28 Sep 2015

Trolling, Trolling, Trolling Down the River

David R. Henderson, Gene Callahan, Scott Sumner 69 Comments

Largely because I’m technologically impaired, I don’t follow a large number of blogs. So even if I zing a certain blogger regularly, he should feel flattered. In that light, I offer the following two items:

==> I was mostly being a smart aleck when I pointed out that Scott Sumner was being Krugman-esque when he seemed to be saying that the Fed’s pivotal September rate decision would be a “natural experiment,” except when things didn’t play out the way Scott would have predicted. I figured Scott would either ignore me or say something like, “*sigh* OK Bob, I didn’t phrase that right, what I meant was…” and we would move on with our lives.

But look at the exchange between Scott and others who jumped into the fray, including David R. Henderson. Scott kept digging himself deeper. At one point he wrote: “David, Yes, I meant it’s a natural experiment who’s outcome is hard to read. I thought we’d get a clear reading, but we didn’t. So it’s as if there was no experiment at all. The test tube was accidentally dropped on the floor, before we could get a clear reading of the contents.

Yikes! Scott agreed with David’s paraphrase of what Scott could have been trying to say, but then went totally off the rails. Vivian Darkbloom smelled blood in the water and pounced:

“The test tube was accidentally dropped on the floor, before we could get a clear reading of the contents.”

That’s not it at all. The contents of the test tube, i.e., the record of the stock market movements, is very clear. The fact that you don’t know what conclusions to draw from the contents of that test tube doesn’t mean the contents are unknown because the test tube was dropped. Science shouldn’t disregard test results simply because they don’t go the way one originally predicted. This isn’t a case of a dropped test tube; it appears to be a case of throwing the contents of the test tube out after the experiment was conducted It is not as if there was no experiment.

Now to be sure, I’m not saying Scott Sumner’s ill-advised handling of this challenge to an offhand remark on his blog post destroys the case for NGDP targeting. Indeed, I continue to be impressed with how much traction the idea is gaining, when seven years ago nobody knew what NGDP even was. All I’m saying is, keep your eye on that Sumner fellow.

==> In more lighthearted news, try this fun trick. First–and the order is important–read this Gene Callahan post. Second, read this one.

69 Responses to “Trolling, Trolling, Trolling Down the River”

  1. Major.Freedom says:

    I chuckled at the two Callahan posts.

    He should rename his blog

    La Due Bocca della di mezza Verita.

    ———————–

    Maybe one day he’ll realize he’s as hardcore as Rothbard. Absolutely convinced no ifs and or buts that distributionism as prosperity inducing is still an empirical question, and anyone who disagrees is a dogmatic anarcho-capitslist ideologue who deserves ridicule.

    So tolerant of other’s people preferences for their own property!

  2. E. Harding says:

    You don’t follow a very large number of blogs?!?!? What’s wrong with you, Bob? Here’s the OPML file of the blogs I read; use it with any RSS reader:

    https://drive.google.com/file/d/0B8ZCCfC0yMSObDlvMXh0ZlRVSGc/view

    • Z says:

      Bob only used to follow Osama bin Laden’s blog until Obama zapped him in Abbotabad. OBL used to offer free goodies to his subscribers. He was big into Austrian economics, especially the gold standard.

      • E. Harding says:

        As Gary North pointed out, OBL had a copy of The Best Enemy Money Can Buy, documenting cooperation between the USSR and the US, to which Gary North wrote the introduction. About the highway that allowed the USSR to invade Afghanistan in 1979.

      • Anonymous says:

        Now that’s funny.

  3. aby says:

    Do interventionist publish studies that show a negative correlation of economic freedom and economic growth?

  4. Dan W. says:

    NGDPLT is gaining steam because no other monetary solutions are working. Since 1982 inflation and interest rates have been in decline. But interest rates can’t easily go negative. Well they can but then the bankers get really upset as people can make more money putting cash in their mattress!

    So the “juice” from ever decreasing interest rates is gone and without this stimulus the economy has slowed. The monetarists want more juice, but how, and to what end? For without persistent artificial stimulation and without a structural change in the economy everyone knows all arrows point back to zero.

    I tend to agree with John Cochrane. Let’s learn to live with zero and fix structural and fiscal deficiencies to get the growth we desire.

    • RPLong says:

      “I tend to agree with John Cochrane. Let’s learn to live with zero and fix structural and fiscal deficiencies to get the growth we desire.”

      Yup.

    • Levi Russell says:

      So are you saying that the Fed’s actions over the last 7 years haven’t driven rates lower?

      I propose an experiment: Tell the Fed to completely unwind it’s balance sheet over the next 18 months. Do you think rates will change?

      http://research.stlouisfed.org/fred2/graph/?g=1Wpz

  5. Daniel Kuehn says:

    You’re Gene posts are good, but limited. So Gene mocks Rothbard, fine. But do you think Gene would say “therefore you should ignore what Rothbard wrote rather than evaluate it?”. I kind of doubt it, and if he does say “ignore Rothbard” it’s because he’s evaluated him and found him lacking.

    Pointing out advocacy in itself is not an argument against an idea, but that does not mean that advocacy driven research is a good approach.

  6. Rick Hull says:

    Ultimately, I think Bob is showcasing how difficult it is to overcome bias, even for an advanced practitioner like Callahan. It’s a reminder of how sophistry remains effective and blinding, and how important it is for intellectuals to resist the siren call. In my mind, it’s a point in favor of Rogerian argument, steel- rather than straw-manning, and other humble techniques from the OvercomingBias and LessWrong crowds.

    I think judging intellectual culture has gotten easier with the “humble heuristic”.

  7. ThomasL says:

    I get the supposed irony of Gene’s posts, but it has its own errors. The implication is something like: “It is a fallacy to disregard what someone says because of their motivation for saying it, therefore there is no such thing as propaganda.”

    Umm, no.

    The thing to judge (as best one can) regarding motivation is whether the person is interested in the truth. St Thomas Aquinas was admirably fair to all objections, always engaging his opponents best arguments, not their worst, and meticulously answering each one. The love of truth is at the center of everything he wrote.

    The propagandist only interest is to make you see things certain way. He has no relationship to the truth. He may tell the truth, but only because it “works”, not because it is the truth. He’d tell a lie just as easily. He says whatever he needs to say to get the result he wants.

    Both types of people exist in this world, and because time is short, we do have to judge them. Arguing with the propagandist is pointless, but arguing with a man that wants to find the truth may well be profitable to both of you. You might just find it.

    • ThomasL says:

      Judge between them, that is.

    • tomepats says:

      I think we all likely fall short of St Thomas Aquinas, so how would you make that judgment about motivation? According to Callahan, Rothbard would fall under your ‘propagandist’ label but do you really think Rothbard did not seek the truth?

      Besides that, the implication is not that there is no such thing as propaganda. It’s that dismissing an argument because it is propaganda has no bearing on it’s truthfulness. Propaganda might have bad motivations but that doesn’t mean it can’t be right and someone that loves truth should address the argument from the propagandist rather than dismissing it.

      • ThomasL says:

        I can’t speak about Rothbard with and definiteness. I have read very little of his work. However, I’d assume the best until I had strong reason to believe otherwise.

        I think in the specific case of propaganda, I would almost say more “resisted” than addressed.

        It is is curious thing about the propagandist that since he doesn’t care about the truth of what he says, he can hurl a thousand statements out for every one you spend time analyzing and refuting.

        Reality has its way of crashing in eventually, but in the short term, a propagandist has the upper hand since he doesn’t care particularly about the truth or falsity of any particular thing that he says. He has moved on to saying something else completely by the time you show how he was wrong a minute ago.

        There is good reason to believe, from statements by the man himself, that some of Keynes work fell in this category.

  8. Gene Callahan says:

    The thing is Bob, you have to read the two posts a little more carefully, and you will see there isn’t even any tension between them, let alone contradiction.

    In the first post, I note you can’t refute Aquinas by citing his motivation.

    In the second post, I was not refuting the Freedom Index. We know Singapore is highly interventionist. The question I was asked was, “Well, GIVEN that Singapore is highly interventionist, how could the Freedom Index have ranked them 3?” (Or 4, or whatever they were.)

    You see, if we *evaluated* Aquinas’s argument for X, and saw it was terrible, we might *explain* how he got it so wrong by saying, “Well, he was trying to uphold Catholic doctrine. That would be perfectly valid.

    So you’ve mistaken *refutation* of an argument for *explanation* of why it, having been proven wrong, wound up wrong.

    • Major.Freedom says:

      Swing and a miss.

      “This is why Rothbard would only tolerate “hardcore” libertarians: those were the ones who had completely stopped asking genuine research questions, and whose “research program” had become, “How can I advance anarcho-capitalism?”

      There you are “citing” Rothbard’s “motivations”, and that’s funny because if we connect that to the other post, where you said citing motivations should not be considered a refutation, there is a total and complete absence of any intellectual engagements that refute Rothbard’s writings in your attacks against his writings.

      Your attacks on Rothbard’s character far exceed substantive criticisms. In other words, the two posts are funny when put together because you do to Rothbard what you said the other guy does to Aquinas.

      On, and one more thing. What you call “genuine research” is in fact nothing more than a narrow band of questions permitted by hardcore, dogmatic, absolutism against anarcho-capitalism, which is faked out by paying lip service to the proper position being to “test” both it and your brand of socialism, but then always conveniently concluding that laissez-faire ought not be “genuinely researched”, because according to you the motivations of the Heritage Index researchers are sufficient:

      “It is a piece of propaganda, intended to demonstrate a pre-existing conclusion: more laissez-faire == more prosperity.”

      Hahahaha, geez, it’s still funny reading that hilarity a second time.

    • Bob Murphy says:

      Gene wrote:

      In the second post, I was not refuting the Freedom Index. We know Singapore is highly interventionist. The question I was asked was, “Well, GIVEN that Singapore is highly interventionist, how could the Freedom Index have ranked them 3?” (Or 4, or whatever they were.)

      Gene, I agree that in light of your clarification, there is not obviously a contradiction.

      In my defense, though, in the actual post you had the person asking you, “Well, if the Singapore government is so interventionist, why do they rank near the top of the Index of Economic Freedom?”

      …in which case, my OP makes perfect sense.

      (Note that the word “GIVEN” upon which you place so much weight–you capitalized it–was something you altered after the fact. I’m not saying you did it consciously, but it totally alters the meaning of your post. The way you actually wrote your post, it sounded like the guy you were arguing with was NOT agreeing with you that Singapore was interventionist, compared to other countries. But you didn’t explain to him what specifically was wrong with the ranking, and why your own criteria were superior, it sounded like you merely pointed out the motivations of the people making the ranking and thought that was sufficient. I.e. exactly what the other guy did to you regarding Aristotle.)

      • Gene Callahan says:

        Yes, I agree the original post was not as clear as it could have been. But I have seen very convincing analysis of Singapore’s economy that demonstrate very high levels of intervention, e.g., the government owns something like 80% of the housing stock, and owns shares in almost every major export company. So it was not that he agreed with me, he was saying, “How could this possibly be the case, when Singapore ranks so high in the Freedom Index?”

        So I was not trying to make the case that Singapore has an interventionist economy, I was trying to explain why, given that they do, they could score so high in the Freedom Index.

        • Gene Callahan says:

          But, I totally comprehend why, given I did not express myself clearly, you saw a contradiction!

        • Bob Murphy says:

          Gene OK great, and I didn’t know about Singapore owning all the houses etc. Of course, in one respect, the US government owns a lot of the US housing stock (Fannie Mae and Freddie Mac etc.).

          Also, I still think the EFW guys tried to come up with an objective measurement. Obviously their goal in doing so was to show the wonders of freedom, but I don’t think they did things like say, “Shoot, if we include % of housing ownership, Singapore will look bad, and they have big growth numbers. So let’s not include that metric.”

          • Harold says:

            The requirement for double blind trials in medecine reveals that it is impossible to remove these biases from our consideration. Even those trying to be impartial end up re-inforcing thier biases.

  9. Gene Callahan says:

    As Daniel notes, just because we can differentiate advocacy and research doesn’t mean we can ignore advocacy.

    Marx was engaged in advocacy. But while doing so, he had many brilliant insights we should not ignore, even if we reject his overall conclusion.

    • RPLong says:

      Care to provide an abbreviated list of brilliant insights that originated from Marx?

      • Major.Freedom says:

        It gives Callahan an excuse to put above zero value on his own anti-capitalist political ideology that has religious overtones.

        If Marx’s premises, arguments and conclusions were all bad, that would be one less influential thinker for Callahan to prostitute.

      • Anonymous says:

        Marx’s takedown of Say and explanation of the role of money in recessions is very good.

      • Gene Callahan says:

        Alienation: excellent! Most modern workers are quite definitely alienated from their product.

        The increasing immiseration of the workers: Marx and Engels made it very clear that they meant the social gulf between the lowest workers and the elite would keep widening, not that the workers would become poorer in absolute terms. And so it has.

        The importance of the current technology to the social structure: Engels late on admits they had over-stressed this, and came off as technological determinists. But, he says, this was only because earlier writers had unduly neglected this factor. And so they had: since Marx and Engels, few are likely to do so.

        Those are three huge contributions to our understanding of society: I could go on, but this should illustrate what I mean.

        • RPLong says:

          Did these ideas truly originate with Marx? I am skeptical in particular of examples 1 and 2.

          #3 is one I just simply disagree with. No one during Marx’s time could possibly have underestimated the importance of the industrial revolution going on at that time.

        • guest says:

          “Marx and Engels made it very clear that they meant the social gulf between the lowest workers and the elite would keep widening, not that the workers would become poorer in absolute terms.”

          =Envy. Which is a personal problem, rather than a market failure.

          It is impossible for a consumer to buy from every producer at once, and it would be cost-prohibitive to do so.

          What logically follows from this is that *specific* individuals have the capacity to supply *specific* consumers the goods they want at the price they want.

          This is why those who best serve the consumer get rich on the free market, while others don’t.

          I.e., “wealth inequality” that has resulted from voluntary exchanges is the most efficient way to allocate scarce resources.

          (Aside: Scarcity is always a function of consumer demand. So concepts such as “sustainable development” completely misses the point, which is that only voluntary exchanges are sustainable.)

          Also, if someone doesn’t have the means to produce for many (economies of scale), or for multiple industries, then why would they be entitled to the wealth that’s created among the buyers and sellers who trade with each other?

        • Major.Freedom says:

          “Alienation: excellent! Most modern workers are quite definitely alienated from their product.”

          On no! I am unable and/or unwilling to accept a car that I help produce as my income.

          Metal does taste good, and I cannot wait the 6 months it takes from raw material to finished product.

          I feel so…alienated from what I am helping to produce purposefully for others.

          In fact, by alienation Marx did not have in mind workers not earning income in what they happen to help in producing for the market. His conception of alienation was far more cosmic, more ontological. He had in mind the schism between subjectivity and objectivity that is most painfully acute in a division of labor, in capitalism, which is supposed to be overcome in communism. He viewed “man” as estranged and alienated…from himself, until communism.

          His attacks against other socialists who viewed alienation as solvable through worker coops, illustrates that the main problem for Marx was not workers not owning the capital. That problem was secondary. The main problem for Marx was the division of labor itself. That the true humanity in everyone would have us all experts in everything, dabbling in whatever suits our whims on a given day, but never being locked in producing only cars day in and day out, even if every production was cooperative and worker controlled.

          Strike number 1.

          “The increasing immiseration of the workers: Marx and Engels made it very clear that they meant the social gulf between the lowest workers and the elite would keep widening, not that the workers would become poorer in absolute terms. And so it has.”

          Incorrect. Marx made it very clear that he referred to absolute worker poverty, not “relative” poverty. He definitely did not predict that capitalism would see workers owning 10 yachts and 5 mansions while the capitalists owned 100 yachts and 50 mansions. He wrote very extensively on the “iron law of wages” in capitalism, in which wages allegedly were forced down by capitalists to “minimum subsistence”, and that should wages ever rise above that for whatever reason, that ” the iron law” would win and workers would again have their incomes decreased to minimum subsistence while everything else, the surplus value, goes to the capitalists.

          The notion of “relative” impoverishment was only reluctantly conceded by Marx as a temporary phenomenon, but would inevitably be consistent with absolute poverty, but it was Marx’s followers and his “interpreters” who then deftly changed Marxism from its actual absolute impoverishment prediction, to relative impoverishment as the empirical data contradicted what Marx predicted.

          That interpretation is what you shaky memory is telling you what “Marx and Enge!s were very clear” about.

          Strike number 2.

          “The importance of the current technology to the social structure: Engels late on admits they had over-stressed this, and came off as technological determinists. But, he says, this was only because earlier writers had unduly neglected this factor. And so they had: since Marx and Engels, few are likely to do so.”

          Meh, the Luddites already wrote most of Marx referred to anyway.

          OK, you get a fielder’s choice.

          “Those are three huge contributions to our understanding of society: I could go on, but this should illustrate what I mean.”

          No no no do please “go on.” What you originally called “brilliant” seems to be a redefinition of that word. Curious to know how else the anti-capitalist thinker was brilliant.

      • Gene Callahan says:

        And M & E proposed a completely utopian, unworkable solution to the problems they saw. That is why I said I reject their overall conclusion. But that shouldn’t stop us from recognizing Marx was a genius, albeit a twisted genius.

        • Major.Freedom says:

          Yes, unworkable since their utopia didn’t have a state.

      • Gene Callahan says:

        And finally, I will point anyone interested to the free-market economist Thomas Sowell’s book _Marxism_: it was Sowell, not any Marxist, who first made me appreciate how bright Marx was.

        • Major.Freedom says:

          Read Kolakowski’s three volume “Main Currents of Marxism” if you want to see the best book on Marx’s thought.

      • LK says:

        “Care to provide an abbreviated list of brilliant insights that originated from Marx?”

        Useful insights in Marx:

        (1) the use of a proto-effective demand theory by Marx;
        (2) Marx’s rejection of Say’s law;
        (3) the notion of a monetary production economy (also developed as a theory of Keynes); and
        (4) the need for a conflict theory of the distribution of income.

        However, there are many deeply rotten and false things in Marx. The labour theory of value is rotten to the core:

        http://socialdemocracy21stcentury.blogspot.com/p/eventually-i-will-write-full-series-of.html

        Marx was also a die-hard metallist in his monetary theory, so has more in common with libertarian metallists than Keynesians on that point:

        http://socialdemocracy21stcentury.blogspot.com/2015/06/marx-on-necessity-of-money-being.html

        • RPLong says:

          Correct me if I’m wrong, but I think we are supposed to blame Ricardo for the labor theory of value, not Marx, right?

          I’m puzzled by your inclusion of (4), Why is this a “need?”

          (2) and (3) seem especially important to Keynesians, which is perhaps an amount of daylight too broad to reach me, but I take your point, even if it strikes me a bit as the Keynesian equivalent of the Austrian “fiduciary money” vs. “money substitue” thing.

          I’d love to hear more about (1), if you’re willing to expound.

          • Major.Freedom says:

            Bingo. Ricardo was the main contributor of the
            LTV, although the general idea had been around for a long time prior.

        • Major.Freedom says:

          (1) Proto-effective demand? Oh you mean the general belief that capitalism would choke in on itself if not for some radical revolution against capitalism, which you in your anti-capitalist Keynesianism finds affinity for?

          (2) Explain how a fallacy filled “rejection” of anything constitutes a useful insight. In fact, explain how any “rejection” constitutes a useful insight. No, “Because I agree with his conclusion” doesn’t count.

          (3) How is “the notion” of an economy that every economist before and after Marx understands, is a “useful insight”?

          (4) Ah yes, the need for an intellectual cover for envy and resentment. There is no conflict without anti-market types introducing it.

          What the heck does ” Die hard Metallist” even mean? Bah, your post was worse than Callahan’s

  10. Tel says:

    The difference between research and propaganda is how well backed up it is with source data, and how consistently the same standards have been applied. Presumably the Heritage index is in question here:

    http://www.heritage.org/index/country/singapore

    Singapore is a nominally democratic state that has been ruled by the People’s Action Party (PAP) since independence in 1965. The PAP won 81 out of 87 seats in the legislature in the May 2011 elections, although its percentage of the vote (just over 60 percent) was the lowest in history. The opposition won another seat in 2013 during a special election. Certain civil liberties, such as freedom of assembly and freedom of speech, remain restricted, but the PAP has embraced economic liberalization and international trade. Singapore is one of the world’s most prosperous nations. Its economy is dominated by services, but the country is also a major manufacturer of electronics and chemicals.

    They admit that political freedom is limited in Singapore, but this is not an index of political freedom, nor is it a statement on gay marriage, nor an index on whether you would like peanuts with that. It is economic freedom, and they break it down into four major items, then ten sub-items and they explain how they work through each of those.

    If you want more information you click “ABOUT THIS INDEX” at the top and you get some questions answered:

    Q.3. How do you measure economic freedom?

    We measure economic freedom based on 10 quantitative and qualitative factors, grouped into four broad categories, or pillars, of economic freedom:

    Rule of Law (property rights, freedom from corruption);
    Limited Government (fiscal freedom, government spending);
    Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and
    Open Markets (trade freedom, investment freedom, financial freedom).

    Each of the ten economic freedoms within these categories is graded on a scale of 0 to 100. A country’s overall score is derived by averaging these ten economic freedoms, with equal weight being given to each. More information on the grading and methodology can be found in the appendix.

    Then if you want more details of the methodology, you click the “Downloads” link and there is a methodology link.

    • Gene Callahan says:

      “The difference between research and propaganda is how well backed up it is with source data, and how consistently the same standards have been applied.”

      And no: the difference is whether one is really seeking for answer, or one already knows the answer and is just trying to demonstrate it. The difference between “let me found out if” and “let me try to demonstrate that”!

      • Tel says:

        Logical truth springs from intentionality?

        Hmmm, that seems to undermine the whole idea of logic as far as I’m concerned. I can just imagine Pythagoras waving his sum of squares geometry and some other Greek saying, “Well, it looks OK, but you were probably thinking about that cute priestess of Diana when you wrote this, so I’m going to mark it false.”

        You don’t find too many physicists basing empirical results on intentionality, “You know, the gravity only works while you want it to work, if you believe hard enough you can fly “ Yeah, I wanna see those mind-over-matter demonstrations. Until I’ve seen it myself, I’ll stick with a belief in an objective universe, admittedly something we only get subjective glimpses at.

        • Gene Callahan says:

          Who said anything about logical truth?! (Besides you.)

          First of all, research would be about empirical, not logical, truth.

          Secondly, people genuinely doing research can and do get things wrong. And people doing advocacy can and do get things right.

          And the difference is one of intentions!

          • Major.Freedom says:

            No it isn’t, it is of scientific rigor.

            Intentions and bias and prejudice are not in any way a problem for establishing any theory as right or wrong.

            A scientists who is convinced Jews are the evil of the world, and spends every day trying to develop an atomic weapon to destroy whole cities of Jews, will be scientifically wrong or right based on their science, and their ideology does not heighten or lessen the scientific qualtiy of their work.

            • Harold says:

              In this case their intention about the bomb is a pursuit of the truth. They genuinely want to make an effective bomb. They are not propopgandists w.r.t. that science.

              If they want to (scientifically )demonstrate that Jews are the evil in the world, instead of finding out if Jews are the evil in the world, then they have departed from pursuit of truth and become a propogandist.

              If it turns out that they were correct in their original assumption, then thye may produce a valid piece of work as they will not have to depart from the pursuit of truth to justify their conclusion. If they are wrong, then they will produce a flawed piece of work, since they will have to depart from the truth to demonstrate their conclusion.

              So only an honest quest for truth is guranteed to end up with valid conclusions. Propoganda may or may not do so.

              • Tel says:

                They genuinely want to make an effective bomb. They are not propopgandists w.r.t. that science.

                Maybe they thought they were making a clock?

                We can’t entirely rule out that possibility.

          • RPLong says:

            “First of all, research would be about empirical, not logical, truth.”

            One example of this I can think of is how the stock market was once correlated to the length of popular skirts. Empirically true, but logically nonsense. Why should research embrace this kind of claim?

            Okay, I admit it: that’s a rhetorical question, but it’s an illustrative one.

        • Gene Callahan says:

          Think of it this way, Tel: There is a difference between investigating a murder and trying to pin a murder on someone.

          But in the first case, you still might get the wrong person, and in the second, you just may have hit upon the right person!

  11. Tel says:

    If you don’t like the Heritage index, there are lots of others. All of the economic related ones rate Singapore very highly, so I guess they must all be propaganda? Right??

    http://globaledge.msu.edu/countries/singapore/indices

    Where Singapore bombs out is pretty much what you would expect: their freedom of the press is not good.

    Singapore got a bad rank in “Global Services Location Index”… and I had to look that up, because I’d never heard of that one:

    A.T. Kearney’s Global Services Location Index™ (GSLI) offers a snapshot for business leaders who must choose among a growing number of offshore locations, and the policymakers who seek to influence their decisions. Established in 2004, the GSLI analyzes and ranks the top 50 countries worldwide as the best destinations for providing outsourcing activities, including IT services and support, contact centers and back-office support.

    Hmmm, interesting, I would have thought Singapore was pretty strong in IT services, support, contact centers, and back office support. Maybe they priced themselves out of that market. Checking elsewhere I found components of that index (these are 2011 numbers):

    Financial Attractiveness
    India: 3.11
    Malaysia: 2.78
    Singapore: 1.00

    People Skills & Availability
    India: 2.76
    Malaysia: 1.38
    Singapore: 1.66

    Business Environment
    India: 1.14
    Malaysia: 1.83
    Singapore: 2.40

    Which is what I guessed, Singapore is considered too expensive, although that’s probably a reflection of their success in other areas, and the price signal could be trying to tell us about Ricardo’s comparative advantage here. At any rate, I think places like India and Malaysia won’t remain cheap labour forever… a sign of a mature market is that you get what you pay for.

    • Harold says:

      “a sign of a mature market is that you get what you pay for.”
      So is a sign of an immature market that you get more than you pay for?

      • Tel says:

        No, in an immature market you have a strong risk factor, you may get various things. This is the whole entrepreneurial aspect… the new business may consume a lot of capital an then flop (e.g. Solynrda) or it may become astoundingly successful (e.g. the early days of Google, although personally I think they have peaked, but certainly they have some creditable success to boast about).

        In a market like motor vehicles for example, it’s a fairly tight grouping because both consumers and producers have a well established understanding. Pick a given class of vehicles around a given price range and they are almost indistinguishable from each other.

  12. Tel says:

    http://freedombarometer.org/asia.45.html?country_id=8&year=2014

    Here’s yet another index site. Basically they rate Singapore poorly in political freedom, highly in economic freedom and moderate in rule of law. I think that’s exactly what you would expect, I think most people you ask from around the region would give a broadly similar appraisal (except people from Singapore itself who would politely decline to talk about politics of course).

    • Gene Callahan says:

      Tel, they all seem to ignore the huge role the Singaporean government plays in its nation’s economy.

      Also: “However, as there is no need to reinvent the wheel, we use the data of existing indices and combine them in a new way.”

      So this is not an independent measure!

      • Gene Callahan says:

        Look, if you want to define “economically free” as “low tariffs and low taxes, even though the government owns the vast majority of the housing stock, shares in almost every major company, and sets industrial policy,” you are free to do so. But I hope you don’t mind me noting that this is not exactly a laissez-faire economy!

        • Tel says:

          Gene, if you can’t trust the governments of the world, who can you trust? Ultimately the majority of economic statistics come from governments describing themselves. Well we know there’s an incentive to idealize that description just a touch (China GDP anyone?)

          Presumably you are talking about GIC Private Limited and Temasek Holdings, which are not strictly speaking owned by government. They are owned by future pension claimants.

          The way it works is that government imposes a compulsory pension contribution on all workers, and then government becomes the trustee of this pension money; feeding it into investment and holding companies which operate (so it is claimed) at arm’s length from any political process. Those holding companies are not supposed to have an active executive role in managing the companies they own shares in, so (in theory) it is arm’s length squared.

          Government forcing citizens to make savings is of course increasing the size of government, but many governments do it (including the US with Social Security and Australia with compulsory Superannuation). Singapore is not magical in this regard, although the details are different. Yes, details are important, but a worldwide index cannot absorb itself into such things too much, else it will no longer be any sort of index at all. There are certainly rumours going around about the Lee family and those big pension funds, just like there are rumours going around about the Australian unions management of the industry Super funds. You can’t build the index on rumours though, if you are worried about objective research you can only work on facts, not hints.

          On the Heritage methodology page, unfortunately they don’t explain whether compulsory pension contributions are regarded as taxation for purpose of the index. I would say, yes for sure. Trying to pretend that compulsory contributions are anything other than a tax is a sad scam, as far as I’m concerned, but you know the OECD is happy to support that scam. My understanding is that the World Bank just regard it as tax, therefore increasing the size of government. Heritage mention IMF, World Bank and OECD as their sources… maybe worth asking about their position on that.

    • Gene Callahan says:

      “The Singapore government adopted an interventionist approach to develop its economy, while the Hong Kong government followed the laissez-faire principle.” — http://olemiss.edu/courses/pol387/lam00.pdf

      This is widespread knowledge, not some quirky view of mine.

      • Tel says:

        Gene, from your link (my emphasis):

        Entering the 1980s, the Singapore government encouraged industrial diversification from manufacturing into Financial and professional services in order to develop the city into a total business centre (Tan, 1996, p. 10). Singapore entered a brief period of recession in the First half of the 1980s as a result of high wages caused by over-regulation, high company tax rate, rising statutory charges, and a high CPF contribution rate (Fong and Low, 1996, p. 400).

        The government responded to the economic downturn by recognizing certain adverse effects of excessive intervention and by introducing a number of corrective measures in 1986. Since then, the government has adopted a number of policies to reduce its direct involvement in the economy and has switched to a new emphasis of managing the economy through partnership with business and labour. The Government of Singapore Investment Corporation (GIC), formed in
        1981, invested heavily in the private sector (Luckett et al., 1994, pp. 126±127; Sikorski, 1989). These changes contributed to productivity increases and a 30% drop in production costs. By 1988, the economy rebounded (Sullivan, 1991, p. 127) and, entering the 1990s, Singapore has been aiming to surpass Hong Kong as an international centre of Finance and business headquarters.

        So the Heritage index starts in 1995 and the events described above all happened 10 years before Heritage even started calculating their index. The heavy handed Singaporean government intervention (described elsewhere in the same article) was back in the 1960’s and 70’s. I mean really, you expect the Heritage index to include a component of time travelling? And if their time travel is not adequate then we dismiss the whole thing as “propaganda” ?!? Because real research is all about not being biased. Yeah right.

        I’ll also point out that nearly every year (after 1995) Hong Kong beats Singapore on the Heritage index, so they are correctly documenting that Hong Kong has greater economic freedom. The index is designed to capture a span right down to North Korea and Zimbabwe… but you quibble about the top two rankings to say they aren’t exactly the correct distance apart or something.

        I’ll also point out that the Heritage index remains solidly consistent right over that span which includes pretty much every country on Earth, other than a few where it’s impossible to get statistics. You saying they jiggered the whole scale top-to-bottom? It’s all a load of “propaganda” and really North Korea is a pretty cool place to do business?

  13. Innocent says:

    Well since economics is based in how people trade with one another you sort of have politics involved at that point as the rules people to create to initiate trade and subsequently tax one another involve politics.

    I do not view economics as free from politics. It is an attempt to explain human behavior in either micro or macro context.

    Change the way people behave and you change the way an economy grows or expands.

    Why is the US economy not growing like it did in the 1950’s? Because people, technology, needs, wants, etc and so on have ALL CHANGED. This is social, political, educational and technological.

    There is no ‘right’ method of economic thought because everyone has different ‘goals’ for the economy.

    • Tel says:

      I agree there’s no “right method” but we can find concepts such as “freedom” which may not be 100% precisely pinned down, but we have a reasonable idea about what is free and what is not free. This concept spans cultures and spans economic systems so it gives you something to work with as a measurement.

      A certain group of people may not want to be free, they may love getting told what to do all the time… fair enough I suppose, but that doesn’t cause freedom as a concept to go away.

  14. guest says:

    “There is no ‘right’ method of economic thought because everyone has different ‘goals’ for the economy.”

    That is a notion that is subsumed under Methodological Individualism:

    [Time stamped]
    Austrian Economics and the Business Cycle | Robert P. Murphy
    https://www.youtube.com/watch?v=hkDYsRDah3I#t=3m23s

  15. Major.Freedom says:

    I feel bad for Murphy.

    He made a passing reference to the labor theory of value, which unfortunately was a core theory of Marx, who has unfortunately been heavily read by LK in recent months, which means LK just had to post a ton of drivel here to prove his newfound misunderstanding of yet another body of work.

    So the thread got totally sidetracked and a mess was made.

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