was introduced by Majority Leader McCarthy as a response to Orlando, and it included one short, terrifying section that mirrored the Republican-backed Cornyn proposal the Senate had voted down the week before. It allowed the Department of Justice and a judge to deny gun purchases to anyone investigated for terrorism within the last five years (i.e., on one of those secret government lists) merely upon probable cause to believe that the person will commit an act of terrorism. Not that the person had committed an act of terrorism, or had conspired or attempted to commit terrorism, but that he or she will commit terrorism in the future. McCarthy seemed to think that government is almost mistake-free. It's good that Justin Amash was there. Having judges make factual, legally binding determinations of what an innocent person will do is not the practice of a free society--it's precrime; it's something out of the film Minority Report. Due process requires more. Exactly. Minority Report was supposed to be a fictional warning, not a handbook. We issued a statement through the House Liberty Caucus, blasting the bill and telling my colleagues we would be scoring against it. I filed an amendment to strike the gun section from the bill. That night, I went to a meeting of the House Freedom Caucus (not to be confused with the House Liberty Caucus!). At the start of the day, almost no one else opposed the bill--at best, they were neutral--but one by one, members were convinced to oppose it. And before the meeting adjourned, HFC took an official position against it. The Democrats also were expected to oppose it (because it wasn't dystopian enough), so without HFC's support, the bill didn't have enough votes to pass. Soon after, leadership quietly pulled it from the calendar. We never voted on it. Speaker Ryan was later asked about the bill at a press conference, and he said, "We're not going to take away a citizen's constitutional rights without due process." Remember, this was the Cornyn proposal that Republicans had been lauding. This was Republican leadership's bill in the House. It was offered by the majority leader. It was supposed to pass with overwhelming Republican support. But here was Speaker Ryan on TV suggesting it violated due process! I had made the constitutional argument that convinced my colleagues, and here it was, being echoed in the speaker's remarks. In short, one man turned Speaker Ryan around. Now, this victory, along with the other victories over the past couple [of] months, was modest. But these are just small examples of what's possible with this approach to legislating. Abiding by the Constitution, upholding the rule of law, and applying p[...]
Tue, 18 Oct 2016 16:56:07 -0500I seem to be one of the relatively few right-of-center intellectuals that worry about global warming. In previous posts I've argued that if the GOP were smart (no jokes please) they would propose the following policy: 1. Global warming is a crisis for our planet, and it's time to stop playing politics with the issue. Therefore we suggest that Congress pass the sort of policy that experts believe is the most effective solution, without any bells and whistles that address other partisan concerns. 2. It's clear that experts view a carbon tax as the most efficient solution. 3. This tax should be completely revenue neutral, and should not be viewed as a back door way to advance other agendas, such as bigger government and more spending. 4. Therefore the carbon tax should be offset by reductions in our most distortionary taxes, especially those that bias us toward consumption. A revenue neutral carbon tax focuses like a laser on the environmental problem, and doesn't get bogged down in left-right disputes over the proper size of government. I've suggested that this is a win-win for the GOP. First, it's possible (indeed likely) that the concerns over global warming are valid. In that case a revenue neutral carbon tax is clearly beneficial. And second, even if scientists are wrong about global warming, our current tax system is so grotesquely inefficient that it would be easy to find taxes far more distortionary than the carbon tax, which could then be reduced to offset its impact. Thus it's probably a sound public policy, even if global warming is not a problem at all. But for GOP climate skeptics it gets even better. I've argued that the Democrats might well reject this proposal, as they actually care more about taxes than global warming, even though they pay lip service to Al Gore's claim that global warming is the great challenge of the 21st century. They would reject the GOP proposal, and this would expose their hypocrisy. Then the GOP could gain the moral high ground, by constantly reminding voters that they favored the policy that was advocated by global warming experts and the Democrats shot it down because they cared more about imposing ever-higher taxes on the public than they did about actually solving global warming. So it's a pure win for the GOP, with no downside at all. The tax never even gets implemented. Well-educated suburban women move back to the GOP. Do I have any evidence for this outrageous charge? Are the Democrats really that cynical? I'm not certain, but consider the following: ASK an economist how best to reduce pollution, and the chances are that they will recommend taxing carbon emissions. And with good reason: doing so should encourage markets to find the least costly way to reduce pollution, something governments will struggle to discover themselves. In November Washington state's voters will decide whether their state should mimic neighbouring British Columbia's carbon tax, after a grass-roots campaign put the proposal on the ballot. It would be the first such policy in America. You might think environmentalists would unite behind such a pathbreaking effort. Instead, many oppose it. Initiative 732, as it is known, would tax carbon emissions at a rate reaching $25-a-ton in 2018 and then rising by 3.5% plus inflation every year, to a maximum of $100 in 2016 dollars. Today's levy in British Columbia is C$30 ($23) a ton. As in the Canadian province, the proceeds would be recycled into tax cuts elsewhere. The sales tax would fall from 6.5% to 5.5%. Low-income workers would get a tax rebate. And, to help placate affected businesses, manufacturing taxes would fall. Yoram Bauman, who heads the Yes campaign (and who somehow makes his living by performing economics-themed stand-up comedy) proudly notes that three Republican state legislators support the initiative, and that it has not attracted the well-funded opposition[...]
Tue, 18 Oct 2016 16:17:18 -0500This is from a recent speech given by Justin Amash, a member of the U.S. House of Representatives from Michigan, at Cato University. His speech is block quoted and the italics are his. My comments follow where appropriate: What's a libertarian in Congress to do? Today, I want to share with you a couple [of] recent stories that illustrate how my staff and I operate, how it's different from other offices, and how just one person can make a difference in the defense of liberty. A couple [of] weeks ago, the House considered H.R. 5606, the so-called Anti-terrorism Information Sharing Is Strength Act, or the "Anti-ISIS Act." I'm sure you won't be surprised to hear that this bill has little to do with stopping terrorism. It was listed among the suspension bills for the week, meaning leadership intended to have it fast-tracked through the House, skipping committee and all the other normal procedures. In exchange for the fast-track process, suspension bills need a two-thirds majority to pass instead of just a simple majority. "I'm sure you won't be surprised to hear that this bill has little to do with stopping terrorism." Maybe I'm naive but I would have thought it would have a lot do, even if futilely, with stopping terrorism. But read on and you'll see that he's right. Unlike most offices, my staff and I actually read all the bills--yes, even the suspension bills. The stated reason for ha ving a process to suspend the rules and fast track a bill is that some bills are considered uncontroversial--if few members object to a bill, the idea goes, it would simply be a waste of everyone's time to have it go through the normal committee process. Most offices take leadership at their word when a bill is put on the suspension calendar--they assume that if it's up under suspension, it must be fine. Needless to say, that's not how my office works. We read and think about each and every bill, which is no small undertaking--on Friday night we were given a list of 25 bills that were to be considered the following Monday. They actually read them. What a pleasant surprise. Good for them. H.R. 5606 amends a section of the Patriot Act that instructs the Treasury Department to adopt regulations encouraging cooperation between banks and the government, with the "specific purpose of encouraging" the government to share information with banks about persons suspected of terrorism or money laundering. This section also includes a provision that allows banks to share information about these people with each other, without being liable to their customers for sharing their private information. On the face of it, this law plainly encourages sharing of information from the government to financial institutions. But this is the Patriot Act. "Plain meaning" doesn't apply. Instead, Treasury has used this law to create a program whereby the government can compel financial institutions--22,000 of them--to provide law enforcement the account and transaction information of people they suspect of terrorism or money laundering. No probable cause. No warrant. No due process. You can learn a lot by reading carefully. This program is bad enough as it is, but H.R. 5606 expands the program to cover dozens and dozens of additional federal crimes. Murder, drug offenses, copyright theft ... all the way down to stealing mail. I had to stop this bill, but I didn't have much time. Now we see why Amash made his earlier claim: drug offenses and copyright theft don't sound a lot like terrorism. We spent the weekend drafting materials to oppose the bill, and, of course, I took the fight to social media. On Monday morning, I issued a vote alert on the bill through the House Liberty Caucus, of which I'm chairman. Throughout the day, I lobbied my colleagues personally, and my staff lobbied other offices through emails and phone calls. I love the "of course, I took the fight to social media.[...]
Tue, 18 Oct 2016 09:16:12 -0500TravisV directed me to a recent speech by Janet Yellen: The Influence of Demand on Aggregate Supply The first question I would like to pose concerns the distinction between aggregate supply and aggregate demand: Are there circumstances in which changes in aggregate demand can have an appreciable, persistent effect on aggregate supply? Prior to the Great Recession, most economists would probably have answered this question with a qualified "no." They would have broadly agreed with Robert Solow that economic output over the longer term is primarily driven by supply--the amount of output of goods and services the economy is capable of producing, given its labor and capital resources and existing technologies. Aggregate demand, in contrast, was seen as explaining shorter-term fluctuations around the mostly exogenous supply-determined longer-run trend.1 This conclusion deserves to be reconsidered in light of the failure of the level of economic activity to return to its pre-recession trend in most advanced economies. This post-crisis experience suggests that changes in aggregate demand may have an appreciable, persistent effect on aggregate supply--that is, on potential output. It seems likely that demand shocks have at least a transitory impact on aggregate supply, if only because they impact investment. But I think Yellen is making a mistake here, which could lead monetary policy astray if we are not careful. There are good reasons why most economists have viewed AS and AD shocks as being independent, at least as a first approximation. Deep recessions such as 1907-08, 1920-21, 1929-33, 1937-38, 1981-82, etc., are usually followed by fast recoveries. The recent 2007-09 recession is of course an exception. But should we re-evaluate the basic model based on a single exception? Suppose the model is revised, and we now assume that deep recessions lead to a long period of sluggish growth as aggregate supply is depressed. In that case we will have not one mystery to explain (2007-09), but dozens. A more plausible explanation of the recent period is that the Great Recession just happened to coincide with a slowdown in trend growth. The unemployment rate did recover, which is exactly what you'd expect if my theory were correct. Instead, other factors not usually linked to AD seem to explain the slowdown. These include a slowdown in the growth rate of the working age population as well as a slowdown in productivity growth. Could the Great Recession have caused the sharp slowdown in productivity growth? I suppose anything is possible, but in that case why didn't previous deep recessions lead to slowdowns in productivity growth? There's another, and in my view even more persuasive argument against Yellen's theory. The models that try to explain why AD might depress AS tend to predict lower levels of RGDP, but no permanent reduction in the growth rate of RGDP. This might reflect discouraged workers retiring or going on disability, as well as a slightly smaller capital stock. Neither factor should reduce the long run trend rate of growth in RGDP--it's one-time level reduction. Now admittedly it's too soon to say the long run trend rate of growth has slowed. But this leads to the biggest problem with Yellen's hypothesis: long-term interest rates are extremely low, both in nominal and real terms. The overwhelmingly most likely explanation of the lower than normal long-term real interest rate is that the market expects sluggish RGDP growth to be the new normal. If that's the case, then there is really no plausible AD model to explain this slowdown. It's just barely possible that the 2008 recession depressed output by 5% today (although I doubt it) but it's completely implausible that it would depress output by 20% in the year 2030. More likely, the US is being impacted by the same factors that have [...]
Mon, 17 Oct 2016 19:41:19 -0500
In 1992, I went to San Francisco's Candlestick Park to see the Giants play the Cincinnati Reds. To get into the baseball spirit, I wore my blue L.A. Dodgers helmet. (I root for both the Giants and Dodgers, but I figured why buy a Giants' helmet when I already had a Dodgers' one?) I was sitting in the stands when a young man came by selling hot dogs. Because he was about 40 feet away, rather than try to shout above the din, I put up one finger for one hot dog. The young man looked at me, noticed my helmet, pointed to his own head symbolizing my helmeted head, and shook his head as if to say, "No, I won't sell you a hot dog because you're a Dodgers fan." Then he grinned and I grinned, and he passed the hot dog down the row. We both knew that he would sell me the hot dog. There was no way he was going to refuse to make money off me even if I was a Dodgers fan.
This story of how the free market broke down discrimination may sound trivial. If it just had to do with my hot dog, it would be. But the story illustrates a much wider and crucial point: Markets are especially good at breaking down discrimination when what is exchanged is goods rather than labor. Think about how little you know about the politics, race, gender, or even nationality of the person who makes the bread you buy. You don't know because you don't care. What you care about is getting the best deal on bread, and even if this means buying it from someone whom you would hate, you'll still buy the bread. That's why, for example, even book stores whose owners and employees detest Rush Limbaugh still displayed his books prominently. By trying to hide the books, which apparently some stores did for a short time, they would pass up precious sales.
One of my favorite lines in a movie is in the scene in The Magnificent Seven where Yul Brynner tries to persuade the local hearse driver to risk getting shot while taking a dead Indian to be buried in dignity in boot hill. When the driver declines, Brynner asks, "Are you prejudiced?" The driver answers, "When it comes to saving my life, I'm downright bigoted." The market illustrates the opposite point. When it comes to saving their economic lives, even otherwise prejudiced people are downright tolerant.
The above is a slightly edited excerpt from my book The Joy of Freedom: An Economist's Odyssey.(17 COMMENTS)