04 Oct 2010

Murphy Twin Spin

Economics, Financial Economics, Shameless Self-Promotion 12 Comments

(We also would have accepted, “Murphy Double Play.”)

Sometimes life can get you down. Your kids are misbehaving, your car breaks down, you throw your back out, you root for the Buffalo Bills….

But then, every once in a while, a Monday rolls along featuring new Murphy articles in two different venues. And somehow, you find the strength to keep on going.

Today at Mises.org, I pick apart Alan Blinder’s high- and low-brow defenses of the Obama stimulus.

Over at EconLog, I have the article of the month–which is sort of like being the Employee of the Month, except I didn’t have to be courteous to anyone. An excerpt:

Despite its importance, the stock market remains a bit of a mystery, even to many otherwise staunch champions of the free market. People who have no problem defending the actions of advertising executives or payday lenders, often fall short of defending the stock speculator or “corporate raider.” Yet these popular villains actually perform vital services, and government policies against “hostile takeovers” actually make us poorer.

12 Responses to “Murphy Twin Spin”

  1. Silas Barta says:

    Not a criticism but I was a bit surprised that your stock market article didn’t make the point in your Privatized Banking book about, “yes, speculation has a purpose, and yes, buying stock can increase total investment, but the stock market probably isn’t the kind of investing the average person should do with their savings, even through index funds”.

    I guess that would be too far outside the scope?

    • bobmurphy says:

      I can’t remember if that even occurred to me to mention, but even if it had, I probably wouldn’t have put it in because of space constraints. The EconLib articles are supposed to be pretty well documented / defended in their assertions, and I don’t think I could’ve just had a throw-away remark like, “Of course, none of this is to suggest that people should equate mutual funds as safe places to put their money” etc.

  2. Silas Barta says:

    Oh, and about your Blinder criticism: I know there’s not much to add beyond “wow, how what a stupid argument on Blinder’s part”. But it’s things like this that really sap out my hope for the world.

    He’s highly respected, and now, lauded for his “brilliant” “empirical” analysis of the stimulus, despite the fact that the model is completely insensitive to the empirical data. It says nothing after that it couldn’t say before.

    I’m far from infallible myself, but I can’t imagine myself making that kind of error (in calling that analysis “empirically driven”). Am I somehow smarter than the top economists? Is the whole econ field just a case of “the blind leading the blind”? Could Blinder make money from his area of expertise if he weren’t, in various ways, propped up by the government?

    • bobmurphy says:

      I’m not sure, Silas. Just to be clear, there was some empirical dial-setting after the fact. But I’m pretty sure that was just to get his “simulated” path of the economy to perfectly match what in fact happened. Yet the underlying issue–whether the economy would have been stronger or weaker in the alternate timeline, without the stimulus and TARP–was embedded in the model all along.

      In fact, now that I type that out, it’s obvious. How could we possibly empirically test whether TARP worked? We can only see what happened.

      I do think a lot of really smart people are masters of technique and can’t take a step back and see the big picture.

      • Silas Barta says:

        In fact, now that I type that out, it’s obvious. How could we possibly empirically test whether TARP worked? We can only see what happened.

        Well, you can have a model, connected to various other well-understood areas, which has testable implications *other* than TARP, and then see what it has to say about what the world would look like on a “TARP success” vs. a “TARP failure”. Such a model would have sensitivity to the data.

        (This is not too different from the way that you can know whether photons spontaneously vanish when they leave our light cone, even though it is physically impossible to check on it.)

        But Blinder does even worse — pretending data sensitivity and “empirical analysis” where there is none.

        I do think a lot of really smart people are masters of technique and can’t take a step back and see the big picture.

        That frustrates me too — an academic field shouldn’t let something like this happen; it should imbue an understanding on practitioners that keeps them connected to the big picture so they have *something* to alert them when they go astray. Instead, econ (and probably climate science) is basically set up so that it encourages information cascades — where theories become self-reinforcing no matter how disconnected from reality they are.

  3. Yancey Ward says:

    Well, as long as EconLog doesn’t have articles of the month written by an inanimate carbon rod, then that is nice.

  4. Yancey Ward says:

    And, as for being a Bills fan, all I can do is point out that, at one time, it was worse to be a Broncos fan.

  5. newson says:

    talking of “spin”, how come the obituary on sobran has been pulled? is this the work of the same lobby that had him effectively removed from public discourse? i’ve got to say how pusillanimous the freedom movement looks when political correctness is the target, and not government. maybe i’m being uncharitable and it’s only a technical glitch.

    here’s my favourite tribute to the man so far, though of i’d also like to read bob murphy’s piece.

    • bobmurphy says:

      Are you talking about my obituary? If it’s pulled I have no idea. I can check if you confirm that’s what you’re talking about.

    • bobmurphy says:

      Hang on, what do you mean? I had a quick little blurb that said “Joseph Sobran, RIP.” And I had a few sentences. Is that what you’re talking about? If it’s gone, I have no idea why.

  6. newson says:

    your blurb ends mid-sentence:

    “Sobran used to be a conservative who wrote for […]”

    naturally, i looked for the end of the obituary, but it has no continuation.