03 Oct 2009

You Get What You Give

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Or so I hear. I’ve added my version of a Blog Roll to the left. I am surely leaving out plenty of blogs that I visit often, so I’ll be adding to it in the near future. But it’s a start for me to join the wonderful world of mutually beneficial linking.

03 Oct 2009

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

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In a thread at ThinkMarkets, the ubiquitous question of WWII spending and the Great Depression came up. I realized that I don’t think I’ve ever succinctly summarized Bob Higgs’ research on this point. (I explain all of this in great detail in my book.)

OK so here is what the limited-government, anti-Keynesian is up against:

Well gee whiz, it sure looks like military spending got the US out of the Great Depression, doesn’t it? Sure, common sense tells you that directing scarce resources into tanks and bombers, and then shipping them overseas to get blown to smithereens, can’t possibly help the domestic economy. But the figures above don’t lie, right?

In a series of really first-class papers, Bob Higgs points out the problems with the conventional stats. First of all, GDP includes government expenditures. If we just look at the private component of GDP, we see a different story. (I can’t find the data right now, but I’m virtually certain that private sector GDP fell throughout the war years, and jumped way up in 1946.) So already we run into a methodological issue: If the government takes, say, $1 billion out of the hands of private citizens, and spends it on “$1 billion worth” of tanks and bombers, is that really just a change in the composition of total output? Isn’t there an objective sense in which $1 billion spent by millions of consumers corresponds to more “total output” than $1 billion spent by military procurement officers in a non-competitive process?

Yet it gets worse. A lot of the wartime expenditures were financed (perhaps indirectly) through the printing press. Just look at how much they jacked up the monetary base during the war; it’s shocking to anyone except Ben Bernanke.

Now normally, if the Fed printed up a bunch of money that allowed the government to spend billions (in nominal terms) on military equipment, that wouldn’t boost real GDP. Sure, nominal GDP would go up, since you tabulate it by counting up the actual dollar expenditures by everyone, including the government. But because of all the money printing, the prices of milk, eggs, bread, gasoline, and so forth would skyrocket. So because the CPI (or GDP deflator) would be changing so much, the “real GDP” figure would not (in theory) go up just because of Fed-financed war expenditures.

Ah here’s the great part: The government made it illegal for the CPI to go through the roof during the war years. And the ridiculous economic statisticians make no effort to adjust for this. In other words, they take the nominal expenditures during the war years at face value, and they take the statutory price schedules at face value.

So yes, if the Fed triples the monetary base in about six years, and for several of those years the government makes it illegal for prices to rise very quickly, then voila! You’ll see a big jump in “real Gross Domestic Product.” Woo hoo! Stones into bread!

03 Oct 2009

Human Action Cannot Be Predicted

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I can’t predict my actions, so I really doubt that anybody else is going to, anytime during my lifetime.

For example, I just about never give money to panhandlers; in fact I once wrote an LRC article titled, “Stop Giving Money to Bums!” My argument was that you’re not helping them by making their lifestyle tenable. If you’re worried about someone starving to death, you can offer to walk into a store with the person and buy the food s/he picks out. (I’ve done that on a few occasions. Sometimes the people will come up with a reason that they don’t have time for you to buy them food! Other times you end up buying someone a bunch of food, which makes you feel a lot less like a sucker.)

But for some reason, tonight I ended up giving a guy $5. Here’s how it went down: I was walking around the lovely Greenville downtown, fresh from a fabulous performance at the Mises Circle. A guy comes up to me and says, “How you doin’? No offense sir, but you know who you look like? You know Seinfeld?”

So I say, “Yeah I do look like him. ‘George is getting very angry, Jerry!’” (I do a decent George Costanza.)

The guy cracks up and says, “Hey, you like honesty right?”


“Hey man, can I get a few dollars? I want to get a cold beer, you know, I’m just being honest with you.”

“Okay.” I decided I would give him $3, but I only had one single so I gave him a $5. When he saw the denomination his eyes lit up and he gave me a Denzel Washingtonian, “My man!”

So I made white people and black people happy today.* My work is done here.

* Argh, I keep forgetting that subtlety doesn’t work on the Internet. In case you are horribly offended, the point of my joke wasn’t, “Panhandlers are black.” The joke involved the fact that the particular guy was obviously black, what with my reference to Denzel Washington etc. And then I was actually making fun of the Mises crowd, in the sense that I believe they were all white.

03 Oct 2009

Rachel Maddow Opposes "Treason" Against US Government

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What a tool. Although Glenn Greenwald and a few other progressives are willing to admit that the US government didn’t become cleansed of its sins with the inauguration of Barack Obama, Rachel Maddow certainly doesn’t qualify. Watch her discussing Jim DeMint and Honduras. I only watched about the first three minutes of the clip, but note (1) very early on, Maddow uses the terms “us,” “our government,” and “our country” interchangeably, and (2) crystallizes DeMint’s sin as “telling them to resist what our government wants” (not an exact quote but close). Oh the horrors! Telling someone to resist the wishes of the US government!

It should go without saying that I am not supporting military coups, and I’m not saying Jim DeMint is a crusader against US imperialism. I am simply agreeing with Lew Rockwell who commented on this, “Here is demonstrated the deal [Maddow] made, and all the TV media have made, in return for money and glory: state worship and thought control.”

03 Oct 2009

Manzi on Evolution

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Jim Manzi is by far my favorite writer on the nuts-and-bolts of the climate models. After reading relevant sections of the IPCC AR4, I thought I had a pretty good idea of how the simulations actually worked, but I wasn’t totally confident until reading this Manzi piece.

Anyway, I recently checked out his archives at The American Scene. If you have never read Manzi, I encourage you to skim his posts and see if anything grabs you. I was very pleasantly surprised to see that he has (perhaps foolishly for his credibility in our secular age) dived into the evolution debate. In particular, I really liked his response to evolutionary biologist Jerry Coyne, who (in a book review of somebody else) had given the grandiose claims about “thank goodness Darwin set those self-important Bible-thumpers straight!”

Now note that I’m not saying Manzi is 100% in the post linked above; I think at times he overreaches. But even so, he does a great job dismantling some of the more absurdly over-the-top claims that are often put forward by evolutionary biologists in this type of debate.

I had wanted to get hip-deep into these issues, with Coyne’s claims, Manzi’s proferred counterexample, my commentary, etc. But I have been so busy, I know that’s not going to happen anytime soon. Instead let me just give you Manzi’s concluding paragraph:

The theory of evolution, then, has not eliminated the problems of ultimate origins and ultimate purpose with respect to the development of organisms; it has ignored them. These problems are defined as non-scientific questions, not because we don’t care about the answers, but because attempting to solve them would impede practical progress. Accepting evolution, therefore, requires neither the denial of a Creator nor the loss of the idea of ultimate purpose. It resolves neither issue for us one way or the other. The field of philosophical speculation that does not contradict any valid scientific findings is much wider open to Wright [whose book was under review] than Coyne is willing to accept.

Incidentally, in making his case, Manzi discusses in some detail a “genetic algorithm.” I asked Silas Barta what he thought of Manzi’s case, since Silas knows a lot about information theory. (See this post on Intellectual Property, and Silas’ clever example, to see him deploy information theory in a different context.) Anyway, below is Silas’ response to Manzi’s column, and of course Silas does not necessarily agree with anything I am saying in the present post:

-I’m a bit disturbed by how Manzi didn’t discuss the local optimum problem, where a genome isn’t the best overall, but is better than all the other candidates and yet can’t be improved without radical revision. This means that a genetic algorithm, like all general optimizers, is not guaranteed to find the global optimum on an arbitrary problem. In the example of the 100 switches, it may reach the solution slower than randomly iterating through them, which often plagues those who have high expectations of GAs. This is mentioned in the link he give[s] to Talk Origins.

(GAs are way overrated, by the way; they don’t on average do better than the other optimization methods like simulated annealing, hill-climbing, etc.)

Because you’re probably wondering about it: yes, that means that evolution of earlier life by no means guaranteed humans evolving, or indeed any intelligent species capable of culture.

-Scientists do indeed claim that evolution has no long-term purpose, but…this just means that they don’t believe they gain in predictive power by assuming it works toward some long-term purpose. However, they claim that evolutionary processes have the effect of attempting to maximize the fraction of the gene pool that any given gene represents. Manzi is correct to note that the constantly-shifting fitness landscape (what’s optimal for animals living near wolves isn’t optimal for animals living near ducks, etc.) and massive multi-directional interplay of factors make it effectively impossible to say *which* genes will increase in frequency in advance.

-As for Manzi’s general theme about the purpose of the universe being outside the realm of science, I would say that under some circumstances, scientists would be able to identify a purpose, but the dynamics at play in the universe as we know it make it currently impossible for science to say one way or the other.

UPDATE: Oh I should also mention that another flaw in Coyne’s typical critique against medieval Christians, is that Coyne gets his timeline screwed up. Gene Callahan pointed out (in email) that it wasn’t Galileo but Kepler Copernicus [my dumb typo, not Gene's--RPM] who had “announced” that the earth wasn’t the center of the universe. Furthermore, as reading Dante etc. indicates, medieval Christians didn’t think it was noble to be at the center of things; that’s where Hell was!! (Gene may have to clarify in the comments if I’ve botched his critique of Coyne.) So this standard debating ploy of “Christians can’t accept Darwin because of their fragile egos” is based on bogus Church history. Yes, it’s certainly true that modern Christians don’t like being told, “You’re not special, you serve no divine purpose, you are a statistical fluke,” but the ‘history’ given to buttress that charge is bogus.

03 Oct 2009

Two Items on Cap-and-Trade

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* Here I elaborate on Krugman’s chastisement of Martin Feldstein’s allegedly bogus numbers on the costs of Waxman-Markey. (Hint: When you use the number Krugman recommends–and translate it back into a per-household figure–it’s much higher than the number Feldstein had been using.)

* Here’s my hit on Fox Business Live, talking about a new IER study on the regressive nature of Waxman-Markey (because of the allowance handouts to certain industries). (Note that they incorrectly refer to my group as “Institute of Energy Research” when it’s really “Institute for Energy Research.”)

03 Oct 2009

Crimes vs. Sins: Letterman’s Blackmailer

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I actually haven’t seen the full clip yet; I’ve been traveling like crazy and my internet connection in this hotel is slooooooow. But I’m sure you all know about David Letterman’s recent announcement.

I don’t know all the details, so there might be something specific to the story that really shows the producer engaged in (what ought to be) criminal behavior. However, as Walter Block argued with great flair, in general the police shouldn’t punish blackmailers. Yes, you are arguably a moral degenerate, a huge jerk, etc. etc. if you blackmail someone, but why is it a crime?

If I know a secret about you, and it’s something that I have the legal ability to publicize, then how in the world is it a crime if I give you the option of paying me not to do something that is perfectly legal? Now if, say, you start to work for a company, and you sign all kinds of non-disclosure agreements, then it could be a crime if you demand hush money from them to keep your mouth shut about their secret trading strategies, or the special ingredient in their BBQ sauce. But there, you are extorting money under the threat of doing something clearly illegal; it’s akin to saying, “Give me some money or I’ll stab you.”

But if some producer happens to know that David Letterman is building his own special Top Ten List (you know I had to work in some cheesy pun in this post), and if that producer has the legal right to blog about it, talk about it, even to write a book about it, then how in the world is it a crime for him to give Letterman the option of buying his silence?

The way I see it, the only true crime involved with blackmail per se, would be if Letterman paid the guy $2 million, and then the guy went ahead and spread the gossip anyway. Of course, the crime there would be violating the deal, not the offer a deal in the first place.

To repeat: Something can be morally reprehensible and yet not qualify as criminal. For example, it is (and should be) illegal to steal a pack of chewing gum. Yet in the grand scheme, that’s a far lesser offense than cheating on your wife, or telling your parents that you hate them just to hurt their feelings. Yet clearly those latter two should NOT be crimes, punishable by the judicial system. So when I make these points, it’s not to defend the blackmailer as a nice guy; I’m just saying he shouldn’t be a criminal.

02 Oct 2009

Job Losses "Far Worse Than Expected" in September

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I don’t want to be the jerk who makes a pessimistic prediction and then gloats when it comes true, so I’ll just give you a link and not say anything more about it.

I don’t get into all the “leading and lagging indicators,” consumer sentiment, and all that jazz. All I know is that if the Fed sets the price of short-term borrowing to just about zero, and the feds take over the financial sector, and the government takes $1.5 trillion out of the private capital markets, etc. etc., that the economy is going to be awful for a long time.

The really annoying thing is that a year from now, if and when unemployment is still above 8% and consumer spending “is surprisingly sluggish,” it’s not as if Krugman et al. are going to say, “Whoa, we were wrong! I guess half-socialism gives you an economy half as robust as the Soviet Union’s!”