A very important fact, indeed

I agree with Yuval Levin, from his EconTalk podcast, about a simple point and an important fact:

I think Conservatives today don’t often enough make the simple point: that, when it comes to economics the market system that we are advocating has been the best thing that has ever happened to the poor in human history. And has dramatically reduced extreme poverty around the world and is still doing it right now; has been the way in which the needy and the vulnerable have been lifted up. It’s worked far better than anything else we’ve every tried, far better than anything the Left has tried to do economically. And that should matter. That’s a very important fact.

I hear this point made on occasion in left/right debates by the right. I find it interesting at how quickly it gets swept under the rug by the left. It’s usually with a red herring like, “but capitalism has its problems, too.” What I find interesting is how uninterested the left is in examining this important fact.

It goes back to the Levin quote in the previous post, “…the left takes for granted a thriving economy that just comes in the background…

This very important fact, in fact, was key in dislodging my liberal thinking. Before it was pointed out to me, I too, took the thriving economy for granted.

But, when it was pointed out to me, it was eye opening. Rather than sweeping it under the rug, I went silent and thought, if that’s right, how could I be against it? Isn’t it achieving the very thing that I say I want?

Levin went on to say:

Beyond that, the kind of society we are arguing for is a society that for very solid reasons we believe is grounded in a way of life that helps advance the moral good. A way of life that helps people build the sort of lives they want. That makes government more effective at solving problems that people confront. That gives people the room to build the lives they want and protects them from the worst risks that they might confront in modern life, rather than a society that says: This is the way, and you have to do it. Which, again and again, this is how the Left approaches the life of our society: centralize, consolidate, exercise authority to push people into the right grooves.

I couldn’t help to think of this quote when I read this Wall Street Journal op-ed on the politics around the federal nutrition standards for school cafeterias.

The nutrition mandates from 2010 First Lady bill centralizes nutritional choices for school lunches to “push people into the right grooves.”

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Bottom up links

In this Freakonomics podcast, Steven Levitt discusses his work with companies whose managers resist experimentation to test their beliefs.

In one example, he couldn’t convince a company to stop running newspaper ads in any market to see if that would have an effect on sales. But, they discovered that an intern neglected to buy ads in Pittsburgh one summer. It had no effect on sales. But, the company still buys ads.

In this EconTalk podcast, Yuval Levin made what I expected to be a dull conversation about Edmund Burke and Thomas Paine, very interesting. On this, especially, I agree:

I think that there’s a way in which the Left takes for granted a thriving economy that just comes in the background and the question is how to distribute the goods. We have to make the argument that that thriving economy–which makes possible the thriving life of this society–has to be sustained. And it’s a function of certain attitudes toward law and order, of certain kinds of rules, certain kinds of liberties that have to be defended, both because they are right and because they are good. Conservatives are nowhere near good enough at making that kind of case.

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Participation Trophy College

The previous post brings to mind discussions I’ve had on the topic in the past. In one such discussion, a person asked:

So, do you want to be the one who tells someone they can’t go to college?

It shows how much of a pedestal we’ve put college education upon. Like home ownership, it’s now a dream, that everyone is entitled to.

In home ownership, we forgot that renting was a good option for many. With college education, we forget that people without college education do fine, too.

Do I want to be the one who tells someone they can’t go to college? No. If I did, I’d apply to be a college admissions officer.

But telling people they can’t go to college or people deciding for themselves that it isn’t for them isn’t bad. How’s it any different from telling people they didn’t get a part in a movie or people deciding that pursuing their dream of acting isn’t panning out so they should try something else?

How’s it any different from kids in sports not making the team or deciding that a certain sport isn’t for them?

The question also shows how unimaginative we’ve become. It’s college or else. We can’t imagine alternatives. Yet, there are many.


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Good from afar, far from good

I realized that quip to describe the phenomenon where someone of the opposite sex looks attractive from a distance, but less so the closer you get to them, also applies to the poor and needy.

Deserving from afar, far from deserving?

I’ve noticed that the folks who tend to be strong advocates for the generic needy (the needy from afar), become less so the closer they get to specific needy people and to their own wallets.

I, again, recall a conversation with a friend who owned a car lot. He was a strong advocate for the deserving and faceless “minimum wage worker,”, because they were powerless against employers. But, apparently the car salesmen on his lot weren’t deserving of that treatment since he treated them as contractors so he wouldn’t have to be locked into paying them minimum wage.

Health insurance is another example. The faceless uninsured was used to garner support for Obamacare because everyone ‘deserves access to health care’. But, put faces on some of the uninsured and look at some of the choices they’ve made — like paying for an expensive cell phone plan, instead of buying insurance — and the ‘deserving’ moniker starts to make less sense.

This exposes a good tactic to use in conversations with people who have the ‘deserving from a far, but far from deserving’ affliction. First, put some faces on those who they think are deserving.

Their next argument will be that those are only a few abusers or outliers and ‘that should be fixed, but doesn’t take away from the vast majority of the other (faceless) deserving.’

To which, a good response is, “How do you know? Are you guessing?”

Sports Craze & False Choice

Redistribution based on income inequality is a false choice. The reasoning goes something like this:

  • There are wealthy people and poor people.
  • Ignore why they are that way. Like many poor people are just kids starting out and many wealthy people have worked hard and saved their whole lives.
  • Poor people place a higher value on an extra dollar than a rich person who already has plenty.
  • Ignore that the behavior of rich people and poor people do not support this claim, otherwise poor people may be more interested in doing things that can earn and save them more dollars.
  • Therefore, we should redistribute more dollars from the wealthy to the poor.
  • Ignore the already high rate at which this is done.

Why do we only focus on wealthy people in our redistribution schemes?

In my opinion, things mustn’t be too bad if we can afford to support a host of marginal men’s and women’s sports programs from grade school through college, where most people who participate — especially at the higher levels — have few prospects for continuing in those sports after they get past those supported programs, except maybe to teach the next generation of youth to take advantage of those programs or to tell their glory day stories in the break room.

How many poor people could have been helped with the taxpayer money that has been put into all sorts of sports projects? Locally, we have taxpayer-funded pro sports stadiums and amateur sports facilities. Apparently playing soccer on grass is just too hard. Spending millions on fake grass fields for pre-teens to hone their soccer skills is the new norm.

Why don’t we look at more of such things and say if we really take external approaches to helping those in poverty seriously, why don’t we cut out all this other stuff?

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An Unproductive Discussion

I saw this video of David Letterman’s interview of Rand Paul from 2011 posted on Carpe Diem:

I suggest skipping past Paul’s corny attempts at humor near the beginning and watch the last five to six minutes of the discussion. It’s a great example of how someone’s ignorance, Letterman’s in this case, can be mistaken for legitimate arguments by stating platitudes and refusing to accept facts.

In one example, Letterman characterizes Republicans as the party that just wants to give tax breaks to the rich and big business.

Paul points out that there’s the idea that the rich don’t pay their fair share isn’t accurate. They, in fact, pay most of the taxes. He says the top 1% income earners pay a third of income taxes collected and the top 50% pay 96%. Letterman gets some claps for replying:

…I think there’s something wrong with those numbers. I don’t know what it is exactly, but I’m pretty sure there’s something wrong with them…

I’ll give Letterman credit. After the applause, he then says:

Thank you, you’re applauding my stupidity, God bless you.

I’d like to know if Letterman followed up to learn more about these facts to see if he could build a more valid counterpoint than “I’m pretty sure there’s something wrong.” If he did, what did he find? Did it change his mind?

What do you do when you encounter facts that go against what you previously believed? I don’t know about you, but I find that intriguing and I usually dig in deeper.

Earlier in the conversation (4 minute mark), Letterman demonstrates his ignorance by confusing the national deficit with the debt.  “The American debt is what, $3 trillion?”

Paul explains that the deficit is running about $2 trillion each year, but total debt has accumulated up to $14 trillion.

Letterman blows by this fact. He just learned that something he thought was $3 is nearly 5 times as big and he has no reaction. A reasonable person should respond, “Holy cow! $14 trillion? How did that happen? I had no idea that it was that much. What was I thinking?”

I will give Letterman some credit here. He asks how continuing to borrow will affect him. Paul tries to explain, but I don’t think it made much sense to Letterman.

I would have said the Soviet Union, Greece, Cyprus and Detroit are good examples of what can happen. It’s tough to tell how far down the road that is, but that’s the direction borrowing leads.

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The (kids) gloves are coming off?

Russ Roberts and Don Boudreaux, of Cafe Hayek, don’t know what to call their recent posts about Paul Krugman. I have a suggestion: It’s about time.

Economist Russ Roberts criticizes Krugman for his treatment of intellectual opponents, like economist Robert Barro, in this case. Roberts quotes two passages from Krugman’s own economics textbooks that support an argument that Barro makes:

Additional transfers to people with earnings below designated levels motivate less work effort by reducing the reward from working.

Yet, while Krugman said as much in his text books, in his blog post, Krugman does a poor job of characterizing this incentives-driven view of what Barro calls “regular economics”:

But if you follow right-wing talk — by which I mean not Rush Limbaugh but the Wall Street Journal and famous economists like Robert Barro — you see the notion that aid to the unemployed can create jobs dismissed as self-evidently absurd. You think that you can reduce unemployment by paying people not to work? Hahahaha!


If you read Barro’s piece, what you see is a blithe dismissal of the whole notion that economies can ever suffer from am inadequate level of “aggregate demand” — the scare quotes are his, not mine, meant to suggest that this is a silly, bizarre notion, in conflict with “regular economics.”

Not exactly. I did read Barro’s piece. He sets a good example of how to characterize opposing views, accurately and without straw-manning it like a 9-year-old who just put gum in her sister’s hair because “she deserved it”:

Keynesian economics argues that incentives and other forces in regular economics are overwhelmed, at least in recessions, by effects involving “aggregate demand.” Recipients of food stamps use their transfers to consume more. Compared to this urge, the negative effects on consumption and investment by taxpayers are viewed as weaker in magnitude, particularly when the transfers are deficit-financed.

Thus, the aggregate demand for goods rises, and businesses respond by selling more goods and then by raising production and employment. The additional wage and profit income leads to further expansions of demand and, hence, to more production and employment.

And, it wasn’t quite a ‘blithe dismissal’. It was an argument that Krugman chose to blithely dismiss himself, instead of addressing it.

So, why did Krugman describe Barro’s argument as he did? Why not simply state the argument. For example, Barro believes that the unemployment creates incentives for people not to work, something I also believe and have written in my textbooks. Where I disagree with him is that I believe during recessions, those incentive effects are overwhelmed because there are fewer jobs a lot more people who want them.

Don Boudreaux goes one further and criticizes the people who seem to relish in their own intellectual capacity to deal with Krugman’s nuances (by using bigger words than I used in the previous paragraph), while missing a larger point, that economics shouldn’t be used to justify stealing.

I did something that I rarely do. I read Krugman’s whole piece, and was reminded of why I choose not do so. Not only do I agree with the points made by Roberts and Boudreaux above, but there are other things that bug me.

Here’s a couple of those things.

1. He says of Keynes’ “discovery” of aggregate demand:

…while I’m generally against scientific pretensions, it amounted to a scientific revolution, something like plate tectonics in geology.

First, I don’t put much stock in anyone who compares economics to science. I think they will be prone to be more confident in their views than they should be, which can lead to disastrous results.

Second, why make this analogy if he really is “generally against scientific pretensions.” Just not in this case? Aggregate demand is lone example in economics where scientific pretensions is warranted?

Something else bugs me. Krugman writes:

Think, for example, about the Great Recession and its aftermath. Regular economics says that economies should normally get richer each year, as their work force and capital stock grow, and technology advances. But after 2007 the United States and other advanced countries suddenly went into reverse, becoming poorer instead of richer, and for an extended period too [pointing to a chart of declining GDP in the recession].

Does regular economics say that economies should get richer every year? Maybe. I haven’t heard that one.

Is GDP a measure of wealth? I thought it was a measure of economic activity. Can’t GDP decline and wealth still go up? If Bill makes $100,000 a year and has $1 million in Apple stock, does his wealth go down if his salary declines to $90,000? Not necessarily. It depends on how much he spends, doesn’t it? If he spends $80,000 a year, his wealth can still grow after the decline in his salary, no?

Perhaps I’m mistaken in my understanding of GDP. If so, please correct me. But, if not, it seems that Krugman’s language is unnecessarily sloppy here for a Nobel economist.

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David Henderson Has Balls

On EconLog, David Henderson answers my question, why he reads Paul Krugman. I am the Seth he refers to in that post.

I thank David for taking the time to answer. His answer was better than I expected. More on that later.

There are several reasons I don’t pay much attention to Krugman.

Mark Twain sums up the main reason:

Never argue with stupid people, they will drag you down to their level and then beat you with experience.

Also, it’s unproductive.

I know. Who am I? I must be crazy to think that a Nobel Prize winner and successful New York Times columnist is stupid. But, I do. And, maybe I am crazy. I’m open to that argument. But, for the few times I’ve tried to read Paul Krugman, I’ve found it difficult to get past his first logical fallacy, which usually comes in the form of a straw man or ad hominem. Logical fallacies are markers of poor arguments.

I expect more of a Nobel winner. If he can’t be careful enough to state his opponent’s position accurately, I’m done. I have much better uses for my time.

His apologists stretch to overlook these transgressions to productive dialogue. For example, they point out that ‘technically’ some whacko holds the view that Krugman constructed, but we all know that doesn’t address the real issues or the actual disagreements, so it’s not productive. Waste of breathe.

Which brings me to another reason I don’t pay attention to Krugman. Henderson laid it out well in the post that started this topic, Krugman Kontradiction:

 …when he [Krugman] appears to contradict himself, without ever admitting it, which he often does appear to do, he can usually get out of it because when you go and read him carefully, you find that he didn’t really contradict himself but, instead, misled his audience into thinking that he said something that he didn’t quite say.

Or, it’s like 9-year-olds arguing. You said that. No, I didn’t. Yes you did. No I didn’t. Again, not productive. I don’t have much time for people who express thoughts just so. It’s adolescent. I coach a youth sports team. I get enough of that level of discussion at practices.

In his book, Antifragile: Things That Gain From Disorder, Nassim Taleb expresses another reason I don’t pay attention to Krugman (which this post clearly violates): There’s no such thing as bad publicity. Taleb explains that the success of Ayn Rand’s books is owed, in no small part, to her intense critics. I don’t wish to be responsible for Krugman getting any more attention.

Another reason I don’t pay attention to Krugman is that he’s never wrong, or at least he doesn’t seem to think so. I have enough know-it-alls in my life who squirm their way out of being wrong by using their clever intellects. In my view, these people have lived their whole lives with others telling them how smart they are. Their ego depends on it. When they are wrong, they kick their smarts into high gear and go into ego-protection mode.

The last reason (that I’ll mention) why I don’t pay much attention to Paul Krugman is that his job is easy. It doesn’t take a lot of balls to convince people that elites and government can solve their problems. That seems to be what they want to believe anyway. So, if a Nobel Laureate is telling you what you want to hear, it seems, there’s really no reason to check him or think about it too deeply.

It’s much more challenging to convince people that they can and should solve their own problems and that they will be better off if they do so.

Now, why was Henderson’s answer better than I expected? Because Henderson didn’t bow at the altar of Krugman. Henderson said because Krugman is one of the most important economics bloggers, which I take to mean that he is widely followed, not that he is the most talented or even deserving of being followed. Just that he is widely followed.

I am interested in economics. But, I prefer to learn from economists like David Henderson — not because I like Henderson’s biases (which I do), but because he has the balls to take on the fundamental disagreements directly, rather than construct straw men. He admits when he’s wrong, and doesn’t get blinded by his own ego and desire to be right. He encourages his students to think deeply and challenge him, rather than depend on him as the tea-leave-reading expert.

Economists like Henderson don’t expect you to take their word for it. They want to move the dialogue forward, not distort it.

Blackboard Economics e.g.

In this post on his blog, Arnold Kling links to a post from Daniel Little that says:

the idea that a properly functioning market economy will tend to reduce poverty and narrow the extremes of income inequality has been historically refuted — at least in the case of American capitalism.

Little provides supports this claim with two charts.

I think this is a good example of what Ronald Coase refers to as Blackboard Economics. That is, on paper, Little may be making a good point, but reality doesn’t support. Look out the window of real life and things are different.