Consulting by RPM || Free Advice Blog

The Nobel Laureates

For those of you who are pure econ geeks, here are some links:

==> As usual, check out Tyler Cowen, on Paul Romer (make sure you read the thing about Romer saying World Bank reports couldn’t use “and” more than 2.6% of the words) and William Nordhaus.

==> Also as usual, the person whose take is closest to mine is David R. Henderson in the WSJ (paywall). He also gives a shout-out to me, if that nudges you to read it.

==> If you’re a grad student or above, this post by A Fine Theorem is pretty good for explaining the development of these fields. However, do you folks agree with his description of the classical economists and their view of growth? Seems a bit off, to me.

Nordhaus vs. IPCC

I’m going to write more on this in the coming weeks, but for now, let me point you to my reaction at IER to William Nordhaus winning the Nobel, on the same day the IPCC’s latest came out. An excerpt:

Now, any normal citizen reading the above two samples from our major media—who ostensibly are all up-to-speed on the “consensus” and would never dream of letting ideology get in the way of the empirical evidence—would be quite certain that William Nordhaus’ work supports the IPCC’s call to limit global warming to 1.5°C. And yet, as I’ll show in the next section, this is utterly false. Nordhaus’ work shows that such an ambitious climate change goal is far too aggressive.

A Difference in Worldviews

At church today that pastor was introducing our series on the Book of Revelation. I was talking with my son afterwards, and I mentioned that–among other things–it dealt with “the end of the world,” quite literally. It details the Apocalypse.

That explains why so many movies are based on it: the end of the world is quite a gripping and dramatic topic.

But from the perspective of those who believe in Jesus, it is actually a relief. The suffering of this world finally comes to an end:

The New Heaven and the New Earth

Then I saw a new heaven and a new earth, for the first heaven and the first earth had passed away, and the sea was no more. ² And I saw the holy city, new Jerusalem, coming down out of heaven from God, prepared as a bride adorned for her husband. ³ And I heard a loud voice from the throne saying, “Behold, the dwelling place^[a] of God is with man. He will dwell with them, and they will be his people,^[b] and God himself will be with them as their God.^[c] 4 He will wipe away every tear from their eyes, and death shall be no more, neither shall there be mourning, nor crying, nor pain anymore, for the former things have passed away.”

⁵ And he who was seated on the throne said, “Behold, I am making all things new.” Also he said, “Write this down, for these words are trustworthy and true.” ⁶ And he said to me, “It is done! I am the Alpha and the Omega, the beginning and the end. To the thirsty I will give from the spring of the water of life without payment. ⁷ The one who conquers will have this heritage, and I will be his God and he will be my son. ⁸ But as for the cowardly, the faithless, the detestable, as for murderers, the sexually immoral, sorcerers, idolaters, and all liars, their portion will be in the lake that burns with fire and sulfur, which is the second death.”

Can You Outsmart Steve Landsburg?

Steve’s got a new book! I haven’t read the finished product, but I saw an early draft of the manuscript and this looks fun. If you like his blog you will love this book.

Murphy vs. the Market Monetarists

It is a dirty rotten lie when people say I just go after Krugman. In my latest for Mises.org, I have a long critique of Scott Sumner and Kevin Erdmann’s narrative of the housing boom/bust. An excerpt:

On the face of it, Erdmann is trying to demonstrate that if we use an objective measure, then it seems there was nothing unusual—from a historical perspective—about the growth in the stock of housing in the mid-2000s. After all, even at its recent peak, the particular measure of “Housing Units per capita” was still lower than it had been in the late 1980s.

There are several responses I’ll give to this line of argument. First, who’s to say that the level in the late 1980s was correct? After all, there had been a devastating crash in the real estate market (and related crises in banking) following the “closing of loopholes” in the 1986 Tax Reform Act.

A second problem is that there is an admitted discontinuity in the data set, which is why Erdmann draws the dotted line in his graph. If we just start with the consistent data set beginning in 2000, then the chart is broadly consistent with the claim that there was an unsustainable surge in housing stock in the mid-2000s.

A third problem is that houses nowadays are much bigger than they were in the 1970s. Mark Perry reports that for new homes (of a certain category), living space per person has nearly doubled since 1973. A much more revealing statistic, then, would be something like, “Housing square footage per capita,” which I imagine would have been at all-time highs circa 2007 (though I couldn’t find the data needed to either back up or reject my hunch).

Finally and perhaps most serious, is the problem that Erdmann is playing central planner. We can’t look at aggregate statistics like “housing units per person” and decide whether “too much” or “too little” housing has been built in the country. If we could, then the socialist calculation problem would be a snap to solve.

Keeping Up With the Murphys

I am not sure how backlogged I am, so I’ll err on the side of posting some repeats:

==> Contra Krugman episodes 155, 156, 157, and 158.

==> Lara-Murphy Show episode 63 (“Why Learn Austrian Economics?”).

==> And my latest at mises.org: A collection of Krugman Kontradictions! Fun for the whole family.

Deep Thoughts on Hoax Publications

Please do not misinterpret this blog post. I totally get THAT the revelations about a round of hoax publications are hilarious and serve to discredit the journals/disciplines involved. But I want to think more about WHY they have this effect.

The quickest way to get my perspective across is to use a thought experiment. Consider the following articles:

1) Claims the legal system and even military defense should be privatized.

2) Argues in favor of selling kidneys to the highest bidder.

3) Argues that the US suffered from a housing undersupply in 2006.

4) Makes the case that Ben Bernanke had the tightest monetary policy since the 1930s.

5) Uses economics to develop a model in which human sacrifice is a rational practice.

I submit that any normal red-blooded American would think all five of the above were parodies. (Indeed, I myself am still waiting for Sumner to jump out and yell, “Surprise! You suckers, Murphy was the only one onto me all these years. I was kicking him under the table.”)

Does that affect the quality of their arguments or make us skeptical of the outlets that published these ideas?

Last One I Promise: Krugman on DeLong on Murphy on Potential GDP

I’m just trying to get my ducks in a row here “among friends” before I go out into the cruel world. I think I have a very strong case so I don’t want to commit an unforced error.

A few of you who have no axe to grind (such as Capt. Parker, who is outranked by Major Freedom just to be clear) are disputing my claim that both DeLong AND Krugman were saying potential GDP wasn’t much lower than the pre-recession trajectory would have implied, as of August 2013. And yet, DeLong goes through a whole post saying I didn’t do my homework, because if you looked at various investment considerations and other factors, you’d know that potential GDP in August 2013 was 1% below trend.

Then Krugman linked to that post and opened with: “Brad DeLong gets very annoyed at Robert Murphy, who ridicules him for not taking into account the effect of low investment on potential output. Brad notes that Murphy apparently hasn’t done the math, which indicates that even the sustained shortfall we’ve had since 2008 (mainly in residential investment) should not have had a major effect.“ (I added the bold.)

So help me out, guys. You’re saying that *really* what Krugman was saying there was, “For all I know, Murphy is right when he says potential GDP is substantially down because of shortfalls in investment since the recession struck”?

One last potential loophole: It occurred to me that perhaps Krugman merely meant, “Sure, potential GDP could be way down–who knows?–but if it *is*, it’s not because of investment patterns. Rather it’s because unemployed workers see their skills atrophy through disuse.”

But that’s not the story at least in the papers Krugman links in his latest post. I haven’t seen anybody make that particular point; instead I see them talking about “procyclical R&D and other investment” that gets hit when governments foolishly engage in austerity.

Either way, I’ll move on with my life (here on the blog) after this post, but I really have no idea what you guys are talking about. Any normal person would be certain Krugman was agreeing with DeLong in August 2013, when he claimed all the data suggested potential GDP was maybe 1% below trend.