Innovative. Free. Very cool.

Tyler Cowen and Alex Tabarrok, George Mason University economists and co-bloggers at Marginal Revolution announced today that they will offer a free, online Developmental Economics course at their new online university, MRUniversity. Sign-up today.

I have a course suggestion: Drawing Conclusions from Comparisons.

This is a weakness I see at all levels, even the well-educated, who should know better. We often make comparisons between two populations and draw conclusions about the differences that happen to fit our biases and give too little thought to alternative explanations.

One example: Homeowners appear to be more responsible than non-homeowners. If we make it easier to buy a home, we’ll make a lot more people responsible.

Cue 2008 mortgage crisis that people are still trying to figure out, or still trying to blame on  free markets or deregulation.

Alternative explanation: Turns out before we relaxed the standards, responsible people were more likely to become home owners and that’s what explained the difference in responsibility between these two groups.

Folks who were able to meet the requirements to own a home did so by being responsible before they owned a home.

Short circuiting home ownership qualification tests (like being responsible enough to exercise financial discipline and save a down payment) ended bad. It allowed irresponsible people to own homes, and surprise, they continued being irresponsible.

It would have been nice to consider alternative explanations to the idea that started it all — that home ownership causes responsibility — before committing to it.

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I could be wrong

Don Boudreaux, George Mason University economist, gets annoyed when non-economists make economic pronouncements.  Boudreaux writes in his Pittsburgh Tribune column:

Economics — unlike chemistry, electrical engineering and almost any other subject matter you can name — is a discipline that people routinely opine on even if they have zero formal exposure to it. No taxi driver or movie star offers, for example, his opinion on the molecular structure of radium or the process by which the magnetron led to the development of microwave ovens. On such matters, that person defers to trained chemists and engineers.

But that same cabbie or movie star is often eager to give his opinion on matters such as the causes and consequences of expanded international trade, the effect of minimum-wage legislation and the appropriateness or inappropriateness of the salaries of professional sports stars.

I’m embarrassed to confess that I often get annoyed at non-economists making pronouncements on economics.

Later in the column he softens his credentialism a bit:

Please don’t mistake me as saying that someone must have a degree in economics to offer worthwhile opinions on economics. I don’t believe for a second that that task requires formal training in economics.

What is necessary is at least some exposure to serious, formal economics — for example, taking a good course in principles of economics or reading at least two or three of the many good books on the market today that aim to introduce non-economists to the economic way of thinking. (Superb examples of such books include my colleague Russell Roberts’ “The Invisible Heart” and James Gwartney’s, Richard Stroup’s and Dwight Lee’s “Common Sense Economics.”)

I happen to think that Boudreaux is wrong about folks not opining on chemistry or electrical engineering.  I don’t think he pays as close attention to those fields.

Folks may not opine on the molecular structure of radium, but as a former electrical engineer, none of my friends or family who make pronouncements about the potential of solar or wind energy or electric vehicles ever ask for my opinion on the matter.

I also see plenty of non-chemists make pronouncements on the effects of chemicals and substances in our air, ground and water.

I also think Boudreaux does an injustice by singling out ‘non-economists’.

I get annoyed at anybody who makes pronouncements on any subject without considering that they might be wrong.  Economics is a wide field with plenty of different specialties and  economists can stretch their resumes and make dumb economic pronouncements on subjects they know little about too.

In my groups of peeps I try to gently enforce an informal rule.  If someone makes a pronouncement, I may ask them to explain to me how they arrived at their position.  Then I listen. I also request that they listen if I think they missed something in their thought process.

If they are unwilling to participate, I kindly request that they refrain from making such pronouncements unless they are willing to discuss.  It seems to work.

Now, everybody, let’s practice. Take a deep breath. Count to 3 and repeat after me.  1…2…3: I could be wrong.

It really doesn’t hurt that much to say it. Once you feel comfortable saying it, you open yourself to learning, teaching and seeing the world differently. But, of course, I could be wrong.

I use to have a tough time saying this.  Many of my family and friends have a tough time saying it. I still struggle with it at times.  But, I’m better now, and when I find it tough to say, I usually get over it quickly.

When you can say it, it’s amazing how disarming it can be.

Don Boudreaux asks some good questions

Don Boudreaux, of Cafe Hayek and George Mason University, asks some great questions in his column, And the answer is?, in today’s Pittsburgh Tribune.

Here are a few:

Why do so many conservatives distrust Uncle Sam when it meddles at home, but trust it when it meddles abroad?

Why do so many “progressives” who preen publicly about their magnanimity toward the poor want to prevent foreign workers — most of whom are farpoorer than is any American — from bettering their lots by competing freely against relatively rich American workers?

Why are “progressives” madly obsessed with inequality of incomes but not with inequality of work effort, risk taking, prudence, courage, honesty, integrity, ambition and dedication? Monetary incomes, after all, are largely a result of the application of these qualities: Those who apply more of these qualities to their lives and careers generally earn higher incomes than are earned by those who apply fewer of these qualities to their lives and careers.

Why is it considered bad form today to point out that personal character plays a large role in determining one’s fate in life — including one’s income?

If the current American model for supplying K-12 education is desirable, why do we not also supply college and post-graduate education in the same way? That is, why not fund state colleges with tax dollars, charge zero tuition and assign each post-secondary student to that college in his or her geographic district? Going to a public college outside of the district would be prohibited. Does anyone believe that implementing this model of supplying college education would improve post-secondary education?

Grandpa’s Lament

Markets fail.  Use government.

This is the underlying belief held by those who think it’s a good idea to expand the role of government to fix problems.

Arnold Kling gets credit for this simple counter:

Markets fail.  Use markets.

Kling calls this Masonomics, after the classical/libertarian economics department of George Mason University.  As Kling explains:

Masonomics worries much more about government failure than market failure. Governments do not face competitive pressure. They are immune from the “creative destruction” of entrepreneurial innovation. In the market, ineffective firms go out of business. In government, ineffective programs develop powerful constituent groups with a stake in their perpetuation.

In the Wall Street Journal this week, David Malpass wrote about why we should pay some heed to Masonomics as grasshopper governments are looking for ants to bail them out, so they can keep acting like grasshoppers:

Across Europe and the United States, the fiscal crisis is setting up an epic battle among government services, pensioners, government employees, creditors and taxpayers. There is simply not enough money coming in to pay all the promises politicians have made. The shortfalls and fights are challenging our democracies and shifting wealth from the private sector to ever bigger government.

The hope has been that Europe’s debt crisis would force government downsizing in time to meet cash flow requirements. Newfound fiscal discipline would provide a silver lining to the debt crisis. But that’s not working out.

Germany’s insistence on centralized fiscal discipline for the euro zone will lead to a massive expansion of bureaucracies in Brussels, Frankfurt and Berlin. They’ll include temporary and permanent bailout funds, dangerously intrusive powers for the International Monetary Fund and the European Central Bank, endless summits, new taxes on property, and recessions.

With Europe’s government structures assured of getting even bigger, the U.K. reacted immediately by opting out. U.S. lawmakers are already objecting to the European plan to expand the IMF. As in Greece, IMF programs are antigrowth, imposing austerity on the private economy, not the government. Greece has raised value-added and property taxes, then projected revenue increases that never materialize in order to keep payments flowing to creditors and the government’s entourage.

Governments on both sides of the Atlantic are trying to use the crisis to grow rather than shrink. News of Europe’s fiscal incompetence abounds, but Washington had no budget at all in 2010 or 2011 and the federal deficit grew at record pace. President Obama sailed through 2011 without any significant spending cuts or government downsizing.

It’s a shame that the U.S. government has been turned into a grasshopper government.  My Grandpa used to express his concern for the future:

If these kids are going to be our next leaders, we’re in trouble.

Yep.

Ron Paul is not an isolationist

Rarely do I defend politicians.  I’m not sure this is a defense.

It’s more of a correction, or maybe clarification on one distinction between conservative and libertarian thinking.

I’ve often heard Ron Paul’s “foreign policy” referred to by conservatives as “isolationist“.   My local conservative talk show hosts are guilty of this charge.  I’ve heard Dennis Miller do it repeatedly — even though he often interviews Ron and Rand Paul on his show and each time Miller calls Paul an isolationist, they correct him.

I’ve heard that exchange now three or four times in the past year, with the latest being Miller’s interview with Rand just before the Iowa debates (I believe it was around August 10, available on iTunes).  I listened to it today.

Miller said:

He’s a little isolationist for me, but on everything else he makes a lot of sense.

Rand Paul replied:

The foreign policy isn’t isolationism, it’s just that we should not go to war without declaring it formally, you know, like the Constitution intended.

I’ve also heard Ron tell Miller that he is not isolationist.  He said he support individuals trading with other individuals in other countries.  He just doesn’t think we ought to use our military beyond what it was meant to do — defend us.

I’m waiting for Miller to stop the flow of the show for a minute or two and ask one of them, Okay, maybe I have it wrong.  Can you explain to me how it is that you are not isolationist?  I’m not sure that has occurred to him to do that yet.  I’m also not sure it has occurred to Miller that perhaps he doesn’t know what isolationism is.

I’ve heard others do it. (Full disclosure: I might have done it a few years ago).

I think part of it is the conservative way to discount Paul and distance themselves from appearing to agree with a fringe candidate (we had this same struggle with identity when we went from liberal to conservative).

I think another part of it is, like Miller, conservatives don’t know what isolationism is and they haven’t thought much about when we should use our military and what the Constitution says about that.

Miller, and other conservatives, would do themselves a big favor if they read a blog post from George Mason University economist Don Boudreaux entitled, A Conflict of Visions Different than the one Sowell Identified, from March of this year.    The post is a copy of a letter Boudreaux sent to the Washington Post in response to George Will’s Column, Is it America’s duty to intervene wherever regime change is needed?

Here are Boudreaux’s key paragraphs:

Most modern “liberals” believe that domestic economic problems are caused chiefly by unsavory characters – “business people” – who impose their destructive rule on masses of innocent workers and consumers yearning for more prosperity, and that the best solution to these problems is government force deployed using armies of regulators to subdue these bad guys and to keep close watch over them and their successors.  Failure to intervene is immoral.  These same “liberals,” though, believe that foreign problems are typically the result of complex forces that can be understood only poorly by American-government officials; it is naïve to suppose that even well-intentioned foreign intervention by Uncle Sam will not have regrettable unintended consequences.

Most modern conservatives believe that domestic economic problems are typically the result of complex forces that can be understood only poorly by government officials; it is naïve to suppose that even well-intentioned economic intervention by Uncle Sam will not have regrettable unintended consequences.  These same conservatives, though, believe that problems in foreign countries are caused chiefly by unsavory characters – “dictators” or “tyrants” – who impose their destructive rule on masses of innocent people yearning for more democracy, and that the best solution to these problems is government force deployed with armies of soldiers to subdue these bad guys and to keep close watch over them and their successors.  Failure to intervene is immoral.

WTF WSJ?

I was pleased to see Spreading Hayek, Spurning Keynes in the Wall Street Journal this morning about professor of economics Peter Boettke at George Mason University.

After spending the entire article laying out the thinking behind Austrian economics, it ends with this:

But as much as the Austrian diagnosis may resonate now, it doesn’t provide a playbook for what to do next, which could limit its current resurgence.  Mr. Hayek rightly warned of the dangers of central planning, Mr. Boettke says, but “he didn’t give a prescription for how to move from ‘serfdom’ back.”

Straw man.  I’d be shocked if Boettke’s quote was taken in context.

Keynesians need “playbooks”.  Austrians want less government and more adult behavior.   Move in that direction.

Economic Stimulus

More people should interview George Mason University economist, Don Boudreaux.  In Here’s Why Economic Stimulus Does Not Work, Derek Thompson of the Atlantic, asks Boudreaux a few questions about the economic stimulus.  It’s worth a read as are the comments.

There are more comments about the article here.