Potpourri
==> This is the feel-good story of the week. (I have particular interest in this one, because the heroine of this tale is good friends with some of my libertarian activist buddies. So it is neat to see her being Internet celebrity for a while.) Of course, this poor guy must now be terrified. He is expected to show up at a party with 100+ attractive women and he has no idea what to do. I’m being serious; this would be like if those goofy guys making YouTube videos asking models to go to prom with them actually got “yes” for an answer. Worst thing that could happen.
==> Alex Tabarrok discusses the Ferguson report.
==> Somehow this came up during a conversation I had with Tom Woods. It suddenly made sense of my life:
The Symphony No. 8 in F Major, Op. 93 is a symphony in four movements composed by Ludwig van Beethoven in 1812…. When asked by his pupil Carl Czerny why the Eighth was less popular than the Seventh, Beethoven is said to have replied, “because the Eighth is so much better.”
==> At Mises CA I walk through a Salon piece from a former Ron Paul fan who now says Honduras proves libertarianism doesn’t work. My favorite part of my response:
Let me hit that again from another angle. If there had been a government-funded airport, then it would be coherent to point to it and say, “See? The market wouldn’t have built that.” This is what statists in the U.S. often do, when it comes to football stadiums and dams that only exist because of tax support. There, the proper response is Bastiat’s “seen and unseen.” But at least it’s understandable that people could look at an existing building that the State produced, and count that as evidence in favor of the usefulness of the State.
Yet this writer pointed to an empty lot as evidence that the Honduran government was better at building airports than the private sector.
At This Point, I’m Pretty Sure Rand Paul Doesn’t Know Much Accounting
OK I was giving him the benefit of the doubt when, in his speech in Des Moines, Rand Paul said “assets” when he meant “equity.” But then for a written piece for Breitbart–which appeared 4 days after the speech, and so presumably Paul and his staff had seen how people on Bloomberg etc. pounced on his misstatement in the speech–Paul (or his aides) wrote this:
The Fed has $4.5 trillion in liabilities and only 57 billion dollars in equity. It is leveraged at 80:1, nearly three times greater than Lehman Brothers when it failed.
Nearly 40 percent of the Fed’s liabilities are said to be mortgage-backed securities – the question needs to be: How many are distressed home loans?
I’m pretty sure he meant to say 40 percent of the Fed’s *assets* are mortgage-backed securities…?
I Have Found a Nobel Economist Calling Krugman’s Walmart Article Crankish
[UPDATE below.]
Remember in his recent Walmart piece that Krugman wrote:
Conservatives — with the backing, I have to admit, of many economists — normally argue that the market for labor is like the market for anything else. The law of supply and demand, they say, determines the level of wages, and the invisible hand of the market will punish anyone who tries to defy this law.
But labor economists have long questioned this view. …[B]ecause workers are people, wages are not, in fact, like the price of butter, and how much workers are paid depends as much on social forces and political power as it does on simple supply and demand.
In my response at Mises CA, I pointed out that in his own textbook, Krugman himself first used supply & demand to show that price floors on butter lead to “butter mountains,” and then he went right into saying that price floors on labor lead to unemployment.
Yet here is another example of an economist doing the very thing that Krugman criticizes in his recent Walmart piece:
So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This theoretical prediction has, however, been hard to confirm with actual data. Indeed, much-cited studies by two well-regarded labor economists, David Card and Alan Krueger, find that where there have been more or less controlled experiments, for example when New Jersey raised minimum wages but Pennsylvania did not, the effects of the increase on employment have been negligible or even positive. Exactly what to make of this result is a source of great dispute. Card and Krueger offered some complex theoretical rationales, but most of their colleagues are unconvinced; the centrist view is probably that minimum wages “do,” in fact, reduce employment, but that the effects are small and swamped by other forces.
What is remarkable, however, is how this rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda–for arguing that living wages “can play an important role in reversing the 25-year decline in wages experienced by most working people in America”…Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects….
…[The authors of the book being reviewed] also argue that because there are cases in which companies paying above-market wages reap offsetting gains in the form of lower turnover and greater worker loyalty, raising minimum wages will lead to similar gains. The obvious economist’s reply is, if paying higher wages is such a good idea, why aren’t companies doing it voluntarily? But in any case there is a fundamental flaw in the argument: Surely the benefits of low turnover and high morale in your work force come not from paying a high wage, but from paying a high wage “compared with other companies” — and that is precisely what mandating an increase in the minimum wage for all companies cannot accomplish. What makes this an odd oversight is that the book contains a lengthy and rather well-done critique of attempts by local governments to create jobs through investment incentives, arguing that they mainly end up in a zero-sum poaching war; how could the authors have failed to notice the parallel?
… what the living wage is really about is not living standards, or even economics, but morality. Its advocates are basically opposed to the idea that wages are a market price–determined by supply and demand, the same as the price of apples or coal. And it is for that reason, rather than the practical details, that the broader political movement of which the demand for a living wage is the leading edge is ultimately doomed to failure: For the amorality of the market economy is part of its essence, and cannot be legislated away.
I don’t suppose at this point you guys have any doubt as to the author of the above? (HT2 C. Van Carter.)
By the way, look at how Krugman’s archives classified the piece above. It’s filed under “cranks.” In other words, it’s not merely that Krugman in 1998 held the view that Krugman in 2015 is ridiculing conservatives for holding. Rather, back in 1998, he considered someone who holds the view of Krugman 2015 to be a crank.
People are allowed to change their minds. But I don’t think polite, intellectually honest people can mock others for holding views that they themselves had in the past, when they are now pushing views that their old self thought were evidence of being a crank.
P.S. David R. Henderson had written about this before, but I’d forgotten.
UPDATE: Someone pointed out on Twitter that the archives holding this old Krugman essay are billed on the main page as the “Unofficial Paul Krugman Archive.” I had thought this was maintained by Krugman himself, because (I think?) he occasionally links to it from his blog posts. But, in light of this new information, I now retract the claim that Krugman himself is calling Krugman a crank. At best, all we can say is that Krugman’s fan, relying on Krugman’s 1998 book review, would classify Krugman 2015 as a crank.
Krugman on Walmart and the Minimum Wage
He really outdid himself on this one, as I explain in my latest Mises CA post. An excerpt:
[I]t is a very strange argument to say, as Krugman does, that since we observe Walmart raising wages voluntarily, that therefore having the government force other firms to do so involuntarily won’t cause any major problems.
Look, Target just announced that it will lay off thousands of workers as part of a package to save $2 billion over two years. So should Stephen Moore write an op ed arguing that the government should require all existing firms to lay off thousands of workers, because the possible downsides are obviously smaller than what conventional wisdom suggests?
Or, if my Target analogy is too extreme for you–even though it’s exactly what Krugman did with Walmart–try this one: Chick-fil-A doesn’t serve food on Sundays. So that means the government could pass a law forcing all fast food restaurants to stay closed on Sundays, since clearly the gains to the workers (in the form of more time with their families) is higher than any potential downsides, such as convenience to consumers and paychecks for the workers. Right?
However, I found something quite juicy that many of you will enjoy, so click the link.
Evaluating the Iranian Nuclear Threat
I am a professional economist, not a military strategist or historian. Nonetheless, I think I can offer some perspective on typical arguments for U.S. government military action. Consider the following excerpt from a NYT article by Chris Hedges, titled, “Iran May Be Able to Build an Atomic Bomb in 5 Years, U.S. and Israeli Officials Fear” (HT2 Julie Borowski):
Iran is much closer to producing nuclear weapons than previously thought, and could be less than five years away from having an atomic bomb, several senior American and Israeli officials say.
“The date by which Iran will have nuclear weapons is no longer 10 years from now,” a senior official said recently, referring to previous estimates. “If the Iranians maintain this intensive effort to get everything they need, they could have all their components in two years. Then it will be just a matter of technology and research. If Iran is not interrupted in this program by some foreign power, it will have the device in more or less five years.”
The reassessment of Iran’s nuclear potential is now described by Israeli officials as the most serious threat facing their country.
…
“When we look at the future and ask ourselves what is the biggest problem we will face in the next decade,” a senior Israeli military official said, “Iran’s nuclear bomb is at the top of the list.”
…
And if Iranian oratory is to be believed, the Islamic Government would support a showdown with the Jewish state, whose very existence, it says, is an affront to the Muslim countries in the Middle East.
So let me offer some quick points of pushback:
==> Look at the lack of accountability in the quotations from anonymous American and Israeli officials. After all, considering recent history it’s not as if our default position should be to trust their warnings when it comes to weapons programs in Middle Eastern countries.
==> It’s interesting that the same neo-conservative pundits who think Washington, DC is full of evil, incompetent liars when it comes to domestic welfare programs, all of a sudden forget how unintended consequences work when it comes to nation-building at missile-tip. As I sarcastically pointed out on Twitter: “If we make nuclear weapons illegal, only rogue nations will have them!” In case you don’t get it, that’s the way self-described conservatives react to progressive proposals for domestic gun control. Granted, the two situations are not exactly the same thing, but there are millions of Americans who (a) loved the type of argument put forth in John Lott’s More Guns, Less Crime and yet (b) have never once in their adult lives seriously considered the possibility that more nuclear powers would result in fewer military conflicts.
==> The only government to ever use an atomic bomb against civilians is the United States.
==> The above NYT article was written in 1995.
Potpourri
==> Chase Chandler writes on Nelson Nash, Mark Spitznagel, and Nassim Taleb. (BTW at the Nelson Nash Institute YouTube channel, you can see my extended interview with Nash, if you don’t know of him.)
==> I’ve asked on Facebook but the people there didn’t really answer my specific question. Does anyone know, do the Wonkette contributors all have a log-in and it’s decentralized? Or do the people running Wonkette consciously run the articles on the site? I ask because I want to know if they were cool with this piece about Sheriff Mack’s medical bills.
==> Gene Callahan and I checked the calendar and realized that it was time for our monthly brawl.
Potpourri
==> Scott Sumner agreed that I checkmated him, but for some reason took it really well.
==> Oh no… Alex Tabarrok too has succumbed to the “open borders” label. OK let me try it this way: Hey everybody, let’s start a movement called “Open Bank Vaults.” Now some of you are going to get huffy and argue that it would be insane to just leave bank vaults open, but all I mean by that phrase is that I don’t think the federal government should be deciding that certain foreigners aren’t allowed to go in the vault. Now that I’ve clarified what I mean by the phrase “Open Bank Vaults,” who’s with me?
==> Dave Ramsey vs. the world. (In case you guys don’t know, I often use Ramsey as the foil in my public talks on whole life insurance, since Ramsey hates it.)
==> Did I link to this one yet? Anyway I had some fun on Facebook saying that some conspiracy theory nutjobs were saying a U.S. state had been involved in forced sterilization of thousands as part of a eugenics program.
==> Another one that’s been on my browser for a while and I can’t remember if I linked: Mark Spitznagel explaining why he doesn’t think a market crash will be a “black swan.”
==> His style and mine are light years apart, but I love this line from Tyler Cowen: “[T]hat out of control Greek government spending and borrowing has been converted into a (supposed) cautionary tale about the dangers of fiscal conservatism is one of the greatest (and most unfortunate) public relations triumphs of modern times.”
Potpourri
==> I am pretty sure this is checkmate for Scott’s attempt to reason from a price change regarding the ECB. Note, I’m not claiming I’ve won the whole tournament–just this particular game.
==> I break out my undergrad Public Choice text to argue that the work of Niskanen is at serious tension with (some of) what the new Niskanen Center is doing.
==> Someone help me out here: What the heck is Brad DeLong talking about, when he says such-and-such an interest rate cut would lead to only a 6% increase in the price of a long-duration asset? Can anybody reverse engineer his calculation so I can be sure of what he’s saying? I think he’s totally wrong but I’d feel more comfortable if I knew exactly how he got that number, before going on the attack.
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