23 Nov 2015

Contra Krugman Episode 10: Terrorist Attacks Aren’t Good for the Economy

Contra Krugman 9 Comments

Oh this was a fun one, with guest Scott Horton. I didn’t work it into the episode, but let me take the time here to note that my refined analogy (about you trying to decide whether to fix your car or cut the lawn, and then someone sets your house on fire and snaps you into action) was based on a point Silas Barta made several years ago, when we were arguing about the broken window stuff.

9 Responses to “Contra Krugman Episode 10: Terrorist Attacks Aren’t Good for the Economy”

  1. Silas Barta says:

    w00t! Love the shoutout! Here’s a post where I made a more brutal version of the analogy:

    “For example, say an unemployed guy, Joe, is trying all different kinds of things to find a job, and nothing is working. Then while driving one day, makes a wrong turn and steers his car off a bridge into the river below. Not good. But there is one teensy-weensy good part: it’s a lot easier to prioritize! Previously, Joe didn’t know what he should do to make optimal use of his time. Now, he knows exactly what he needs to work on: avoiding death from falling into a river!”

    • Major.Freedom says:

      Yeah I agree with Murphy about that excellent point.

      “And we can step back even more and generalize further: what we are seeing is but a special case of the law of diminishing returns. Abstractly, each additional unit of satisfaction requires a greater input of factors: land, labor, capital … and thought (sometimes called “entrepreneurial ability”)”

      That last bit opened a new world for me as well, seriously.

      • Tel says:


        Nobel Memorial Prize recipient Herbert Simon (1955) was an early critic of the idea that people have unlimited information-processing capabilities. He suggested the term “bounded rationality” to describe a more realistic conception of human problem-solving ability. The failure to incorporate bounded rationality into economic models is just bad economics—the equivalent to presuming the existence of a free lunch. Since we have only so much brainpower and only so much time, we cannot be expected to solve difficult problems optimally. It is eminently rational for people to adopt rules of thumb as a way to economize on cognitive faculties. Yet the standard model ignores these bounds.

        It was a pretty big deal when it came out. Seems pretty obvious in retrospect, but a lot of these things do.

        • Major.Freedom says:

          Good citation Tel.

    • guest says:

      He was already prioritizing before that, in that he was “trying all different kinds of things” to find a job.

      Now, in the case of him having to choose between two or more jobs, then, if he’s comfortable enough waiting as his savings continue to shrink, then he doesn’t need to prioritize.

      • Silas Barta says:

        The point was that the accident made it *easier* to decide on what to do (“prioritize”); he was certainly prioritizing before.

        • Major.Freedom says:

          Was thinking about that Silas….

          When you say “easier”, that to me presumes an intangible psychological factor that I dare say may not be as objective as we think.

          If I were to have fallen in a river, would I not be facing a very difficult time? Even thinking about choosing to live over choosing to die from drowning, may not actually always be “easier”. If it were always so, wouldn’t we see slackers jumping into rivers all the time?

          I can at least imagine myself feeling I am having a very difficult experience in the river. The choice to live may seem easy to make on an armchair, but actually making that choice in real life? I can imagine having an easier time choosing which of the next set of job opportunities to apply to. That to me seems in a certain sense ” easier” than “swim or die”.

          Or maybe ” easier” may be the wrong word?

    • Andrew Keen says:

      Now that’s what I call drastic stimulus!


  2. guest says:

    Scott Horton says something to the effect that “No one is saying that with a libertarian foreign policy, we wouldn’t be attacked.

    Coming from the Right, I can say that that response is going to further marginalize libertarians in the eyes of Conservatives.

    If “no one is saying” that, then why, whenever we point out that consistent Muslims are inherently dangerous, that all we hear about is our lousy foreign policy, as if that addresses our concern?

    At least say that we should all be armed, individually, or something.

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