Lessons for the Young Economist, now on Betamax
The women who edit the books at the Mises Institute want me to stress that this is the BETA version, but here is the PDF of my forthcoming principles textbook, Lessons for the Young Economist. I am really happy with the way this turned out.
Even though it’s aimed at junior high kids, glance through it and I think you may pick up some useful lessons yourself. In particular, check out the chapter on Drug Prohibition. I think you may have this reaction.
And of course, if you know someone–including yourself–who would want to listen to me for ten weeks walking through (some of) this book, then act now.
Brad DeLong’s Methodology
Yes, I am using that word correctly. I am here talking about DeLong’s views on method. So remember kids, if you’re giving a job market talk, don’t say, “In this paper my methodology was to regress unemployment against Glenn Beck’s ratings.” If I am on the hiring committee, you’re done for. (Of course, I won’t be on the hiring committee, so it’s a moot point.)
Anyway, Mario Rizzo tips us off to this amazing statement by DeLong:
One of the embarrassing dirty little secrets of economics is that there is no such thing as economic theory properly so-called. There is simply no set of foundational bedrock principles on which one can base calculations that illuminate situations in the real world. Biologists know that every cell runs off instructions for protein synthesis encoded in its DNA. Chemists start with what the Heisenberg and Pauli principles plus the three-dimensionality of space tell us about stable electron configurations. Physicists start with the four fundamental forces of nature. Economists have none of that. The “economic principles” underpinning their theories are a fraud–not bedrock truths but mere knobs twiddled and tunes so that th right conclusions come out of the analysis.What are the “right” conclusions? It depends on what type of economist you are, for three are two types. One type chooses, for non-economic and non-scientific reasons, a political stance and a political set of allies, and twiddles and tunes their assumptions until they come out with conclusions that please their allies and their stance. The other type takes the carcass of history, throws it into the pot, turns up the heat, and boils it down, hoping that the bones and the skeleton that emerge will teach lessons and suggest principles that will be useful to voters, bureaucrats, and politicians as they try to guide our civilization as it slouches toward utopia. (You will not be surprised to learn that I think that only this second kind of economist has any use at all.)
I feel utterly vindicated. For a few years now, when people ask me, “Are these Keynesians stupid or evil?” I say, “No, I think it’s that they don’t believe in economic law. So they aren’t lying in their minds. They can go to sleep at night because they think, ‘For all we know, my policy prescriptions just might work. Those free market guys can’t be sure they’re right either. This is just a big game we play with the public.'”
Now I had guys like Krugman in mind when crafting such responses; I really do think Krugman is clever enough to realize he can justify any policy response he wants, by making some ad hoc assumptions about political feasibility and then whipping up a two-period model.
But DeLong explicitly admits that he doesn’t believe there are economic laws. Very refreshing.
I Have No Idea What This Means, But I Love It
At the LRC blog I saw this automatically-generated quote from Mises’ Socialism:
“In his life and his reading he remained so far removed from the facts of economic life that he was as great a stranger to the work of the bourgeoisie as a Hottentot to the work of an explorer taking geographical measurements.”
I don’t know which person Mises was criticizing here, and I don’t know what a Hottentot is, but I bet this isn’t flattery.
Hayek on Firing Line
Bob Roddis came to the Night of Clarity earlier this month and hand-delivered some audio clips of Hayek. In this one he talks about Keynes with William F. Buckley. (It’s 4:44 long.)
I think this clip made the rounds on the blogosphere before, but apparently the links are all dead. So Bob wanted me to re-post it.
Believing Is Seeing: Brad DeLong on the Depression
I thought Brad DeLong’s reaction to a Greg Mankiw piece was so perfect, I used it in my talk today on the Great Depression at Mises University. Here’s DeLong (HT2 Krugman I think):
Mankiw’s broader point is that since we have seen nothing like this before except for the Great Depression, we should be humble and risk averse–and hence have the government stand back and wash its hands of the situation.
However, even a minor and hasty acquaintance with the Great Depression teaches that the belief that the government should stand back and wash its hands because the self-regulating market quickly returns to full-employment equilibrium is the most arrogant belief possible.
And even a minor and hasty acquaintance with the Great Depression teaches that having the government stand back and wash its hands is the most risky strategy conceivable.
This is simply fascinating. DeLong has convinced himself that the government stood back and did nothing during the 1930s, and that’s why the world was stuck in the Great Depression for a decade.
Even if Hoover really were the liquidationist that DeLong (erroneously) believes him to be, that still would leave open the question: Why did the Great Depression occur under the laissez-faire Hoover, but not under the laissez-faire [insert the name of every earlier US president]?
In other words, the Keynesians can argue that Hoover did “too little, too late,” but it’s a bit much for DeLong to say that the brute facts shout out the failure of laissez-faire in the 1930s.
If the standard Keynesian theory were correct, then obviously DeLong is right and Mankiw is wrong. But of course, Mankiw’s whole point is that maybe the standard Keynesian view is wrong, and that we need to exercise some humility before saying, “Welp, obviously we need more stimulus, because the patient is still sick!”
Let’s keep in mind that the pro-austerity forces have numerous examples on their side. (I’ll post on this separately either today or tomorrow.) Krugman et al. are forced into going through and explaining away all the cases where (a) austerity led to economic growth and (b) big government deficit spending led to economic stagnation.
On the flip side, the Keynesians have no real example of deficit spending leading to a healthy economy. On the contrary, they point to awful economies (like US from 1935-1937 1934-1936 or in 2009) as examples of “near misses” where things would have been even worse–so they assure us–if Calvin Coolidge had been in charge.
And then, in the face of this huge imbalance in the empirical record, and in the face of the obvious craziness of Keynesian theory–“just have the politicians spend money on anything at all, that will make us richer”–DeLong thinks only a fool could doubt the Keynesian prescriptions.
Believing really is seeing.
(No doubt I do the same thing with respect to my free-market worldview. It’s still fun to point it out in DeLong’s case.)
“Minnesota Government Mistreats Ladies”
…thus the provocative, Internet-ish title of my recent Mises Daily:
Recently the Minnesota Department of Human Rights — a funny title in itself — declared that the practice of “ladies’ night” was illegal gender discrimination. Apparently, five establishments in the Twin Cities area were denying men “full and equal enjoyment” of their services because they charged women lower cover and drink prices.
Besides the unjust (and absurd) violation of private-property rights, the Minnesota government’s harassment of businesses will end up hurting female and male customers. The practice of price discrimination — charging different customers different prices even for the “same” good or service — is economically beneficial.
Krugman vs. Sumner
It would be nice if at least one of them struck a fatal blow…
I am at Mises U and they’ve got me working my tail off this year [.pdf]; I give a lecture every day except Saturday I think. And tomorrow morning’s 9am lecture is a brand new one for me (on banking), so I have to prepare for that.
Thus, I will not be able to deal with the response-demanding posts from Krugman over the last few days, until later in the week at best. In the meantime, here is Krugman’s thinly-veiled critique of Scott Sumner, and here is Scott’s response.
Reading Krugman vs. Sumner reminds me of the trailer for the movie Predator vs. Alien. The big-voice announcer said, “No matter who wins, we lose.”
Summer Seminars for Students
Tomorrow I am headed down to Auburn for Mises University. Will there be amazing instruction in core Austrian economics? Of course. Will there be amazing karaoke performances in classic rock? Perhaps so.
Also, the Independent Institute is holding their summer seminar in August. I am not involved with their event, but if Oakland, CA is closer to you than Auburn, AL, you might consider it.
BTW, here is a pretty neat video if you have never been to Mises U:
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