Anarchy in Somalia
Earlier this year the BBC did a series on the 20th anniversary of the fall of the Somali state. (Gene Callahan held a prayer vigil for Siad Barre, I hear.) It just came to my attention, but better late than never:
Economists familiar with the Rothbardian tradition have taken the analysis even further, persuasively arguing that Somalia is much better without a state than it was with one. The standard statist put-down — “If you Rothbardians like anarchy so much, why don’t you move to Somalia?” — misses the point. The Rothbardian doesn’t claim that the absence of a state is a sufficient condition for bliss. Rather, the Rothbardian says that however prosperous and law-abiding a society is, adding an institution of organized violence and theft will only make things worse.
NPR Podcast on PorcFest
I can’t believe I missed my chance to be on NPR… I heard this guy was walking around, but I never saw him.
Incidentally, George the bacon guy’s food was awesome. But he didn’t insist on silver payment, as the podcast suggests. I paid with FRNs, and so did most other people in line, the 5 times I bought stuff from him.
So basically, the guy’s big critique of PorcFest seems to be completely bogus. Maybe people were playing a joke on the dumb NPR guy? I don’t know.
Keynes Bask
OK for my Keynes, Krugman, and the Crisis class–we still have registrations rolling in, don’t be shy!–I have just assigned Chapters 1-3, and some selections from Chapter 12, to give about a 50-page excerpt from the General Theory to convey Keynes’ diagnosis of how the “classical” economists went wrong.
Now to make sure I know exactly what Keynes is doing–so that I can “dumb it down” for the layperson–let me ask the resident Keynesians for some clarifications, all related to Chapter 3:
* What is the unit of aggregate supply price and aggregate demand? In money?
* Is the aggregate supply price referring to the unit price, or the total proceeds? Keynes defines the aggregate supply price as the “expectation of proceeds which will just make it worth the while of the entrepreneurs to give that employment.” So does that mean total proceeds, or proceeds per unit of output?
* Related to this, are the functions Z=psi(N) and D=f(N) upward sloping? [UPDATE: It’s not psi, but I can’t remember my Greek letters…] (And what is the Y axis here–money?) So Keynes is saying that in the general case, D starts above Z, but has a lower slope, so that when N is really low, D is above Z, but eventually they intersect as N increases?
* Keynes says that when N is below the equilibrium point, then D is above Z, and so entrepreneurs have an incentive to hire more workers. But why? It sounds intuitive at first, but I’m not so sure it is. In particular, Keynes says that when N is such that D and Z intersect, the entrepreneurs profit has been maximized. But it seems to me the profit is zero at that point? (In a standard micro model, it’s fine for the producers to maximize profit at the point of zero-profit, because they’d earn negative profits at different levels of output. But that’s not what happens here. If N went below the intersection point, then wouldn’t aggregate profits go up?)
* Later on, when discussing the implications of the classical view, where D=Z at all levels of N, Keynes says “the forces of competition between entrepreneurs may be expected to push [N] to this maximum value.” But why? If Z and D overlap each other for all N, and Keynes has earlier argued that at the intersection point, aggregate profits are maximized, then why would entrepreneurs have an incentive to move N one way or the other, if Say’s Law holds?
More Comment Poltergeists
Once again, for some reason WordPress decided to change the comment settings on my posts, such that even posts that were already up and had a few comments on them, suddenly became “closed.” No idea why that periodically happens. Feel free to offer advice in the comments here, if it lets you.
I suspect that when Roddis and MamMoth reach the 50th exchange, some internal circuit breaker flips and tries to save the blog.
Konkin: We’re All Marxists Now
I did a crash course in agorism for a panel at PorcFest. Specifically, I read the New Libertarian Manifesto. (Thanks to the reader who pointed me to it.) I liked a lot of it, especially the fact that Konkin dedicated it gave special acknowledgements to Mises, Rothbard, and LeFevre. (This shocked me; I had no idea he was so hip-deep into a “right-winger” like Mises.)
However, I have two major complaints:
(1) Typos. The book is littered with them. And this was the second edition. Did Konkin not want to make an editor his wage-slave?
(2) The suspiciously Marxist-sounding recommendations for how we will achieve the new libertopia:
Each step from statism to agorism requires a different strategy; tactics will differ even within each step. There are some rules which will apply in all stages.
Under all circumstances, one recruits and educates. Given typically confused individual acquaintances who consider a counter-economic act, encourage them to do it. If they are intelligent enough and not likely to turn on you, explain risks involved and return expected. Most of all, educate them by your example to the extent you can let them know.
All “Library Libertarians” you know, those who profess some theoretical variant of libertarianism but eschew practice, should be encouraged to practice what they preach. Scorn their inaction, praise their first halting steps towards counter- economics. Interact with them more and more as trust grows with their competence and experience.
Those already in counter-economics whom you meet can be “let in on” the libertarian philosophy that you hold, that mysterious belief you hold which keeps you so happy and free of guilt. Drop it nonchalantly if they feign lack of interest: wax enthusiastic as they grow more curious and eager to learn.
Self agorism by example and argument. Control and program your emotional reactions to exhibit hostility at statism and deviationism, and to exhibit enthusiasm and joy at agorist acts and the State’s setbacks. Most of these tactics will come with routine but you can check yourself to polish a few things.
Finally, co-ordinate your activities with other New Libertarian activists. At this point, we arrive at the need for group tactics and organization.
Sorry, fans of Konkin, but that part I put in bold gives me the creeps.
Last Call for the Keynes/Krugman Class
It starts Wednesday evening. Here is the full infomercial, and here is the registration link.
Termite Bask
OK, so I moved into this house in Nashville in the fall of 2006. (Yes that’s right, I bought a house at nearly the peak of the housing bubble.)
From that time until today, I have (a) never seen any evidence of termites and (b) never had Terminix or other companies come.
Today, I had Terminix come to give my house a “booster shot.” There was no evidence of termite activity, but they were just doing an application to keep them at bay. That was in the early afternoon.
Just now, around 5pm, I went out to get my mail. I noticed that it was covered in (what I thought were) ants. Then I looked inside the mailbox and saw it was swarming with “ants.”
Well it turns out my wooden mailbox frame is covered with termites–hundreds of them.
The Terminix truck was parked near the bottom of my driveway, about 10 feet or so from the mailbox. Is there some conceivable way that hundreds of termites were in his vehicle and migrated to my mailbox? Or is this just an incredibly freaky coincidence?
Either way, what the heck do I do about my mailbox post that is covered with hundreds of termites? I don’t want to pay $300 or whatever it is, for them to come out and spray down a mailbox. Can I just buy something at the store, or is that being pennywise and pound foolish?
On Using Models
From Mises’ Theory of Money and Credit (though it is from the later material, which was written much later than the original 1912 edition):
“There are problems of theory full comprehension of which can be attained only with the aid of the theory of indirect exchange. To seek a solution of these problems, among which, for example, is the problem of crises, with no instruments but those of the theory of direct exchange, is inevitably to go astray.” (p. 462)
I’m not as knee-jerk opposed to “mathematical models” in economics as many Austrians claim to be. I think when we talk about Robinson Crusoe, or a two-country international trade problem, or use a Hayekian triangle, we’re basically doing the same type of thing.
However, Mises’ quote above really struck me, because I had had similar misgivings in our upper-level macro courses at NYU. In the world of the model, people (or should I say, the Representative Agent) had rational expectations, knew all the production functions, demand functions, and vector of equilibrium prices.
In that world, there was no role for money as a medium of exchange. We could arbitrarily pick one of the commodities as the numeraire, define its price as 1, and then price everything else relative to it. But ultimately this was a world of direct exchange, because there was no issue of goods having different degrees of liquidity (which is what drives the demand for money in the Austrian story).
Now of course, the mainstream macro guys want to be able to have a central bank in the model, and to put different monetary policy rules through a windtunnel. So there has to be “money” in the model, and there has to be a reason for people to hold it. So (at least in the standard models we were learning) they would just throw real cash balances directly in the utility function, so that the Representative Agent got utility from holding purchasing power the same way he would get utility from holding a Picasso.
It always seemed fishy to me that we were deriving “optimal” monetary policy in a model in which money really served no purpose, and where we had to make ad hoc tweaks to force people to even want to hold money.
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