Economics Principles Class Starts Next Week!
Hey kids, let’s get ready to leeeearn!
There are now about 90 people signed up, and the enrollments are flying in fast and furious. If you are an adult and don’t want to feel like you’re sitting at the kiddie table at Thanksgiving, don’t worry: There are several dozen adults (including my mom) who are taking the class. (I don’t have the exact breakdown handy, but it’s possible a majority of the students are adults.)
In case you don’t know what I am talking about, here is the article explaining the online class (which has its main lectures Wednesday nights).
Even if you aren’t going to take the class, I encourage you to download the free PDF of the my new principles textbook, Lessons for the Young Economist. Truly, I have gotten feedback from several people who claim that it is the best introduction to free-market economics they have ever read. (And no, I’m not even talking about my mom in that group of readers.)
Resistance Was Futile: I Joined Facebook
In high school I think I lasted until junior year before I started rolling up my pants like everyone else had been doing for years. I still maintain it was a dumb style, but everybody was doing it.
(Incidentally, in high school the correct answer to, “If everyone jumped off a bridge, would you?” is, “How high is this bridge, and are there girls there?”)
So as you can see, I resist trends. For some time now, I have been beating back the many people who have tried to drain even more of my productivity with their siren song of Facebook. Tonight I finally gave in. So friend-request away, or whatever it is you crazy kids are doing these days on the Intertubes.
Speaking of high school, I think this will be the sequence of reactions of most people who stumble upon my profile:
==> “Hey whaddya know, it’s Bob Murphy, the valedictorian.”
==> “Wow, I never would have guessed Bob Murphy would have this many friends.”
==> “What the hell? Who are these nutjobs? Did Bob start a cult or something?!”
Robert Wenzel Charmed By Christina Romer
Ah well, we always knew RW was a pushover. He writes:
WaPo’s Dana Bank reports on the remarkable departing words of the chairman of President Obama’s Council of Economic Advisers, Christina Romer. This is a must read as this honest lady lists the failures of the Keynesian economists in the White House…
Normally I think RW is far too harsh with the poor Keynesians–especially if they worked in the government–but here he’s actually being too nice. It’s true that Romer indicts the Obama economic policies, but only if you read between the lines. (I mean, look what she had to work with.) Here’s the kind of buck-passing fluff that Romer actually delivered (HT2 Arnold Kling):
It is clear that the Recovery Act has played a large role in the turnaround in GDP and employment. In a report that Jared Bernstein and I issued during the transition, we estimated that by the end of 2010, a stimulus package like the Recovery Act would raise real GDP by about 3½ percent and employment by about 3½ million jobs, relative to what otherwise would have occurred. As the Council of Economic Advisers has documented in a series of reports to Congress, there is widespread agreement that the Act is broadly on track to meet these milestones. The nonpartisan Congressional Budget Office, CEA’s own estimates, and estimates from a range of respected private sector analysts suggest that the Act has already raised employment by approximately two to three million jobs relative to what it otherwise would have been. These estimates are also consistent with the direct job-creation reports filed by a subset of recipients of Recovery Act funds.
And how does Dr. Romer handle the touchy problem of her team’s embarrassing unemployment projections? Watch this “honest lady” go to work:
What the Act hasn’t done is prevent unemployment from going above 8 percent, something else that Jared and I projected it would do. The reason that prediction was so far off is implicit in much of what I have been saying this afternoon. An estimate of what the economy will look like if a policy is adopted contains two components: a forecast of what would happen in the absence of the policy, and an estimate of the effect of the policy. As I’ve described, our estimates of the impact of the Recovery Act have proven quite accurate. But we, like virtually every other forecaster, failed to anticipate just how violent the recession would be in the absence of policy, and the degree to which the usual relationship between GDP and unemployment would break down.
By February 2009, before the Recovery Act was passed, unemployment was already over 8 percent; and by June, before the Recovery Act could have had much of an impact, it was 9½ percent. That is, our projection turned out to be wrong even before the Recovery Act had a chance to get off the ground, which is about as clear-cut evidence as one could imagine that the problem was in our assessment of the baseline, and not in the effects of the Act.
Now, the report was very clear that there was great deal of uncertainty about the no-policy baseline, and noted that some private forecasters anticipated unemployment as high as 11 percent in the absence of action. Yet the chart we presented did not show that uncertainty, and so allowed critics to take it out of context, and falsely claim that the spike in unemployment early in 2009 is somehow evidence that the Recovery Act didn’t work. [Bold added.]
That part I’ve put in bold is absurd. Suppose for the sake of argument that having politicians borrow and spend $800 billion is a BAD idea in the middle of an awful recession. Well, in that wacky wild world, when would the harmful effects kick in? Would it be when the borrowing and spending actually started?
Or, maybe employers would alter their hiring decisions once they learned the news?
Just to drive home the point, consider a ridiculous analogy. Suppose Obama announced on September 3 that starting January 2, the US military would begin bombing randomly selected houses that did NOT have energy-efficient insulation. When would we notice a change in the housing market? When would we notice an increase in orders of new insulation? Would it be on January 2, or more like September 3?
Some Disturbing Trends
In two previous posts, I linked first to this TV news report, and then this 4-minute-and-change NPR story. Something was screwy and people couldn’t leave comments. I have no idea why that was happening.
Anyway, I took down those posts because I kept getting emails saying The Man was on to me, shutting down my blog, etc.
Hopefully comments will work on this post.
Potpourri
* A great WSJ piece by Jerry O’Driscoll from mid-August, “The Fed Can’t Solve Our Economic Woes.” (I believe the effusive von Pepe sent it.)
* OK either Mario Rizzo and Jerry O’Driscoll are wrong, or I am. But in the comments here we can’t agree on supply curves and price movements. BTW, I am not “really” saying that those guys are idiots. What I’m saying is that we are arguing about something pretty basic, and yet, if you read each of our views in isolation–and if you were in a hurry–you would think each of us is right. Weird.
* Glenn Greenwald has another great post, this time on drone attacks in foreign countries. (Believe it or not, there’s more going on than the Almost Mosque in the Vicinity of Ground Zero controversy.) Here’s a good quote:
The illogic and propaganda driving this is so familiar because it’s what has been driving the American National Security State for the last decade. There is anti-Americanism and radicalism in Yemen; therefore, to solve that problem, we’re going to bomb them more with flying killer robots, because nothing helps reduce anti-American sentiments like slaughtering civilians and dropping cluster bombs from the sky.
* David R. Henderson’s new piece in the Freeman opens with this melancholy anecdote:
On a flight from Chicago to Washington, D.C., in 1981, I sat beside a U.S. foreign service officer who had just finished a stint in Moscow. He told me that although he had enjoyed the job, he needed to get his family back to America because he wanted his children to grow up understanding what it was like to live in a free country. His children were only aged five and seven. “In what ways would your children have even known they were not living in a free society?” I asked. He answered: “They noticed that when we traveled, we, and those around us, had to show an ID to a government official. You couldn’t travel freely.”
Get Your Red-Hot Original Zombie Scripts, Accept No Substitutes
OK in an effort to contain guffawing on the part of some readers, let me explain exactly how I got this idea: I was going to meet with a potential client and I wanted to take a notepad with me. But the first few pages had all kinds of weird stuff scribbled on it, so I began ripping the sheets out to reach a blank page.
Most of it was trash, but then I came upon the actual notes and script that I had written for myself, when Tom Woods and I filmed the masterpiece below.
I hesitated before throwing out the three sheets of paper. I mean, this was the actual script that contained such notables lines as, “Book.” And who could forget the first time hearing, “Neo-confederate!”? Ah, it still makes me chuckle.
On the other hand, it would be reckless for me to “save” this. I can’t currently locate things that were really important to me, like the journal submissions that Paul Samuelson marked up in disgust. (That’s not a joke; I really have those, floating around somewhere.)
The solution was obvious: I would auction the zombie script off, here on Free Advice!
To make this slightly less narcissistic, and slightly more educational, let’s make it a teaching moment on game theory: Rather than do a standard first-price auction, we’ll do a second-price auction. So in the comments, go ahead and throw out your bid. The high bidder wins the script, BUT, you only pay the second-highest bid.
So for example, if Joe bids highest at $1,000, while Mary is second highest at $850, then Joe PayPals me (or sends me a check) for $850 and I mail him the script. (Actual bidding results may vary. Past results are no guarantee of future performance.)
The rationale for this is that, in theory, you should be willing to bid your actual reservation price. I.e. this is supposed to take the strategic element out of it. You bid as much as you’d be willing to pay. If you run through the scenarios, you would never regret having bid your actual cutoff price, and in some scenarios you would be glad that you didn’t bid lower than the actual value. This is why it’s “weakly dominant” to bid your actual reservation price.
(Technically, I’m not sure if that still holds up in an environment like this, where we have sequential bidding. You can prove the above result pretty fast in a model where everyone bids once in secret. But what the heck, let’s give it a go. Maybe I’ll get a joint paper with Vernon Smith out of this, in addition to my $850.)
OK so here are the ground rules:
1) You can bid as many times as you want; that may be half the fun for 4 of you.
2) You are on your honor to not be a jerk to everyone else. Don’t bid unless you are serious; otherwise if you win and then back out, it screws it up for everybody who is being serious.
3) I will mail you the script in the USPS’s Priority mail envelope, so it doesn’t get bent. The pages are not folded. The 2nd page was not a perfect tear out of the pad (the top is a little jagged), but other than that the pages are in good condition. Your bid price includes all s&h.
4) The auction will close on Thursday, September 2, at 12pm EDT. So at that time, we’ll look through the comments on this post and see what the top two bids are, and determine the winner.
5) You can PayPal me or mail me a check. Upon receipt I go to the Post Office.
The Problem With School Vouchers
In his laudatory review of Jacob Huebert’s new primer on libertarianism, David Gordon quotes this:
The independent schools would not be killed off by genuine market competition; they would be killed off by government privileges [i.e., approval by the government to receive voucher payments] to some schools — those willing to accept government control — and not others. A program that would do this cannot be called libertarian. (p. 126)
Unfortunately, a lot of “right-wingers” and even self-described libertarians think that the free-market position on government schools is to introduce vouchers. In their rhetoric, they claim that this will end the public school monopoly, return competition to the industry, give parents a choice, etc. And of course, the free-market guru Milton Friedman himself pioneered the idea, so who could doubt its libertarian bona fides?
But hold on a second. Let’s apply the rhetoric to other areas. “Hey, I think we should give real choice to American families! Everybody should get a voucher, paid for by taxpayers, to spend up to $10,000 on a new automobile. This will give poorer families a real choice, and the competition will spur car producers to offer new options in an effort to capture those voucher revenues.”
Obviously no free-market person would support such a plan; it would represent an unjust wealth redistribution among the population, and it would wreck the car industry. The government would have to continually revise its detailed regulations governing eligibility for the program, lest some shady people set up a scam whereby they would sell cardboard “automobiles” to a voucher recipient, and then split the $10,000 afterwards.
The same is true with formal schooling. If we started from an initial, free market in the “school industry”–with no mandatory attendance laws, no government funds, and no government interference with curriculum–then the voucher idea would smack of pseudo-socialism. It would horrify Tea Party people as much as ObamaCare.
Of course, the big problem is that the government ALREADY intervenes so heavily in the area of formal schooling. That’s why the voucher position seems to be a move back towards liberty.
But is it really? As Huebert notes, the widespread introduction of vouchers could very well destroy what’s left of the independent, private schools. The government would have to establish criteria for which schools were eligible for the vouchers, and which weren’t: Taxpayers would be outraged if Joe Blow set up a “school” where he just popped in DVDs all day, and collected checks from the government.
It’s true, the government currently intervenes in numerous ways with what private schools can do. But the government would have far more leverage if it could make its requirements tied to cash disbursements, as opposed to imposing blanket regulations. For example, if the government simply declared, “It is illegal to mention ‘Intelligent Design’ in the classroom,” there would be an outcry in certain areas of the country. But if the government said, “We will not give taxpayer assistance to any schools mentioning Intelligent Design,” then the opposition would not be as strong.
However, as more and more private schools succumbed to the temptation to accept voucher-funded students, the government’s stranglehold on curriculum would expand. In the beginning, there might be temporary improvements in standardized test scores and other criteria, for all the reasons that voucher proponents cite.
But another immediate impact would be a huge increase in the demand for education tax dollars. Parents who currently send their kids to private schools (or homeschool) would apply for the vouchers. Thus the government would be paying for kids in “public” schools, but also in private. Property taxes would have to go up.
In the end, when everything had settled down, the government would extract a lot more out of taxpayers than it does now. And the difference between government and private schools would have been eroded even further. The government would have effectively taken over all formal schooling.
It is understandable that parents in many areas of the country are disgusted with their government-run schools, and look to vouchers as a “free-market” solution. But this is a grave mistake. The only way to truly fix schooling is to get government out of it altogether.
Robert P. Murphy has a PhD in economics from New York University. He has a new book [.pdf] on principles of economics aimed at junior high school students, available for free download. His online course using this book begins September 8.
Venus Needs Some Austrians
I explain at Mises.org. The “Venus Project” is a utopian (not using that term pejoratively) vision of a world free from scarcity. I agree that our world could be fantastically more productive than it current is, such that a casual observer might describe it as “post-scarcity.” Still, the people involved with this project blame everything on private property and money:
Our present world is manifestly unjust. In addition to wars and genocides, there are also pockets of shocking poverty that could be quickly eradicated if only the right social institutions were in place.
Those championing the Resource-Based Economy recoil in horror from our present world, and understandably so. Yet because they have obviously not studied Austrian economics, they have misdiagnosed the problem.
Abolishing money will not solve the world’s problems, because money is an indispensable tool to aid in economic calculation. Rather, the way to raise the material standard of living around the world is to foster a universal respect for property rights.
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