…but we’ll be back!
Recently David R. Henderson had a very gallant post in which he admitted that he thought he was going to catch somebody in a bout of hypocrisy, but had been wrong. So let me do the same thing here.
This morning, I read Scott Sumner really letting people have it for arguing that a currency depreciation could help a country’s real GDP by boosting its (net) exports. “Oh boy, here we go,” I thought. “Another example of Scott wagging his finger at people for making ceteris paribus assumptions and taking a shortcut, when he himself has done the same thing a dozen times on his blog while touting the virtues of looser money.”
Well, I spent ten minutes looking and couldn’t find an example of Sumner making the same “mistake,” and what’s worse I found several examples of him making the same (correct, in terms of the framework he’s using) point in the EconLog post. Namely, Scott was pointing out that if currency depreciation occurs because of looser monetary policy in a situation where that promotes growth, for all we know net exports might FALL (even as real GDP rises), because the richer population now buys more imports.
So, I am happy to report that Scott has been pretty consistent on this point. However, I still will die on the hill for my claim that Scott “reasons from a price change” when it comes to interest rates all the time.
My latest FEE article briefly describes five examples of “unintended consequences.” I bet you haven’t heard of all of them.
Before you write and tell me, “Bob, you should’ve included such-and-such,” I want you to reflect on the fact that (a) there are thousands of possible examples and (b) the whole point was to include NON-obvious examples.
(In case it’s not clear, my patience with online libertarians is at a decade-low at the moment.)
==> Justin Mohr asks me about the Great Depression.
==> Tyler Cowen posted this interesting excerpt on ACA (“ObamaCare”) enrollment.
==> Like Walter Block, Daniel Kuehn hates the term “market failure.”
==> MK Lords is disillusioned with certain elements of libertarianism. Just to warn all of you, after I get caught up on my day job, I am going to push back against the writings in support of the SCOTUS ruling on gay marriage coming from many libertarians. So partly to defuse the reaction that, “Oh jeez Bob you can’t stand it when people criticize your buddies,” that’s why I’m highlighting MK Lords’ piece here, because I know exactly what she means. In other words, I am a huge critic of annoying libertarian traits (especially if you follow me on Facebook you’ll know what I mean). So when I am going to push back on the SSM stuff, it’s because I really think the targets of my criticism are missing the boat.
==> It is astounding how the two (main) sides in the climate change debate have such different narratives. In this piece, for example, the message is that climate scientists are afraid to raise the alarm because they’ll be blacklisted and have their careers ruined. (?!) And it contains this gem of a sentence: “For more than thirty years, climate scientists have been living a surreal existence. A vast and ever-growing body of research shows that warming is tracking the rise of greenhouse gases exactly as their models predicted.” I think the only response is this.
==> Attention Josiah Neeley and others who thought I was attacking a strawman: Here is one of my star former pupils arguing that if only 1% of the population understood the benefits of vaccination, they would be justified in forcing the other 99% to undergo it. I wait for you to rush to my defense (after you apologize of course), now that you see this isn’t merely a matter of government school policies.
==> Which economist said it? “Real estate is one of the easiest forms of consumption to hit with a progressive tax. We already have property taxes, and we already estimate the value of properties. Just do it!” Thomas Piketty? Paul Krugman? Joseph Stiglitz?
Just in time for your barbecue on the 4th, the Office of Management and Budget released a 44-page response to critics of the White House’s handling of the Social Cost of Carbon. In this first of perhaps several posts at IER, I explain the deal with discount rates. An excerpt:
Present dollars are more important than future dollars. If you have to suffer damage worth (say) $10,000, you will be relieved to learn that it will hit you in 20 years, rather than tomorrow. This preference isn’t simply a psychological one of wanting to defer pain. No: Because market interest rates are positive, it is cheaper for you to deal with a $10,000 damage that won’t hit for 20 years. That’s because you can set aside a smaller sum today and invest it (perhaps in safe bonds), so that the value of your side fund will grow to $10,000 in 20 years’ time.
In this framework, it is easy to see how crucial the interest rate is, on those safe bonds. If your side fund grows at 7% per year, then you need to set aside about $2,584 today in order to have $10,000 in 20 years. But if the interest rate is only 3%, then you need to put aside $5,537 today in order to have $10,000 to pay for the damage in 20 years.
An equivalent way of stating these facts is to say that the present-discounted value of the looming $10,000 in damages (which won’t hit for 20 years) is $2,584 using a 7% discount rate, but $5,537 using a 3% discount rate. The underlying assumption about the size and timing of the damage is the same—the only thing we changed is the discount rate used in our assessment of it.
Hey kids, I am 95% sure that in December 2008 Ben Bernanke was called before Congress to testify about all the emergency loan programs etc. They asked him to divulge the names of the recipients of the loans, and he said no, it would defeat the purpose of the program (because investors/depositors would dump weak banks needing Fed life-support).
Can anyone provide a link to justify my recollection? Google has failed me.
I am in a debate on State-mandated vaccinations at FEE. Don’t bother voting for me, though; there’s a greater chance you will be struck by lightning than changing anyone’s mind. An excerpt from my side:
This is a crucial point, and it shows why the case for mandatory vaccines is so much weaker than, for example, the case for mandatory restrictions on carbon dioxide emissions or mandatory contributions to the national military. When a person gets vaccinated, the primary beneficiary is himself. And this benefit is all the greater the lower the rate of vaccination in the population at large. In other words, among a population of people who all believe that a vaccine is effective, the individual cost-benefit analysis of taking the vaccine will only yield a temptation of “free riding” once a sufficient fraction of the population has become vaccinated, thus ensuring “herd immunity.”