Economics of the Undead: Zombies, Vampires, and the Dismal Science

July 11, 2014

by Glen Whitman

Last year in this space, I posted the Call for Abstracts for a forthcoming book called Economics of the Undead. That project is now coming to fruition! The book will officially be published tomorrow; here’s the Amazon page, and here’s the Barnes & Noble page. (The Kindle version should also become available tomorrow.) If the brilliant title and fetching cover haven’t already convinced you to buy the book, then you should visit the official website, which includes the table of contents, chapter excerpts, a course guide, and even a blog.

I know that some economists, including some who might frequent this page, have a problem with the term “dismal science.” For that reason, I thought I should post the following passage from the book’s introduction:

But before you start sampling, let’s return for a moment to the subtitle of this book: “Zombies, Vampires, and the Dismal Science.” In a book about the undead, we couldn’t resist the temptation to use the economics discipline’s most famous nickname. But while many people know economics as the dismal science, few know the true origin of that phrase. It came from Thomas Carlyle, another Scottish philosopher. And Carlyle was not denigrating economists for their (quite real) tendency to emphasize the limits of our resources and the barriers to remaking society as a fanciful utopia. No, Carlyle was criticizing economists for supporting the abolition of slavery! He was incensed by the optimism of economists like John Stuart Mill, who believed that people of African origin—like people of all races—were capable of governing themselves.

We tell this story because we think you’ll find, possibly to your surprise, that this book presents one of the more optimistic perspectives you’ll find on the undead threat. From Darwyyn Deyo and David T. Mitchell’s argument that we should trade with vampires instead of staking them; to Kyle Bishop, David Tufte, and Mary Jo Tufte’s suggestion that innovative humans might ultimately achieve victory over the zombie threat; to Brian Hollar’s discussion of how humans will seek prosperity even after a zombie apocalypse, a broad theme emerges: that humans—and maybe our recently dead brethren as well—have a vast capacity to cope with adversity and somehow make the world a better place.

(There’s also a citation to Levy and Peart in there, which I have omitted from this post.)


Economics Music Video Contest: Markets Promote Peace

June 30, 2014

by Edward Stringham

As a professor, I am a  fan of rigorous economic research, but I am also a fan of helping students learn about how important economics is in an engaging way. John Papola did an excellent job with the Keynes Versus Hayek music videos (especially the second one with yours truly), and over the past couple years I have had students make economics music videos. Think it is impossible to have music videos about Supply and Demand or Economic Value is Subjective? Think again! The results of the 2012 Supply and Demand Music Video Contest and the 2013 Economic Value is Subjective Video Contest have  been fantastic and have had more than 100,000 views on Youtube. See the winning entries below.

I am pleased to announce the 2014 Economics Music Video Contest on Markets Promote Peace. Winners get $2,500 and their professor gets $500. According to the great 19th century liberal, Richard Coben, markets help change a relationship between strangers from one of indifference, or even contempt, to one of mutual benefit. People who may not have cared about each other, now see the other party as an ally. Militarism, on the other hand, causes conflict. To Cobden an important, more humane, and more effective substitute for militarism in the international realm is the expansion of markets.

Continue reading about the contest here: http://hackleychair.wordpress.com/2-economics-music-video-contest/

Winners of  the 2013 Value is Subjective Music Video Contest

 

Winners of the 2012 Supply and Demand Music Video Contest

 


Gary Stanley Becker (1930-2014): Through My Austrian Window

May 5, 2014

by Mario Rizzo

It is tempting to over-romanticize a person when he or she is gone. I will strive to be balanced in keeping with how I feel and think about Gary Becker.

I am saddened by his recent death (May 3rd). I have known him since at least 1974 – some forty years. He was not on my dissertation committee but he took a strong interest in and liking to my dissertation on the effect of crime on property values. I audited his version of the first-year sequence in price theory at the University of Chicago. It was, in my view, the best of the three versions I was exposed to. He was a little scary insofar as he lectured and then suddenly would call on a student with a question. Since I was an auditor only, my name did not appear on the class list so I escaped the surprise questioning.

He loved economics and loved to apply it to a wide range of problems. He was no enemy of mathematical economics but thought that theory should be as simple as possible and developed with applications in mind. He was a true follower of Alfred Marshall on this: theory as the engine for the discovery of concrete truth. He was also no “positivist” in methodology. (Some people are quite careless about how they use that term.) He did not think that every statement in economic theory has to be falsifiable or testable. In response to what I believe to be the methodological disaster of behavioral economics, he argued that rationality per se is never testable. What is testable is the complex of assumptions and basic structure of a theory when it is applied to concrete problems. (I add, for those schooled in the philosophy of science, that he invoked the “Duhem-Quine Thesis.” )

He accepted Lionel Robbins’s view that economics is a science of choice generally, and not only a science of market exchange (what used to be called catallactics). In accepting that view he accepted the same perspective on this matter as Ludwig von Mises and the British economist Philip Wicksteed – from both of whom Robbins derived his own view. So there is immediately an undeniable Austrian connection.

Within the past couple of years or so, I wrote to Gary about how I thought his view on “irrational” preferences was similar to those of Philip Wicksteed who, in 1910, argued that irrationalities and inconsistencies of preference tend to be eliminated under the pressure of costs, when in fact those preferences detract from the agent’s attainment of his own goals. He agreed with me, with – in typically Beckerian fashion – the proviso that Wicksteed didn’t have adequate empirical evidence, but Becker did in some of his papers. Okay.

Some Austrians may think that Becker was an enemy of Austrian economics because in 1962 he and Israel Kirzner had a debate in the pages of the Journal of Political Economy. In the fullness of time, I believe that neither of them had a clear view of their own developing perspective in 1962. Nevertheless, Kirzner was emphasizing that some assumption about rationality (later “alertness”) was necessary if a market is to move from disequilibrium to equilibrium. Becker was arguing that you don’t need a rationality assumption to get a negatively sloped demand curve – scarcity is enough. Becker, I believe, was getting at a point later made by Vernon Smith that “rational” behavior can be provoked or engendered by the (institutional) constraints of the system under study. The interesting question is when is alertness the key and when are institutional constraints the key. What is the relative role of each?

I think to a certain extent contemporary economics has moved beyond (but probably not nearly enough) the equilibrium versus process divide. Most good theories borrow from each paradigm. Nevertheless, it is hard to argue that Becker’s relatively equilibrium-oriented approach has not provided useful insights about the real world.

Gary Becker will be missed not only for the breadth and depth of his ideas, but also because of his kindness and generosity to others.

Ave atque vale.


Zimbabwean Currencies: Condoms, Sweets and Paper Money

February 21, 2014

by Alexander Czombera*

If there is one single law in economics then it is that markets tend to equilibrium. Or, to align this with Grove’s law  (“Technology will always win. You can delay technology by legal interference, but technology will flow around legal barriers”), the free market will find its ways, whether in white, grey or black market. Despite of initially strong resistance of the Zimbabwean government it was market forces and not political consent that abolished central banking and legal tender laws in the South African country. Paper money of its original currency was replaced with notes from other countries, the shortage of coins was addressed by “efficient rounding”, condoms and sweets.

While inflation was mostly in double digits ever since its independence in 1980 it began to climb when the government faced high deficits and deep recessions in the early 2000s. In late 2008 it eventually reached a peak of  8.97 x 10 (to the 22nd power) percent. Prices doubled almost every day.

Because of the limited supply of foreign currencies and fixed exchange rates some people used this time to exploit arbitrage opportunities. The term burning money was coined when well-connected people in Harare exchanged their Zimbabwe Dollars into the limited supply of South African Rand at the fixed exchange rate and sold the Rand in the parallel market at a fair price.

The continuing devaluation of its own currency moved Zimbabwean citizens into other currencies, most notably Rand, Pula, US Dollar, Euro and Pound. In spite of legal tender laws these currencies became established in the regions which traded frequently with the countries issuing these currencies or having previously adopted them. Read the rest of this entry »


Libertarianism and Classical Liberalism: Is There a Difference?

February 5, 2014

by Mario Rizzo

I consider myself both a libertarian and a classical liberal. I have been teaching a seminar in classical liberalism at the NYU Law School for six semesters. I am always asked about the difference.  My answer is basically this. Classical liberalism is the philosophy of political liberty from the perspective of a vast history of thought. Libertarianism is the philosophy of liberty from the perspective of its modern revival from the late sixties-early seventies on.

The philosophy of liberty has always admitted of gradations or degrees. Consider that in the nineteenth century there were such thinkers as Lysander Spooner, Auberon Herbert, and Benjamin Tucker. These thinkers are sometimes called “individualist anarchists.” Clearly, they espouse a political philosophy that would anathema to most who call themselves “classical liberals.” Yet they do begin from many of the same premises as mainline liberals. They disagree with those who advocated a limited state insofar as they believed that a completely voluntary order based on private property was possible and morally desirable. They elevated the individual to the primary place in their analysis just like the rest of the classical liberal tradition. Read the rest of this entry »


Interview with Gerald O’Driscoll

December 27, 2013

by Mario Rizzo

I am happy to post a very interesting interview with my long-time friend and Cato senior fellow, Jerry O’Driscoll. As readers of ThinkMarkets know, Jerry frequently contributes to this blog. This is from the Lara-Murphy Report. The entire report can be accessed immediately below. The interview with O’Driscoll begins at page 24.

LMR Interview with Odriscoll

O'Driscoll Interview

O’Driscoll Interview

First Page of Interview

First Page of Interview


South Africa and Ending Apartheid: W. H. Hutt and the Free Market Road Not Taken

December 14, 2013

William Hutt (left) with F.A. Hayek.

William Hutt (left) with F.A. Hayek.

 

 

 

 

 

 

 

 

 

by Richard M. Ebeling*

The public eulogies marking the passing of Nelson Mandela at the age of 95 on December 5, 2013 have refocused attention on the long struggle in South Africa to bring about an end to racial discrimination and the Apartheid system.

Forgotten or at least certainly downplayed in the international remembrance of Mandela’s nearly three decades of imprisonment and his historical role in becoming the first black president of post-Apartheid South Africa is the fact that through most of the years of his active resistance leading up to his arrest and incarceration he accepted the Marxist interpretation that racism and racial discrimination were part and parcel of the capitalist system.

Mandela was a member of a revolutionary communist cohort who were insistent and convinced that only a socialist reorganization of society could successfully do away with the cruel, humiliating, and exploitive system of racial separateness.

With the fall of communism in Eastern Europe and the Soviet Union in the late 1980s and early 1990s, the communist model of socialist transformation was too tarnished and delegitimized to serve a as a guidebook for post-Apartheid South Africa by the time that Mandela assumed office as the first black president in that country in May 1994.

Instead, Mandela’s government followed the alternative collectivist path of a highly “activist” and aggressive interventionist-welfare state, with its usual special interest politicking, group-favoritism, and its inescapable corruption and abuse of power. Its legacy is the sorry and poverty-stricken state of many of those in the black South African community in whose name the anti-Apartheid revolution was fought.

But this did not have to be the road taken by South Africa. There were other voices that also opposed the racial and Apartheid policies of the white South African government, especially in the decades after the Second World War.

These voices argued that racial policies in that country were not the result of “capitalism,” but instead were precisely the product of anti-capitalist government interventionism to benefit and protect certain whites from the potential competition of black Africans.

One of the most prominent of these voices was economist, William H. Hutt. Hutt had come to South Africa from Great Britain in 1928 and taught at the University of Cape Town until the 1970s, when he moved to the United States where he died in 1988. Born in 1899, he had attended the London School of Economics and studied under Edwin Cannan, the noted historian of economic thought and liberal free trade economist. Read the rest of this entry »


Poverty of Ethics without Economics: Bangladesh

December 13, 2013

by Mario Rizzo

In a world where people’s ethical goals are intrinsic values we could easily argue, as did David Hume, that the values themselves are not subject to scientific analysis.  But, as things turn out, many of what people believe to be intrinsic values, and therefore ultimate goals, are not. They are intermediate ends to which the attainment of some more nearly ultimate goal is imputed. For example, if I believe that my happiness is an intrinsic moral good, and I think that the connection between my happiness and making more money is completely unproblematic, then I may legitimately believe that additional money-making is an ultimate moral goal. (How one intrinsic good should trade off against another is a separate issue.)

Some people think that policies that mandate good wages and safe working conditions are ultimate goals. Or at least they seem to believe that. Much of the discussion about the recent Bangladesh factory fire has this air about it. Much to my disadvantage in polite company, I argued that the advocates of “justice for the poor” were ignoring important factors.

Even if you do believe that better working conditions and higher wages for Bangladeshi garment makers are intrinsic values, what kinds of policies will achieve these values? Does it matter whether the policies will result in some workers improving their wages and working conditions, while other will see a decline in their wages and working conditions? Read the rest of this entry »


Let Wedding Cake Bakers Discriminate in Peace

December 8, 2013

By Mario Rizzo

“A Colorado judge says a baker who refused to make a wedding cake for a same-sex ceremony must serve gay couples despite his religious beliefs, a ruling that a civil rights group hailed as a victory for gay rights.” Fox News 12/06/2013

Friedrich Hayek argues in his famous essay “Why I am Not a Conservative” that conservatives and socialists alike have no principled way of dealing with people whose moral views differ from theirs. Neither of them has absorbed the true lessons of toleration. Socialists (and I would add “progressives”) argue, in effect, for the imposition of their specific collective hierarchy of values including ideas about the allocation and distribution of resources in society. Conservatives often want to impose a hierarchy  of social values including restrictions on pornography, teaching of traditional values in the public schools (“creationism”), restrictions on entry into consensual social relations (“marriage is exclusively for one man and one woman”) and so forth.

The classical liberal insistence on a society that makes maximal room for a pluralism of values starts with the insight that markets permit individuals to make decisions according to their own hierarchies of values. Markets do not insist that we all share the same goals about the use of resources. And yet, subject to a few basic general rules, we can have coordination (not homogenization) of values through the price system. You can work , for example, for Amazon to help pay for your child’s clothing while the manager in your Amazon division is saving for a flat screen TV; the executive working for Amazon may be working for a vacation while the senior-citizen stockholder of Amazon is using the appreciation of stock-value to pay for copays on his medicine. And then there are all of the different goals of those working or investing in firms that deal with Amazon. And so forth as we spread our sights through the whole complex system of market interactions. Read the rest of this entry »


Economics Will Not Be Mocked

December 1, 2013

by Mario Rizzo

A few years ago I read and studied in great detail Pope Benedict XVI’s encyclical on globalization “Caritas in Veritate” or “Charity in Truth.” I posted a three-part analysis on the doubtful economics contained therein at ThinkMarkets. The first part is about the destructive influence of the encyclical. The second part is about globalization. The third part is about the attack on classical liberalism.

Shortly thereafter, I went to a conference that included discussion by economists of the encyclical. There were almost no defenders of the pope’s economics. In fact, I was told by one participant not to waste my time in a detailed examination of papal ideas relating to economics. No one in places of intellectual or policy influence much cares what the pope says. I was told that I care only because of my sixteen years of Catholic education. Perhaps this is all true; I do not know.  Nevertheless, the pope is worth listening to and reacting to because, in the modern world, there are few attempts by prominent public figures to address moral issues honestly.

The current statement of the “social gospel” by Pope Francis in “Evangelii Gaudium” or “The Joy of the Gospel” is less authoritative than the previous encyclical by Benedict insofar as it is considered simply an “apostolic exhortation” or pastoral letter. However, the ideas expressed are in keeping with the recent Church teaching. (Nevertheless, one cannot help thinking that Pope John-Paul II’s economics in the encyclical “Centesimus Annus” was much better than that expressed by the two most recent popes.)

I will not go into the details of the current letter because I think my previous comments on Pope Benedict at ThinkMarkets effectively cover most of these. I want now simply to make a “meta-critique” of Pope Francis’s letter only insofar as it deals with issues that have economic content. Read the rest of this entry »


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