Agorist Bask
Oops there was a slight miscommunication. I was originally going to be on an Agorist roundtable discussion at “Porc Fest” this Thursday, but I thought it got moved to a time before I’d arrive. Yet I’ve discovered that no, there are two Agorist discussion groups with Dan D’Amico and Roderick Long, and the Thursday one is still on.
So, what are the essential Sam Konkin works? I’ve read a little bit of his stuff before, but I am hardly an expert. So if you fans could point me to (online) things I can at least know the context before making a fool of myself. (I may very well still be in zombie makeup at that point, so my ignorance might appear to be staged.)
Discrimination Bask
I am writing something up on the Wal-Mart ruling. I know within the last year or two some libertarians (?) interviewed people in a mall, asking if black restaurant owners should be forced by the government to serve members of the KKK. Most people said no. Can anybody find the link to that video?
Bitcoin Crash in Real Time
This is kind of neat, though I have to disagree when the guy at one point says, “This is the biggest story of all time.” (And he’s not saying it tongue-in-cheek.)
I got the link from Justin Ptak’s blog post over at Mises. I gather from the comments that Justin has been critical of Bitcoin. I am still very open-minded (and still collecting info for the article some of us are working on). But one comment from Justin’s thread actually struck a chord with me:
Please, this is supposed to be perfect according to all those arguments with me. This can never happen. People don’t get compromised. It’s secure and impossible to violate. Now here we have one lone user completely destroying a supposedly “sound” monetary system in a matter of seconds. Now we have an arbitrary group called administrator’s taking on pseudo-governmental power and rolling back transactions THEY believe are suspect. No trial, nothing, just the suspicion of faulty transactions.
Another reason I have little faith this “money” will survive for very long.
I have seen this particular critic (“J. Murray”) say things in the past about Bitcoin that struck me as non sequiturs. This one, however, seemed pretty serious. If the whole point of Bitcoin is that there is no central administrator, then yeah–how was it that the Mt. Gox people can reverse trades? Is it that users hand over their private keys when they place their coins under the custodianship of Mt. Gox, and the people to whom they coins were transferred didn’t actually receive the coins in an “outside” capacity, but merely got their account with Mt. Gox credited?
Daniel Kuehn Embraces Bimetallism
Over the years, some have suggested that I am overly sensitive to criticism. (Naturally, I don’t talk to those jerks anymore.) Because of this, I want to report on a running dispute Daniel Kuehn and I have had. I believe that Daniel has demonstrated a clearcut double standard with respect to Paul Krugman and me, but I am open to other thoughts.
It all began when Daniel linked to a “fascinating paper” that explored the difference between aggregate expenditures and aggregate income. In theory the two should be the same, but for whatever reason(s) they are measured differently in the real world. The authors of the paper took the difference between the two measures, and plotted it against the national unemployment rate. Lo and behold, the two series clearly moved together. Daniel suggested that this was consistent with Keynesian theory, saying:
We would expect these discrepancies to have pronounced cyclical qualities. Particularly, when the income measure is high relative to the expenditure measure (when more income is being earned than is being spent) we’d expect to see more unemployment, and when the income measure is low relative to the expenditure measure, we’d expect to see less unemployment.
There was just one problem: The graph showed the opposite of what Daniel was saying he “expected” based on Keynesian theory. In other words, the graph from the “fascinating paper” showed that when the income measure was high relative to the expenditure measure, then we saw less unemployment, and vice versa.
Naturally I pointed this out, and suggested it was a problem for Daniel and Keynesianism. He didn’t see what the problem was, so I spelled it out in a post and then in a particular comment of that post.
Daniel then came back with a new post entitled, “Bob Murphy sees economic science very differently from how I see it, I think.” Here are some key excerpts from that post:
When I was working off a misunderstanding of the graphic, I talked about what we “expect to see” according to Keynesianism, and I said it was an interesting graph (I still think it’s an interesting graph – it’s surprising these discrepancies would end up being anything other than noise). I didn’t say it was proof of Keynesianism. But I did have an expectation going into it, and that expectation ended up being wrong.
So is that a reason to discount Keynesianism? Maybe. But I don’t understand why Bob is so quick to jump on that. He jumped on it with 1920-21. He jumped on it with his recent Mises Daily article where he declared the Austrian school was right on the stimulus and Keynesianism was wrong. And he appears eager to tally this to the anti-Keynesian camp here. I don’t understand this perspective.
My reaction is to say “Huh – that’s weird. I wonder why that is happening?” (non-Keynesians might not find it quite as weird because their expectations weren’t dashed like mine were). It seems to me we oughta try to answer that question before considering this a mark against anyone. Commenters here offered some ideas (including Nick Rowe who just said it’s impossible to interpret). In Bob’s comment string, I suggested a life cycle consumption hypothesis explanation – an explanation Bob apparently came to forty comments after me. That seems like a pretty reasonable explanation to me, which solves our conundrum. Is life-cycle consumption inconsistent with Keynesianism? It wasn’t the consumption theory Keynes offered, but it is not inconsistent with Keynesian macroeconomics. Is it inconsistent with the Austrian school? Not that I’m aware of. So the best explanation that the crowd-sourced minds of my blog and Bob’s blog can come up with for this data is once again something that is consistent with multiple macroeconomic theories. That’s where I come out at the end of this, and that’s what I call scientific progress. We have a lot of ideas. We take it to the data. I make mistakes. I get my mistakes corrected by my peers. I get curious and confused. We figure out an explanation of the data, and we draw conclusions. For a scientific or an empirical mind, this has all been a great experience, and I am plenty happy to admit I was wrong.
But there seems to be this tendency in some corners – instead of doing science – to do proofs and falsifications. It makes sense, of course, that Austrians think in terms of “proving” things. That’s the deductive mindset after all. It shouldn’t surprise regular readers to learn that I really don’t think we’re equipped to do that. If you’re interested in abstract philosophy and epistemology, Popper is among the best. If you’re actually interested in doing something useful you can largely forget Popper (well – at least you can forget Popperian epistemology – I don’t want to rip on Popper himself, who may very well have agreed that epistemology is of limited use in the practice of science, except as a vague mirage). I have serious doubts that Keynesian theory is falsifiable. I have serious doubts that Austrian theory is falsifiable. I have serious doubts that any truly interesting theory, at least of a highly complex phenomenon, is falsifiable. This point is crucial for scientists to understand.
Now that is fine as far as it goes, but at this point in our debate I had already begun to suspect the dreaded double standard. So I said in the comments:
Daniel, can you point us to where you criticized Krugman’s deductionist viewpoint in the numerous posts he’s made, like this? If I didn’t know [any better], I would say Krugman feels vindicated since Keynesian theory predicted interest rate and inflation movements better than the Chicago School and Austrian guys. But surely Krugman isn’t a follower of non-scientific Austrianism.
(You can read Daniel’s reply here.)
There the controversy died away. It was rekindled today when Krugman ran a post containing yet another victory lap:
And here we are, two-plus years later, and the interest rate on 10-year U.S. Treasuries is only 2.94 percent. This should count as a triumph of economic analysis: the model was pitted against the intuitions of practical men, making a prediction many people considered ridiculous – and the model was right.
And nobody noticed; economic discourse – and even a lot of investment strategy — continues to rely on the supply-and-demand-for-bonds view, even though it has been thoroughly discredited by experience.
How is this possible?
One answer is that the Greeks muddied the waters…
More broadly, I guess it turns out that Hicks/Keynes analysis is harder than it looks, and that even smart people – many of them with economics PhDs – just can’t wrap their minds around the notion that sometimes just doing supply and demand isn’t enough.
The result – that one theory has been proved wrong, another proved right, yet the world continues to believe in Theory #1 – is frustrating. It’s also tragic, because that intellectual obstinacy is contributing to the “new normal” of permanently high unemployment.
Now the connection (to me) to my dispute with Daniel was so obvious, I sent the following email (in its entirety), subject line “krugman sounding like murphy,” to him:
“If I were completely petty, I would post a blog and this demanding that you chastise Krugman. But I’ll just send it to you instead.”
And then I pasted the link to Krugman’s blog. Here is what Daniel said in response. This is his full email, reproduced with his permission:
I’m happy to chastize, but what exactly would I be chastizing him for?
The strict “proven wrong/proven right” language? I could certainly note that it’s hard to absolutely dismiss arguments in macro… but if you soften that language a little I’m pretty sympathetic to the drift of the post. Is that what you were getting at?
I had actually requested that Brad repost that post that Krugman is refering to. I think it’s one of his best.
So, am I being touchy, or is this a jaw-dropping double standard? I am genuinely open to different opinions on this, since Daniel isn’t trying to be a jerk (and neither am I). Is this just a classic illustration of the fact that it seems worse when somebody on “their side” attacks “one of us”?
Does Ethanol Make Gasoline Cheaper?
There is a big push by the pro-ethanol people to publicize the results of a new study from Iowa State showing that ethanol “reduced gas prices by 89 cents per gallon in 2010.” I didn’t have too much time to respond, but here is what I wrote for IER last week on it.
For those of you who are professional economists with econometrics training, I would love to hear your reaction. In particular, please check out my analysis regarding the differential impact that ethanol supposedly had in the Midwest versus the East Coast. The study found that ethanol “held down” gas prices more in the Midwest than in the East Coast, and yet the actual change in gas prices over the period in question is much smaller than the reported difference. So I took this to mean that the regression the Iowa State professors ran, doesn’t really do what they think it does.
Discuss.
(Last thing: If libertarian purists want to get into the distinction between tax credits versus outright subsidies, that is fine. I actually was going to write on that, but the post was already too long. Another issue is that there are actual mandates for blending a certain volume of ethanol by certain years, so there is definite intervention at the federal level into the ethanol industry. I.e. it’s not merely letting them keep more of their money than they take from other producers who rely on conventional oil and gasoline.)
Austrians versus Chicago School
I wrote this piece because two different people asked me in the same week if there were an article such as this… An excerpt:
Although Friedman’s analysis sounds perfectly reasonable, and the epitome of “scientific,” Mises thought it was a seductive trap for economists. For a quick illustration of the difference in perspectives, let me relay an example from my teaching experience.
It was a principles of microeconomics class, and we were using the (excellent) textbook by Gwartney, Stroup, et al. In the first chapter they have a list of several guideposts or principles of the economic way of thinking. As I recall, these are items such as, “People respond to incentives,” and “There are always tradeoffs.” These were noncontroversial things that every economist would agree were important for getting undergrads to “think like an economist.”
However, the one guidepost that stuck out like a sore thumb announced, “To be scientific, an economic theory must make testable predictions.” I explained to the class that even though this was a popular view among professional economists, it was not one that I shared. I explained that everything we would learn the entire semester from the Gwartney et al. textbook would not yield testable predictions. On the contrary, I would simply teach them a framework with which they could interpret the world. The students would have to decide whether the framework was useful, but ultimately their decision wouldn’t boil down to, “Did these tools of supply and demand make good predictions?”
After I went through my spiel, one of the students made the excellent observation that not a single one of the other guideposts was a testable prediction. He was right! For example, how could someone test the claim that, “People respond to incentives”? I could say to a person, “I’ll give you $20 if you cut off your big toe.” Regardless of what happens, my claim is safe and secure. If the person doesn’t cut off his big toe, it just shows that I didn’t offer him a big enough incentive.
Outsourcing
This guy emailed me with some concerns about my recent gold standard essay, but I said I would outsource it to you folks. So if any of you want to reply to him, please do.
God Has a Plan
One of the side benefits of believing in an all-powerful, loving God is that when you are worried about something, you can reassure yourself that there is a plan behind it. This observation doesn’t mean “it will be fine” in the short-term; you may very well be worried for good reason. But it does mean that one day, you will understand why things had to turn out that way they did.
Another technique I use to work through paralyzing worry is to stop focusing on things from my own perspective. In other words, stop thinking, “Such-and-such might be awful because things might turn out this way for me…” If instead I start thinking, “How can I mitigate the impact on others if this bad thing happens…?” then I can become productive again.
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