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.


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.

The multiplier is not prosperity

“I’m doing my part to help the economy!”

I’ve heard many folks make this joke after a big purchase. We snicker. We know they really bought it for the personal benefits they expect to gain. As we’ve been discussing in the comments, they bought it because they valued it more than what they gave up.

The joke implies the multiplier effect — the idea that your purchase stimulates economic activity. You buy a car, which means income for the car maker and workers, they spend that income on suits and shoes, and so on. And, by the time it’s all said and done every dollar of your purchase ‘stimulated’ more than a dollars worth of economic activity, which is measured as GDP.

For some reason, we don’t snicker when economists and politicians make this same claim. We should.

David Henderson, who doesn’t make this claim, does a great job explaining why we should snicker in his aptly titled essay, GDP Fetishism, which I discovered after reading a recent post of his about the ‘multiplier’ of foreign aid.

Also recommended, his latest post about subjective value, which is a topic we’ve touched on here recently in the comments.

Annoying quotes

From David Henderson’s post, Quotations from Alice Rivlin, on EconLog, Rivlin said:

If we didn’t raise the debt ceiling and we actually defaulted, we’d have a hell of a crisis. If the Tea Party is strengthened in the next election, we might have a default.

This is like the old joke, “I have a drinking problem. I don’ have a drink.”

If you don’t get it, Rivlin is concerned about a default occurring because Tea Partiers may get in the way of letting government spending run rampant. In Rivlin’s view, we need to let government spending run rampant to avoid a crisis. That’s like staying drunk to avoid becoming sober.

Here’s a great comment from that post from Ken B:

If the Tea Party had been ‘strengthened’ in elections going back a couple decades I doubt we’d have the crisis she worries about.

Justice Roberts makes a poor question subustitution

Here’s a great follow-up from David Henderson at EconLog to his previous post, my post on the government subsidy fallacy, and Bryan Caplan’s post on Kahneman’s new book.

In it, Henderson criticizes Justice John Roberts comment regarding government decency standards:

All we are asking for, what the government is asking for, is a few channels where … they are not going to hear the S-word, the F-word, they are not going to see nudity.

As Henderson correctly points out, the question isn’t whether “we” want cuss words and nudity on TV, but whether the government has the authority to tell us that we can’t.

Most people might think, but if most people agree, then I’m okay with the Federal government doing that.   However, the government was not designed to acquire powers simply through what I think sounds good or a public opinion poll.

It was designed to have its power modified via Article V of the Constitution: Amendment.

The Government Subsidy Fallacy

Lyndon Baines Johnson Department of Education ...

No Federal Department Left Behind

Just because you don’t think the government should do it, doesn’t mean that you’re against it.

David Henderson points out a Bastiat insight in this blog post that I, as well, find frustrating.  This is from Bastiat’s What is Seen and What Is Not Seen:

When we oppose subsidies, we are charged with opposing the very thing that it was proposed to subsidize and of being the enemies of all kinds of activity, because we want these activities to be voluntary and to seek their proper reward in themselves.

Henderson then shares a technique he uses in his economics class to illustrate this:

When I teach this article in class, I ask the students, who are almost all American, how many of them favor having government subsidize religion or requiring that people be religious. Typically no one raises his hand. Then I say:

Wow! That’s really something. I’m going to go home tonight and say to my wife, “Babes, I have a class of 25 people and all of them are atheists.” Did I get that right? Am I leaving something out?

The classic example of this is the Federal Department of Education.

Mention that we should get rid of it and — despite the fact that since its establishment per student, inflation-adjusted spending on public education has tripled while declining in quality, despite the fact that DC driven education accountability has proven not work (not under this guy, that guy, or that one) and the best accountability is parents, despite the common sense view that sending our money to Washington to have bureaucrats give it a hair cut and then send it back to our schools doesn’t make sense — you will likely be accused of being against education.

When actually, it’s just the opposite.

Make Someone Else’s Life Better

Econ Professor David Henderson gives a hat-tip to Bob Murphy for this wisdom from Will Smith:

Henderson likes Will’s wisdom at the 3:30 and 7 minute marks.  Me too.

I also liked what he had to say between 4 minutes and 4:35, especially this:

If you are not making someone else’s life better, then you’re wasting your time. Your life will become better, you know, by making others’ lives better.

As I commented on Henderson’s post, I believe most people will understand this wisdom to mean giving in a charitable way.  However, I also think it captures the meaning of this Adam Smith quote:

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely.

Perhaps Adam and Will are related.

In this quote, the long-dead Smith explains the positive sum universe of capitalism: voluntary, mutually beneficial exchange. Simply put, we choose to trade with others because we value what we give up in the trade less than what we gain.  Likewise for those trading with us.

Even simpler: capitalism is win-win, not win-lose.

I’m certain Will Smith had a charitable note in his wisdom.  I’m also believe he included family and community responsibility.

But, given that Will has been quite successful in the capitalist realm, I imagine he understands and included Adam Smith’s secret potion that benefits so many people on a daily basis with so few of those people seeming to grasp it.  It’s why I get to eat king crab just about whenever I want.

Media Bias

Here’s an interesting real story of media bias from David Henderson of EconLog.  Thanks to Megan McArdle for the link.

The issue:  Mainstream media typically attaches ideological labels to conservative sources, but not to liberal sources.

David Henderson wrote about when this happened to him in the L.A. Times and how he confronted the reporter.  Not only did the reporter ascribe an incorrect ideology to Henderson, he didn’t subscribe an ideology to the liberal sources in the same article.

I persisted and asked him why he didn’t ascribe an ideology to the other economists quoted, who clearly had ideologies. He explained that I was the only one quoted who was critical of the Obama team.
“Did you hear what you just said?” I asked. “Only those who are critical are given ideologies.”

We can talk about media bias, but it’s always good to have specific things to point to.  This is one. There’s no reason not to be fair and consistent and ideological labeling.  Either label everyone or don’t.

I think we all tend to do that in our own minds as well.  Those who agree with us get no labels.  Those who disagree are labeled to explain away the disagreement.  Much easier to do that than to actually think about the disagreement.