Russell Roberts's Blog, page 1456

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Robert Higgs comtemplates truth-seeking.  Here's one of my favorite paragraphs:

In my career in academia, however, I discovered to my dismay that many of my colleagues had little interest in the search for truth, however one might understand or pursue it. To them, their research and publication amounted to a game in which the winning players receive the greatest rewards in salary, research funding, and professional acclaim. They understood that because of cloistered academic inbreeding, economists at the most prestigious universities consider the "smartest guys" to be those who employ the most advanced, complex, and incomprehensible mathematics in their "modeling" and "empirical testing." I observed colleagues who became excited by their discovery of a mathematical theorem that had never been applied in economic research. These economists would look around for a plausible way to use the newly discovered mathematical theorem, to give it the appearance of economic relevance. In this way, mere technique drove research and publication. These economists did not consider, or care, whether the theorem would assist them in the discovery of economic truth; they cared only about showing off their analytical powers to impress their technically less advanced colleagues and journal editors. Unfortunately, these colleagues often did feel intimidated by the authors of articles they could not understand because they did not know the mathematical techniques employed in the exposition. This entire enterprise, which continues even now, consumes valuable time and brainpower in a misguided carnival of intellectually irrelevant one-upmanship.

The great Richard Epstein argues for letting the rich get richer.  (HT Manny Klausner)  Richard is right.

Heather Mac Donald productively ponders graffiti and vandalism.

Shikha Dalmia criticizes Rep. Paul Ryan for conceding too much to the nanny-statists.

Limousine 'liberals' are no fans of the Institute for Justice!

I want to be in this catalog!  (Perhaps I could fetch as much as $10 per hour.)

In Politics, Idiocy Trumps All

Here's a letter to the Los Angeles Times:

Jonah Goldberg properly smacks down Mr. Megalomania, Donald Trump, for now backing away from many political positions that Trump staked out before setting his sights on the White House ("Duck, it's The Donald!" April 19).  Alas, The Donald is only an uncommonly clownish version of the typical seeker of that high office.  H.L. Mencken's 1940 assessment of 'serious' presidential candidates remains descriptive today:

"They will all promise every man, woman and child in the country whatever he, she or it wants.  They'll all be roving the land looking for chances to make the rich poor, to remedy the irremediable, to succor the unsuccorable, to unscramble the unscrambleable, to dephlogisticate the undephlogisticable.  They will all be curing warts by saying words over them, and paying off the national debt with money no one will have to earn.  When one of them demonstrates that twice two is five, another will prove that it is six, six and a half, ten, twenty, n.  In brief, they will divest themselves from their character as sensible, candid and truthful men, and simply become candidates for office, bent only on collaring votes.  They will all know by then, even supposing that some of them don't know it now, that votes are collared under democracy, not by talking sense but by talking nonsense, and they will apply themselves to the job with a hearty yo-heave-ho.  Most of them, before the uproar is over, will actually convince themselves.  The winner will be whoever promises the most with the least probability of delivering anything."*

And too many Americans will devotedly and pathetically follow one or the other of these boardwalk messiahs as stray dogs follow someone whom they think is carrying a sack full of sausages.

Sincerely,

Donald J. Boudreaux

* H.L. Mencken, "The Politician" (1940), in A Mencken Chrestomathy (New York: Knopf, 1949), pp. 150-151.

An Objective Scientific Case for Intervention?

Economists (and members of the general public) have long known that economic outcomes are distorted to the extent that people make decisions without taking full account of the effects that their decisions have on third parties.  Whenever such "externalities" exist, the outcomes of free choices cannot be correctly assumed to be socially optimal.  Such outcomes are, at least in principle, able to be improved either by changes in the institutional structures that influence individual choices or by direct intervention by some agent sitting, and acting from, outside of the system.

Early 21st-century Americans today suffer from such externalities.  One externality in particular directly and ominously threatens the physical environment in which we live.  If matters continue unabated, not only the health of Americans, but of people worldwide, will decline.  Compared to what would prevail if this externality were 'internalized,' our life-expectancies will be lower; the air we breathe will be more foul; the quality of our lives will be reduced.

This externality is the result of private citizens daily making countless private decisions that, while each decision benefits its individual maker, combine in total to threaten the fragile climate that makes our lives prosperous, clean, and healthy.

Many noted scientists – some of them Nobel-prize-winning experts in the field – have long warned against the folly of ignoring this problem.  These experts note that the climate that makes our lives possible – that keeps nearly 7 billion people alive on the globe, and that keeps the vast majority of these people healthier and more prosperous than anyone has been at any time in history – cannot sustain the continued battering it is receiving as a result of these private decision-makers who remain insufficiently constrained in making private choices that add to the accumulating poisonous effluence that is destroying the climate.

Admittedly, there are deniers, even among the scientists.  But we all know that there is no proposition so lunatic that some people will not buy it.  Some people, sad to say, still deny that the Holocaust ever happened.

(Not all of the people accused of being deniers, however, are really deniers.  Some of the 'deniers' are simply people who admit that the externality might well exist but who doubt that there is any cure for it that would be better than the ailment itself.  These people, while more reasonable than the outright deniers, are insufficiently aware of the grave and irreversible tragedy that will befall humankind in just a few years if actions are not taken today to solve the externality.)

The externality, of course, is political decision-making – every decision from casting ballots in voting booths to the President of the United States signing legislation that gives government greater power to regulate capitalist acts among consenting adults.  Political decision-makers make their decisions based upon their own private calculus – each decision-maker deciding according to what is in his or her own best private interest.  But, obviously, because every political decision affects countless strangers who have little or no input into each decision being made, each and every political decision emits external effects – 'political pollution,' if you will; countless irresponsible private decisions that, set adrift into the body politic, will dangerously change the climate to one of hostility toward markets and enterprise.  The overall outcome of these decisions cannot, scientifically, be presumed to be optimal.

Many economists understand that free markets, and a culture that celebrates bourgeois values and activities, are a huge force for prosperity and improved human living conditions.  Quality housing without the filthy dirt floors and vermin-infested thatched roofs that our ancestors endured; automobiles that keep our streets clean of animal manure and the resulting swarms of flies; personal-hygiene and first-aid products that keep our persons cleaner and healthier.  The list is very long.  Unfortunately, because individual political agents make decisions without having to account for the full effects that their decisions will likely have on the economy's ability to continue to generate this cornucopia of human-climate-improving benefits, the continuing – indeed, expanding – role of politics in our lives poses a grave threat to humanity's future.

…..

I actually am not among those persons who believes that the economy will crumble into chaos at the slightest introduction of unwarranted intervention.  But do note that the same sort of story daily told about the threat of climate change to humanity's future can be told, just as compellingly, about the political interventions aimed at mitigating the effects of alleged market imperfections, including those that bring about climate change.

Natural Scientists and Economics

Commenting on this post, Notalawyer writes that he (or she) is seriously concerned about global warming especially because

many natural scientists consider this to be a serious and existential problem. Its [sic] entirely possible that global warming could open up more space for human habitation, crop growth etc. But most scientists believe it will have large detrimental effects.

While no one has more respect for the natural sciences than I do, I am not persuaded by Notalawyer's reasoning.  Meteorologists, biologists, horticulturists, zoologists, physicists, entomologists, physicians, and other natural scientists are not economists.  (Each might well, and rightly, use as a pseudonym 'NotanEconomist.')

While there are some exceptions – Indur Goklany, for example – of natural scientists who understand economics, far too many of them see the world as posing physics or engineering problems rather than as posing economic ones.  The two problems are very different from each other.

And the economic way of thinking – studying economic history; pondering the role of entrepreneurship; reflecting on creative destruction; being attuned to the fact that so many social phenomena are the results of human action but not of human design; understanding the fact that market-determined prices both signal important information about resource availabilities and give consumers and producers incentives to change their actions in accordance with changes in resource availabilities – gives economists a different perspective from that of natural scientists on the range of likely economic consequences of climate change.  One manifestation of this different perspective offered by economics is that the prospect and possibilities of productive human creativity seem to be more readily grasped by the typical economist than by the typical natural scientist.

Natural-scientists' track record on predicting the economic impact of environmental changes is poor – at least, this is my off-the-cuff sense.  Most famously, the scientist Paul Ehrlich has been consistently and magnificently mistaken about the effects of economic and population growth on human well-being.  Likewise, Jared Diamond, for all of his undoubted brilliance, fundamentally misconstrues the most basic features of globalization.  (See also here.)  So, too, the great E.O. Wilson (whose 1994 autobiography Naturalist, I enthusiastically add, is among the most enjoyable of that genre that I've ever read).

Albert Einstein – no slouch when it comes to science – was a terrible economist.

I don't blame natural scientists for their frequent failures to grasp even basic economics.  Each of these scientists is a specialist in his or her own field.  It would be as out of place for me to criticize, say, a scientist who specializes in the study of ants for his poor grasp of economics as it would be for the ant-specialist scientist to criticize me for my poor grasp of the biology and behavior of ants.  The difference is that I don't fancy that my expertise in economics equips me to speak with any authority at all on ant science or on other natural-science matters.

….

Here's what my colleague Jim Buchanan wrote in December 1976:

The principle that exposure to economics should convey is that of the spontaneous coordination which the market achieves….

I recently talked with a prominent economist who mentioned that one of his colleagues had reported having several conversations with the then presidential candidate Jimmy Carter.  This colleague passed along his view that Carter was a "good systems analyst," and my friend added, more or less as an afterthought, and "hence, a good economist."  I very quickly and very emphatically put him straight, saying that nothing could be further from "the economic point of view," properly interpreted, than that of the systems analyst.  Indeed, this is precisely my own fear about Carter, that he is, in fact, a good systems analyst without the remotest understanding of the principle of spontaneous order. [James M. Buchanan, What Should Economists Do? (Indianapolis: Liberty Fund, 1979), pp. 81-82; original emphasis].

Climate Change

Here's part of the conclusion of a recent, data-rich paper by Indur Goklany; this paper is Chapter 6 in Climate Coup (Patrick J. Michaels, ed., 2011):

Despite claims that global warming will reduce human well-being in developing countries, there is no evidence that this is actually happening.  Empirical trends show that by any objective climate-sensitive measure, human well-being has, in fact, improved remarkably over the last several decades.  Specifically, agricultural productivity has increased; the proportion of population suffering from chronic hunger has declined; the rate of extreme poverty has been more than halved; rates of death and disease from malaria, other vector-borne diseases, and extreme weather events have declined; and, consequently, life-expectancy has more than doubled since 1900.

And while economic growth and technological development fueled mainly by fossil fuels are responsible for some portion of the warming experienced this century, they are largely responsible for the above-noted improvements in human well-being in developing countries (and elsewhere).  The fact that these improvements occurred despite any global warming indicates that economic and technological development has been, overall, a benefit to developing countries [pp. 181-182].

Indur here nicely captures my own attitude toward the current hysteria about climate change.  I neither deny that climate change is occurring nor that its occurance is the result of human activity.  (I'm no natural scientist, so my ability to judge the science is inadequate.)

What I do deny is (1) the presumption that climate change necessarily has worsened or will worsen human well-being compared to what that well-being would have otherwise been, or will be, under different feasible policies, and (2) the presumed necessity for governments to 'do something' about climate change.  From the perspective of an economist, it is a non sequitur to conclude from the existence of made-made climate change that government must take steps to halt, or to diminish, those human activities that contribute to climate change.

Of course, the fact that fossil-fuel fueled improvements in humans' 'micro' environments – the close-in environments that matter most to us, such as the air in our homes and workplaces, the cleanliness of our clothing, the absence of animal manure on our city streets, etc. – are very real and very large does not imply that steps ought not now be taken at the margin to reduce human activities that are thought to contribute to climate change.

But the case for taking such steps would be more plausible, believable, and acceptable were not so many of its advocates prone to write and speak as if the benefits of industrialization, such as those mentioned above by Indur, are unreal or overblown or, more precisely, as if these benefits are not connected with the very industrial and commercial processes that climate-change hawks wish to further rein in.  So much of the conversation by climate-change hawks takes place as if the demonstration of the existence of a cost is sufficient to prove that that cost must be reduced.

And, too, so much of that same conversation takes place as if the political authorities to be charged with reducing this cost will act both wisely and in the public interest.

Both stances are most unscientific.

No Archons

Re Wall Street Journal letter-writer Michael Stoken's discussion of modern Greek anarchists: while in today's English the word "anarchy" means "lawless," etymologically it means "leaderless."  The two meanings are different.

Literally, "anarchy" means "without an archon."  Archons were leaders of ancient Greek city-states.  But being without a leader – without an archon – is not necessarily to be without law.  The vast bulk of law emerges not from the commands of sovereign rulers but, rather, from the everyday interactions of countless ordinary people as they exchange, intermingle, cooperate, and come into conflict with each other.  Only the most naïve social creationist equates the dictates of strongmen (or of groups of strongmen, such as assemble in legislatures) with "law."

Reasonable people can and should debate the extent to which centralized sovereign power is necessary to enforce laws.  It's a grave error, however, to suppose that all commands issued by "archons" are law and that a society is lawful only insofar as its denizens follow the commands of "archons."  Indeed, among history's most destructively lawless characters are "archons" themselves – for example, Stalin and Mao.

Renting Reality

Nicole Gelinas eloquently exposes many of the flaws of New York City's rent-control system. Rent-control advocates – like all advocates of policies that prevent people from voluntarily exchanging goods and services at prices that they (rather than government officials) determine to be appropriate – forget that market prices reflect an underlying economic reality.

Market prices are messengers that deliver important information to buyers and sellers about the relative availabilities of different goods, services, and resources.

To believe that tenants and potential tenants are made better off by capping the ability of markets to charge rents above some artificially determined rates is akin to believing that patients with high blood pressure are cured of their hypertension by capping the ability of blood-pressure monitors to register readings higher than 100 over 60.

Klein on openness

My colleague Dan Klein makes a provocative case for openness and ideological transparency in the classroom. I agree.

iCreative Destruction

Not long ago people complained that Borders and Barnes & Noble were causing independent book retailers to shut their doors.  Now Rep. Jesse Jackson, Jr. is warning that the iPad and other e-book readers are hurting Borders and Barnes & Noble.'  (HT Charlie Frey and Nick Mueller)

The jobs they are a-changin'.  Competition and progress are like that.

Not even a deck chair on the Titanic

More like a slat from the chair or a piece of a slat of a deck chair. The National Journal reports (HT: Drudge Report)

A Congressional Budget Office analysis of the fiscal 2011 spending deal that Congress will vote on Thursday concludes that it would cut spending this year by less than one-one hundredth of what both Republicans or Democrats have claimed.

A comparison prepared by the CBO shows that the omnibus spending bill, advertised as containing some $38.5 billion in cuts, will only reduce federal outlays by $352 million below 2010 spending rates. The nonpartisan budget agency also projects that total outlays are actually some $3.3 billion more than in 2010, if emergency spending is included in the total.

I'm paraphrasing and it's not my joke (maybe Don's?) but to say that Congress spends money like a drunken sailor is to insult inebriated seamen.