Tue, 30 Dec 2008
We're All Baby Sitters Now
Interesting! So Paul Krugman read the story of a baby sitter club which had poor
policies regarding issuance of its currency, and because he was able
to apply Keynsian economics to their situation, that gave him the confidence
to apply the same economics to the entire society. Amazing. Astounding!
The lesson that I draw from this is not that I'm wise enough to manage
an economy (I know I'm not). Nor do I think that Paul Krugman is wise
enough to manage an economy (but he thinks he is -- which makes him a
dangerous person). No, the lesson that comes to my mind that "We're all baby
sitters now."
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Mon, 29 Dec 2008
Fifty Paul Krugmans
Paul Krugman says that the state governors are acting like Fifty Herbert Hoovers. He thinks this is wrong. He thinks they should spend and burn money like
he wants the federal government to do. Maybe he's right. If he's right, then
the 62 counties of New York State should also borrow like maniacs and spend
like lunatics. And if they should, then so should the citizens of New York
State. Borrow! Spend! Like there's no tomorrow! Don't worry, the Fed has
made sure that we'll have massive inflation, so you'll only have to pay back
a fraction of the money you borrow!
Paul Krugman is a doody head!
Like all bad economists, Krugman is paying no attention to the fact that
there's a REASON why people aren't spending their money like, well, like a
Krugman (we need to start using "Krugman" as a synonym for "foolish idiot").
Here's a hint: if you see someone who isn't taking into account all the
effects of a policy they propose, then they're being a bad economist. As
soon as you identify a group of people being ignored, or a time (now or later)
being ignored, you can immediately label that person a bad economist. It's
up to them to explain why they're ignoring those people or that time.
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Sun, 28 Dec 2008
Ride starting Sun Dec 28 10:22:05 2008
11.41 km 37427.95 feet 7.09 mi
2378.00 seconds 39.63 minutes 0.66 hours 10.73 mi/hr
December 28th, and I'm bicycling! It's 60 degrees and windy as all getout.
Cold weather is blowing in, so best go for a ride while I can. The ride
is short by a mile and a half because my Garmin Foretrex took that long to
get a synch. No matter.

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Fri, 26 Dec 2008
Boonies of Boonville
I've been looking for unfinished railroads via map services again. I think
I've found the tunnel that the Ogdensburg, Clayton & Rome built
near Pixley Falls in the Boonville Gorge. I also have a candidate road
for this "cut and abutment". Look on the Historic USGS maps. Look at
the red circle, and the road just to the south of it. That road heads down
the hill. Where it crosses the driver is approximately one and a half miles
below upper Lansing Kill Falls, just as described. I'll have to look in
person, but I'm reasonably confident that it's not the railroad.
Just to the left of the red circle is a large flat spot on the side of
the hill. On the south end of the flat spot, next to the aforementioned
road, is a house. I'd guess that somebody wanted a farm with a view.
I can't see any ruins of a farm there, but you can look at the farm site for yourself
and see if you can see it. Switch to Satellite for high-resolution photos.
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Sun, 14 Dec 2008
Skidelsky? Not so much...
Robert Skidelsky praises John Maynard Keynes. There are many missing
facts, facts that don't line up, and logic that isn't.
The chairman of the Federal Reserve is a regulator. Skidelsky should
not be "astonish"ed to find a regulator who decries the failure of
deregulation.
The story says "the regime of deregulation he oversaw" and links to an
article. The article, however, doesn't speak to a single deregulation
which could be laid at Greenspan's feet.
It doesn't logically follow that legislation is the regulation
necessary to make inefficient markets efficient. Perhaps there are
other solutions?
Soros is right -- the problem was intrinsic to the financial system --
which cannot in any sense be described as unregulated, deregulated, or
less regulated. The best description of it is "highly regulated".
I've read the financial filings that go with an IPO, cover to cover.
Would anyone describe an IPO as having been a part of "extensive
financial deregulation"?
Skidelsky could name a deregulation, and then compare it in magnitude
to the effects of Sarbanes-Oxley, which is a new regulation. Then we
could decide whether the amount of regulation has increased or
decreased. If you only count deregulations and never reregulations,
then you must eventually conclude that there are no regulations left.
That doesn't describe financial markets.
I grant that it's possible that there really are fewer regulations,
but Skidelsky hasn't made that case and doesn't deserve to be granted
it "for argument's sake".
Talking about "deregulation" without naming the deregulations makes it
impossible to refute.
Similarly, laying blame at the feet of any one or more deregulations,
and then claiming that all deregulation is bad, is like finding a bug
in one line of code, and then claiming that all lines of code are
equally bad. It just doesn't follow.
Similarly, if you deregulate the predators, while keeping the victims
regulated, you have created, not solved a problem. When the wolves
are freed, and the sheep left penned, you know mutton is on the menu.
Skidelsky doesn't name any of the "economists who believes that all
uncertainty could be reduced to measurable risk." I can't name any
either.
"Most economists", again, not named. There are multiple schools of
thought about the nature of money. To which ones does Skidelsky
refer? Without knowing to whom he refers, it's impossible to judge
whether his summary of their ideas is accurate.
"It is this flight into cash that makes interest-rate policy such an
uncertain agent of recovery." Let's assume this is a true statement.
The fact that Keynes held to one thing that was true lends no credence
to any other things he may have said.
"Spend on pyramids, spend on hospitals, but spend it must. (sic)"
Keynes felt that non-productive spending was as useful as productive
spending. The problem is that this is exactly the Broken Window Fallacy.
Greenspan being wrong doesn't make Keynes right. It's possible that a
third theory is more correct.
Someone who has written a biography on Keynes is emotionally and
financially invested in the ascendancy of Keynes' ideas. This article
is just one stop on a book tour. True, it's not evidence that Keynes
is wrong, but I never expect anyone to speak for the truth against the
interests of their wallet. They might do it, but I'm surprised when
it happens. Here, it hasn't.
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The Failures of Libertarianism
Tubby writes to say that I'm just as politicized as Krugman and
Stiglitz. Maybe. I assume that nothing works perfectly, that
everything fails in its own way, that all we can seek are
improvements, not perfection.
I think that the opponents of libertarianism see that libertarianism
is: not perfect, doesn't try to be perfect, and acknowledges that
people are corrupt, institutions fail, and hopes are dashed. These
opponents look to coercive planned collective action as the solution
to those problems: planning can be perfect, is an attempt to be
perfect, can eliminate corruption, make institutions work, and create
hope.
They're wrong, of course. But that's their own form of imperfection,
their own failing institution. Since they plan on perfection, since
they require perfection, they cannot acknowledge that they might be
in error.
Which is why they're so scary to me.
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Epistemological Problem
So, I have this epistemological problem. I have a great deal of respect
for Tim O'Reilly. He's created a successful publishing and conferencing
company. That's an accomplishment not to be made light of. One of the
things he does from his bully pulpit is look for insight into problems.
Of course, he uses that insight to further target his conferences and books,
but there's nothing (NOTHING) wrong with that.
The problem is that Tim O'Reilly advocates bad economics. You know,
the Krugman and Stiglitz brand of economics. Economics needs to be free
of a political slant, less it cease to be description and wander off into
the weeds of prescription. Unfortunately, both Krugman and Stiglitz
espouse political ideas in the guise of economic analysis, and Tim has
bought into those ideas.
Okay, so anybody can be wrong, right? Yesbut, Tim is respected for
his insight, and uses that respect to promote ideas. When you're in that
kind of position, you need to be careful to only promote ideas that
you are confident of. Of Economics, Tim knows little, but he thinks that
because he has created a successful business, he knows something about
economics. Thus the epistemological problem.
John Maynard Keynes was a successful investor. Because he became wealthy,
he thought he knew something about economics. Because he became wealthy,
other people thought he knew something about economics. Unfortunately,
business and investment insight does not lead directly to an understanding
of economics. Only a study of economics leads to an understanding of
economics.
Like Keynes, O'Reilly knows very little good economics. I do understand
economics (an assertion you can check for yourself by reading the archives
of this blog). Yet O'Reilly natters on about economics. He also has much
to say about other things, of which I know little. How am I to trust
O'Reilly, now that I know he is willing to promulgate bad information?
How do I know when Tim is speaking from his experience and his insight,
instead of pulling stuff from his butt? If I can't trust him to be right
in areas where I have expertise, how can I trust him to be right in areas
where I have little knowledge?
Answer: I can't. The solution for him is to listen to his friends.
When they tell him he is wrong, in areas where they have expertise, he should
be more circumspect in his pronouncements. The trouble is that, like so
many people, O'Reilly (and Keynes) thinks that because he is good at finance,
he's good at economics. How to cure people of this idea?
I still have a lot of respect for Tim as a person. But as a seer?
Much less. It hurts to say so, but I guess every hero has clay feet.
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Mon, 08 Dec 2008
The Bailout. Coming this January.
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Sun, 07 Dec 2008
Eric Baum on the Greater Depression
Run, do not walk, to Eric Baum's essay on the Greater Depression.
UPDATE: Dec 14: Claudia writes to point out that Eric's essay is political spin. True.
But is it good economics? I don't care if people have opinions. People
always have opinions. I don't want people to let their opinions infect
their economics. Economics isn't subject to your opinion. As a soft
science, it's mushy at the edges, and economists should admit when they're
in a mushy area. E.g. for small increases in a minimum wage, you will very
very few jobs destroyed (see, that's me sticking to the facts,
but also inserting my opinion -- which is that no amount of job destruction
is worth the gain of somebody else's higher pay). So yes, you can do spin,
but you can also be accurate in your economics.
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Not Deregulation!
Richard Heinberg is not impressed by modern economists, expressing disgust with both Keynsians and Austrians alike. He prefers to ride his hobby-horse that Peak Oil means the end of modern "growth" economics. The fact that economics is the study of choice seems to have escaped him.
But Austrians still win out. We predict that when you inflate the currency, you confuse people into thinking that they have more money than they really do. They use that money to expand their business. The thing is, that money wasn't real. As everyone realizes this, they start to raise their prices. The new business that you hoped to get doesn't show up. You have to lay people off, lower salaries, and sell your business improvements for dimes on the dollar. Keynes' prescription: forcing taxpayers to borrow money to buy the unwanted things now. Exactly HOW does that help us??
I predict that none of this "stimulus" spending is going to help one whit. We're in for a good ten years of lowered employment and lessened prosperity. More if government tries to help more. Less if government does nothing.
I'd like to be wrong about this, but I'm not.
Oh, and if you think that recent deregulation got us into this mess, I'd point to things like Sarbanes-Oxley, or Fannie Mae / Freddie Mac, or anti-redlining regulations for banks. There's still plenty of harmful regulation: the Fed, to make our money worthless (by printing up new diluted money), the FDIC, to create a moral hazard for banking (why bother selecting a bank when no matter what they do you can't lose your money?), the farm subsidies (the corn lobby ensures that corn is cheap enough to put into all food products), the Sherman Antitrust act (where you can be charged with anti-trust if your prices are lower, equal to, or higher than your competitors).
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How to Think like an Economist
Economics in One
Lesson is the most important book about economics that you may
ever read. It will teach you how to think like an economist. This is
important, because if you do not think like an economist, then
anything you say about economics will be nonsense. Let me repeat
that, because many many people think they can fail to think
like an economist and still say sensible things. If you do not think
like an economist, then anything you say about economics will be
nonsense, or it may be sensible, but you will have no way to know the
difference.
The one lesson, in its entirety:
The art of economics
consists in looking not merely at the immediate but at the longer
effects of any act or policy; it consists in tracing the consequences
of that policy not merely for one group but for all
groups.
Every economic error, every economic fallacy, can be tracked back
to a failure of that looking or tracing. The classic broken
window fallacy fails to trace the effects of paying to fix the
window -- money that could not be spent on something the shopkeeper
would have preferred to have.
Knowing this lesson is the equivalent of having a PhD in economics.
It means that you're finally ready to start understanding economics,
just like having a black belt means that you're finally ready to start
understanding martial arts.
Go read Economics in
One Lesson, and learn how to apply the lesson to the examples in
the book. Then you will be ready to start thinking like an economist,
and understanding the world of choice around you. For economics is
not the study of money, or trade, or public policy. Economics is the
study of choice.
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Sat, 06 Dec 2008
How NOT to Stimulate an Economy
How NOT to stimulate an economy: promise to take decisive
action in a couple of months. In the meantime, no sane person will
invest in anything, and your economy goes further into the shitter.
Krugman says "but we have to do SOMETHING". In fact, no, we don't, and
promising to do something is worse than promising to do nothing.
Posted [23:47] [Filed in:
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Saving the World, One Acre at a Time
Do you think global warming is the modern-day equivalent of the
Salem Witch
Trials? Me too. It's a load of superstitious crap.
That said, it always makes sense to grow trees. Saving Species is buying degraded agricultural land
on the cheap, and allowing it to regrow in trees. I donated to them,
and I think you should, too. They do donate the land to the government,
so they're not without sin, but governments are usually pretty good about
preserving national parks.
Posted [11:40] [Filed in:
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