Dan Klein and IUC: May I Have Another, Sir?
OK I am supposed to be balancing my checkbook tonight, so that’s why I continue to harp on this issue of Dan Klein and interpersonal utility comparisons. Gene Callahan and Daniel Kuehn have chimed in. I have just two more clarifications, and then it’s double entry bookkeeping time, baby. Goethe, eat your heart out.
(1) I have no problem if Dan Klein thinks “a dollar means more to a poor person than to a rich person.” I have no problem if he goes so far as to say, “Look, we’ve all heard the standard shtick from Rothbard to Varian about ordinal preference relations blah blah blah. But c’mon people, we all know perfectly well that there is a legitimate sense in which a dollar means more to a poor person than to a rich person.”
To repeat, if Klein says that, fair enough. I have little problem with it. What I do have a problem with, is Klein putting that on a test to see if people know basic economics. That would be like asking, “Can the government raise GDP by spending a dollar?” and then dinging people for saying yes. That would be a very unfair question to ask people, since they were probably taught that government spending can raise GDP. And by the same token, some of the people Klein surveyed may very well have been explicitly taught that it is a meaningless statement to claim that a dollar means more to a poor person than to a rich person.
So that was my objection, that this was an awful question for the purpose Klein intended. I don’t care how Klein himself would answer the question.
(2) Daniel thinks we can all get along if we assume “other things equal.” No, that won’t cut it, at least not in the way I am thinking about utility. It’s not that I think “a dollar means more to a poor person than a rich person” is sometimes true, sometimes false, and thus I don’t want to say it is true in general. For example, my objection isn’t that hey, maybe we’re comparing a miserly billionaire with an aesthetic monk who took a vow of poverty.
No, that’s not the problem. The problem is that utility has to do with ordinal preferences. To say “an apple gives Mary more utility than a banana, but vice versa for John,” simply means that Mary would choose the apple over the banana, while John would do the opposite if faced with the same choice. There is no way you can take such language and come up with a comparison of Mary’s utility from an apple versus John’s utility from a banana. Mary and John are separate, acting agents. It is simply nonsense to start comparing one person’s utility with another, if you are using “utility” the way mathematical economists have used it in price theory since (at the latest) the 1930s, and the way the Austrians were using it even earlier.
Modern Utility Theory and Interpersonal Utility Comparisons
I want to elaborate on my earlier post in which I temporarily ceased being The Fonz of Economics due to a problematic question that Dan Klein had used to separate the men from the boys among the libertarians. First, let me be clear: Tyler Cowen clearly knows about everything I am going to say in this post, but for some reason (perhaps he thought it was obvious or he was just in a rush and didn’t want to confuse things) he let it go. I am less sure about how to handle Klein on this issue, because he (I believe) wrote the list of questions in the first place.
Anyway, to refresh your memory, Klein had asked people whether or not they agree with this statement: “A dollar means more to a poor man than to a rich man.” Klein thought the answer should clearly be yes, so much so that he said “c’mon people!” to those who disagreed.
I just double-checked and yes, I disagree with Klein on this so much that I actually devote a whole section of my introductory textbook to saying why the above statement is meaningless. Now you can see why I am taking this so seriously, and why it makes me lament the state of economics that we can have such huge disagreements. (Note, I am not saying Klein is a bad economist and I’m a good economist. I’m saying, economics as a discipline is in sorry shape if Klein dreams up a question to test basic economic literacy, that I use an example of economic illiteracy in an introductory textbook.)
So for those who want more (both of you), here is the discussion from my textbook, Lessons for the Young Economist. And keep in mind as you read the following that I am aiming this at junior high or even younger students, so that’s why I engage (for once) in puerile humor.
Preferences Are Subjective
Because preferences are tied to specific individuals, we say that preferences are subjective. Loosely speaking, the difference between a subjective versus an objective statement, is akin to the difference between an opinion versus a fact. It makes sense to say, “Mary prefers vanilla ice cream to chocolate, but John prefers chocolate ice cream to vanilla.” These two statements are perfectly compatible, because preferences (in this case, preferences for ice cream flavors) are subjective and can differ from person to person.
In contrast, it does not make sense to say, “The ice cream has 300 calories for Mary, but 280 calories for John.” The number of calories in a serving of ice cream is an objective fact; it can’t differ from person to person. Mary and John might disagree with each other about how many calories the ice cream has, but in that case at least one of them is simply mistaken. Yet both of them could be simultaneously “correct” when Mary says, “Vanilla tastes better than chocolate,” while John says the opposite. To repeat, Mary and John can disagree with each other about which flavor of ice cream tastes better—with neither one nor the other being wrong—because preferences are subjective. There is no “fact of the matter” concerning which ice cream tastes better, the way there definitely is an objective way to demonstrate how many calories are in a serving.
Warning! Many critics of economics—both from the progressive “left wing” as well as the religious “right wing”—totally misunderstand what economists mean by saying that preferences are subjective. These critics think that economists are somehow endorsing moral relativism, or that they are saying no one can judge the actions of anyone else. But these complaints are without merit, because economists aren’t saying those things at all!
Remember, we are simply tracing out the logical implications of our decision to classify observed behavior as purposeful action. If we see Mary go up to the counter and choose vanilla ice cream, while we see John go up to the counter and order chocolate, we won’t get anywhere in our understanding unless we realize that Mary and John have different tastes when it comes to ice cream flavors. As we will see more clearly in Lesson 6, the only satisfactory way to explain market prices is to first recognize that preferences are subjective. This recognition in no way condones the preferences of particular individuals.
For example, an economist can’t possibly explain the price of tobacco without acknowledging that some people prefer to spend their money on cigarettes, rather than on other products. After the economist states this fact, he can—with perfect consistency—then ground his teenage son when he catches him smoking in the garage with his hooligan friends. If you’re still not seeing the distinction between professional analysis versus personal beliefs, forget about economics and consider an FBI profiler. To track down a serial killer, the profiler needs to “think like the killer,” and try to understand what desires are causing the killer to act the way he is. Obviously this analysis doesn’t mean that the profiler is neutral with regard to the actions the killer takes, or that murder “is a personal choice.”
To sum up: When people engage in purposeful actions, they are motivated by desires that are not necessarily identical from person to person. In order to explain exchanges, economists must recognize that preferences are subjective.
Preferences Are a Ranking, Not a Measurement Using Numbers
Because preferences are tied to a person’s exchanges, the preferences can only reveal a ranking of goals. When Mary chooses vanilla over chocolate ice cream, this purposeful action only indicates that she prefers vanilla. We can’t determine “how much” Mary prefers vanilla over chocolate; indeed, that statement doesn’t even make sense in terms of strict economic logic.
In everyday conversation, we all know what it means to say that “Mary really prefers vanilla over chocolate but her sister Jane only slightly prefers vanilla to chocolate.” But it’s important for you to see that this type of talk makes no sense in terms of the preferences that we use in economic reasoning.
After all, what does it really mean—from the standpoint of pure economic logic—to say that Mary has a preference for vanilla over chocolate? All it means is that, faced with a choice between the two flavors, Mary would pick vanilla. But that is the same thing we can say about her sister Jane, whose friends would testify that she has only a “slight” preference for vanilla. Jane too, when faced with a choice, would pick vanilla over chocolate. So in terms of logical deductions that we can make based on a person’s purposeful actions, all we can say as economists is that both girls exhibit a preference for vanilla over chocolate.
We can take this train of thought further to drive home the lesson. Even if Jane announces, “I just barely prefer vanilla to chocolate!” that wouldn’t give an economist the ability to conclude that her preference for vanilla is “less intense” than Mary’s. No, it would merely allow the economist to conclude that Jane preferred to yell that particular sentence, versus yelling something else or keeping her mouth shut. Remember, we are using the notion of a person’s subjective preferences to explain the concrete actions that the person takes. If someone utters a statement, that informs economists about the person’s preferences all right, but only because the utterance itself is a purposeful action!
To help you remember the points of this lesson, consider the analogy of friendship. For example, Sally might have three friends, and so we could say that in her mind she holds feelings of friendship for each of them. We can push it further and ask Sally to rank her friends. She might say that Bill is her best friend, that Mary is her second-best friend, and that Joe is her third-best friend. Such talk is perfectly meaningful.
But what if we then asked Sally how much better a friend Bill was than Mary? Now things start to sound a little strange. And if we asked her, “Does Bill possess at least 30% more friendship than Joe?” we would have entered the realm of the absurd. The moral of this story is that it makes sense to rank friends, but even so there’s still no such thing as an objective “unit of friendship” behind the scenes, driving our ranking.
The same is true with preferences in general, at least as we use them in economics. As you will learn in upcoming lessons, to understand and describe exchanges, we need to assume that people have a ranking of goals or ends. People take actions to satisfy their most important preferences, or to achieve their highest goals. We do not have to say that people have a mathematical “utility function” that they seek to maximize, even though such talk is commonplace in other economics textbooks. This alternate approach is only useful in coming up with specific answers to contrived numerical problems; it doesn’t actually shed more understanding on the process of exchange. In fact, the use of mathematical utility functions is very harmful when learning basic economic principles, because it often causes the student to forget where the notion of preference comes from in the first place.
An Alternate View
Even professional economists do not always heed the principle that preferences are a ranking, not a measurement. For example, economists often use the term utility to describe how much pleasure or satisfaction a person gets from a particular situation. Therefore they might describe our scenario by saying, “Mary chose vanilla ice cream because it gave her more utility than the chocolate ice cream would have given her.”
So far, so good. But then many economics textbooks push it further and start assigning numbers to measure how much utility, so that (say) Mary gets “55 utils” from vanilla but only “34 utils” from chocolate, and so in order to “maximize utility” she obviously chooses the vanilla. If you are taking a Ph.D-level class, the textbook will explain that “utils” don’t really exist, the way “kilograms” are an objective unit of weight and “meters” are an objective unit of height. Instead, the Ph.D.-level textbook will explain, economists can use mathematical utility functions just as a convenient shortcut to describing preference rankings. So when the function assigns “55 utils” to a bowl of vanilla ice cream but only “34 utils” to the chocolate, all that really means is that Mary would choose the former over the latter. The utility function could just as well have assigned “18.7 utils” to the vanilla and “2.3 utils” to the chocolate; the important thing is that Mary acts “as if” she is maximizing this arbitrary mathematical function.
In this book, we will not be using the confusing terminology of “utils,” and we won’t be performing calculus on “utility functions” the way other economics textbooks do. These practices, though common, are dangerous because they can mislead you into thinking that we are measuring the amount of psychic satisfaction an individual derives from particular actions.
It may be that one day neuroscientists come up with an objective way to quantify various degrees of happiness, such that they can coherently talk about Mary being “three times more satisfied” than Bill. But even if this happens, our point here remains the same: In the field of economics, such talk is meaningless. In economics, we use terms like “preferences” as a way to explain or describe the purposeful actions of individuals. When someone chooses one thing over another, all we can conclude is that the person preferred the chosen item over the discarded item. Psychologists or neuroscientists (or even common sense) might shed more light on the event, but economic logic per se can go no further. The economist isn’t claiming to have all the answers; far from it! The economist is actually being humble here by admitting the limits of what economic reasoning can say about a given event. In Lesson 6, we will see how subjective preference rankings interact to yield objective market prices. At that time, you will understand better why we are stressing these points in this lesson.
Different Individuals’ Preferences Can’t Be Combined
If preferences are subjective to each individual, and cannot even be measured or quantified for each individual, then obviously it would make no sense at all to try to combine or aggregate individual preferences into “social” preferences. Unfortunately, even professional economists often engage in just this type of reasoning. Many people (try to) justify progressive income taxation, for example, by claiming that “a dollar means more to a poor man than to a rich man.” The idea is that taking $1 million from Bill Gates won’t lower his utility very much, whereas handing out $1,000 to a thousand different homeless people will greatly boost each of their utilities. Therefore, the typical argument goes, total or “social” utility has been increased by the redistribution of some of Bill Gates’s wealth.
In Lesson 18 we will examine the consequences of progressive income taxation. For now, we point out that the typical justification for it is absurd. You can’t add up different amounts of utility from various people. In fact, if you use the alternate term preferences it will be more apparent why combining them from different people is an impossible task. It makes sense to ask, “What is the total weight of the population?” or “What is the average age of the population?” It does not make sense to ask, “What is the total preferences of the population?” or “What is the average amount of utility per person?”
To make sure you understand just how nonsensical it is to (attempt to) perform arithmetical operations on different people’s preference rankings, once again let’s switch to the analogy of friendship. Suppose that Sally and Larry have the following “friendship rankings”:
Friendship Rankings
Before continuing, make sure you understand the table: Sally has five friends total. Her best friend is Bill, her second-best friend is Mary, and so on. Larry, on the other hand, only has two friends. His best friend is Joe, and Bill is his second-best friend. Notice that even among their shared friends, Sally and Larry don’t have the same ranking order. Sally thinks Bill is a better friend than Joe, while Larry thinks that Joe is a better friend than Bill. There is nothing strange about this, because preferences are subjective.
Now suppose a busybody school administrator comes along and says, “This is terrible! Poor Larry doesn’t have as many friends as popular Sally! I have a great idea to make things fairer. I’ll write a note in Sally’s handwriting that says, ‘You smell!’ and put it in Adrian’s lunch bag. This will cause a big fight between Adrian and Sally, so he won’t be her friend anymore. Then I’ll arrange it so that Adrian sits near Larry on the school bus. They will eventually become friends. I can’t predict whether Adrian will become Larry’s 1st, 2nd, or 3rd-best friend, but no matter what, he will be ranked higher as a friend of Larry than he was as a friend of Sally. Through my benevolent intervention, I will have increased the total amount of friendship among the children.”
Obviously the above story is quite silly. But we have used a silly story to demonstrate the silliness of trying to add up subjective, individual preferences. Hopefully you can now see that trying to increase “social utility” by taking money from a rich man and giving it to a poor man, is simply nonsensical. Perhaps proponents of progressive taxation can justify it on other grounds, but appealing to the economic concept of preferences (or utility) doesn’t get the job done.
Econ Journeyman Watch
Sometimes my hunches turn out to be so correct that I surprise myself. (Other times, for example on late 2009 official CPI, not so much.)
So there I am, minding my own business skimming Tyler Cowen’s blog about Daniel Klein’s admission that libertarians can be just as biased when it comes to economics questions as he (Klein) and a co-author had declared a year ago in the Wall Street Journal about leftists.
The very first sentence Tyler quotes from Klein is this: “…under the right circumstances, conservatives and libertarians were as likely as anyone on the left to give wrong answers to economic questions.”
I immediately thought, “I bet you these ‘wrong answers’ depend on assumptions. Economics is such a joke at this point, in the hands of us ‘professionals,’ that you can squeeze any conclusion you want out of it. I bet what Klein labels as the ‘wrong’ answer could easily be made ‘correct’ with an understandable set of assumptions, that aren’t radically less plausible than whatever argument Klein has in mind for the obviously ‘correct’ answer.”
And holy cow, check out how Klein proves that his libertarian colleagues are stupid:
More than 30 percent of my libertarian compatriots (and more than 40 percent of conservatives), for instance, disagreed with the statement “A dollar means more to a poor person than it does to a rich person”—c’mon, people!—versus just 4 percent among progressives. Seventy-eight percent of libertarians believed gun-control laws fail to reduce people’s access to guns. Overall, on the nine new items, the respondents on the left did much better than the conservatives and libertarians. Some of the new questions challenge (or falsely reassure) conservative and not libertarian positions, and vice versa. Consistently, the more a statement challenged a group’s position, the worse the group did.
It’s the part I put in bold that stuns me. I went and checked Klein’s original article to make sure there wasn’t a typo, or that Tyler had unintentionally quoted him in a misleading way.
Nope, Klein says with no further comment “c’mon people!” to those who disagree that, “A dollar means more to a poor person than it does to a rich person.” And the well-read Tyler, who can give an impromptu lecture on von Neumann Morgenstern utility functions or the mating habits of Latvian beetles, didn’t have any comment on this.
So, on the off chance that neither Tyler nor Klein knows this, let me point out that some of us specifically use exactly this statement to teach undergrads the proper way to think about utility theory. As I thought every mainstream economist he cared about this stuff knew since at least Hicks (and of course the Austrians were into this earlier), there are serious philosophical problems with interpersonal utility comparisons. That’s why if you read a modern textbook, they will point out that preferences are ordinal rankings unique to individuals, and that we shouldn’t assign anything meaningful to the numbers popping out of utility functions. And if you need to come up with a “social welfare function” that aggregates everybody’s utility function, there are serious problems when using the weighting mechanism for just this reason.
I’m actually annoyed that more than 50 percent of the libertarian respondents agreed with the statement. It shows (to me) they never got a good lesson in the foundations of modern utility theory.
But of course, I’m not actually annoyed, because I understand that the people who agreed were thinking in the everyday, psychological sense of “means more.” They weren’t thinking in terms of formal economic theory, where such a statement is meaningless. It would be like if you asked a bunch of quantum physicists if they thought Jim’s cat (in the other room) were alive or dead or both, probably not 100% of them would say “both” even though that is the “correct” answer if you specify the question properly.
In the spirit of Klein’s question, I have a suggestion. On a future survey, Klein should ask, “Do you think it would be a bad idea to let Herman Cain chaperone Smurfette’s next slumber party?” Klein will be shocked at how many people put the wrong answer to this question. C’mon people, sexual harassment is a real issue! Don’t ignore it just because you are a conservative Republican!
The Comment Gremlins Strike Again
Folks, I really have no idea why this keeps happening. But, once again WordPress decided to lock all the comments of previous posts. I turned the default back to open, but it appears I have to manually unlock all previous posts.
I did it (I think) for the most recent ones, but if you wanted to comment on an older post, drop me a note in the comments here (assuming you are physically able to do so, which is 50/50 at this point).
Guest Post: Praising the Financial/Economic Punkosphere
[Frequent commenter James Miller submitted this to me a good two months ago, and I somehow managed to just post it today. But, he should appreciate my punky behavior.–RPM]
by James E. Miller
Last December, the New York Times ran a piece entitled “10 Annual Year in Ideas.” The number one idea on the list, right next to the never ending train, was the advent of “do it yourself” macroeconomics. Citing such websites as The Big Picture and Calculated Risk, the Times described this new past time as a break away from an industry normally dominated by academia:
“Until recently, the economics profession largely controlled the production, dissemination and interpretation of economic data. Now there’s a new trend afoot: do-it-yourself macroeconomics, in which ordinary citizens pull apart the data and come to their own conclusions.”
“At the same time, a growing army of knowledgeable “econo-bloggers” began analyzing the data available online. Strikingly, many of the authors of these blogs…aren’t academic economists but people with real-world experience in financial markets. Their Web sites offer sophisticated interpretations of economic data and hold passionate debates with their readers over the merits of the data.”
What the Times doesn’t acknowledge is the failure of most academic economists to foresee the financial crisis. This failure has provided an incentive to fill a void for those curious to contrarian points of views outside the mainstream. It’s funny how free and open markets work.
So with the economic establishment too inept and brainwashed to drop the Keynesian paradigm, someone needed to step up and offer a new perspective. Particularly a new perspective that doesn’t fall into the trap of believing prosperity comes from the printing press. And most importantly, this new viewpoint needed an attitude that only the fervor of bucking the establishment can bring.
What grew out of this much-needed change is a creature I dub the economic/financial punkosphere.
Case in point: a recent post on the financial blog Zerohedge highlighting a report from the Switzerland bank UBS titled “Euro Break Up – The Consequences.” Under the pseudonym of Tyler Durden, the author highlights the main points of the report:
“the Euro does not work. Either the current structure will have to change, or the current membership will have to change.”
“the consequences would include corporate default, recapitalization of the banking system and collapse of international trade.”
“It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war.”
In brilliant prose, Durden sums up the report:
“So you see: save the euro for the children, so we can avoid all out war (and UBS can continue to exist).”
Yet this isn’t the best part of the post. When it comes to Zerohedge, one of the best aspects of the site is the comments section which is uncensored. People posting under such names as “Sudden Debt” or “Dabernank,” complete with avatar pictures ranging from naked women to cartoon animation, shoot off enough snarky comments that any reader could spend the rest of the day enjoying each one. As for the mentioned article, this post from user “TruthInSunshine” (complete with an End the Fed avatar) in particular had me rolling:
“Who will play the roles of the European versions of Hank ‘Tank in the Streets’ Paulson, Ben ‘No Banker Haircuts’ Bernanke & Timmmay ‘I Want To Be A Player – Can I? Huh?
Please’ Geithner?”
This is precisely what encapsulates the financial/economic punkosphere. It is composed of a minority of like-minded individuals spontaneously coming together who reject conventional wisdom and aren’t beholden to academic tenure. In a global economic system defined by the collusion of government and large financial institutions, these bloggers and commentors try to make sense of the world while calling out idiocy whenever they deem fit. Keep in mind; the label “punk” is used as a term of endearment for its rebellious connotation and not an insult.
Many times, the criticisms they throw out are what make them incredibly popular. Take Mike “Mish” Shedlock, a self described deflationist, for example. Not only does Mish dish out plenty of insults at the incompetent and lying central bank establishment, he consistently does it in an informative and entertaining manner. From a recent post on Mish’s Global Economic Trend Analysis, he responds to a pathetic warning from Head and soon-to-be-Head of European Central Bank Jean-Claude Trichet and Mario Draghi and issues his own cautionary note to the central bankers:
Hello Mr. Trichet.
The odds 17 sovereign states “get their act together” quickly regarding a fiscal union is zero.
There is no agreement on Eurobonds even from Germany and France, so how are 17 countries supposed to quickly agree on that?
Finland and Austria want collateral, and pray tell why shouldn’t they? Is every country supposed to do exactly what you want?
Greece is going to default and you and your big ego made matters worse by refusing to accept that fact, so much so that you and the ECB failed to plan for it.
You want 17 countries to get their act together. How about one central bank, the ECB, led by you, get its act together and admit your policies have failed? How about the ECB coming up with a legitimate plan for dealing with it this crisis instead of illegally making demands on sovereign nations?
The market gave you fair warning on Greece and you refused to see it. Now the market has said “time’s up”.
Face the facts Mr. Trichet “The Euro has failed.”
Now of course Mish is right, but it’s doubtful Trichet or Draghi will read the warning or even take it seriously. It’s way too logical for either of them to take the time. But that’s beside the point; Mish’s blog provides an outlet to criticize the establishment as well as inform people on global economic trends all while maintaining a humorous composure. When it comes to the topsy-turvy world of fiat currency, it takes a great deal of humor to reconcile what will inevitably be a collapse of an unstable fractional reserve banking system.
In this spirit, I praise what has become the financial/economic punkosphere that consistently challenges the establishment. The internet has done wonders in the decentralization of information and knowledge. No longer do ivory tower academics hold all the sway when it comes to economics. Thanks to this new outlet of blogs, the Federal Reserve has never faced such scrutiny by the public in its almost century-long existence.
But don’t expect the establishment to take this new movement lying down. After all, the armchair positions within the higher arches of academia can be put at serious risk if the theories espoused on national television and taught to thousands of youngsters happen to be wrong. Recently Zerohedge had a kind of “war of words” with economist Nouriel Roubini who is, as John Tamny puts it, “still clinging to his 15 minutes after an economy call that he got right for all the wrong reasons.” Roubini still grasps to the Keynesian mindset which has ravished the economy and has made the act of saving a virtual sin with super low interest rates and a frightening concentration on the sacred benefits of consumption.
There is something to be said about an economic theory that punishes the savers who are the most unfit for labor, but I will leave that to the punks in the blogosphere who know best.
Other notable mentions of the financial/economic punkosphere include:
Robert P. Murphy- Murphy’s Free Advice blog is used to both engage and critique fellow economic commentators in an always jovial manner. Paul Krugman has yet to take him up on his debate challenge, thus proving he would rather let the downtrodden citizens of New York starve.
Robert Wenzel- Economic Policy Journal serves as an outlet to not just mock the financial/economic elites that be, but to offer data and policy analysis that is second to none.
James Altucher- I will let such posts as “Politics is a Scam- Why I Will Never Vote Again” and “Abolish the Presidency- It’s a Useless Job” from The Altucher Confidential speak for themselves.
And of course LewRockwell.com, the Ludwig von Mises Institute, and other blogs such as CafeHayek which provide plenty of ammunition for every anti-statist out there who tires of the mindless garbage that passes for the mainstream political thought.
Krugman the Modern Day Bastiat?? C’est ne pas!
(If my French is ungrammatical, I am coining a new phrase.)
David R. Henderson asked who today’s Bastiat is. People were throwing out obvious candidates like Thomas Sowell and Walter Williams, but Karl Smith kept arguing that it was clearly Paul Krugman. (BTW it was an honor just to be nominated, and don’t worry I’m not noiselull.) Here’s Smith:
The obvious answer is Paul Krugman.
The style is similar and tone is similar. They are both speaking against the currents of their day and they both write intelligibly for the lay person.
Indeed, in discussing Krugman’s abrasive style – which I find unfortunate – I have had to acknowledge that Bastiat also had an abrasive style and perhaps for that reason he is still celebrated today.
As much as I wish the world rewarded humility and grace, it does not.
Now people like Don Boudreaux (also in the running) disagreed for obvious reasons. How could Smith possibly say Krugman is today’s Bastiat, when Krugman is by no means a classical liberal, falls for the broken window fallacy, etc. etc.?
But that’s not really the part of Karl’s argument that bothered me the most. (After all, as Karl suggests, Krugman thinks he’s pointing to the unseen–it’s just Boudreaux and I would say it’s unseen because it’s nonexistent.)
No, I’m bothered the way Seinfeld said, “I’m offended as a comedian!” when his dentist becomes Jewish for the jokes. I think Landsburg, Horwitz, et al.–all the people nominated in the comments–look up to Bastiat as a model of how to dismantle an opponent with rhetorical pizazz. And I’m sorry Karl, I know a masterful put-down when I read it, and Krugman doesn’t have it.
I really don’t think I’m being biased here. I can acknowledge that Krugman could be very clever, witty, and funny; his paper (written in the late 1970s) on the economics of interstellar trade is a riot.
But alas, at least for the last decade Krugman has been quite simply a hack. To give a quick example, Krugman in 2005 (HT2 Yosef) devoted an op ed in the NYT–i.e. not some quick thing he fired off on a blog post–to the case for pulling troops out of Iraq, and why Bush officials should be held accountable for falsely leading the country into war. Has Krugman written ONE WORD about foreign policy under Obama? I don’t think so, and the reason is that he couldn’t possibly say anything that his progressive fans would like, so he keeps his mouth shut. Because Krugman isn’t even a progressive, he’s actually a Democrat (capital D).
Actually that’s not quite right. I think Krugman really is a progressive, and deep down agrees with Glenn Greenwald and Jon Stewart when they point out the many ways in which Obama is just as bad, or even worse, than Bush on foreign policy and civil liberties. But (I conjecture) Krugman has decided that we live in a second-best world, and if he criticizes Obama on anything besides falling for austerian talking points, then a Republican will win the White House and that’s no good for anybody (except oil companies and cancer doctors).
Another example, narcissistic yes but it beautifully illustrates what I mean. In my “sushi article” on capital theory, I had passages like this:
[O]ne day Paul Krugman washes onto the beach. After being revived, he surveys the humble economy and starts advising the islanders on how to raise their standard of living to American levels. He shows them the outboard motor (still full of gas) from his shipwreck, and they are intrigued. Being untrained in economics, they find his arguments irresistible and agree to follow his recommendations.
…(If the reader is curious, Krugman doesn’t work in sushi production. He spends his days in a hammock, penning essays that blame the islanders’ poverty on the stinginess of the coconut trees.)
For a few months, the islanders are convinced that the pale-faced Nobel laureate is a genius. Every day, 606 sushi rolls are produced, meaning that everyone (including Krugman) gets to eat 6 rolls per day, instead of the 5 rolls per day to which they had been accustomed….
But alas, eventually the reduction in boat and net maintenance begins to affect output…..The islanders continue to get 6 [sushi] rolls per day, but now each roll has less fish in it. The islanders are furious — except for those who are repulsed by the idea of ingesting raw fish.
…
The islanders are a bit concerned. When they first followed Krugman’s advice, their consumption jumped from 5 rolls to 6 per day. Then when things seemed to be all screwed up, Krugman managed to fix the worst of the discoordination, but still, consumption fell to 5.5 rolls per day. Krugman reminded them that 5.5 was better than 5. He finally got the crowd to disperse by talking about “Cobb-Douglas production functions” and drawing IS-LM curves in the sand.Because this is a family-friendly website, we will stop our story here. Needless to say, at some point the 5 islanders devoted to net and boat production will decide that they have to cut their losses….(We can only hope that Professor Krugman has been rescued by the Swedes by this time.)
So Krugman comments on the above by saying:
Someone, I don’t know who at this point, sent me to this post by Robert Murphy, which is the best exposition I’ve seen yet of the Austrian view that’s sweeping the GOP — and I mean that sincerely, never mind the puerile insults aimed at yours truly. As regular readers know, I’m a stylized-example kind of guy, and Austrians tend to prefer lots of words instead; but in this case Murphy does offer a little story that is, in a way, a counterpart to my story about the baby-sitting coop (although my story was based on an actual real-world example).
Now you might have thought I was mad about the economics, but no I didn’t care about that. I couldn’t believe Krugman characterized my jokes as “puerile insults.” How the heck can someone use “puerile” in the same ZIP code as a joke involving a Cobb-Douglas production function? “Geeky,” “eye-rolling,” “smug,” I’ll give you all those. But puerile?
But my reaction is like Jon Stewart taking offense that Donald Trump thought he was actually doing an impression of Herman Cain. No, Trump didn’t think that (and didn’t think Stewart was being racist). Just like Krugman didn’t really think I was throwing “puerile insults” at him. He just said that, because he can’t be too subtle with his readers. He is a man on a mission, and he has to keep them in line.
You think I’m reading too much into this? OK then why does Krugman say things like this?
From the op ed that made someone compare Krugman to Bastiat (and which prompted David R. Henderson’s blog post):
Let’s face it: a large part of our political class, including essentially the entire G.O.P., is deeply invested in an energy sector dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar.
So what you need to know is that nothing you hear from these people is true. Fracking is not a dream come true; solar is now cost-effective.
Or this line from a recent blog post, talking about conservative think tanks on the question of income inequality:
Look, let me make a public service announcement: if you rely on bought and paid for sources on income inequality, you’re going to embarrass yourself again and again. These people never get it right, because their whole reason for being is to obfuscate. You should never, ever, trust what they say on this issue.
And of course there was the infamous blog post (I’m not going to bother digging it up) where Krugman openly said that the right and left aren’t the same, that he doesn’t even bother reading right-wing blogs etc. because they have nothing interesting or intelligent to say (I’m paraphrasing but that was definitely the spirit of what he said).
Oh what the heck, this jumped out at me too when I was looking for the above posts. In this post Krugman is complaining about what hypocrites right-wingers are:
There’s a big difference between the left and the right in such matters, one that I don’t fully understand, although I’m trying. Here’s how it goes: if a liberal politician is caught behaving badly — enriching himself while preaching the need to help the poor, or just in general showing himself less than admirable by having an affair, visiting call girls, whatever — his career is over.
But if a conservative politician who preaches stern traditional morality is caught engaging in actions that are at odds with what he preaches — buying sex, taking wide stances in restrooms, or, in this case, stiffing his family even while preaching family values — he may well ride right through the scandal. Witness what’s going on now with Herman Cain.
Yeah, I can’t think of any liberal Democrats who ever had scandals involving call girls or cheating on their wives, whose political careers weren’t immediately over. I’m racking my brains here, but I’m coming up with nothing.
In contrast, here’s Bastiat zinging his opponents:
To the Honourable Members of the Chamber of Deputies.
Open letter to the French Parliament.
Gentlemen:
You are on the right track. You reject abstract theories and have little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is, to reserve the domestic market for domestic industry.We come to offer you a wonderful opportunity for your — what shall we call it? Your theory? No, nothing is more deceptive than theory. Your doctrine? Your system? Your principle? But you dislike doctrines, you have a horror of systems, as for principles, you deny that there are any in political economy; therefore we shall call it your practice — your practice without theory and without principle.
Surely you see the difference, Karl.
Last point: It occurs to me that Karl is more familiar with the collected writings of Bastiat than I am, and maybe he will point out that Bastiat was indeed a jerk to people (by name) in print. Two things:
(1) The very fact that I don’t know shows that this isn’t what Bastiat is remembered for. So maybe a hundred years from now people will look back on the babysitting co-op article. They won’t be looking back on Krugman’s posts on Paul Ryan.
(2) Even so, I’d like to see Bastiat’s biting remarks. I am going to go out on a limb and say they were far wittier and devastating than, “The thing you need to know is, these people are liars. Don’t believe them.”
Krugman Bask
Does anybody know of a Krugman quotation along the lines that we can’t trust politicians with Power X, because they will inevitably abuse it and not use it in the way the experts think is “optimal”? I don’t have a quotation in mind; I’m just wondering if he ever said anything like that. In particular, back when he used to champion free trade, did he ever say anything like, “Although theoretically there is an academic case for an ‘optimal tariff,’ in practice industries would clamor for protective tariffs that were far too high.” ?
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