22 Nov 2017

How to Beam Factories to Mars

Economics, Krugman 4 Comments

I give some practical instruction in this piece. An excerpt:

Now suppose that the Martians finally get their wifi routers working, and they are shocked to discover intelligent life on the nearby blue planet. After figuring out how to communicate and consummate financial transactions, an amazing thing happens: Massive amounts of financial capital from human investors start pouring into the Martian economy. The human investors are amazed at the real interest rates of 100% available on the red planet, and rearrange their portfolios accordingly. This pushes down the market rate of interest on Mars, and pulls up the market rate of interest on Earth, until the Martian interest rate — due account being made for the riskiness of the investments — is comparable to the yield on terrestrial assets.

Yet to answer Krugman, we need to be more specific about how this process occurs physically. Well, in the extreme example I’ve constructed, we can imagine that the huge Earth economy swamps the Martian economy. So what happens in the first year is that all trade goes one-way. Specifically, anything that can be imported from Earth is imported from Earth. This includes database and cloud hosting, CPA services, math tutoring, and website design. Any work that can be done by Earthlings and then beamed to Mars, will be performed.

Yet as Krugman says, this may only account for, at most, 2% of the Martian economy. Even so, consider the impact. The Martian workers who used to maintain databases and perform CPA services, will now be freed up to do other jobs. Indeed, Martian workers and industries will be reshuffled so that they now devote 2% more of their economic output to the production of machines, tools, and other equipment.

22 Nov 2017

The Lara-Murphy Show Episode 45: The GOP Tax Plans, Theory & History

Lara-Murphy Show 18 Comments

In the latest episode I first walk through the standard theory of tax reform, explaining why different types of taxes have different impacts on behavior. (I make it clear that I’m not endorsing any of these taxes–as they are all coercive–but am just trying to get people to see the logic driving the “mainstream” discussion.)

Then Carlos and I discuss the House and Senate tax bills. I end up agreeing (somewhat) with the Democrats who complain they are targeted for the rich. (Not that there’s anything wrong with that per se, but the flip side–that other people’s taxes go up–is the problem.)

19 Nov 2017

Did God Forsake Jesus on the Cross?

Religious 5 Comments

This is the account Matthew gives of Jesus’ death on the cross:

45 From noon until three in the afternoon darkness came over all the land. 46 About three in the afternoon Jesus cried out in a loud voice, “Eli, Eli, lema sabachthani?” (which means “My God, my God, why have you forsaken me?”).[d]

47 When some of those standing there heard this, they said, “He’s calling Elijah.”

48 Immediately one of them ran and got a sponge. He filled it with wine vinegar, put it on a staff, and offered it to Jesus to drink. 49 The rest said, “Now leave him alone. Let’s see if Elijah comes to save him.”

50 And when Jesus had cried out again in a loud voice, he gave up his spirit.

Jesus’ question is a quotation from Psalm 22, which opens like this:

My God, my God, why have you forsaken me?
Why are you so far from saving me,
so far from my cries of anguish?
2 My God, I cry out by day, but you do not answer,
by night, but I find no rest.[b]
3 Yet you are enthroned as the Holy One;
you are the one Israel praises.
4 In you our ancestors put their trust;
they trusted and you delivered them.
5 To you they cried out and were saved;
in you they trusted and were not put to shame.
6 But I am a worm and not a man,
scorned by everyone, despised by the people.
7 All who see me mock me;
they hurl insults, shaking their heads.
8 “He trusts in the Lord,” they say,
“let the Lord rescue him.
Let him deliver him,
since he delights in him.”

It is obvious that this passage in Psalms anticipates the gospel accounts of Jesus, and so you can see why Christians would find the connection so striking.

Now normally, Christian preachers deal gingerly with this subject, because it sounds crazy that God would abandon His Son right when at the moment of maximum vulnerability. And yet, prima facie that certainly seems like what happened?

Indeed, here’s how Billy Graham tries to answer the problem. (And I just googled and grabbed his link, since he’s obviously not a strawman. His view is standard.)

What did [Jesus] mean by [saying] this? Was He suddenly filled with doubt, wondering if He had misunderstood the mission God had given Him? Or was He filled with despair, concluding He was a failure and all His work was in vain? After all (some have said), the crowds had turned against Him, and seemingly His ministry had come to an abrupt end.

But in reality His words point to something far different. They point to the fact that when Jesus died on the cross, all our sins—without exception—were transferred to Him. He was without sin, for He was God in human flesh. But as He died all our sins were placed on Him, and He became the final and complete sacrifice for our sins. And in that moment He was banished from the presence of God, for sin cannot exist in God’s presence. His cry speaks of this truth; He endured the separation from God that you and I deserve.

To take a more intuitive approach, some of you may recall in a previous post here at Free Advice–and if any of you can help me locate it, that would be swell–I tried to come to grips with it by making an analogy. I said that if, under some insane set of circumstances, my son volunteered to let himself be hurt by other people because this was “the right thing to do” and would make the best of a bad situation, that even if I somehow agreed to this plan, even so I couldn’t possibly WATCH it. (To reiterate, I am not saying I could imagine endorsing such a plan. I’m just focusing here on the part about agreeing to it intellectually versus actually WATCHING it.)

And so, I argued that maybe something like that was happening here, where God effectively “turns His back” on His Son, not out of rejection or distance but actually out of parental love, because He literally can’t watch while piddly evil men murder a moral giant.

Well, now I’ve heard another take on the whole affair that is quite fascinating. An intriguing Christian sent me this sermon by John Crowder. Especially if you’re a studious Christian and you are familiar with the “standard” take I’ve summarized above, I strongly encourage you to check out this sermon. I should warn you, at times you might worry that Crowder is too flippant and/or irreverent, but try to put aside your reaction to his style and focus instead on his arguments. I think you’ll see that Crowder anticipates your objections and at least does a decent job responding to each of them, by quoting Scripture.

In a nutshell, here are some elements of his case:

==> God did NOT forsake Jesus on the cross.

==> God is a better parent than you are. Would you forsake your son in his moment of despair and agony? Of course not. So God didn’t do it to His Son, either, since–we all agree–God is a better parent than you are.

==> God didn’t abandon us in our sin. Rather, we pushed God away. The distance between you and God caused by your sin is something that you impose.

==> Jesus, like David, was crying out with a question, because in His humanity Jesus was empathizing with us, in how it sometimes feels as if “God doesn’t care about me since He let this awful thing happen.” But just because someone asks, “God, why have you abandoned me?” doesn’t mean God actually did it.

==> Jesus was not asking that question out of the blue; it’s not like He just randomly said that same thing David had written. No, Jesus was deliberately quoting David, knowing that the devout Jews in the crowd would *recognize* that He was quoting from Psalms.

==> Don’t just stop at the opening lines of the Psalm. Keep going, and look at the part in bold. Are you telling me that we’re supposed to conclude, “God abandoned Jesus on the cross”?

16 Dogs surround me,
a pack of villains encircles me;
they pierce[e] my hands and my feet.
17 All my bones are on display;
people stare and gloat over me.
18 They divide my clothes among them
and cast lots for my garment.
19 But you, Lord, do not be far from me.
You are my strength; come quickly to help me.
20 Deliver me from the sword,
my precious life from the power of the dogs.
21 Rescue me from the mouth of the lions;
save me from the horns of the wild oxen.
22 I will declare your name to my people;
in the assembly I will praise you.
23 You who fear the Lord, praise him!
All you descendants of Jacob, honor him!
Revere him, all you descendants of Israel!
24 For he has not despised or scorned
the suffering of the afflicted one;
he has not hidden his face from him
but has listened to his cry for help.

==> As I mentioned above, there are plenty of objections one might have, including portions from Paul that seem to support the standard view. Crowder tries to answer them. My point here isn’t to tell you, “You’re thinking about this all wrong!” Rather, I’m just trying to show that it’s far more nuanced than you may have originally believed, and the gushers of the Father’s love and mercy should engulf you.

18 Nov 2017

Krugman, the Slippery One

Krugman 3 Comments

As the man who coined the term “Krugman Kontradiction,” I am familiar with how the Nobelist can write misleading things without technically stating a falsehood.

And yet, for a few moments I was scratching my head over a statement Krugman made in his latest op ed. While excoriating the Senate version of the tax plan–and by the way, I am sympathetic to Krugman’s overall take on it, believe it or not–Krugman wrote:

So in an attempt to limit that deficit blowout, Senate Republicans are proposing significant tax increases on working families. In fact, according to Congress’s own Joint Committee on Taxation, taxes would rise on average for every group with incomes under $75,000 a year, and would surely rise for many families even in higher-income groups. The only significant winners would be those making more than $1 million a year. Populism!

Yikes! That seems pretty crazy, doesn’t it?

The weird thing is, if you click the link and go look at the JCT analysis, it doesn’t seem to support Krugman’s claim at all. It was only after scrolling through the whole thing did I realize the trick.

Here is the breakdown of the JCT analysis, over the ten-year horizon of the Senate proposal:

==> In the year 2019, the bill would reduce federal income taxes (on average) for every single income group listed.

==> In the year 2021, the bill would reduce federal income taxes for every group except those making between $10,000 and $30,000. In particular, those making less than $10,000, and those making from $30,000 to $75,000, would see their taxes reduced.

==> In 2023, the groups making $30,000 and above get taxes cut.

==> In 2025, the groups making $30,000 and above get taxes cut.

==> In 2027, the groups making $75,000 and above get taxes cut.

Now, to be sure, I see the big picture of what Krugman is getting at here. Certainly for political, supply-side, and moral reasons, if I had the task of “design a tax change that will reduce revenues on a static basis by $1.5 trillion over ten years,” this is NOT what I would have produced.

Even so, Krugman’s description is wildly misleading. He’s leaving out what happens to most groups during the first 9 years of the analysis–which only has a ten-year horizon–and stating the result at Year 10, after a bunch of the broad-based tax cuts are phased out. Regular readers of Krugman would understandably think that their taxes were going up right away, rather than, “I will see a tax cut for several years–perhaps 9–and then a hike.”

18 Nov 2017

Potpourri

Potpourri 1 Comment

==> Just to give you a heads’ up, I have a post in the pipeline to come out at Mises.org, riffing off this Krugman blog about Martians trading with Earthlings. So if you want to read his post to get your imagination chugging, it might make my post (which will run next week, I presume) easier for you to digest.

==> An interesting David Stockman post on the young foreign policy advisor to the Trump team that is in trouble with the FBI. (The punchline: Stockman doesn’t think this in any way justifies the “Russia tainted our election!” claims.)

==> I’m not usually a big fan of her Bloomberg columns, but I liked Megan McArdle’s recent appearance on EconTalk to discuss internet shaming and online mobs.

17 Nov 2017

Jordan Peterson on Harry Potter, Jung, Rom Coms, You Name It

Jordan Peterson No Comments

As I’ve said before, it’s a shame that the pronoun controversy has overshadowed his academic perspective (though it obviously gave him a bigger platform). If you’ve wondered why everyone fanbois over JP so much, this is a great sample. It’s 20 minutes taken from one of his college lectures. I for one would not have skipped this class as a student.

15 Nov 2017

Murphy Twin Spin

Climate Change, Contra Krugman 68 Comments

==> Here’s the latest Contra Krugman, where we talk about corporate tax cuts and Krugman’s Kontradictions.

==> In this IER post, I come up with a car analogy to try to motivate deadweight loss, and give intuition for why a carbon tax–even if revenue-neutral–would reduce conventional economic growth. (To be sure, that by itself doesn’t mean it’s bad, but it *does* blow up the narrative being pushed in certain quarters.) An excerpt:

Suppose the government wants more revenue, and so decides to levy a $1,000 tax on every new car sold in America. Analysts come up with estimates that the new tax will raise such-and-such billion dollars in new receipts for the Treasury.

Now further suppose that someone suggests tweaking the plan. “Look,” the guy says, “right now red cars constitute 20% of the overall market. So instead of levying a $1,000 tax on all cars, we can achieve the same outcome if we instead levy a $5,000 tax just on red cars.”

This is a very bad suggestion, from the point of view of textbook tax analysis. Most obvious, it seems arbitrary and unfair. Why should people who like red cars have to pay a $5,000 tax, when the people who prefer silver cars or brown cars get to pay nothing?

But beyond the arbitrariness and unfairness, there is the problem that with a narrow car tax—which only targets 20% of the market—consumers will adjust their behavior. People who originally planned on buying a red car might instead buy a silver car, and thereby avoid the $5,000 tax.

Because many people will respond this way, it means that the government won’t raise the same amount of revenue from the two possible approaches. If the tax is going to be concentrated just on red cars, then it will have to be made higher—maybe $6,000—to account for the fact that the proportion of red cars in the overall market will shrink, due to the tax. This of course only increases the unfairness of the burden that is being placed on the shoulders of red car enthusiasts.

Yet it gets worse. When the dust settles, there is a permanent loss to society from this onerous tax on red cars. Specifically, there are a lot of people—perhaps millions of them—who were induced to drive a non-red car, even though they would have preferred a red car in the absence of the new tax. So these people are definitely worse off; they’re driving a car with a color they don’t really like.

Unfortunately, there is no corresponding gain to anyone in society from their unhappiness. Remember, these particular drivers aren’t paying any tax; they switched to a non-red car in order to avoid the tax. So the government isn’t gaining any revenue from them, and their unhappiness (at having to drive a non-red car) is a pure loss. Economists refer to this type of outcome as deadweight loss. It is the drag on the economy—the missing out of “win-win” market exchanges—due to inefficient taxation.

13 Nov 2017

This Is What It Looks Like When Scientists Don’t Understand Something

Economics, Physics 19 Comments

Tyler Cowen linked to this Nature article, which I find unintentionally hilarious. The first sentence alone is magnificent: “Physicists are growing ever more frustrated in their hunt for dark matter — the massive but hard-to-detect substance that is thought to comprise 85% of the material Universe.”

I beseech you, please do not lecture me in the comments about how much more physicists know about cosmology than economists know about economic growth. I am not disputing that. (Here’s an earlier post I did on this stuff.) You would be hard-pressed to find someone on social media who mocks economists more than me. (Latest example: For a long time I didn’t know exactly what “total factor productivity” was supposed to be, but now I realize it means, “The portion of output that economists can’t explain.”)