Paul Krugman: Ipse Dixit

by Mario Rizzo  

Under other circumstances, Paul Krugman would have made an excellent pope if we judge by his economics pronouncements. Let me take two examples from a recent New York Times column. This is my interpretation of what he is saying.  

1. On the one hand, as Keynesians have always taught: There is no real danger of interest rates rising as the Treasury accumulates massive amounts of debt. This is because there is a vast surplus of (ex ante) savings out there just waiting to buy US treasuries at low interest rates. This is our official teaching.  

2. On the other hand, there are economists out there sowing the seeds of heresies. It is understandable in this time of unprecedented events that even wise economists might be tempted to stray from the Truth. They are making statements that confuse the faithful in their daily activities (of buying and selling treasuries). They are frightening them with stories of inflation and high interest rates. Many, perhaps most, of these teachers have evil motives.  These heretics are making it more difficult for the “church” to help us all to salvation.  

Read the article yourself. Isn’t this what he is saying?

What Ended The Great Recession?

by Mario Rizzo  

Some business forecasters with a not-too-bad record are predicting that the recession will be over by the end of the year.  (NBER dates the beginning to December 2007.)  

Of course, the recovery in terms of real output from the Great Depression began in the 3Q of 1933 and that did not preclude high unemployment rates and a further recession in 1937. Here. Let that pass for the moment. 

If recovery begins, the discussion about why will also begin. Let’s confine ourselves to evaluating policies designed by the government to produce recovery.

OK, it’s “later” now

by Sandy Ikeda

MSNBC reports that “Evidence mounts that recession may be ending”. At the same time, in the Wall Street Journal:

[T]he central bank has been buying mortgage-backed securities and Treasurys. Through programs announced since last fall, it has bought more than $460 billion of mortgage-backed securities and more than $125 billion of Treasury bonds. But the winds turned against the Fed in recent days, as investors worry the government’s approach could lead to inflation.

Time to start crossing that bridge already?

Earthquake, shmearthquake

by Sandy Ikeda

“To Protect an Ancient City, China Moves to Raze It” The city is Kashgar, “the best-preserved example of a traditional Islamic city to be found anywhere in central Asia….”

Local authorities claim that by pre-emptively demolishing 85% of it they will be protecting its citizens from the kind of catastrophe that befell Chengdu last year. As Robert Moses was fond of saying:  “If the ends don’t justify the means, what does?”

An Austrian spin on baseball?

by Sandy Ikeda

Phil Hughes, the Yankees’ up-and-coming ace, may be throwing batters curves but not the kind they think.

Here we present an illusion that suggests that the perception of a “break” in the curveball’s path may be related to physiological differences between foveal and peripheral vision. We contend that the visual periphery frequently reports a perceptual combination of features (a process we refer to as “feature blur”) because it lacks the neural machinery necessary to maintain separate representations of multiple features.

Note:  The spin the pitcher puts on the baseball still deflects it — it’s the sharp change of direction that’s the illusion.  See the award-winning demonstration at Illusion Sciences.

Strategy and statistics play more important roles in the game of baseball than in most other sports, and perhaps that’s why it’s popular among economists.  However, with such a central element of the game now revealed to be purely subjective, depending entirely on the batter’s perception of his particular circumstances of time and place, one could argue that it’s really the quintessential “Austrian” sport.

Rising in Phoenix: Entrepreneurial responses to housing and health-care problems

by Sandy Ikeda

The New York Times, in “Amid Housing Bust, Phoenix Begins a New Frenzy”, reports that “Real estate got just about everyone into trouble in Phoenix, and the thinking seems to be that real estate is going to get everyone out.”

If the property looks promising, Mr. Jarvis puts in a bid on behalf of any of his dozens of clients eager to become landlords. When he wins, he offers to let the family stay in the house and rent for much less than their mortgage payment.

Phoenix is also where “supermarket health clinics”and urgent-care centers for the uninsured have proliferated.  Some have been able to adjust quickly to a souring economy.

Health clinics located inside grocery stores typically offer less-comprehensive medical service than urgent-care centers such as NextCare and Maricopa Urgent Care…  NextCare, which has 17 clinics in the Phoenix area, has responded to the downturn with a series of moves aimed at reaching more patients.

Read more about it in this story from AZCentral.

What is the Philosophy of Freedom Called?

by Mario Rizzo  

As one who has taught courses in classical liberalism at NYU both at the college and at the law school, I cannot help take an interest in the discussion about conservatism over at the Becker-Posner blog and by my colleague William Easterly at Aid Watch. So permit me to add something.  

To the nominalists out there: What we call the philosophy of freedom is not simply a matter of stipulation. “Naming” is identifying with a literature, a history and an analytical core. It is no small matter.  

Gary Becker and Richard Posner each identify the philosophy of freedom with some aspect of conservatism. Becker writes of tensions within conservatism. Posner wonders about its intellectual decline. Bill Easterly complains, quite rightly, that many definitions of “conservative” and “liberal” say nothing about individual liberty.  

I do not believe that the philosophy of freedom has much to do, in an essential way, with conservatism. The relationship is largely due to historical accident. Furthermore, analytically speaking, the moral, political and economic basis of freedom does not fit coherently in the conservative intellectual framework.  

Water does not run uphill

by Roger Koppl

The Los Angeles Times reports, “Industry is warming up to Obama’s climate plan.”  It seems many big businesses, including Alcoa, want to go green.  To what do we owe this sudden tree-hugging zeal?  It could be an altruistic desire to save the planet, but I have a more skeptical opinion.  I think they see it as a way to keep the competition at bay. 

Economic Confidence: An Empty Box?

by Mario Rizzo  

In a recent talk on Keynes, Roy Weintraub refers to an idea he finds in Keynes that can be characterized as the confidence multiplier. Spending in particular areas builds confidence in other areas because businesses in the latter can rely on complementary spending in the former. Thereby a generalized resumption in spending can take place, perhaps lifting the economy out of a slump.  

This idea many Keynesians have promoted is seriously flawed. Under appropriate conditions, spending can beget spending. But so what? 

Airports: Coase, but no cigar

by Sandy Ikeda

A year ago the Bush administration proposed auctioning landing slots at Kennedy, LaGuardia, and Newark airports in the New York region. Yesterday the Obama administration canceled these plans. From the NYT article:

“In proposing to rescind the auctions, the department noted that the rule making was highly controversial and that most of those filing comments opposed the slot auctions,” the Transportation Department said in a statement. “The Department also noted that circumstances have changed since the rules were issued, including changes in the economy.”

Among those opposed were the airlines themselves.