Why does government work so well? Huh?

In this post on EconLog, Bryan Caplan explores why government enterprises work so well.

He makes a good point.

I think the small-government types (like myself) can overplay disasters of government involvement and we lose credibility when we do so. So, I do think its helpful to recognize when government seems to be doing, at worst, okay.

On the flip-side, I think big-government types can overplay the successes of government enterprises.

But, I think much of this is explained to the extent of what level of government we are talking about and the dynamics of that level, to what extent it is bottom-up or top-down.

I discussed this in more detail in this post back in 2013. I think government enterprises that work pretty well are more bottom-up and the ones that don’t work so well are top-down.

That post was inspired by an apples-and-oranges comparison often made by government-types.  They say that fire and police departments are government, and work pretty good. Then they make the logical leap to use this to support that some Federal government enterprise will work.

The lapse in that logic is that fire and police departments, while government enterprises, operate at the local level. There are thousands of these departments, that operate rather independently of one another, across our country. This makes these enterprises operate much more like a bottom-up organization, than top-down. This allows these enterprises to benefit from the same dynamics of innovationism as businesses.

Why do we trust scientists who can be duped by parlor magicians?

Scott Sumner makes a good point about the economy and studies of it in this EconLog post. He writes:

I recall a story that scientists are often unable to explain the “tricks” performed by magicians. Scientists tend to be smart, but also rather linear thinkers. They are not used to their test tubes trying to deceive them. Something similar occurs in economics.

The economy operates in very subtle ways, and often when I read academic studies of issues like discrimination, the techniques seem incredibly naive to me. They might put in all the attributes of male and female labor productivity they can think of, and then simply assume than any unexplained residual must be due to “discrimination.” And they do this in cases where there is no obvious reason to assume discrimination. It would be like a scientist assuming that magicians created a white rabbit out of thin air, at the snap of their fingers, because they can’t think of any other explanation of how it got into the black hat!

They forget how easily fooled they were by the magician.

Why is this important? Sumner also makes the point that the economy works in subtle ways which are often just as misleading as the magician’s misdirect. He brings up one example, the vexing problem of why dry cleaning prices are higher for women than men. Perhaps it’s gender price discrimination.

The truth test — as Dan Hill points out in the comments to Sumner’s post — is to ask anyone who makes such a claim to put their money where their mouth is. If discrimination is the reason for the higher prices, not costs of some sort (be they direct or opportunity), wouldn’t you be able to make a lot of money by opening dry cleaners that offer a lower price for women?

The competition to see who can best cooperate with consumers

That’s a great way to view competition between businesses.

Credit David Henderson’s post on EconLog, where he is justifiably annoyed at the use of battle terms in a Wall Street Journal article to describe competition between two airlines for consumers flying to and from Seattle. Henderson thinks the author, and many like her, neglect the benefits to consumers when framing business competition as a battle.

Also, credit a commenter on his post, Julien Couvreur, for pointing to and summarizing a Don Boudreaux post about the same thing. Couvreur writes:

…economists tend to talk a lot about competition, but it is competition for cooperation (who can cooperate best with consumers). This is hardly war.

 

Two more good ones from Bryan Caplan

Bryan Caplan thinks it’s inconsistent for the left to believe the poor shouldn’t be blamed for their predicament, but Republicans can be blamed for a host of things like not helping the less fortunate or ignoring evidence of global warming.

He also points out that the predatory pricing practiced by public schools yields only a 90% market share after decades, not a monopoly as folks believe.

 

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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.

Liberty is the Golden Rule

Why I’m Libertarian is a new Tumblr blog (via Pretense of Knowledge and EconLog blogs) where folks declare why they are libertarian. Great idea.

Here’s why I’m libertarian: Because I believe in The Golden Rule. I believe that’s the true source of liberty.

Do unto others as you would have done unto yourself.

The day we talked about The Golden Rule in church when I was a kid was a clarifying moment. I remember thinking, man, that makes a lot of sense. What a fabulously easy way to test your actions. Would I want others to do that to me? If the answer is no, or even a maybe not, don’t do it.

Lots of libertarians say they are libertarian because of things like ‘limited government’, ‘individual rights’, ‘don’t believe in war’…and so forth.

But, for me the Golden Rule is why all of those things are important.

Update: In another coincidence on this blog, in this week’s episode of EconTalk, Russ Roberts interviews Nassim Taleb about an essay he wrote called, Skin the Game. He also discusses the source of the Golden Rule.

I personally believe that the Golden Rule is a social norm that is responsible for the advances in the standards of living humans have experienced over the last several hundred years. I haven’t finished listening to the EconTalk podcast yet, but I’m hoping Taleb will agree with me.

 

Links

Mark Perry links to three examples of how the market is the best regulator and our best friend (though, admittedly, the kind of friend many people like to dump on).

Chris Berg explains why Capitalism is Awesome (HT: EconLog‘s Alberto Mingardi). Worth a read. It’s not the necessarily the Facebooks and the Apples, but the guys trying to make a better shelf.

A short video of Jim Buchanan on the illusion of the public interest (HT: Cafe Hayek‘s Don Boudreaux):

 

Unintended consequence of Obamacare?

I yawned when I read this. Did you?