As I write this, the Congress is preparing to pass a bill that would place restrictions on the ability of people to get credit. Personally, I have mixed feelings about the bill. On the one hand, when you make it harder for (mainly poor) people to get credit cards, you encourage them to turn to less savory means of obtaining credit. On the other hand, it’s at least arguable that some of the common irrationalities demonstrated by behavioral economics are present in the credit card market (whether the bill will actually address these problems is another story). And then there’s this.
But I don’t really want to argue about the credit card bill. Rather, I wanted to note an odd premise that both the pro and anti credit bill folks seem to be relying on in making their respective cases. Continue reading
If you’re like me, you’ve spent a lot of time (probably too much time) searching for the perfect introductory guide to economics, something to recommend to people who are interested in learning more about the subject or who, in your own arrogant opinion, would benefit from learning more about the subject. Such a book, to be ideal, would have to meet two criteria:
1) It would have to set forth the sometimes difficult and/or counter-intuitive ideas of economics in a way that is compelling and easy to understand (yet not overly simplistic); and
2) It must be a book that people will actually read.
Sadly, finding a book that meets these criteria is harder than it might appear. I’ve looked at plenty of contenders, but virtually every book I’ve come across has had some major drawback or flaw. Either it’s too technical, or too dated, or it leaves too much out, or most of it is excellent, but there is one part that will turn off anyone who reads it so thoroughly as to nullify any effect the rest of the book might have.
After viewing this episode of Bloggingheads, I’m considering making Filthy Lucre: Economics for People Who Hate Capitalism my standard recommendation, at least for people who are broadly speaking left-of-center. The book’s author, Joseph Heath, is a philosophy professor at the University of Toronto, student of Charles Taylor, expert on Habermas, and author of The Efficient Society: Why Canada is as Close to Utopia as it Gets and The Rebel Sell: How the Counter Culture Became Consumer Culture. Heath is no one’s idea of a right-winger, but he also acknowledges that a lot of arguments made by the left are premised on a faulty understanding of how the economy can and does work. Continue reading
Another Scott Sumner gem:
Let’s say the center of power in America is in the center. In that case neither liberals nor conservatives will be able to construct the sort of society that they dream about. In frustration, they will demonize the other side, and take some extreme; and perhaps unrealistic positions. In particular, liberals will be able to indulge in the very satisfying sport of capitalism–bashing.
Now let’s assume that in Northwestern Europe (especially the Nordic countries (including Holland), but to a lesser extent the other countries north of the Alps and west of Poland) the center of the political spectrum is “liberal” as the term is defined in America. So they are successful in erecting a large welfare state. Once they achieve this success, however, they start running into problems. The heavy tax and subsidy burden starts slowing growth in the 1970s and 1980s. Unemployment rises sharply. In response they frantically cut away at all sorts of non-essential statist interventions, anti-market policies that don’t seem to have much egalitarian benefit. In particular, they do the following:
Last week I was accused of being a stooge for the powerful. It wasn’t the first time, and it probably won’t be the last. What did I say that caused this charge? I suggested that the market should be given a greater role in the provision of health care.
Well, then, you might say, what more need have we of witnesses. Everybody knows that free markets are in the interests of the powerful. That’s why big businesses are so opposed to government intervention in the economy.
Changing the subject completely, I was reading an article in the DC Examiner only a few hours later when my eyes fell upon the following sentence:
Philip Morris, openly and without qualification, backs Kennedy’s and Waxman’s bills to heighten regulation of tobacco.
Robert Samuelson’s The Great Inflation and Its Aftermath tells the story of America’s battle with double digit inflation in the 1970s. As Samuelson tells the story, in the post-WWII period economists and politicians began to think that they could use the insights of Keynesian economics to fine tune the economy. According to Keynes, there was a fundamental economic trade off between inflation and unemployment. By using its control over the money supply, then, the government could induce a small amount of inflation, which would lead to lower unemployment and hence higher overall output.
The problem was that while inflation did in fact lead to a drop in unemployment, the effect was only temporary. At first an infusion of cash into an economy would boost demand for goods and services and lower interest rates (as people mistook the increase in dollars with an increase in wealth). Eventually, however, people would begin to catch on to what was happening, at which point a higher level of inflation would be needed to achieve the same effect. By the early 1970s, the United States was facing both high unemployment, high interest rates, and high levels of inflation, something which according to standard Keynesian theory should have been impossible. Continue reading
In the sixty plus years since the end of WWII, Western governments and aid agencies have dolled out more than $2 trillion dollars in economic assistance to the world’s poorer nations as a means of economic development. The results of all this assistance, to put it mildly, have been far from stunning. Numerous studies have found no positive effect of foreign aid on economic growth, and there is even some evidence that the impact may be negative.
And while some countries have seen spectacular growth in recent years (to the point where the standard of living in these formerly “Third World” countries now exceeds that of many places in the West), this growth has tended to be in countries that have received little in aid. Continue reading
Two stories. First up, from our brothers and sisters to the East, comes a baptismal incentivized baby boom:
Two years after having one of the lowest birth rates in the world, Georgia is enjoying something of a baby boom, following an intervention from the country’s most senior cleric.
At the end of 2007, in a move to reverse the Caucasian country’s dwindling birth figures, the head of the Georgian Orthodox Church, Patriarch Ilia II, came up with an incentive. He promised to personally baptise any baby born to parents of more than two children.
There was only one catch: the baby had to be born after the initiative was launched.
The results are, in the words of the Georgian Orthodox Church, “a miracle”.
The country’s birth rate increased by nearly 20% during 2008 – a rate four times faster than the previous year.
Many parents say they took the decision to have another child on the basis of the Patriarch’s incentive.
So last night was “Earth Hour,” an attempt to avoid the utter destruction of the planet by having everyone turn off their lights for an hour. Attempts to quantify the actual impact of this action on energy use range from nil to negative, but then I suspect that this isn’t really the point. The whole affair reminds me of the following bit from Tim Harford’s book The Undercover Economist:
“How did you travel here today?”
“I’m sorry?” I’m puzzled. Here I am, going to a panel discussion organized by an environmental charity, and a very earnest young member of staff is grilling me before I even get past the door of the lecture hall.
“How did you travel here today? We need to know for our carbon offset program.”
“What’s a carbon offset program?”
“We want all our meetings to be carbon-neutral. We ask everyone who attends to let us know how far they came and on what mode of transportation, and then we work out how much carbon dioxide was emitted and plant trees to offset the emissions.”
“I see. In that case, I came here in an anthracite powered steamship from Australia.” Continue reading
Part memoir, part polemic, Confessions of an Economic Hitman tells the story of John Perkins, a former economic forecaster for the engineering firm of Chas T. Main, Inc. As a forecaster, Perkins’ job was to provide estimates of the effect various infrastructure projects (mainly electrification) would have on economic growth in developing countries. These estimates were then used to justify loans to developing countries from international aid agencies, which would then hire Main to complete the project.
Perkins makes two claims about his work for Main. The first, that he inflated his estimates so Main could get more and bigger contracts, sounds fairly plausible. It’s true, for example, that the actual growth resulting from foreign aid has often fallen far short of projections. I’m inclined to think that this was more often the result of wild eyed optimism than crass cynicism, but I have no doubt that this sort of corruption did occur, and my only objection to Perkins’ remarks on this score would be to the idea that corruption in transfers of money from Western governments and agencies to developing world governments somehow represents an indictment of the free market.
In addition to profit-seeking, however, Perkins claims that he was in reality an agent of the NSA, and that his true mission in getting developing world governments to agree to these loans was to so saddle them with debt so that they could be forced to abide by Western economic and foreign policy interests. Continue reading
Here are some excerpts from another interesting post from Scott Sumner:
A New York Times article once reported that economists in academia tend to vote about 3 to 1 Democratic, whereas other academics vote about 7 to 1 Democratic. Of course the general public tends to split about 50/50 between Democratic and Republican voters. What should we make of this pattern?
For the purposes of this post, consider the term ‘worldview’ to represent one’s views about cause and effect, or what economists call positive questions. Values relate to what is viewed as being morally right and wrong, or normative issues. I don’t claim that there is any clear boundary between these two categories, but I hope they will prove useful anyway.
Now let’s assume that “ideologies” reflect values plus worldviews. Thus the liberal worldview has many different ideologies. Let’s also follow the standard practice of assuming that the term “left” applies to more socialistic versions of liberalism and the term “right” applies to more libertarian, or classical liberal, versions of liberalism.
Suppose that an economistic worldview makes one vote more to the right . . . That could explain why economists vote Republican more often than other academics. Indeed I think this is a pretty standard explanation of their voting pattern. Thinking like an economist makes one less receptive to socialist policies.
- Animal Rights
- Catholic Social Thought
- Death Penalty
- Double Effect
- Foreign Policy
- Global Warming
- Health Care
- Just Wage
- Just War
- Men and Women
- Nuclear Weapons
- Political Theory
- Quotidian Matters
- Social Security
- Voluntary Associations
- War and Peace