Potpourri
==> Richard Ebeling on the “inequality trap.”
==> A NYT article about some of the wacky freedom fighters in New Hampshire. This is my target audience for the Bob Murphy Variety Show at Porcfest (happening again this June, by the way!).
==> Joe Stromberg on the semantics of the term “laissez-faire.”
==> A project to translate Human Action into Swedish.
==> Adam Kokesh gets me to do the Sicilian from “The Princess Bride” at the end of this interview.
Politics vs. Science at the IPCC
In this post for IER I quote from two of the Lead Authors of the latest IPCC report. It confirms what some of us have been saying for years. The intro:
Those pushing for aggressive government intervention in the name of fighting climate change often claim that “the science is settled” and dismiss any dissenters as “deniers.” The so-called “consensus” is codified in the periodic reports issued by the Intergovernmental Panel on Climate Change (IPCC). The alarmist camp’s repeated references to “peer-review” and the number of organizations behind the IPCC are rhetorically very effective; they have done a great PR job in making it look as if their political solutions really do flow naturally from what the scientists in white lab coats are reporting. But allegations from IPCC authors show that politics and not science drive the process at the IPCC.
As we have documented countless times on these pages (here’s the latest example), the alarmists greatly exaggerate when they claim that aggressive and immediate government action is needed to prevent catastrophe. When you read the actual scientific literature, as opposed to the pithy summaries given by a few outspoken activists, then we see no cause for alarm. As we shall see, the latest findings stress a growing role for adaptation to a changing climate.
In the present post, I’ll walk through the recent statements issued by two bona fide experts on the economics of climate change: Richard Tol and Robert Stavins. Even though both of them played important roles in the latest IPCC report, they have publicly condemned the IPCC process as political, which distorts the underlying science and misleads policymakers and the public. Besides their impeccable credentials on this topic, Tol and Stavins are both supporters of a (modest) carbon tax. Therefore, their strong condemnations of the IPCC process should receive special attention from those who think “the science is settled” and that anyone challenging the alarmists is a “denier.”
A Question on Debating Tactics
OK let’s try it this way: Suppose you encountered an economist who argued like this:
[HYPOTHETICAL ECONOMIST HOLDING A STRANGE VIEW:] In a market economy, in competitive equilibrium wages are equal to the marginal product of capital. I can prove this to you mathematically in a simple model where physical machines can do all the jobs that humans can do, and so in equilibrium it must be the case that an hour of labor earns the exact same amount as an hour of machine-time. Moving beyond my formal model where I can literally prove it mathematically, intuitively we can see that wages are determined by the marginal productivity of capital because workers can produce more stuff with an additional unit of capital.
Now, I hope we can all agree that the above is utterly confused. But imagine that you met PhD economists who believed it quite passionately, and indeed there was a bestselling book on Amazon founded on the above framework.
I am being dead serious. Please take this thought experiment seriously, and tell me exactly how you would try to get the above economist to realize his whole framework was messed up, and he needed to not simply tweak it, but to jettison it entirely.
The Importance of Capital in Economic Theory
This is my EconLib article this month. I told the editor that this isn’t my personal favorite piece, and it’s not my “best” piece in some objective sense. But if I had to pick a single article (word for word) to represent my contribution to professional economics, it would be this one. It summarizes some of the “news you can use” from all the work I did in grad school.
Two excerpts below, but I’m going to insist that you guys click the link and read the whole thing. If you hang out at this blog, trust me, you are going to need this background because I am going to hit this topic a lot in May what with the Piketty stuff going down (coincidentally) at the same time I wrote this article for EconLib.
Although the example in the previous section seems simple enough, its lesson is relevant even for today’s PhD economists. Relying on simplified mathematical models, they have been taught that in a competitive market economy, the real interest rate equals the “marginal product of capital,” just as surely as the real wage rate equals the “marginal product of labor.”
The logic here is straightforward: If a firm hires a worker for an additional hour, its output will increase by a certain amount. If the labor market is competitive, the firm must pay the worker a wage corresponding to the market value of this increment in the firm’s physical output.
By the same token—as modern economists typically reason—if the firm hires an extra unit of capital, then physical output will increase, and so the firm must pay the owners of this capital an interest payment corresponding to the market value of this increment in physical output.
However, this typical logic confuses physical capital goods with financial capital. If a firm hires a specific capital good for a unit of time, the payment is the rental price of the capital good.
and
Framed in terms of macroeconomic aggregates, the Keynesians do seem to have a strong case against the RBC theorists and other free-market economists who think the economy should be “left alone to sort things out” during a recession. If we use a model that represents the capital stock by a single number (call it “K”), then it’s hard to see why a boom period should lead to a “hangover” recessionary period. Yet if we adopt a richer model that includes the complexities of the heterogeneous capital structure, we can see that the “excesses” of a boom period really can have long-term negative effects. In this framework, it makes sense that after an asset bubble bursts, we would see unusually high unemployment and other “idle” resources, while the economy “recalculates,” to use Arnold Kling’s metaphor.
Killing for God
Last week I made an offhand remark to the way I try to explain why it’s not murder when God orders the Israelites to kill people in the Old Testament. Someone in the comments asked: “if God gave you the same orders as he gave to those Hebrews, would you go ahead with them?”
I think this is a great question because it once again illustrates how the usual standards of reasoned, philosophical debate go out the window when skeptics attack believers. (Note, I’m not necessarily implicating the guy who asked this, but I’m talking about the broader context, as we’ll see in a second.)
So in terms of my value system, yes, absolutely, if God orders you to do X, then it is good to do X. That is true even if He orders you to kill someone who, as far as you can tell, hasn’t committed a crime.
Now that I’ve given the atheist libertarians the “gotcha” they were looking for, let me add two big asterisks:
==> In actual practice, if I “heard a voice in my head” giving me such an order, I would not obey it. This is because I would be worried I was going nuts, that someone was playing a trick on me, that it was a demon pretending to be God, etc. Since that would be so far removed from what I would normally expect Him to tell me to do and since it conflicts in such a prima facie way with what Jesus commands us to do in the gospels–I would not actually believe it was God. At the very least, it would take some serious signs (such that Stefan Molyneux and Steve Landsburg would be running to get baptized) to make me even contemplate such a command.
==> I really do hope nobody goes, “Aha! Now we see the vile implications of the Christian worldview.” There are plenty of philosophical discussions about crazy scenarios in which totally moral, reasonable people would entertain the idea of killing a person who has not (to their knowledge) committed any crime. E.g. a runaway trolley, South American guerillas, or–everybody’s favorite–getting a time machine and killing baby Hitler. In fact, in addition to being ridiculed for my Christianity, I am also ridiculed (not necessarily by the same group of people) for being so “absolutist” about not violating rights when a killer asteroid is hurtling toward Earth.
So in summary, this is what I’m saying: Most people would admit that either (a) they would kill somebody or at least (b) they can understand how a moral person would make that decision, if there were strong reasons to suspect that doing so would produce humongous positive results (like avoiding the Holocaust or saving billions of people from being killed by an asteroid). Well, if you think God is omnibenevolent and omniscient, then He’s in a position to know when such a move would actually be correct, isn’t He?
Last point: Before any principled libertarian tries to bite my head off by pointing out that crude utilitarianism cannot justify the violation of rights: I agree with you. But if there really is a God as depicted in the Christian Bible who created the physical universe de novo, then He owns everything. It’s not a violation of anybody’s rights to be killed by God, through whatever means He chooses. George Lucas is not a murderer for making Anakin slaughter a bunch of kids.
Piketty on the Marginal Product of Capital
I’m not going to comment on this right now; I have a big article on capital theory coming out next week, and you guys should read that first as foundation. So I’ll wait.
In the meantime, however, let me go ahead and type out the following excerpt from pp. 212-213 of Thomas Piketty’s blockbuster Capital in the Twenty-First Century. This will be like the puzzles in the kid’s menu at a restaurant: “Can you find what’s wrong in the picture below?”
Technology naturally plays a key role. If capital is of no use as a factor of production, then by definition its marginal productivity is zero. In the abstract, one can easily imagine a society in which capital is of no use in the production process: no investment can increase the productivity of farmland, no tool or machine can increase output, and having a roof over one’s head adds nothing to well-being compared with sleeping outdoors. Yet capital might still play an important role in such a society as a pure store of value: for example, people might choose to accumulate piles of food (assuming that conditions allow for such storage) in anticipation of a possible future famine or perhaps for purely aesthetic reasons (adding piles of jewels and other ornaments to the food piles, perhaps). In the abstract, nothing prevents us from imagining a society in which the capital/income ratio β is quite high but the return on capital r is strictly zero. In that case, the share of capital in national income, α = rXβ, would also be zero. In such a society, all of national income and output would go to labor.
As Obama would say, now let me be clear: The above is fundamentally, totally, utterly wrong. Piketty doesn’t even know how to conceptually think about capital and interest income in a simple thought experiment. Since Piketty’s whole book is about capital and interest income, that’s kind of a big deal. (It helps to be an Austrian to see why, but you don’t have to be; Nick Rowe could come up with an example of two guys and an apple tree to show the problem.)
“Fresh Air” Really Grinds My Gears
My inaugural article at LibertyChat, where I’ll be contributing weekly. An excerpt:
Earlier this week I was listening to an interesting episode of the NPR show “Fresh Air.” The host, Terry Gross, was interviewing the New Yorker’s Dexter Filkins, who was recounting his experience in Iraq while he was researching his latest article. Filkins gave example after example of how violent daily life still is, and how the Iraqi government is hopelessly corrupt. The entire interview was one giant testament to the utter failure of the U.S. invasion to bring peace and democratic government to the country.
Yet despite Filkins’ first-hand experience of the failure of U.S. military might, and the daily corruption of the Iraqi government, he uttered a casual remark that made my jaw drop as I was driving. His remark underscores why it is so hard for the supporters of a voluntary society to get the general public to see just how dangerous and malevolent the State is.
Libertarian Battles
OK kids let’s remain civilized in the comments. But here’s some red meat for you:
==> Lew Rockwell once again affirms that libertarianism as a political philosophy is about the non-aggression principle, period.
==> Tom Woods and Gary Chartier discuss “thick” vs “thin” libertarianism.
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