01 Jan 2010

Boettke Et Al. Engage in Product Differentiation

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The blog formerly known as “The Austrian Economists” will henceforth be referenced by the symbol α. No no it is actually now “Coordination Problem,” and Boettke et al. ask you to update your blogroll accordingly. [Insert joke about coordination problem here.] In this post Boettke explains the decision:

As of January 1, 2010, we are changing our name to “Coordination Problem”. This name change is symbolic as well as substantive. The term “Austrian economics” has become as much a hindrance to the advancement of thought as a convenient shorthand to signal certain methodological and analytical presumptions. We started this blog with a clear purpose to emphasize ongoing research in the scientific literature, and developments in higher education as related to economics and political economy. As a group we are committed to methodological individualism, market process theory, institutional analysis, and spontaneous order theorizing. And while we do not shy away from policy discussions, we do not identify with any political party or specific political movement.

As an experiment, over the past six months we have been tracking the use of the term Austrian economics in the news and in the blogosphere. Less systematically, we have also been listening carefully to the use of the term among fellow professional economists and what they think the label means. The results do not fit our intention. Google alert, for example, inevitably points to financial advice or libertarian politics, rarely to the research paradigm of F. A. Hayek, never to the scholarship of Israel Kirzner. Mises is often mentioned, but Mises the ideological symbol, not Mises the analytical economist. The “Austrian” theory of the business cycle is mentioned, but only in relationship to anti-fed politics and hard money advocacy, and never as an ongoing research program among professional economists.

These trends are not recent, but have been constant throughout our respective careers. We have always been among those who attempted to offer resistance to this use of the term. It has become evident to us that our efforts have been futile. Rather than resist the pure ideological identification, we are choosing to devote our efforts elsewhere. The name Austrian economics has been lost as a focal point for a tradition of economic scholarship, and is now a focal point for something else. We have to let it go.

OK I have mixed reactions about this. At first I wasn’t even sure I should mention it, because I don’t want to start another civil war. But since Boettke isn’t allowing any comments on his post, we’ll have to have the discussion here. This is a rather big announcement (in the admittedly small pond of Austrian blog readers) so it should be discussed somewhere. Here are my quick thoughts:

* For sure, I think it is childish if some people flip out at the “betrayal” of Mises, the “selling out,” etc. etc. I saw that happen when Daniel Klein made a suggestion a few years back to rebrand Austrian economics as “spontaneous order studies” or something like that. I disagree with what Boettke et al. have decided, but it is a strategic disagreement and not one of “purity.”

* It is undeniably true that Arnold Kling has gotten way more mileage among professional economists with his “Recalculation Argument” concerning the recession, than Mario Rizzo or I have gotten with our explicit debt to Mises and Hayek. Note that I am not saying Kling has done anything underhanded, and I’m not saying Kling’s ideas are totally unoriginal. All I’m saying is that the progressive economists who bother to criticize Kling’s views would have the exact same response to Rizzo or me, and yet they never bothered to point out why, “Those espousing the ‘Austrian’ explanation of depressions are wrong because…” It’s true that Paul Krugman has explicitly attacked the Austrian theory of the business cycle and the “hangover” theory, but that was like a biologist at Harvard discussing creationism. The explicitly named ABCT has never gotten the courtesy from other econo-bloggers that Kling’s “Recalculation Argument” has gotten, and I suspect much of the difference is simply due to the label.

* Having said that, I think Boettke et al. are wrong. For one thing, everyone is going to still refer to it as “Austrian economics.” Yes, it’s awkward when some people think you are talking about unemployment in Vienna, but in the last two years there has been major progress on that front. When Carlos Lara and I discuss our forthcoming book with insurance industry people, he has no qualms launching into a discussion of “Austrian economics,” and half the time the people know what he is talking about already. One guy floored me by saying something like, “Look I like Schumpeter as much as the next guy, but let’s think about the regulations our industry faces…”

* And this leads into my most serious objection/observation: For a long long time, there has been a big disagreement in Austrian (coordination problem?) circles over the strategy to get the word out. For lack of better terms, some people took the Rothbardian approach of trying to stay afloat in academia, but concentrating on educating the intelligent layperson. Other people took the Hayekian approach of trying to convert the intellectual elites, especially other professional economists.

Now look closely again at Boettke’s explanation. I realize this may strike some as gloating, but that can’t be helped: What Boettke is saying is that the people who decided to “take it to the common man” have been so overwhelmingly successful that the particular spin they put on “Austrian economics” has drowned out what the other camp wants people to think the term signifies. After all, I’m guessing it’s not as if citations to Hayek or Kirzner have dropped in 2008 and 2009, relative to five years earlier. Rather, it’s that people like Peter Schiff, Ron Paul, and–dare I say it?–Lew Rockwell have gotten the term “Austrian economics” into the public discussion in a previously inconceivably short time frame. Ron Paul used the term on Jay Leno, for crying out loud!

So it is a bit exasperating when Boettke et al. decide to split off precisely when the strategy that others have been pushing has paid off so incredibly. Just to make sure my point is clear, let me say this: Five years ago, presumably Boettke et al. did not endorse the things being said in the name of “Austrian economics” referring to the evils of central bankers, the wickedness of George Bush, the dastardliness of Abraham Lincoln, etc. But they didn’t bother to change the label back then. It is only now, when the “take it to the public” strategy has been so much more successful than the “let’s take over the econ journals” strategy, that they have to disassociate themselves from the self-styled Austrians who are ostensibly pushing a narrow meaning of the term.

* Last point: When I become a rock star economist and can start charging for access to this blog, do I have to wait until January 1, 2020 before changing its name?!

01 Jan 2010

GATA Sues Federal Reserve

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While the rest of you are getting smashed, I’m standing sentry at the Purchasing Power Castle, looking for signs of maurading central bankers. On my watch, MercedesRules passes along this tidbit:

GATA [Gold Anti-Trust Action Committee] today brought suit against the U.S. Federal Reserve Board, seeking a court order for disclosure of the central bank’s records of its surreptitious market intervention to suppress the monetary metal’s price.

The suit was filed in U.S. District Court for the District of Columbia and targets Fed records involving gold swaps, exchanges of gold with foreign financial institutions. In a letter dated September 17 this year to GATA’s law firm, William J. Olson P.C. of Vienna, Virginia, (http://www.lawandfreedom.com) Fed Board of Governors member Kevin M. Warsh acknowledged that the Fed has gold swap agreements with foreign banks but insisted that such documents remain secret:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

The lawsuit follows two years of GATA’s efforts to obtain from the Federal Reserve and the U.S. Treasury Department a candid accounting of the U.S. government’s involvement in the gold market. These efforts parallel those of U.S. Rep. Ron Paul, R-Texas, who long has been proposing legislation to audit the Fed. The Fed has wrapped in secrecy much of its massive intervention in the markets over the last year, and Paul’s legislation recently was approved by the U.S. House of Representatives.

The Fed claims that its gold swap records involve “trade secrets” exempt from disclosure under the U.S. Freedom of Information Act.

While GATA has produced many U.S. government records showing both open and surreptitious intervention in the gold market in recent decades (see http://www.gata.org/node/8052), Fed Governor Warsh’s letter is confirmation that the government is surreptitiously operating in the gold market in the present as well. That intervention constitutes a huge deception of financial markets as well as expropriation of precious metals miners and investors particularly. This deception and expropriation are what GATA was established in 1999 to expose and oppose.

Of course GATA’s lawsuit against the Fed will take months if not years to resolve. We think we have a good chance of winning it in court. But we can win it outside court, and much sooner, if the suit can gain enough publicity from the financial news media and market analysts and prompt enough inquiry from them and from the public, the mining industry, and members of Congress.

31 Dec 2009

Memorable Free Advice Posts from 2009

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I was going to do a Top Ten but that would take too long. Browsing the archives, here are some that jumped out at me (asterisks mean I think it’s a double plus good post):

Marianne Sierk Standup

Obama Nominates a Socialist

Coining a New Term for the Coming Economic Disaster

Of Flat Taxes and Idols

Tyler Cowen, a Sensible Central Planner

Did Deflation Cause the Great Depression?

Casey Mulligan: “Wow, I Was Only Wrong by 72% to 575%”

The Merciful God of the “Old Testament”

Not So Silent Cal

The Stock Market in 1929 Was Undervalued?!

Obama Will Be Re-elected

** Why Does God Let Bad Things Happen? Part 28 **

Ben Stein Suspicious of Those Untrained in the Ways of High Finance

Comrade Obama to Make Bank Nationalization Official

Scott Sumner Restores My Faith in Economists [SIC!!!]

TARP, a Criminal Enterprise

Toward a Review of Tom Woods’ Meltdown

Robert Wenzel: I Love the Way This Guy Thinks

The Peace That Passeth All Understanding

Star Trek: Get Me to Sickbay, I’m Gonna Puke

How Am I Like Jenny McCarthy?

Awkward Thoughts on Memorial Day

Krugman vs. Murphy on Inflation: Two Men Enter, One Man Leaves

Do Non-Believers Burn in Hell?

** JFK: Courage Under Fire? **

An Unexpected Invitation from the LORD

Wenzel vs. Murphy: the Grand Finale

Invasion of the Purchasing Power Snatchers

** The Big Picture **

Believing is Seeing, Economic History Edition

Hillary Clinton, Pod Person?

Ezra Klein Apparently Doesn’t Think Immigrants Are Part of the Universe

** My Solution to the Mind-Body Problem, and the Reconciliation of God’s Sovereignty With Free Will **

** The Coming Marijuana Legalization **

** A Review of Jon Sciescka’s Smash! Crash! **

The “Efficient Markets Hypothesis” Is a Mental Crutch for Economists

Has Andrew Sullivan Disavowed Barack Obama, Like He Promised?

The Innumerate Billy Ocean

Kroger Receipt from August 27, 2009

More Free Market Evangelism From Larry Kudlow

That Settles It, Glenn Beck Cannot Be Trusted

** My Response to John Cochrane **

God the Father

** How to Predict the Coming Bank Pay Regulation **

** “My God, It’s Full of Stars!” **

Arnold Kling’s Bizarre Monetary Theory

Crimes vs. Sins: Letterman’s Blackmailer

** Why Military Spending Didn’t Get Us Out of the Great Depression **

Scott Sumner’s Mind Is a Terrible Thing to Waste

A Little Stimulus Arithmetic

** Thoughts on Libertarians and Immigration **

Did Krugman Get the Inflation Go-Code at the G30 Meetings?

I Told You Guys That Krugman Was Misleading the Children

31 Dec 2009

Two Funnies From the 5-Year-Old

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I was reading my son his bedtime story and he had a long hair in his mouth. So we commented on its yuckiness and so forth, and then he started rubbing his head. He said, “I have lots of hairs.” Then he rubbed my head and said, “You have 2 hairs.”

Later on I was getting ready to leave the room and he said he needed his lamb (i.e. a stuffed animal). I asked where it was. He pointed and said, “Right there.” So I’m looking all over the place and don’t see it. “It’s right there?” I demand, gesturing at the wall. He says yes.

After some exasperation, he finally gets up to get it himself. He walks out of the bedroom and into his play room. I start cracking up and say, “So you were pointing through the wall?!” and he answers “yes” as if that’s totally normal.

In retrospect, who ever said you can’t point through a wall? We adults impose all sorts of constraints on our minds.

31 Dec 2009

The Jackpot Question In Advance

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I know many of you simply assume that an internationally known Austrian economist (that’s me) would be ringing in the new year hanging with my boyz in da club, and then we’d take the show back to the hotel to party some mo. Alas, my wife is out of town so I am spending New Year’s Eve entertaining my 5-year-old.

We did the usual circuit: First we hit Barnes & Noble for some Thomas the Train action, followed by the joys of coin op Bob the Builder and the generic fire engine. But since today was special, I capitulated when my son headed into Dave & Buster’s. (I actually hadn’t heard of it until coming to Nashville, so maybe you haven’t either: It’s a restaurant/arcade combo and even has bowling alleys.)

Here are some random observations:

* My son is mercifully still at the age (and we let him play arcade games so rarely) that we spent a half hour in there with him just enjoying the demos of various games.

* Although I didn’t have my son’s patience with games that were waiting for quarters, I was perfectly content to watch a 15-year-old kill dozens, perhaps hundreds, of storm troopers and other miscreants in the employ of the Emperor. It would have been in the thousands, except the TIE fighters blew him up defending the original Death Star and he stopped pumping in more money. I don’t think I’ve ever seen anyone actually fight Vader, even though that scene is featured when no one’s playing the game.

* I didn’t conduct an extensive survey, but it seemed that the gap between the 1st and 2nd place high scores was much much bigger than the gaps between the other rankings. On one game that had cardinal scoring, the 1st place score was almost 5 times higher than the 2nd place score, whereas after that the scores would drop by 10% or so with each step. On the racing games, where the scores were in terms of lowest times, the “Course Record” was so low that I wasn’t sure I was reading the information correctly. The 3rd place would be, say, 3:02, the 2nd place 2:40, the 1st place would be 2:31, and then the “Course Record” would say 0:48 or something. So like I said, I’m not sure what that meant, but it could have been consistent with the cardinal top scores. The point being, there isn’t a bell curve when it comes to killing Aliens. The best guy is WAY the heck better than the others.

* There were security cameras distributed around the place, and there were also TV monitors that would cycle through the cameras. So the point was, they were letting you know they were watching. My son was on a motorcycle and for some reason reached out and put his hand over the lens of the camera and moved it so it pointed somewhere else. Atta boy. Fight the power, my son.

* Without any prodding from his pacifist father, my son grew quickly bored with the shoot-your-way-out-of-a-zombie-house game and spent most of his time racing. (Or more accurately, he spent most of his time watching commercials for racing games.)

* I think if someone from the 1950s–who had warned that Elvis’ devil music would corrupt America–were magically transported to a modern arcade, he would feel completely vindicated. There weren’t too many games that honed your hand-eye coordination by seeing how many kittens you could rescue from a towering inferno, or how many heart transplants you could perform in 60 seconds.

* I’m sure everyone thinks the games of his childhood were the best ever, but I still say nothing beats Super Mario Bros. on the original Nintendo.

31 Dec 2009

The Wonders of the Internet

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I’ve enjoyed Rick Rolls, and I enjoyed seeing the young Bill O’Reilly explosion when it first surfaced. Can the two be married? Apparently so (HT2 Brad DeLong), and watch out for the F-bomb if you are viewing in a sensitive location (or have morals):

30 Dec 2009

If You Go to a Birthday Party at a Restaurant and Somebody Skips Out, Who Pays Her Bill?

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Akal Singh Krau is an extremely interesting guy who is a law student at the University of Tennessee (Knoxville). A few months ago he invited me to give my standard doom-and-gloom talk to bum out his peers, and we realized that he literally grew up down the street from where I currently live. Anyway, since he was back home for the holidays we had dinner. Afterward my other buddy and I went to the karaoke bar (of course), while Akal went to a “hip” Nashville restaurant, PM, where one of his friends was having a birthday party celebration. Here’s Akal’s post-game show:

The scene at the restaurant was…highly contentious by the time I left! One of the birthday girl’s friends accidentally walked out without paying her check. Other than the birthday girl, no one else present knew the friend who walked out, so none of us felt any responsibility.

The waiter and restaurant manager kept pushing the concept of “the table” as a single entity by which all persons present are accountable for every item brought to it. I tried to explain basic contract liability (which I presented as methodologically individualistic) but completely gave up when the manager looked at me and said, “Life is gray; nothing is black and white.” It wasn’t pleasant.

In a follow-up (after I asked for permission to blog this) Akal added:

Yeah, it was kind of interesting. I felt some sympathy with the restaurant’s table-as-entity argument since even customers don’t always know how the check will be paid. Sometimes I might cover your meal, or you might cover mine; and social grace does not permit us to explicitly work this out in advance. As it would be indelicate for a waiter to require an explicit account for each item ordered and brought to the table, the assumption that someone will cover it seems proper.

On the other side of things, the happenstance placement of one’s derrière does not sufficiently communicate an intention to incur gaurantor liability. And how do you define the concept of “the table?” By physical proximity of physical tables? By degree of interaction or familiarity between persons?

Discuss.

30 Dec 2009

Potpourri

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* I know we rarely say nice things about Matt Yglesias around here, so I should point out this really good post arguing that the comparison of legislation to sausage making is unfair to the sausage makers.

* EPJ links to a very interesting story about how Business Insider got hacked. Really, you should check out what the Nigerian email scammers did once they gained control of the email account; they were fast and clever.

* One of the justifications for formalism is that it allows arguments to be settled quickly. Rather than people going ’round and ’round, equivocating and playing word games in their arguments, you just make your claims in formal language and BAM everybody can quickly determine who’s right. Or not (see comments).

* This is a short video [.wmv] showing the end of Kodak Park. (If I didn’t know better, I’d swear the Kodak buildings were taken down by passenger jets flown by radical Muslims.) I grew up literally down the street from a Kodak plant; in fact I suspect its smokestack is the source of my super powers. (Either that or the red Krypton sun.) Unfortunately that building is still standing, according to my dad, so I can’t give this blog post too much personal flavor. I am pretty sure though that my dad spent much of his career in some of the buildings that are now demolished. Outsourcing takes no prisoners.