Even More Middle East Map Fun–Animated and With Music
Watch this and then read my two comments:
(1) Some people didn’t understand why I was saying it’s important, when considering the arguments for bombing Syria and aiding its rebels, to look at a map. Does this video make it clearer? (Again, keep in mind that many Americans–including me!–are awful at geography.)
(2) I am relieved that even when it comes to its plans for world domination, the government is 7 years behind schedule.
More Shifting Sumner Statements
For casual readers, I should probably clarify: Unlike certain Keynesian economists, I actually spend most of my time online reading the blogs of people with whom I disagree. For example, I probably would agree with just about everything posted at The Circle Bastiat, but that’s why you won’t see me commenting much on it. Rather, I like to have my views challenged, and I also like to go on the offensive when I spot mistakes and inconsistencies in my intellectual opponents.
Two of the people I read the most religiously are Paul Krugman and Scott Sumner, because (a) they are really sharp and have a well-developed worldview and (b) I think they are the leaders of the two schools of thought (Keynesianism and Market Monetarism) that pose the greatest threat to Austro-libertarianism. Since I have a good memory and spend so much time reading these two guys, I believe it is my duty to write it up whenever I spot problems; if not me, who?
Last preamble: I pick on Scott a lot, but it’s possible you could find similar flaws with anybody if you read him long enough. For example, Gene Callahan has pointed out that libertarian economists often warn that a tax on corporations will be “shifted” to other parties (such as the consumers or workers), but when it comes to figuring out the effective tax rate paid by “the rich,” the same libertarian economists will often use the statutory incidence of a corporate tax as if it’s coming right off the bottom line. So, I was glad when Gene pointed that out, because at the very least I want to be consistent in how I handle those two issues.
Now on to Scott:
==> On May 5, 2012 he wrote a post titled, “Our profession is wrong about what went wrong, and hence doesn’t know how to fix the problem.”
==> Then on August 29, 2013 he wrote a post titled that “Yes, the economics profession really does believe that low rates mean easy money.”
So it looks like the profession as a whole doesn’t really understand the wonders of Market Monetarism, right? But hang on:
==> Today Scott says that a letter signed by 300 economists supporting Janet Yellen is evidence that she is the better pick for Fed chair than Larry Summers.
And if the above isn’t enough, how about a cheap shot? Today Scott also explained that there are only two words’ difference between himself and Paul Krugman…
Jon Stewart Is How I Honestly Get My News at This Point
I had no idea about Kerry’s snafu. This is awesome, and Jon Stewart is dead-on.
Mises on A Priori Reasoning
This comes from page 38 in the Scholar’s Edition of Human Action. I just had to paste this into a project I’m working on; thought it would be relevant:
All geometrical theorems are already implied in the axioms. The concept of a rectangular triangle already implies the theorem of Pythagoras. This theorem is a tautology, its deduction results in an analytic judgment. Nonetheless nobody would contend that geometry in general and the theorem of Pythagoras in particular do not enlarge our knowledge. Cognition from purely deductive reasoning is also creative and opens for our mind access to previously barred spheres. The significant task of aprioristic reasoning is on the one hand to bring into relief all that is implied in the categories, concepts, and premises and, on the other hand, to show what they do not imply. It is its vocation to render manifest and obvious what was hidden and unknown before.
In the concept of money all the theorems of monetary theory are already implied. The quantity theory does not add to our knowledge anything which is not virtually contained in the concept of money. It transforms, develops, and unfolds; it only analyzes and is therefore tautological like the theorem of Pythagoras in relation to the concept of the rectangular triangle. However, nobody would deny the cognitive value of the quantity theory. To a mind not enlightened by economic reasoning it remains unknown. A long line of abortive attempts to solve the problems concerned shows that it was certainly not easy to attain the present state of knowledge.
More Middle East Map Fun
Whenever the US government tells us how awful a regime is, and why military action is urgently needed, I like to look at a map. (I did this exercise back when the Iranians were the Nazi Germany of the day.) So here you go:
For what it’s worth, in 1994 the Rwandan genocide supposedly involved the systematic slaughter of 500,000 people in 100 days. Here’s how Wikipedia describes the US government’s actions surrounding this inconceivable nightmare:
There were no U.S. troops officially in Rwanda at the onset of the genocide. A National Security Archive report points out five ways in which decisions made by the U.S. government contributed to the slow U.S. and worldwide response to the genocide:
The U.S. lobbied the U.N. for a total withdrawal of U.N. (UNAMIR) forces in Rwanda in April 1994;
Secretary of State Warren Christopher did not authorize officials to use the term “genocide” until May 21, and even then, U.S. officials waited another three weeks before using the term in public;
Bureaucratic infighting slowed the U.S. response to the genocide in general;
The U.S. refused to jam extremist radio broadcasts inciting the killing, citing costs and concern with international law;
U.S. officials knew exactly who was leading the genocide, and actually spoke with those leaders to urge an end to the violence but did not follow up with concrete action.[87]
Intelligence reports indicate that President Clinton and his cabinet were aware before the height of the massacre that a “final solution to eliminate all Tutsis” was planned.
In other news, earlier this year North Korea announced that it had conducted yet another nuclear test in defiance of the Western governments. The Obama Administration is not telling the American people that we need to bomb North Korea to stop the spread of WMDs.
Call me a cynic, but I don’t believe people from the US government telling me they want to bomb Syria in order to save innocent people’s lives and to contain the spread of WMDs.
Economic Theory versus Economic History
In our ongoing Methodenstreit here at Free Advice, I thought the following comment from Kevin Duncan was a good springboard to amplify my position:
Questions such as what has driven real wage growth among certain sectors of the economy are routinely asked within labor economics, and fairly robust empirical methods give reasonable and consistent answers. The same thing has occurred with human capital attainment. Things like the “mincer equation,” have been incredibly robust benchmarks for individual wages across various countries and time periods, almost stupidly so in explaining about the same variance, and having routinely approximated coefficient estimates. Yes, I’m aware of the Austrian critiques against such extrapolation, but used descriptively they do offer us a better insight into how things like education attainment compared to raw skill growth tends to affect life time earnings of workers, and other extrapolated knowledge.
A lot of tax policy work has slowly come to a larger consensus as empirical methods have improved in how to approach discontinuities.. Same thing goes among estimating how various health care policies can impact inter-hospital level of care. The main factor here is that these studies focus on smaller areas than are typically mentioned in the WSJ or reported by groups such as Macroeconomic Advisors.
This is a perfect illustration of the difference between economic theory and economic history.
Let’s say we figure out “what has driven real wage growth” using empirical methods. After estimating our coefficients with backfitting, we can forecast future wage growth using our calibrated model. Bam! It predicts extraordinarily well, given the crude quality of our data collection.
OK great. Now: Does anybody think we have discovered a true economic law in the same way that physicists think that there are actual laws governing the behavior of matter?
I hope not. No matter how much “experience has confirmed” an empirical regularity in the social sciences, people still have free will (at least operationally, if we’re doing a social science rather than looking at them as collections of atoms) and so those forecasting models could go out the window tomorrow.
In contrast, if I logically deduce that, “The purchasing power of money will be lower, other things equal, when the stock of money increases,” then that is a genuine law of economics. If you allow me to define the terms etc. in such a way that that proposition is true today, then it will necessarily be true for all time and all cultures.
Last point: Ultimately, we really don’t even have any good reason to expect that Nature herself lacks free will, and might upset what we took to be her “laws” tomorrow. This is of course Hume’s famous problem of induction. But the physicists and chemists can shrug at the philosophers and say, “You go ahead and argue about why it works, but it clearly does.”
In contrast, the economists–certainly the macroeconomists–have no business whatsoever telling the rest of society, “You go ahead and argue about why we can predict so well in our field, but clearly we can.”
How Can We Be Sure Scott Sumner Opposes the Gold Standard?
Am I the only one who finds this hilarious? Check out the opening lines from a recent Sumner post:
What would Milton Friedman have thought of market monetarism?
I am working on an article with the preceding title. I have some ideas, but am also looking for help on a few points. I’ve come up with 2 arguments suggesting that Friedman would have opposed market monetarism, and 10 arguments suggesting he would have favored it. I need more “against” arguments as I’m obviously biased. This is going to be a “scholarly” paper, and hence there cannot be any bias in my analysis. That’s not allowed in scholarly papers. It’s why there is no lumping of t-stats at around 2.0 in published papers. Oh wait . . .
But seriously, I’d like arguments either way. Also I’d appreciate a quotation of Friedman opposing NGDP targeting. Here are two arguments suggesting Friedman would have opposed MM:
1. He once said he opposed NGDP targeting.
…
To avoid confusion, let me clarify that I cut off Scott’s post at the funny part. After that it just gets into boring econ stuff.
Which Economists Predicted the Sluggishness of the Economic Recovery?
Earlier this week Paul Krugman was patting himself on the back for predicting years ago that the economy would not bounce back quickly from our slump. After quoting himself from 2008 talking about how this slump was different from the V-shaped ones of the past, Krugman (writing two days ago) says:
That’s from early 2008, before we had any idea just how bad it was going to be, but it was already obvious to me then that V-shaped recovery was not in the cards, precisely because prolonged jobless recoveries had already, pre-2008, become the new normal. I was still too optimistic about the length of the slump, but remember, this was seven months before Lehman fell.
So I didn’t mean to imply that 2008 was completely sui generis; on the contrary, it simply represented a stronger form of a pattern that was already apparent from 2001 and before that in 1990-91.
Why, then, did the White House predict V-shaped recovery? I don’t know. I will say, however, that a lot of business economists were still thinking that a deep recession means a fast recovery, essentially because they weren’t thinking about the changing nature of slumps. And maybe that view infiltrated Treasury, in particular.
Not bad, Dr. Krugman. I seem to recall another guy at the time who was skeptical of the White House’s view of the recovery from the slump. Here’s what he wrote in March 2009:
[W]hen I read the [Council of Economic Advisers’] CEA’s forecast analysis, this sentence jumped out at me:
“a key fact is that recessions are followed by rebounds. Indeed, if periods of lower-than-normal growth were not followed by periods of higher-than-normal growth, the unemployment rate would never return to normal.”
That is, according to the CEA, because we are now experiencing below-average growth, we should raise our growth forecast in the future to put the economy back on trend in the long run. In the language of time-series econometrics, the CEA is premising its forecast on the economy being trend stationary.
…
In the CEA document, Table 2 shows growth rates immediately after recessions end. It demonstrates that growth is higher than normal in most of the recoveries. Is this evidence against the hypothesis that Campbell and I advanced?I don’t think so. The problem is that those numbers start at the end of the recessions, and we do not know when the recession will end. In other words, if God came down and told us the exact date the current recession was going to end, my forecast subsequent to that date would be for higher than normal growth. But absent that divine intervention, there is always some chance the recession will linger (remember the Great Depression), and an optimal forecast has to give some positive probability weight to that scenario as well. The forecast should be an unconditional expectation, not an expectation conditional on a particular end date for the recession.
…
Right now, we are facing a particularly high-variance economy. (Just look at the VIX index.) That means, under the conjecture I just described, that when recovery comes, it will probably be a robust one. But this logic is not necessarily a reason to raise the unconditional expectation of economic growth, because we don’t know when that recovery will begin.
That economist was Greg Mankiw. At the time, when he doubted the Administration’s forecast of a quick rebound from the slump, Krugman replied immediately:
As Brad DeLong says, sigh. Greg Mankiw challenges the administration’s prediction of relatively fast growth a few years from now on the basis that real GDP may have a unit root — that is, there’s no tendency for bad years to be offset by good years later.
I always thought the unit root thing involved a bit of deliberate obtuseness — it involved pretending that you didn’t know the difference between, say, low GDP growth due to a productivity slowdown like the one that happened from 1973 to 1995, on one side, and low GDP growth due to a severe recession. For one thing is very clear: variables that measure the use of resources, like unemployment or capacity utilization, do NOT have unit roots: when unemployment is high, it tends to fall. And together with Okun’s law, this says that yes, it is right to expect high growth in future if the economy is depressed now.
But to invoke the unit root thing to disparage growth forecasts now involves more than a bit of deliberate obtuseness. How can you fail to acknowledge that there’s huge slack capacity in the economy right now? And yes, we can expect fast growth if and when that capacity comes back into use.
I quoted the whole thing because it is simply amazing. It is awful for two separate reasons:
(1) Mankiw wasn’t denying that “we can expect fast growth if and when that capacity comes back into use.” Mankiw was saying that he doubted the Administration’s forecast that capacity would come back into use within a few years.
(2) KRUGMAN HIMSELF in that timeframe was denying that “low GDP growth due to a severe recession” would lead to a sharp rebound; that’s why he’s now patting himself on the back, after all.
I am trying to come up with an analogy for what Krugman did here, but there’s too many levels. It is simply impressive, is all I’ll say.
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