06 Jun 2014

And Now a Message From the Fab Four

Pacifism 6 Comments

There was a particularly vitriolic Facebook battle among libertarians today (it’s Friday) and I hoped to end it with this. (I failed.)

06 Jun 2014

Blending Duty to God With Utilitarianism?

Religious No Comments

I may not express my thoughts in this post very well, but I’ll try…

I used to think there was an enormous gulf between the utilitarianism (what might better be termed consequentialism) of Ludwig von Mises versus the moral code flowing from a Judeo-Christian worldview. But the more I read the Bible, the more I think I was mistaken.

For example, Job 28:28 says:

And to man He said,
‘Behold, the fear of the Lord, that is wisdom,
And to depart from evil is understanding.’”

Or check out Psalm 119: 97-104:

97 Oh, how I love Your law!
It is my meditation all the day.
98 You, through Your commandments, make me wiser than my enemies;
For they are ever with me.
99 I have more understanding than all my teachers,
For Your testimonies are my meditation.
100 I understand more than the ancients,
Because I keep Your precepts.
101 I have restrained my feet from every evil way,
That I may keep Your word.
102 I have not departed from Your judgments,
For You Yourself have taught me.
103 How sweet are Your words to my taste,
Sweeter than honey to my mouth!
104 Through Your precepts I get understanding;
Therefore I hate every false way.

Thus, just as Mises would tell the typical voter, “I’m not asking you to change your value system or your goals. I’m informing you that you are mistaken about how reality works,” by the same token I could give that advice to the non-believer.

The reason it’s a “good idea” to obey God’s laws (and yes I realize part of the problem here is to determine exactly what those are) is not simply a matter of definition. On the contrary, I think if people had more information and could see the long-term consequences of their actions, then they would realize why sinning (again, let’s put aside for a moment how to define that) is not in their interest.

As a final point, I don’t merely mean, “When you die, you go to eternal torment if you haven’t done what God said, and so your long-run utility is maximized while you’re alive if you obey Him.” No, I’m saying even in secular terms, following Jesus’ commands (loving your enemies, for example) is a better strategy for happiness, even though it’s initially counterintuitive–just like letting interest rates rise and cause a crash is initially counterintuitive to someone who hasn’t studied Austrian economics.

06 Jun 2014

DeLong and Krugman Have a High Rate of Deprecation (sic)

Climate Change, David R. Henderson, DeLong, Krugman, Piketty 9 Comments

We also would have accepted, “Why oh why can’t we have better Keynesian bloggers?!”

This isn’t worth me writing up in another outlet, but I know some of you like this petty stuff… (I sure do.)

==> Some of you may remember that Krussell and Smith wrote up a Note on Piketty, explaining why his model was unorthodox because it used net rather than gross figures, making it yield odd outcomes and further being difficult to reconcile with actual savings behavior. To illustrate their point, they chose a hypothetical calculation involving a 10% depreciation rate on physical capital.

Well, Brad DeLong bit their heads off, writing:

But with an economy-wide capital output ratio of 4-6 and a depreciation rate of 0.1, total depreciation–the gap between NDP and GDP–is not its actual 15% of GDP, but rather 40%-60% of GDP. If the actual depreciation rate were what Krussall and Smith say it is, fully half of our economy would be focused on replacing worn-out capital.

For the entire economy, one picks a depreciation rate of 0.02 or 0.03 or 0.05, rather than 0.10.

I cannot understand how anybody who has ever looked at the NIPA, or thought about what our capital stock is made of, would ever get the idea that the economy-wide depreciation rate δ=0.1.

And if you did think that for an instant, you would then recognize that you have just committed yourself to the belief that NDP is only half of GDP, and nobody thinks that–except Krusall and Smith. Why do they think that? Where did their δ=0.1 estimate come from? Why didn’t they immediately recognize that that deprecation estimate was in error, and correct it?

Now that’s a bit over-the-top, when the main result (i.e. that Piketty’s use of net rather than gross leads to weirdness, and is also inconsistent with the empirical literature) goes through, whether you use 5% or 10%. (See Krussell’s response and Alex Tabarrok too.) Also, it’s not like they picked 7.485%; no, they used 10%, which is a rather nice round number.

For what it’s worth, if you look at the BEA’s estimate of the replacement cost of the total U.S. capital stock (“fixed assets and consumer durable goods)”, in 2012 (latest year available) it was $53.6 trillion (and that’s in current dollars, not price-inflation-adjusted). Well, nominal GDP in 2012 was $16.2 trillion. So the K/Y for 2012 (if these are the numbers to use) was 331%, which is a lot lower than DeLong’s range of 400% – 600% of GDP. (Incidentally, I emailed the BEA and asked what do I look at for estimates of “total US capital stock” and that’s where they pointed me.)

==> In other news, Krugman bit off Roger Pielke Jr.’s head for being both an idiot and evil, when it comes to the EPA power plant regulations and the analysis of emissions reductions more generally. It’s not worth me going over the whole back and forth, but if you follow the links you can get up to speed. Anyway, David R. Henderson was glad to see Krugman finally acting the economist again (and I agree with David, Krugman’s post did a good job explaining tradeoffs and how “carbon intensity” is not merely an engineering concept but also an economic outcome). But I had to clarify in the comments the perfidy involved:

David,

Obviously I would have to recuse myself if I were ever a judge in a trial involving Krugman, but I think you are being too kind here. I agree that Pielke Jr. is probably a little bit confused in the way he’s using “technology,” but some points:

1) When Pielke Jr. refers to a “cap” on Chinese emissions, he doesn’t mean “a limit on the growth.” No, he means a hard ceiling that stops emissions growth immediately.

2) My description might surprise you, because Krugman matter-of-factly asserts that Pielke’s letter was motivated by the Obama Administration EPA power plants rules, and also tells that Pielke “is actually committed to undermining the case for emissions limits any way he can.” But, Krugman just made up both “facts.” If you look at Pielke’s letter, he says in the beginning that he is responding to this earlier FT piece about a Chinese academic who wants an absolute halt in growth of Chinese emissions to kick in in 2016. Also, if Krugman had bothered to check Pielke’s blog, he’d say that Pielke *endorsed* the EPA’s power plant rules on Tuesday.

3) It’s extremely gracious of you to praise Krugman for finally writing like an economist, when he endorses top-down controls (power plant rules, CAFE standards) and talks about “saving the planet” as the policy goal, without tongue in cheek. (And by the way, he’s not just being ironic in referencing leftist environmentalists. In several recent posts, Krugman has non-ironically talked about what needs to be done to “save the planet.’) What happened to enacting policies such that MC = MB?

* * *

None of this is a criticism of you, David; I realize you probably want to praise Krugman when you can, so people trust you when you criticize him. I’m just pointing out that Krugman was particularly slippery in this post, simply inventing positions and attributing them to Pielke, and then he ended it up with this gem: “I guess I should thank Pielke for his intervention, which has helped clarify how we should think both about energy issues and about him.”

05 Jun 2014

Carbooooooon!

Climate Change, Shameless Self-Promotion 39 Comments

(Supposed to be like “Khaaaaaaan!”)

My latest Mises CA post takes on the typical claim that “uncertainty” bolsters the case for government restrictions on carbon emissions. Plus, I work in a Captain Kirk reference. Some excerpts:

So what these researchers have formally shown, is that if you assume this shape of a damage function, but you are unsure of exactly where the curve is, then the mathematical expectation of “damage from a given amount of warming” is higher, the more uncertain we are about the exact position of the curve, other things equal. Or, supposing we know exactly what the damage function is, but we aren’t quite sure how much an additional ton of CO2 emissions will physically contribute to global warming, then the mathematical expectation of the damage (in dollars) from emitting that ton will be higher, if we have the same mean but more variance in our estimate.

Now that we understand the intellectual adventure, what can we conclude? It is simply building in the conclusion the authors wanted. Analysts could easily flip their arguments about uncertainty upside down to get the opposite answer. What if, for example, under “business as usual” the Earth would have significantly cooled, thus moving up the left-side of the stipulated “convex damage function”? In other words, as Earth approached another ice age, the damages from further cooling would be higher and higher. In such a scenario, human activities that trapped heat would be a blessing, deserving of government subsidies, not taxes (in the conventional Pigovian framework).

My question: Why couldn’t we apply the same reasoning to ANY THREAT AT ALL? There are killer asteroids, alien invasions, superflus, nuclear war, earthquakes, and on and on it goes. Why not, for example, have governments restrict the emission of radio waves, on the off-chance that too much “noise” will attract the attention of aliens who will conquer us? You might argue that we are really uncertain about the nature of such a threat, but hey–that just shows all the more why we need to cut radio wave emissions by 80% relative to 2005 levels.

05 Jun 2014

Kneel Before Zod!

Shameless Self-Promotion, Voluntaryism 50 Comments

Remember this cool clip?

Would you be able to use it in the case for anarcho-capitalism? I did.

05 Jun 2014

Quiz in Reading Comprehension

Humor 28 Comments

I realize we’re all busy and this is silly, but suppose you are trying to figure out which boxer (or both?) broke Ali’s jaw: Ken Norton or Joe Frazier? And then you stumble upon this article which ostensibly will clear it up for you. I encourage you to take 3 minutes and quickly read the whole thing from top to bottom.

Now tell me: If you just had that article to rely on, what would you conclude? I submit that you would conclude, “Joe Frazier and Ken Norton both broke Ali’s jaw in the same fight. Joe Frazier must be the stage name for ‘Ken Norton’ just like Ali is really Cassius Clay.”

05 Jun 2014

IBC: Process vs. Platform

Infinite Banking Concept, Shameless Self-Promotion No Comments

The latest video from the Infinite Banking Institute:

If you want to learn more, come to Nashville on August 15-16!

04 Jun 2014

Using More Government Intervention to Undo Effects of Previous Round

Banking, Federal Reserve, Inequality 35 Comments

In their conversation regarding income inequality, investing, Austrian economics, and other sundry topics, former business partners Nassim Taleb and Mark Spitznagel had this good exchange:

Nassim Taleb: Mark, your book [The Dao of Capital–RPM] is the only place that understands crashes as natural equalizers. In the context of today’s raging debates on inequality, do you believe that the natural mechanism of bringing equality — or, at the least, the weakening of the privileged — is via crashes?

Mark Spitznagel: …[O]ne can absolutely say logically and empirically that asset-market crashes diminish inequality. They are a natural mechanism for this, and a cathartic response to central banks’ manipulation of interest rates and resulting asset-market inflation, as well as other government bailouts, that so amplify inequality in the first place. So crashes are capitalism’s homeostatic mechanism at work to right a distorted system. We are in this ridiculous situation where utopian government policies meant to lessen inequality are a reaction to the consequences of other government policies — a round trip of market distortion. After we’ve been run over by a car, the assumed best treatment is to back the car over us again.

Spitznagel hits the nail on the head. The alleged experts in academia and the central banks around the world assure us that left to its own devices, capitalism would lead to unconscionable inequality as well as intolerable boom-bust cycles. Yet it is central banks themselves that fuel massive asset bubbles–which accrue as capital gains in the pockets of the elites–that eventually burst and cause a depression.

Then, when at least normal market forces would punish the most reckless of the speculators, these same experts assure us that massive bailouts are necessary, lest “laissez-faire capitalism” implode from its own contradictions.

Then, after the central bank and central government use inflation and taxpayer money to bail out the fat cat investment banks (while letting homeowners go under), we are lectured by the very same experts on how unfair the whole system is, which concentrates gains in the hands of the 1%. This is why, we are told, we need a globally integrated tax on wealth, so that the poor governments can keep tabs on these insidious capitalists and check their insatiable greed.