Clarifying Michael Cohen’s Outrageous Apology for Obama
David R. Henderson links to a simply astonishing piece by Michael Cohen, trying to do damage control for Obama. Some excerpts:
In selling the health-care plan that bears his name, President Obama has, according to the fact-checking website Politifact, said at least 34 times that “if you like your health care plan, you can keep it.” That statement was not completely true, and it’s a lie that is today causing the President no end of political headaches.
Still, before we fully castigate the President for his rhetorical flights of fancy, it’s important to keep in mind that Obama was — to a large degree — telling Americans what they wanted to hear. In fact, he was giving them the type of comforting assurances they insist upon getting before backing any major policy change from Washington.
Americans regularly express dissatisfaction with the status quo and demand political change. But at the same time, they recoil at any reform that affects them directly.
…For those who buy insurance on the individual market, the story is quite different. With high premiums, higher deductibles and poor benefit options, these plans often could barely be considered insurance — and weren’t available to those with preexisting conditions. That these Americans would not be able to keep their plans was not a bug of Obamacare; it was the point.
…
So accuse Obama of lying about health-care reform — but understand the simple underlying reality: we can’t handle the truth.
Note, the parts I put in bold were just to underscore how slippery Cohen himself is. (Imagine that: A plan in which you are responsible for routine medical expenses, but the insurer picks up really large expenses, can “barely be considered insurance.”) You can see his overall theme pretty quickly.
Now in his commentary, David makes it sound as if Cohen endorsed the lying in order to get his (Cohen’s) way. But it’s a little subtler than that. Cohen is saying that the outcome is our way; we all wanted Obama to give us ObamaCare, it’s just we’re too fickle to choose it like adults.
If you don’t believe me, look, Jack Nicholson himself says it too:
See? If it were a matter of, “I know you don’t want me on that wall, but I’m going to do it anyway and then cover it up,” why, that would be immoral. Everyone knows that, even the Simpsons writers.
But see, we live in a much more nuanced world. We want him on that wall, so that’s why he thinks it’s OK to do what he does.
And it’s how Cohen convinces himself that Obama’s blatant lie–not a rhetorical flight of fancy–is justified.
The Return of Robert Murphy to Team Brittany!
They actually billed it as “The Return of Robert Murphy.” I’m not a narcissist, just the messenger.
I really don’t know what more you could want from YouTube, than to hear me talking fractional reserve banking with three ladies named Brittany:
Answering David Friedman’s Questions About Austrian Economics
[UPDATE below, then UPDATE #2.]
In a recent post, David Friedman writes:
Yesterday I spoke at a Students for Liberty Conference. Before the talk I had a conversation with several students who identified themselves as supporters of the Austrian school of economics. I asked them if they could explain what that meant by identifying a proposition in economics that almost all Austrian economists and almost no non-Austrian economists would agree with.
One response was along the lines of “Austrians believe that one can derive economic conclusions from convincing axioms without adding any empirical facts.” So I asked them to give me an example of such a conclusion, of a statement that one could test, observe the truth or falsity of in reality, that could be derived in that way.
I now put the same two questions to any readers of this blog who consider themselves believers in Austrian economics. Can you state such a proposition? For the particular proposition that was proposed, can you give an example, a prediction about the real world that can be made with certainty from economic theory alone with no input of real world information?
I have to agree with Vijay in the comments, who wrote:
I’m a little surprised you ask this, Professor Friedman. You have been debating so-called Austrians for many years, and it seems to me you do not have basic exposure to the literature. Have you attempted to read Human Action by Mises? These questions, which are epistemological in nature, are answered in great depth in that book, among others.
This was, after all, the whole focus of our debate at Porcfest over the summer. I’m not expecting Friedman to agree with the Misesian/Rothbardian take (I’m not calling it “the Austrian take” since not all self-described Austrians buy into the a priori stuff), but his question entirely misconstrues what we’re saying. The whole point is that economic principles are not “testable” in the way he means.
So here are two statements that economists know about the “real world” with certainty:
==> People respond to incentives.
==> Choices always carry tradeoffs.
Those are the types of statements we can deduce just by thinking through the logic of rational behavior, or what Mises called “human action.” Notice that they aren’t mere definitions; I’m not saying, “Bachelors are unmarried.” Also notice that they are definitely useful in understanding the world. But, as I said, you can’t test them; there is nothing, even in principle, that would make an economist suddenly doubt either of the above. They are ways of interpreting reality.
Further, Mises wasn’t saying, “This is how we Austrians do economics; everyone else is an idiot.” On the contrary, Mises was codifying what economic science was. It was descriptive, not prescriptive, although as the 20th century progressed, the divergence between “Austrian economics” and “the mainstream” got wider and wider so it turned into the present situation, where Austrians come off wagging their fingers at everybody else.
But if you want to see how historically, the great economists adhered to this method, look at the opening section of Hoppe’s essay. He quotes from Say, Cairnes, and Lionel Robbins to show that Mises was not offering some idiosyncratic view in his methodological writings early on.
Last point: Friedman’s demand to hear something that almost all Austrians believe, but almost all non-Austrians don’t believe, is a loaded question. You could do that with anybody who claims to belong to a school of thought, in any discipline. Then when the person gives the answer, you can:
(A) Point out that no, actually most scholars in that field do believe the proposition, so there’s nothing special with his or her “school,”
or
(B) Point out that nobody else in his right mind believes such nonsense, so why the heck would he or she associate with such a “school”?
In closing, let me say that the tone of my present post here might sound very hostile. Just remember I’m the same guy who did this.
UPDATE: I should probably clarify that the two propositions I listed above are not “Austrian” propositions, but in fact are standard fare in micro textbooks, usually offered in the first section on “HOW TO THINK LIKE AN ECONOMIST.” Another example would be, “There’s no such thing as a free lunch.” Another would be, “Both parties benefit in a voluntary exchange.” I’m purposely picking mainstream stuff to get these guys and gals to realize that Mises is describing good economics. As I pointed out to David Friedman during our debate, nobody passionately believes in free trade because of a regression, but rather because of “thinking about it” in light of an essay by Bastiat or David Friedman, for that matter.
It is nothing but pure physics envy to think that to be “scientific” an economist needs to subject his or her propositions to empirical verification. There are statements in economic history–such as “What caused the US housing bubble?”–that rely on empirical content. But there is a core body of economic theory that you deduce just by “thinking things through.” I can teach a whole introductory class on economics without once having to resort to the authority of previous experiments or statistical tests.
UPDATE #2: In the comments, David says (correctly) that I didn’t offer anything to his first query. OK, here’s are two examples:
“Most Austrian economists think that it is a basic confusion to say that interest is equal to the marginal product of capital, in the way that wages are equal to the marginal product of labor.”
“Most Austrians think that to understand the business cycle, it is important to keep in mind that the capital structure is composed of heterogeneous physical goods, rather than a homogeneous ‘capital stock.'”
Potpourri
==> Oh my gosh, a peer-reviewed publication cited my doctoral dissertation. I am still in shock. Topan and Paun–like me–think Mises makes an invalid argument to establish the apodictic preference for satisfaction sooner rather than later. Jeff Herbener responds.
==> This guy literally lives in the NYU library.
==> Pat Michaels and Chip Knappenberger show that the “consensus” climate models are arguably wrong with 95% confidence. (It’s hard to phrase it accurately; go look at what I’m talking about. The point is, we’re taking into account the “uncertainty zone” in the model runs.)
==> Silas Barta thinks the economics of climate change is too important to be left to the generals. I plan on doing a follow-up post for IER on this. (I am still not sure that Silas’ point [1] is necessary for his argument, and on top of that, I’m not sure he’s actually crystallized what’s going on with the tax interaction effect. I know he didn’t like my statement in the comments–which he quotes with amusement–but the problem is that the result pops out of a general equilibrium model. It’s hard to give intuition on something like that, and in fact various authors have given different intuitions to explain the result.)
==> I’ll be spamming you more in the future about it, but next week I have a new Mises Academy class on ObamaCare.
==> Look, I realize it sounds like I’m just pouting and making excuses, but COME ON: the paper products these days are cutting corners. (HT2 von Pepe) Do you know how fast I go through a roll of paper towels now, compared to five years ago? I’m being serious.
==> I can’t remember whoKen B. sent me this Economist article on trouble in the (experimental) sciences, but anyway, here ya go.
==> JP Koning wrote the best Fama vs. Shiller piece I had seen, when they were big in the news. You know how I like to say that the most hardcore proponents of the EMH believe it as a matter of faith, not empirical evidence? Here’s Koning describing how Fama and Shiller responded after the 1987 crash:
Eugene Fama, who along with Shiller and Lars Hansen shared the Nobel Prize this week, had very different reaction to the event than Shiller. In an essay penned not long after the crash, Fama, a true believer in the efficient market hypothesis, did his best to square the event with theory. The crash, wrote Fama,
[FAMA:] has the look of an adjustment to a change in fundamental values. In this view, the market moved with breathtaking quickness to its new equilibrium, and its performance during this period of hyperactive trading is to be applauded. [Perspectives on October 1987, or What Did We Learn From the Crash? 1988]
[BACK TO JP KONING’s COMMENTARY:] Fama’s effort to justify the crash as a rational response to economic news falls flat. A 22.6% decline requires something cataclysmic, but no significant events preceded the crash. Sure, there was a skirmish in the Persian Gulf with an Iranian oil station, a new tax proposal in the House, and a sell signal from guru Robert Prechter, but none of these events were capable of moving markets more than a few points.
Robert Shiller, on the other hand, gathered data. The day after the crash, he sent out questionnaires to hundreds of investors.
Mises Admits That He Was Too Trusting of Governments
I love this from page 780 of Human Action:
In dealing with the problems of the gold exchange standard all economists–including the author of this book–failed to realize the fact that it places in the hands of governments the power to manipulate their nations’ currency easily. Economists blithely assumed that no government of a civilized nation would use the gold exchange standard intentionally as an instrument of inflationary policy.
Stephan Kinsella Has a Scheme That Walter Block Would Say Is Heroic
From Facebook (and Stephan said I could post it):
So, if it’s now illegal for a medical insurance co to refuse people for ‘pre-existing conditions’– what’s to prevent a group from using this for various extortionate purposes? For example you live in a big city, you have cancer, and you are friends w/ a bunch of cancer victims. You get them all on board to threaten to switch from their disparate insurers to a single one, such as ABC Insurance Corp. You call ABC and tell them, 500 of us cancer victims will sign up tomorrow for your policy, and you cannot refuse us, and we will cost you tens of millions. If you just pay us $5k each we will go away.
And yes, I’m just kidding about Walter Block, making a joke about his heroic blackmailers.
Nordhaus Not Even Warm in His Energy Sector Predictions
An excerpt from my latest IER post:
Nordhaus’ terrible predictions about the energy sector in his 1973 paper have serious implications for present policy. William Nordhaus’ DICE model is one of three Integrated Assessment Models (IAMs) that the Obama Administration’s Working Group selected to estimate the “social cost of carbon.” This value in turn is used by EPA and other federal agencies to run cost/benefit analyses on proposed regulations. It is extremely alarming, to say the least, that the same guy who claimed in 1973 that optimal resource usage would have the U.S. “virtually exhaust” its domestic petroleum supplies over the next seven years, is one of three experts who are implicitly influencing regulations with his model of world energy markets that runs through the year 2300.
When it comes to Alan Greenspan warning about budget deficits, price inflation, and the need to cut government spending, Paul Krugman is happy to ask, “So has the ex-Maestro reconsidered his views after having been so wrong for so long? Not a bit.” Too bad Krugman won’t apply the same criterion to Nordaus, who thinks his computer simulations provide justification for imposing massive new taxes on the energy sector.
Krugman: Whether Potential GDP Is Up, Down, or Sideways, It’s More Evidence That I’m Right
Krugman has made such a strategic error in his advocacy for monetary inflation that even his teammates had to rebuke him. But first some context: “Potential GDP” is a mainstream economics concept referring to the maximum sustainable level of (real) GDP. In the standard New Keynesian paradigm, if actual (real) GDP is above potential, you get accelerating price and wage inflation. Printing more money doesn’t do anything, except cause prices to rise more quickly. On the other hand, if actual GDP is below potential, then there is “slack” in the economy; boosting aggregate demand (through monetary and/or fiscal stimulus) will put people back to work and increase real output, without causing a significant rise in prices.
(#1)==> Now, over the last several years, various opponents of further Fed stimulus have been arguing that there is “structural” unemployment in the economy; further rounds of QE won’t lower the unemployment rate, since (say) there is a growing mismatch between idle workers’ skills and the type of job openings in the new global economy. Not surprisingly, Krugman has dismissed such pontifications as “humbug”–as recently as this August. Since there was no structural change to speak of, it proved that Krugman has been right all along in recommending more aggressive stimulus.
(#2)==> More generally, Brad DeLong and Paul Krugman have both argued that potential GDP today, is not significantly lower than what it would have been, had the Great Recession never struck. Readers may remember that in late August I had the temerity to question DeLong’s reasoning at the time. In response, Krugman sided with DeLong–agreeing that potential GDP today was not much lower than it would have been on the 2007 trajectory–and pointed out that the CBO took into account the lower pace of investment since 2008 (the specific issue I had raised). In the comments at Daniel Kuehn’s blog, DeLong called me a “clown” and said I needed to quit my job as an economist, since even rudimentary calculations showed that potential GDP right now was about 1% lower than its 2007 trajectory. DeLong further explained that if potential GDP today were, say, 5% lower, then that would indeed be something. (I tried to defend my honor by saying that the CBO showed potential GDP was about 3.6% below trend, but that’s just the sort of stupid thing a clown would say, isn’t it?)
Since potential GDP was not materially lower than the pre-recession trajectory, Krugman and DeLong were once again vindicated: We should heed their advice for more aggressive monetary and fiscal stimulus.
(#3)==> Last week, while attending an IMF research conference, Krugman wrote an op ed in which he discussed the “blockbuster paper of the conference” (his actual description of it). Here’s some of what Krugman had to say about that blockbuster paper:
[T]he authors — one of whom is the Federal Reserve Board’s director of research and statistics, so we’re not talking about obscure academics — put a number to these effects, and it’s terrifying. They suggest that economic weakness has already reduced America’s economic potential by around 7 percent, which means that it makes us poorer to the tune of more than $1 trillion a year. And we’re not talking about just one year’s losses, we’re talking about long-term damage: $1 trillion a year for multiple years.
That estimate is the end product of some complex data-crunching, and you can quibble with the details. Hey, maybe we’re only losing $800 billion a year. [Bold added.]
The part I put in bold was to emphasize (a) their estimate is for the drop in potential GDP that has already occurred, and (b) Krugman quibbled with their estimate and thought hey, maybe it’s only a 5.6% drop in potential GDP. (If a 7% drop is $1 trillion in output, then a 5.6% drop is $800 billion in output.)
Naturally, Krugman concluded that since the economic slump has already eroded potential GDP by anywhere from 5.6% to 7%, it’s evidence that we need to increase public (government) spending.
(Also, for those purists keeping score, I note that 5.6%, let alone 7%, are greater than DeLong’s threshold of 5%. But again, this is a clownish point, so I’ll move on.)
(#4)==> At that same IMF conference, Christina Romer and others apparently pointed out to Krugman that he had stepped in it, and just conceded the whole case to the austerians. Krugman realized the potential problem, and so clarified: We don’t know if that blockbuster paper is right in claiming that the drop in potential GDP is here already; for all we know, the damage has yet to be done. So by all means, put the pedal to the medal: We need more aggressive monetary and fiscal stimulus.
(#5)==> And so we see that whether potential GDP is relatively on trajectory, materially below, or on the verge of falling, the conclusion is always the same: It is evidence that we need aggressive monetary and fiscal stimulus. Also, be sure to watch out for ideologues like me, who invent rationales for my preferred policy prescription, no matter what the data say. You need to stick with objective scientists like DeLong and Krugman, who follow the evidence no matter where it may lead.
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