Lists: A Blog Post on Madness

by Mario Rizzo

I don’t like lists. Many bloggers really love them. There are lists for everything. The top 5 books on gardening in October, and so forth.

I don’t like lists because they make me feel insecure. Do I have the top books? Is my blog in the top for new academic blogs in economics? (Some people think so; others do not.) How many views did we get divided by the number of posts relative to other blogs?

Am I reading the top young economists? What about the top economists in a particular area like behavioral-economics rationalized paternalism?

Are my categories in the top ten? Even if I read the top articles in a field, is the field itself in the top as determined by the top economists and the top universities?

I love champagne. Recently, the New York Times had a list of the best champagne that costs between $30 and $40 per bottle. But is that the best price category? (Is the third best champange over $50 better than the second best under $40?)

The store I went to had only the second best champagne in the Times category. I bought it. Should I feel bad?

Finally since I don’t like lists and don’t like other things as well (e.g., Obama), am I missing something by not prioritizing my dislikes? How much time should I spend criticizing Obama relative to, say, Paul Krugman?

I really don’t like lists.

Happy New Year.

Retreat From Reality: Some Obvious Observations

by Mario Rizzo

I am amazed (but shouldn’t be) at how far the American political system has evaded the acceptance of reality and how quickly the chickens are coming home to roost:

1. The War on Drugs. This is clearly a fool’s endeavor  now that Mexico is being destabilized and the US border towns will more and more feel the results. The war is especially counterproductive in fighting the Taliban in Afghanistan. The Afghan poppy farmers look to the Taliban for protection against Nato’s destruction of their livelihood.  (And by the way, Taliban need not equal al Qaeda if the US were a bit clever.)

2. The War on Terror.  Even CNN is acknowledging that al-Qaeda is an ideology or state of mind and that its techniques are available on the internet and even in London — and, I bet, in Brooklyn too. What hope is there of preventing any nut anywhere from doing real damage? It is very similar to the issue of the importation of illegal drugs. Close one route; they find another.

American tolerance for “terrorism” at home is almost zero. The US government will bomb temporary hideouts and these will move.  The fear will more and more conquer us. I am reminded of the brilliant article by William Graham Sumner, “The Conquest of the United States by Spain” (1899). He argued that although the US won the Spanish-American War militarily, we lost it to Spain ideologically. We acquired colonies and thereby betrayed our birthright.

Al-Qaeda may not be a match militarily but it will more and more cause us to erode our liberty and sanity. In all the talking heads yaking on TV very little is said about the underlying causes of our problem: American military and diplomatic interventionism in the affairs of the Middle East. They do not hate us because of  ”our liberty.”

3. The Bankruptcy of the Welfare State. As deficits soar to unprecedented levels and  while the old entitlements are in trouble, a major new healthcare entitlement is about to be passed. “Liberals” are pushing to their fantasy of (low) quality healthcare for all.  Stubborn unemployment will give rise to more calls for stimulus. The stimulus crowd is already getting nervous about the wind-down of spending in many areas. The government refuses to pull back or privatize Fannie and Freddie but will throw more money at it because of “the American Dream.”

If it weren’t for the fact that many innocent and good people are (and will be) suffering, I would simply look with intellectual satisfaction at the playing out of the natural and foreseeable consequences of bad policies.

To The Adults On Christmas Day: No Santa Claus

by Mario Rizzo

As the healthcare bill moves quickly toward approval, we might contemplate the words of Ludwig von Mises:

From day to day it becomes more obvious that large-scale additions to the amount of public expenditure cannot be financed by “soaking the rich,” but that the burden must be carried by the masses. The traditional tax policy of the age of interventionism, its glorified devices of progressive taxation and lavish spending have been carried to a point at which their absurdity can no longer be concealed. The notorious principle that, whereas private expenditures depend on the size of income available, public revenues must be regulated according to expenditures, refutes itself. Henceforth, governments will have to realize that one dollar cannot be spent twice, and that the various items of government expenditure are in conflict with one another. Every penny of additional government spending will have to be collected from precisely those people who hitherto have been intent upon shifting the main burden to other groups. Those anxious to get subsidies will themselves have to foot the bill. (…)

An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole system of interventionism collapses when this fountain is drained off: The Santa Claus principle liquidates itself. (Human Action, Chapter XXXVI, p.858, emphasis added.)

As pleasant as it is to believe in Santa Claus, consider — as it is the Christmas season:

When I was a child, I spoke as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things. (1 Corinthians 13:11)

We now await all of the consequences unanticpated by the “boundedly rational” social engineers.

Austrian Economics Meets The New Decade In The New Century

by Mario Rizzo

My survey article, “Austrian Economics: Recent Work” has now been published by The New Palgrave Dictionary of Economics. You can find the site here.

You need either an individual subscribution or access to an institutional subscription to get to the article. However, you can look here for the almost-final version. There is also my blog discussion here.

As I have said many times, the boundaries between Austrian economics and other schools of economics are fluid and not precisely defined. I do not view the policy conclusions of particular Austrian economists, regardless of their status, as having the same defining features as their analytical or theoretical contributions. Policy is part of the art and ethics of economics and not just the science as John Neville Keynes argued in 1890. It is not, and cannot, be the straightforward implications of economic theory.

I am a classical liberal, but that is not equivalent to being an Austrian economist (in my broad sense of the term!). I do not belittle the other roads to classical liberalism. When we talk about Austrian economics we are not talking about liberalism and when we talk about liberalism we are not necessarily talking about Austrian economics.

In The Economics of Time and Ignorance Jerry O’Driscoll and I explored the interrelations between Austrian economics and Post Keynesian economics. This was not meant to be an exclusive, exhaustive or even definitive connection. We wanted to shock Austrians out of the self-satisfied slumber that some were in.

In the years that have passed, there have been other connections with New Institutional Economics, experimental economics (in the hands of the great Vernon Smith), public choice-constitutional economics (in the hands, especially, of James Buchanan and Richard Wagner), and so forth.

I look forward to the new contributions of Austrians of every stripe. Some will be good and some will be poor. This is way of science. Errors all over the place. Gems of insight here and there. The process goes on.

A Circular Argument in Libertarian Reasoning?

by Gene Callahan

Although I have touched briefly on this topic at my (mostly) solo, non-serious blog, the volume of response I received there has prompted me to flesh out my argument and present it here, on the blog where I limit myself to my more sober postings.

The proximate cause of my addressing this topic was a post by Brian Doherty at Reason.com, where he wrote:

“States, after all, cannot function without first aggressing against someone, if only to get tax money to fund their activities.”

But the ultimate cause was my much longer-term conviction that such reasoning simply begs a central question that political theory is seeking to answer, namely, just when is coercion justified and when isn’t it? After all, every wavelength of the political spectrum considers some coercion to be OK, and some to be “aggression.”

“Unintended consequences of ‘Smart Growth’”

by Sandy Ikeda

That’s the title of a video interview I did with the Mackinac Center that was posted on their website a few days ago. I did it last summer and it runs about twelve minutes.

It’s very hard to do justice to either the SG side or my critique in such a condensed interview, though I think it gets the main points across fairly well. Still, here’s a couple of things.

Fundamental Healthcare Deceptions

by Mario Rizzo  

There are two fundamental deceptions in the Senate healthcare bill. They are so elementary that they are often ignored in favor of more technical problems. They are: 

1. The various provisions do not take full effect until 2015 or so. Thus the ten year cost totals as estimated by the Congressional Budget Office are misleading, but deliberately so, on the part of the bill’s authors. Only one-percent of the costs are incurred in the first four years. Thus, a $849 billion bill becomes a $1.8 trillion bill when the trick is adjusted for.  

2. The elimination of an insurance company’s ability to deny coverage on the basis of existing conditions is an effort to provide a benefit to individuals while hiding the “tax” on the rest. Clearly, insurance rates must rise for most individuals if insurers cannot price according to evident risk. If this were an honest bill there would be an explicit tax to subsidize the premiums of high risk individuals. Costless beneficence is a mockery of the idea of “helping people.” (I do not address the issues of legislative or private alternatives.)  

Why should any honest and intelligent person be happy with this? Democracy becomes a delusion when government lies. Of course, this is the usual modus operandi.

Why Kant Was Smarter Than Behavioral Economists

by Mario Rizzo  

Behavioral economists who like to indulge in normative pronouncements have decided that quasi-hyperbolic discounting violates rationality. In other words, suppose a person decides today that he will give up the hamburgers he loves beginning in 2010 (because of the high fat content). But then when 2010 arrives he reverses his decision and continues to eat them.  To stress the point, let’s suppose that he repeats this preference-reversal one or two more times during 2010.  

The poor fellow is, in addition to all his other troubles, violating standard economic rationality.

Bleeding the Economy

by Roger Koppl

At the Cobden Centre‘s website (and here), Steve Baker discusses recent Fed signals in the context of Big Players theory.  The more active the Fed (or other central bank), the greater the fraction of entrepreneurial attention devoted to Fed watching rather than productive activity.  As Baker says, “traders must pay attention to the Big Player and not the fundamentals.”

Banking 666: Advanced Analysis

by Mario Rizzo

This is your final exam.

Question: Suppose you are a profit-maximizing bank, which course of action do you take: (a) Lend $1 million to Herman Dilbert’s Chicken Finger Brasserie or (b) Buy $1 million in 10 year 3.5% Treasuries?

Answer under the fold.