CNBC’s Description of John D. Rockefeller
OK so I was taking a break in between tasks and flipped through CNBC’s Best American CEOs of All Time slideshow. #6 was Rockefeller, and here’s what they had to say:
It’s hard to top Rockefeller as a monopolist or philanthropist. While doling out dimes and nickels to the poor, John D. built a sprawling empire by squashing, undercutting, and buying up the competition. Over a two-month period in 1872, Standard Oil absorbed 22 of the 26 petroleum firms in Cleveland, where the company was first headquartered. By 1879, it had about 90 percent of the market for refining petroleum and all but complete control of the U.S. oil industry.
THE STAT: Rockefeller’s fortune peaked in 1912 at $900 million ($19 billion in today’s dollars), but by the time he died, in 1937, he’d given most of his money away to heirs and charities.
Let’s put aside the scurrilous “monopolist” charge, since Rockefeller was able to “squash” his competitors by slashing the price of kerosene and other refined oil products. (I discuss Rockefeller and other “robber barons” in my PIG to Capitalism.)
Where in the HECK do they get off saying he gave out “dimes and nickels” to the poor?!* Even if you buy into the standard (crazy) notion that Rockefeller was bad for making so much money, but good for donating most of it back, you can’t say that he nickel and dimed the objects of his philanthropy. Just look at some of the things his money financed.
* In the comments a reader informs me that Rockefeller handed out nickels and dimes to the poor. Hence, that is probably where the writer got the idea for putting that in the description.
Taking the Good with the Bad: N. Gregory Mankiw
I have two negative things to say about the analysis of Greg Mankiw, so let me start off with two positive things. First, check out this hilarious post where he busts the hypocrisy of Ben Bernanke.
Second, reader Stan Kwiatkowski sends me this blast from the past where Mankiw praises Barney Frank for citing Mises and Hayek. (!)
OK but now the bad news. Here I strongly criticize Mankiw’s notorious NYT op ed where he called on the Fed to promise large future inflation as a way to rescue the economy.
Finally, in this post Mankiw epitomizes a trend that really irks me among academic economists. What happens is that they set up a model of the economy that is unrealistic, but they forget that. And then when someone thinks about the economy in an unrealistic but different way, the academic economist pounces as if he has a monopoly on truth–even though the layman’s model’s result might actually be closer to reality!
I’ve criticized David Friedman and Steve Landsburg for this type of thing in the past. For our present example, Mankiw is pooh-poohing a website that offers a simulation of a rollercoaster ride the mimics the Dow Jones Industrial Average from 2007 to 2009. Mankiw comments:
But that can’t be right. Stock prices are approximately brownian motion, which means they are everywhere continuous but nowhere differentiable. In plainer English, “continuous” means that stock prices an instant from now, or an instant ago, are close to where they are now. But “not differentiable” means that the direction they move over the next instant is not necessarily close to the the direction they were heading over the last instant. A roller coaster with that property would be quite a ride.
Hang on a second. First of all, stock prices do not obey Brownian motion. As Mankiw says, Brownian motion is continuous, meaning that if a stock price goes from (say) $100 at 9:30 am to $110 at 9:31 am, then technically the stock price must have hit every intermediate price–$100.01, $100.02, all the way up to $109.99–for some definite time interval in between 9:30am and 9:31am. Obviously that’s not true, and it’s why Hu McCulloch actually favors Mandelbrot’s “stable Paretian” (a non-Gaussian) model of stock price movements, which allows discontinuous jumps (after a bad report on the company, or a war breaks out, for example). (Thomas Bundt and I have an article in the Review of Austrian Economics on this, but I don’t think the issue is online yet? I can’t find it online and it came out pretty recently.)
So sure, Mankiw is right that the rollercoaster simulation is just taking averages of the truly erratic movements in the stock price, but so what? That’s what the Brownian motion approximations used in cutting edge finance models do as well. (And we all know how accurate those models have turned out to be…)
Finally, if I may be a true geek: Is it really the case that a track involving continuous but non-differentiable pieces would be “quite a ride”? I admit that it’s not everywhere non-differentiable, but unless Mankiw lives in a ranch, I bet everyday he traverses a track that is continuous and (at several points) non-differentiable. Yet he probably negotiates it without too much trouble.
How Tyler Cowen and David Friedman Can Get Rich(er)
One of the things that contributes most to my feelings of guilt is that I have to blow off so many people who email with possibly fantastic new ideas that would revolutionize a particular academic field or even the “real world.” More and more, I’ve had to say, “You may very well be right, but I simply don’t have the time to read your paper. I encourage you to try to clean it up and submit to journals X, Y, Z…”
The problem, of course, is that a lot of these people are…weird…and on top of that they don’t have any official credentials. Furthermore, they are often (rightly or wrongly) bitter that here they are, sitting on Fantastic Idea X, and even the Austrians / libertarians / whomever don’t appreciate how awesome it is!!
So I thought of a possible way to process these ideas, to reduce the chance that we’re letting something beautiful slip away just because the guy who thought of it has a tendency to send emails with a lot of CAPITALIZED WORDS. This approach wouldn’t work with me (yet), because I’m not a big enough gun for most academics or venture capitalists to care about. But it might work for, say, Tyler Cowen or David Friedman, who not only are big names and considered really really smart, but also have a reputation for being multidisciplinary. In other words, I think a lot of people would take it seriously if Cowen or Friedman thought they came across a really good idea. So here’s the process:
(1) At the start of the calendar year, the Big Gun establishes a submission price. Let’s say it’s $1000. The entrant submits a Great Idea with the $1000 fee, and then the Big Gun will spend 5 quality hours really considering its merits. For this effort, the Big Gun pays himself $500, and puts the other $500 in a pot.
(2) At the end of the calendar year, the Big Gun ranks the submissions in terms of which should receive more attention from the experts in the relevant field(s). I.e. the top pick is “the single most promising idea submitted to me all year.”
(3) Besides the seal of approval from the Big Gun, the top entrant(s) get dibs on the other half of the submission fees. E.g. maybe the first place gets 50% of the pot, while second place gets 35% and third place gets 15%. The cash award helps the submitters develop their idea more.
Now if this were to really take off, it would spawn a new industry of talent scouts. E.g. after Tyler Cowen had announced his rankings three years in a row, third parties would have a pretty good idea of what types of entries end up winning. (E.g. anything involving secession would be out, and anything involving ethnic food would be a strong candidate.) So these scouts would setup websites where Joe Schmoe could email in his idea for free. Then if the scout thought Joe Schmoe’s idea good enough, the scout would (according to a prearranged contract on the website) pay Joe Schmoe a flat fee (say $100) and then put up the $1000 submission for Tyler’s own procedure. If Joe Schmoe’s idea won that year, then the talent scout would retain the cash award (and maybe give Joe Schmoe a cut, again based on the arrangement beforehand) but of course the world would know it was Joe Schmoe who actually came up with the idea.
I think a process like this would avoid some of the flaws in our current arrangement. I really am not being facetious when I say that I’ve had some potentially brilliant ideas emailed to me, but I’m also being dead serious when I say I just can’t afford to properly investigate them. And it’s also not “right” that I should only consider ideas where someone pays me to consider them (e.g. here). That would leave too many potentially great ideas unconsidered.
Over time, those Big Guns who proved themselves capable of really identifying promising ideas would be able to command bigger and bigger fees. Competition would presumably also whittle down the percentage of the submission fees that the Big Gun keeps for him or herself. Those thinkers who have a comparative advantage in spotting a promising idea–which may not necessarily be the same thinkers who can dream up their own ideas, or who can take a promising idea and bring it to completion–would end up spending more and more of their time evaluating entries. With the promise of someone taking them seriously, thousands of amateurs all over the world would dust off that one really great idea they had, and spend a few weekends developing it enough to send to the talent scout websites.
And Hayek would smile on the whole enterprise.
Do Parents Matter?
Bryan Caplan has been pounding on his theme over at EconLog that “parents don’t matter.” (See here and here.) I must confess that I am incredibly biased because one of my core beliefs is that parents have an incredibly profound influence on their kids. But having confessed my bias, I must report that I find this whole line of thought to be silly, because the proponents are quite obviously exaggerating their findings.
For example, in the first hyperlink above, Caplan asks, “Do Parents Affect How Long You Live?” Do we really need to debate that? Does Caplan deny that if a parent locks a toddler in the closet, he’ll die? Of course not. OK let’s make it fairer: Does Caplan deny that a kid raised by parents in certain African regions will have a shorter lifespan than a kid raised in 90210? Of course not.
Well then what does he mean? Turns out he’s referring to nagging, as in, if you tell your kid not to eat potato chips, will he end up living longer. Bryan says the literature on twin adoption studies shows once again that “parents don’t matter.” I confess I haven’t looked at the studies, but I will go out on a limb and say they are flawed (if they conclude what Bryan says they do).
As I pointed out in my critical review of Freakonomics, these “parents don’t matter” arguments seem to really just rule out a particular mechanism through which parents might matter. In Freako, Levitt said that telling your kid to read doesn’t affect how much he reads. Aww dangit, I can’t influence my kid. Shoot.
Oh wait a minute, you know what Levitt says does get your kid to read more? If you have a lot of books around the house and your kid sees that you yourself are a reader and value reading.
And I feel the same way about other studies that purport to show, “Hey it’s not parents, it’s a kid’s peers that affect his personality.” Well duh, you don’t think parents influence that? Just deciding where to live and what school to send the kid to, has a huge influence in that respect. It’s not just threatening Johnny to stop hanging out with those hoods down the street.
Last point: I asked Bryan for the single best article to show me that parents don’t affect outcomes, and I promised I would read it carefully. But he sent me an article that DID say parents affected outcomes, and Bryan was merely quibbling about how big the effect was.
So for all you parents out there, sorry, you should still feel responsible for how your kid turns out. I know I know, you haven’t gotten a good night’s sleep since they were born, and on top of that now I’m saddling you with a bunch of guilt too. But at least they’re outrageously cute. (Bryan agrees with us on that score.)
Robert Wenzel: I Love the Way This Guy Thinks
Check out his post speculating that the mysterious flu outbreak was a botched effort to force the commander in chief to assume room temperature. (Note that I am trying to avoid being flagged by the government computers that undoubtedly scour the internet looking for key phrases. Because of the post I’ve linked to above, I’m sure Wenzel is now on some list. Of course, he probably got on that list 7 years ago.)
Which One Doesn’t Belong?
At least one legal scholar in the photo below is not enthusiastic about Rothbardian private legal systems. Can you guess who? (HT2 Dick Clark for the photo.)
Ben Stein’s Expelled
A few years ago, when I was a college professor at Hillsdale (where a large fraction of the student body was very interested in Intelligent Design), I spent a lot of time reading in this area. My conclusion was that (a) the vast vast majority of people who subscribed to ID were Christians who had already rejected the orthodox Darwinian account on other grounds, and (b) the prominent evolutionary biologists who said things like “evolution is a fact as well established as gravity” were bluffing. But as with most heated disputes that get people yelling at each other, a lot of the problem was in their framing of the dispute; each side was misunderstanding the claims of the other.
Anyway I recently watched Ben Stein’s documentary Expelled: No Intelligence Allowed, which you can watch instantly at Netflix. My first thought is, “I can’t believe he interviewed all those big guns in the various fields, and managed to produce an entire documentary in which the new viewer would walk away with not a single major argument over which the ID debate rages.” The beginning of the movie focuses on people who were allegedly blacklisted by their professional peers because they had the audacity to discuss ID in a sympathetic light. (Tim Swanson points me to this site claiming that this sob stories are deceptive.) Judging just from the interviews in the movie, I got the sense that a few of the people seemed as if they had been railroaded, but a few other ones seemed to have a martyr complex, so I was suspicious.
The most hilarious thing in the movie–and which perfectly epitomizes the huge waste of time in this debate–is that in the final encounter, Richard Dawkins literally gives up the whole game to Stein, and then Stein manages to come back and (almost) surrender to the other side. Naturally, neither man seemed aware of how poorly he had played in their match. Argh.
In order to explain my observation, I’ll give a very quick background: Contrary to what you may have heard, the proponents of ID do not necessarily even dispute the theory of common descent. For example, I am pretty sure that Michael Behe (who coined the term “irreducible complexity” and loves talking about the “outboard motor” of a bacterial flagellum) is perfectly happy to concede that all living cells today are descendants from a single cell that was the only living thing billions of years ago. But what Behe (and other IDers) dispute is the standard neo-Darwinian claim that it was random mutations and natural selection alone that could have transformed that first cell into all of the things we see today in biology.
In particular, the IDers reject the standard claim that “nobody directs evolution” or that “there is no designer when it comes to life.” They think that this is a completely unwarranted leap beyond what the brute facts of biology tell us. The ID people think that the hard, scientific facts leave open the possibility–and in fact render it the most likely explanation–that something intelligent must have been involved to produce the current mix of life forms. Obviously, most IDers think that intelligence was in the mind of God, but strictly speaking ID theory itself does not get into the identity of the intelligence.
In opposition to ID, the standard Darwinian response has been to (a) dispute the particular “impossible” leaps that the IDers say foil the random mutation / natural selection story, (b) go even further and claim that the very notion of discussing an intelligent designer is unscientific and out of bounds, and (c) speculate that ID is really just a smokescreen for Bible-thumping Christians to smuggle Genesis back into the classroom and label it “science” instead of religion.
OK I’m not going to get into the pros and cons of this position. Like I said, a few years ago I got sucked into the debate and it was a huge time suck. (Not to mention, it convinced many people that I was crazy and/or an idiot.)
But I don’t have to discuss the pros and cons of the case, because Dawkins and Stein each validated the strongest charges of each other (and without realizing it). In the final scene, in a moment of graciousness Dawkins concedes that OK there could be an intelligent designer of terrestrial life, but only if life evolved on other planets (through the undesigned Darwinian process) and then those life forms designed and seeded life here on earth.
At that point, Stein had won. Had he really understood the ID position and the philosophical issues flying around in the debate, he should have said, “I am sorry to inform you, Dr. Dawkins, but you just declared Michael Behe and William Dembski the undisputed winners, and Eugenie Scott the clear loser. For Scott and the other “consensus” scientists have been saying that the very notion of looking for “motives” and “design” in biology is not just wrong, but unscientific. You have just shown that this is silly. If indeed aliens designed the first terrestrial cell and planted it here billions of years ago, then it would naturally take human scientists to uncover this fact and study it. We wouldn’t rely on philosophers and theologians to flesh out the theory of alien seeding.”
But alas, that’s not what Stein said. Rather, he muttered something like, “So you’re not against design, just a particular kind of designer.” Now actually, that was a decent point–i.e. Stein was highlighting that the Darwinians were bluffing when they categorically stated that design per se was unscientific–but he nonetheless confirmed all of the atheist biologists’ suspicions that the IDers really were after confirmation in God designing everything.
Final point: I could not BELIEVE Stein spent a large chunk of the movie exploring Nazi death chambers. I don’t know what the point of that was. Anybody who was convinced of the merits of ID didn’t need to see “where evolutionary theory takes us,” and opponents of course would just go ballistic at such a blatantly emotional ploy. It would be like a pro-Darwin documentary spending time on the Inquisition to show the “logical conclusion” of Intelligent Design theory.
God and Government
A colleague in Nashville (who is also an Austrian and a Christian) and I have been discussing the well-known passage in Judges (17:6) that says, “In those days there was no king in Israel; everyone did what was right in his own eyes.”
I think most American Christians believe that this passage condemns anarchy, i.e. a lack of what we all mean today by the term “government.”
But my colleague and I have been wondering if that’s a misreading. For sure, God certainly doesn’t seem to think that the absence of an earthly king is a problem. He famously warns the Israelites when they ask Him to choose a king over them (I Samuel 8):
10 Samuel told all the words of the LORD to the people who were asking him for a king. 11 He said, “This is what the king who will reign over you will do: He will take your sons and make them serve with his chariots and horses, and they will run in front of his chariots. 12 Some he will assign to be commanders of thousands and commanders of fifties, and others to plow his ground and reap his harvest, and still others to make weapons of war and equipment for his chariots. 13 He will take your daughters to be perfumers and cooks and bakers. 14 He will take the best of your fields and vineyards and olive groves and give them to his attendants. 15 He will take a tenth of your grain and of your vintage and give it to his officials and attendants. 16 Your menservants and maidservants and the best of your cattle [b] and donkeys he will take for his own use. 17 He will take a tenth of your flocks, and you yourselves will become his slaves. 18 When that day comes, you will cry out for relief from the king you have chosen, and the LORD will not answer you in that day.”
19 But the people refused to listen to Samuel. “No!” they said. “We want a king over us. 20 Then we will be like all the other nations, with a king to lead us and to go out before us and fight our battles.”
21 When Samuel heard all that the people said, he repeated it before the LORD. 22 The LORD answered, “Listen to them and give them a king.”
So it’s clear that God may have thought it was important for the Israelites to have human judges but not a (human) king. I find this fascinating since I have mused on how a completely free market in law might function.
Incidentally, there is a more succinct way to handle the issue, found in Deuteronomy. The typical Republican Christian is right when he thinks, “You can’t have people just doing whatever is right in their own eyes!” And indeed, Moses tells the Israelites (Dt 12) that when they cross into the Promised Land:
8 “You shall not at all do as we are doing here today—every man doing whatever is right in his own eyes—9 for as yet you have not come to the rest and the inheritance which the LORD your God is giving you.”
OK, but then how should they behave? He explains in Dt 13:
17 So none of the accursed things shall remain in your hand, that the LORD may turn from the fierceness of His anger and show you mercy, have compassion on you and multiply you, just as He swore to your fathers, 18 because you have listened to the voice of the LORD your God, to keep all His commandments which I command you today, to do what is right in the eyes of the LORD your God.
So it’s certainly true that you can’t have “anarchy,” meaning people doing whatever the heck they feel like. But from that it does not at all follow that those who believe in the God of Moses should establish and obey human political rulers, certainly not as they exist in our modern nation-State, which in practice has truly been institutionalized evil since its invention.
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