24 Dec 2016

Economists: Spell Out Your Premises

Economics, Game Theory 16 Comments

I think this is probably a phenomenon that happens in all disciplines, but I know economics so that’s where I see it. Anyway, while helping some of the Texas Tech grad students study for their qualifiers, I noticed that it’s hard to answer economics questions, when you don’t know what assumptions the professor has in mind.

For example, take Bryan Caplan’s recent lament:

A recurring final exam question for my undergraduate Public Choice class:

“Suppose voters were rational [in the Rational Expectations sense] and the SIVH [Self-Interested Voter Hypothesis] were true.

T, F, and Explain: Democracies would spend a higher share of their budgets on genuine public goods.” 

Almost no one gets it right – and we cover the most relevant material just one week before the final exam!

Now at the time I read that, I thought, “I could give any answer you want, and justify it by making the appropriate assumptions.” For what it’s worth, here’s Bryan’s suggested answer. And I’m sure if someone sat in his class, it would be “obvious” what Bryan wanted. But really, that means the metric is, “What does Bryan Caplan think the answer to this question is?”

Now what I worried about, when I first read the question, was the motivation to vote in the first place. After all, if people are rational in the game theoretic sense, and they’re self-interested, then they shouldn’t bother studying political platforms and casting votes if they think there’s a better chance of dying in traffic than their vote influencing the outcome of the election.

However, you can’t just say, “Nobody would vote!” because then, there would be an incentive for one guy to show up and write himself in as president.

I hope you see now what I mean, when I say I could justify either True or False, and craft the assumptions accordingly. Or more specifically, the things I chose to worry about in my analysis, would decide whether the answer turned out to be True or False. (Incidentally, this is how Krugman manages to almost-always justify the political conclusion his fans want, while always pulling mainstream economics off the shelf to do so.)

While I’m venting, here’s an anecdote from grad school that contributing to my disillusionment:

At the weekly Austrian colloquium, a guy presented a paper showing that there were two strands in the voting literature. On the one hand, you had “median voter theory” kind of stuff. But on the other hand, you couldn’t explain why anybody voted in the first place.

So I’m sitting there thinking, “Wait a minute… I bet I could build models with purely instrumental voting, where I get large numbers of people to vote in a Nash equilibrium.” And sure enough, I did that. (The intuition: Build a 3-person voting game involving a mixed strategy. Then add voters to each side, to either abstain or vote with certainty, so that they cancel each other out. You can build up families of equilibria.)

The NYU expert on this stuff at first told me my idea was impossible. So I sat in his office and after about 15 minutes I got him to realize he was wrong, and that my result *was* possible. Then he changed his tune to, “Nobody would be interested in this result.”

I thought, “Well since you had earlier said something false, surely my result is *moderately* interesting?” But I just submitted my result on my own to a journal. A month later the report came back: “We are rejecting your submission because So and So in 2001 published a more general result including yours as a special case.”

And now you have more insight into my personality…

24 Dec 2016

Tom and I Discuss Ancient Rome

Contra Krugman 1 Comment

Seriously, is there any podcast out there like this?


20 Dec 2016

The Lara-Murphy Show: 2016 in Review

Lara-Murphy Show No Comments

On the latest episode of the Lara-Murphy Show, Carlos and I review 2016. Also:

IBC Seminar for the general public on February 11, 2017 in Birmingham, AL.

For details and registration click here.

18 Dec 2016

Everything About the Human Condition Explained in One Spot

Religious 47 Comments

Perhaps the most famous Bible verse is John 3:16, but I’ll quote 17 as well. (There are double quotation marks because it’s Jesus speaking.) “16“For God so loved the world, that He gave His only begotten Son, that whoever believes in Him shall not perish, but have eternal life. 17“For God did not send the Son into the world to judge the world, but that the world might be saved through Him.””

So what’s the problem? Why isn’t everybody saved and destined for paradise? The next few verses explain:

18“He who believes in Him is not judged; he who does not believe has been judged already, because he has not believed in the name of the only begotten Son of God. 19“This is the judgment, that the Light has come into the world, and men loved the darkness rather than the Light, for their deeds were evil. 20“For everyone who does evil hates the Light, and does not come to the Light for fear that his deeds will be exposed.

I’ve said it before, but I’ll say it again: Notwithstanding the moralizing of many loud Christians, the actual doctrine teaches that all men (and women) are sinners who deserve hell. If you truly accept the gospel account, you have no right to judge anybody else. Rather, you must confess your own guilt and throw yourself on the mercy of Jesus.

But what the excerpt from John above explains so well, the stumbling block is that some people don’t want to be honest about their own guilt.

17 Dec 2016

Try to Reverse Engineer Krugman’s Threshold for Political Labeling

Krugman 19 Comments

Here’s an excerpt from the latest Paul Krugman column:

Let me explain what I mean by saying that bad guys hacked the election. I’m not talking about some kind of wild conspiracy theory. I’m talking about the obvious effect of two factors on voting: the steady drumbeat of Russia-contrived leaks about Democrats, and only Democrats, and the dramatic, totally unjustified last-minute intervention by the F.B.I., which appears to have become a highly partisan institution, with distinct alt-right sympathies.

OK, so notice Krugman gives a hyperlink on the phrase “highly partisan” which itself is embedded in this longer phrase: “…the F.B.I., which appears to have become a highly partisan institution, with distinct alt-right sympathies.”

So, presumably whatever Krugman has hyperlinked, will show that the FBI (1) is highly partisan and (2) has distinct alt-right sympathies.

BEFORE YOU CLICK, I want you to draw a line in the sand. Figure out what you think would be sufficient evidence, justifying Krugman’s description of whatever you will eventually find, when you click that link.

For example, if an internal sting revealed that 96% of FBI agents had donated money to David Duke, then Krugman’s description would be totally fair.

So like I said, I encourage you to take a moment and think about what types of things could be lurking at that link, to justify Krugman’s claims.

Now go click the link and see what you find.

16 Dec 2016

Tom Woods and I Deal With Russian Hackers

Contra Krugman 14 Comments

Well boys, I reckon this is it. Computer espionage toe-to-toe with the Russkies.

I realize it spoils it if I give you a heads up, but don’t miss another bonus feature at the end of the latest episode of Contra Krugman.

14 Dec 2016

One Last Post on the Trump Carrier Stuff

Economics, Trade, Trump 25 Comments

Following up on this post, let me reframe things in the following way. NOTE: I truly am not posting these thoughts as a, “Nana nana boo boo, what a bunch of hypocrites!” I really just think this is curious/interesting, and so I’m encouraging people to dig through their intuitions and see if they can refine them into a coherent framework that still spits out their desired answer on each question.

Suppose I approach an American who is a big fan of free-market economics and libertarian political philosophy. I say to him (let’s assume a guy):

There’s a manufacturing company, let’s call it A, that competes with dozens of American manufacturing companies, that I will call B, C, D, E, … Z. Now it just so happens that right at this moment, company A faces lower taxes and regulations than do B, C, D, … and Z. It is obvious that this disparate treatment makes it harder for these companies to compete with company A. Now the question:

Should the US federal government adjust its own policies vis-a-vis company A, to remove this competitive advantage and force it to sell products to American consumers on the same playing field as companies B, C, D, …. Z? If you so desire, you can split your answer up into economics and political justice.

Given the commentary I’ve seen on social media the past month, I am pretty sure that the typical male American free-market economics libertarian would say, “Before I answer your question, you need to tell me: Is company A located inside or outside the United States? My answer depends critically on this point.”

Especially since this typical person is a fan of open borders and often complains about “arbitrary lines that bureaucrats draw on a map,” I find this response quite interesting.

14 Dec 2016

Can Energy Policy “Create Jobs”?

Shameless Self-Promotion 1 Comment

My recent article for IER. You may be surprised by the charts.