The Economist's Thoughts

Theory and History - Chapter 7

Fri, 18 Dec 2009 19:46:56 GMT

Sadly, I didn't finish it today. But, I just want to say that it is great fun - you know, for anyone who likes to read Ludwig von Mises taking down Karl Marx. You can read it here for free. Though I recommend downloading the PDF from here, as the formatting isn't pretty in the HTML version.

What I did: An interview with myself

Fri, 18 Dec 2009 15:19:09 GMT

"So, Lucas, how did you spend your first hour at work?"

Me? Well, I spent it trying to figure out how to get the lights in my office to turn off.

"Okay... why would you do that?"

Oh, because they were stuck on forever.

"Why not just switch them off?"

Because it's an automatic light switch. I checked the manufacturer's website, and they claim that, if you leave the lights on, they should turn themselves off.

"So, that wasn't happening?"

Nope. It's not been happening for quite a while.

"Why did you choose today?"

Because the power was cut to the building a couple days ago. I hoped that that might reset the switch. But, when I got to the office today, the light was on.

"So, what did you have to do?"

See, there are two sensors that the switch uses to figure out if there's someone in the office, an ultrasound sensor and an infrared sensor. This double sensor lets it avoid false reads from one or the other. Anyway, apparently, somehow, the infrared sensor had gotten turned off, and the other one was on high sensitivity. So, any reads from the ultrasound sensor would be good enough to keep the lights on for another 20 minutes. Since it was on high sensitivity, that meant that it got lots of false positives - enough to keep the light on for hours. What I had to do was figure out how to turn down the ultrasound sensitivity and turn on the infrared sensor.

"Did it work?"

I think so. At least when I did the 30-second test, the lights did turn off. I suppose we'll see what the lights are like on Monday.

So much like English...

Fri, 18 Dec 2009 04:25:16 GMT

I thought some of you might find this interesting. Apparently, this is from the 70s, when an Italian singer decided to write a song where people were "speaking English" - which isn't really English (so don't try to figure out what they're saying), it's just supposed to sound like English. The weird thing... it does. Just shows how much of language is just in inflection. </div>

Ludwig von Mises's Theory and History - Chapter 6

Wed, 16 Dec 2009 18:02:01 GMT

Chapter 6 - "Materialism"

Basic idea: "Materialism" (in the philosophical sense) is poorly founded.

Materialism is the view that only the material world exists. So, every phenomenon can be explained by material forces. However, that's not really the point. The point of materialism is that the spiritual world, the world of ideas, any "supernatural beings" do not exist. Rather, our perception of these is just caused by material reality.

The problem: proving such a thing is very hard - and materialists have failed to do so.

Most of the argument is by analogy. For example, biological processes are complex, but they are ultimately physical. "Therefore", even though psychological process are complex, they are also ultimately physical. Mises points out that this is a terrible analogy, and doesn't really solve the "mind-body" problem. Now, we have some knowledge of how brain damage can affect ones ability to think. However, this knowledge hardly even counts as "scientific", since we often end up with brain damage that is very similar but that gives very different results in thought processes. For example, consider the temporary "brain damage" caused by getting drunk. We all know that there are "happy drunks", "sad drunks", and "angry drunks". So, even though you put the exact same chemical into the person's body, their thoughts react differently.

Also, the physical sciences have failed to explain how ideas spread from one person to another. At best, we get analogies to "viruses". But, that's not describing a transmission mechanism by any means; it's just an analogy.

This gives rise to an interesting question: if the philosophical foundation for materialism is so poor, why do people still believe it? Mises suggests that it was largely a political decision. Materialism really arose in France - at a time when the Church was highly corrupt. Materialism, if it becomes popular, will obviously decrease the power of the Church. So, those who opposed the corruption of the French leadership also opposed religion - and introduced materialism as a means of undermining the very basis of religion. A similar effect has been seen elsewhere.

My comments:

One thing that always shocks me about free marketeers that come out of post-communist countries is that they're often atheists. For example: Ayn Rand. It's odd to me that the Communist propaganda regarding religion and God "sticks", while that regarding economics doesn't.

Personally, I'm not a materialist. Can I prove it wrong? I don't think I can. Rather, I think this is an issue where "faith is required". What I do know: there are lots of things that I think are hard to explain if materialism is true. For example, the fact that ideas DO seem to interact in a logical fashion. Or, say, the grand majority of psychology...

Intermediate Micro SEI Comments and Reflections on them.

Tue, 15 Dec 2009 22:29:39 GMT

Comment 1: Mr. Engelhardt showed a great deal of passion for the subject matter. It was nice to have a student-teacher as him. Although, I feel he did move very fast at times, or tryed to cover too much during one class period.

My thoughts: Here's the difficulty I face - how do I cover all the material that my students are expected to know upon leaving my class, but not move "too fast"? Perhaps I should eliminate my "review day" and my "special topic day". Of course, then there's the difficulty of how to divide the material so that lectures are sensible. See, I like to have my lectures be "complete". So, when I discuss a topic, I cover it in one day or divide it in some sensible way across two days (or maybe more). Dividing across more days will require finding more divisions where each lecture is still coherent.

Comment 2: he is so helpful

My thoughts: thank you.

Comment 3: I like Lucas's attitude toward the class.

My thoughts: I'm not confident what this means, but I'll just say "thanks", as it's obviously positive.

Comment 4: Very refreshing to have a instructor who really makes it a priority to ensure students understand the material. Always extremely helpful. One of the best teachers I have had.

My thoughts: Thank you very much.

Comment 5: I felt the lectured were rushed - more a cramming session than a learning session. The instructor went so deep into the material I was lost after leaving the class or when I attempted the homework assignments. I do feel there is a great attempt to teach and organize the class and I do like the idea that the final is comprehensive and if your score is higher than your class average the final will be used as your final grade. I had a difficult time with the homework which was very discouraging and frustrating.

My thoughts: Actually, a lot of people had trouble with the homework. I think I may have figured out the problem. When I teach, I teach general principles/theory. When I give homeworks, I ask questions about applications. I expect my students to be able to go from general principle to application - and that's apparently a gap that is difficult for many people to bridge. Which, of course, presents me with a big difficulty. Apparently, for many students to be able to "get" applications, I have to show them applications in class. However, this is a pure addition to how much I have to do in class, and my lectures already move too fast. I'm not sure how to solve this problem.

Comment 6: This class was hard, but Lucas made an effort to actually help us.

My thoughts: I'm glad to hear it.

Comment 7: Mr. Engelhardt is awesome. He sincerely cares about teaching, and really does enjoy it. I can definitely say that he is one of the best teachers I've had at OSU so far.

My thoughts: This is very flattering. I'll take it. ;-)

Comment 8: Great class and very helpful professor. Lucas was very willing to help outside of class and was quite successful in conveying subject matter during class as well.

My thoughts: This is kind of an odd contradiction to Comment 5 - which indicates that the student that gave comment 8 was probably one that could think from theory to application pretty well.

Comment 9: i loved his way of speaking and excellent wardrobe. however, power points would reduce the wasted time he took to write everything on the boards

My thoughts: This is an interesting comment. I actually have a few thoughts about PowerPoint:

(1) I'm no good at PowerPoint. Frankly, I'm TERRIBLE at it, and I can't seem to make slides to satisfy people. My tendency is to put what most would declare "too much" on a PowerPoint slide. (For example, when I used PowerPoints a little over a year ago, I'd seriously have 90+ slides for a 90 minute lecture). Yet, at the same time, people give me comments about my slides not being "detailed" enough. I honestly have no idea how to interpret that.

(2) People already say I move too fast - PowerPoint is likely to speed me up. Writing on the board is, so some degree, a strategic decision, as it slows me down.

(3) I'm better when I'm "off script" - answering questions and the like. PowerPoint is like shackles that tie me to a particular lecture structure and don't allow me the freedom to go through digressions. "Chalk and Talk", however, allow for a certain amount of flexibility.

Comment 10: teaches things that are not necessary.
makes things look more copmlicated

My thoughts: I'm not sure how to interpret this comment. Here's why:

(1) I'm not sure what "things" were unnecessary.

For example, I taught a "trick" for finding marginal revenue when demand is a straight line. The trick is this: if Demand is in the form P = c - dQ, then MR = c - 2dQ. Then, I taught the theory underlying this trick. For the mathematically inclined, it's because Revenue = P*Q, and MR is effectively the first derivative of Revenue wrt Q. Now, the course I teach isn't calculus-based. In fact, it is expressly NOT calculus-based - there's a calculus-based version of the class for those that want to take it. So, I can't say "Why? Well, here's what revenue is, then just take the derivative." Instead, I have to introduce other methods. In this case, I used a "perturbation" method. It's a long process, but it works and only requires algebra.

Now, one can declare perturbation and the whole derivation "unnecessary" - but doing so requires replacing understanding with an appeal to authority (in this case, me). Naturally, whether this is necessary or not depends on...

(2) I'm not sure how "necessary" is being judged. There's obviously some instrumental definition here - but for that to become concrete, I have to know what the goal of the commenter is.

(3) What "things" did I make look more complicated? And more complicated than what? It's certainly possible that reality is just complicated - or it's possible that there's a certain simplicity that I neglected. Unfortunately, I can't tell unless I know what part of the class the commenter is referring to.

Overall evaluation/plan for improvement:

Make sure that I have lots of applications in there with the theory. It may be helpful to adopt an "A-T-A" structure, or perhaps a "Question - Tools - Answer" structure - though I feel like I do that quite a bit, I might not be explicit...

Cut back some on "unnecessary" elements. Which means thinking about which elements might be considered unnecessary...

Who's afraid of inflation?

Tue, 15 Dec 2009 14:07:47 GMT

So, the Producer Price Index came out today.

The PPI is one of the standard measures of price inflation in the US - though not as standard as CPI, which will be released tomorrow.

So, in November, final goods prices as measured by the PPI went up 1.8% in a single month. Annualizing that, it's about 22% annual inflation.

Of course, annualizing this number is a bad idea. A lot of it comes from changes in volatile prices like food and energy, and very well might "undo itself" in the next month. However, even excluding those elements, PPI increased 0.5% this month - which annualizes to about 6% inflation - about twice what most economists consider "healthy" for the US.

Another interesting point: this is the first month in which the Year-over-Year change has been positive since November of last year. The reason? There were big declines in prices around the end of last year. So, the Year-over-Year numbers have been very misleading. To see that, look at this faux index:

20X1
Jan: 100
Feb: 100
Mar: 100
Apr: 100
May: 100
Jun: 100
Jul: 100
Aug: 100
Sep: 100
Oct: 100
Nov: 100
Dec: 50

20X2
Jan: 52
Feb: 54
Mar: 56
Apr: 58
May: 60
Jun: 62
Jul: 64
Aug: 66
Sep: 68
Oct: 70
Nov: 72
Dec: 73

With this data, the "year over year % change" looks like this:

20X2
Jan: -48%
Feb: -46%
Mar: -44%
Apr: -42%
May: -40%
Jun: -38%
Jul: -36%
Aug: -34%
Sep: -32%
Oct: -30%
Nov: -28%
Dec: +46%

So, do the year-over-year figures give a true picture of what's going on? Not at all. They are too impacted by the sharp change in Dec 20X1. So, even though there is obvious inflation from Jan to Dec of 20X2, the year-over-year figures don't capture that, instead they mostly reflect the sharp decline in Dec 20X1. So, it's better to look at the monthly data. Just to make things clear, here's what the PPI looks like:

It's pretty obvious that after the big decline in the last half of last year, there's a more or less steady upward trend in PPI - but year-over-year figures would obscure that fact.

More to come when the CPI gets released tomorrow.

Because I understand Search Costs, that's why!

Mon, 14 Dec 2009 20:12:05 GMT

So, apparently, I'm the 6th most rated person in the Econ Department at Ohio State on RateMyProfessors.com.

Every person above me has been at Ohio State since I arrived - often long before I arrived, and most of them teach very large (like several hundred student) lecture classes.

So, why do I have so many ratings?

See the title of my post.

It's remarkably simple. For a student to rate you on RateMyProfessors.com, they have to search for you. The site is so poorly designed, that this is a potentially serious problem, so only the most motivated students will bother doing it. (For example, if you use the Search box in the top right and search for "Lucas Engelhardt Ohio State University", you get no results. It's not unlikely that many students would give up at that point and declare it "not worth the trouble".)

So, what do I do?

(1) I let my students know how many people check RateMyProfessors.com. My data is based on surveys that I take in my classes. I've found that about 45% of students checked me out on RateMyProfessors.com before they came to the first day of class. This is a large percentage that surprises the 55% of students that don't use the thing. It succeeds in giving a greater level of importance to the process of posting reviews of professors.

(2) I send them a link to my page. I do this about 2-3 times right around finals. I've never devoted an entire e-mail to this purpose, but just tack it on at the bottom of e-mails about other things. This minimizes the trouble that the student has to go through to get to the page.

So, there you go.

Ludwig von Mises's Theory and History - Chapter 5

Mon, 14 Dec 2009 17:21:57 GMT

Chapter 5 - "Determinism and Its Critics"

Basic idea: determinism is basically true - but that doesn't mean what some think it means.

Here's how it goes: all science presumes that there are deterministic, universal laws of cause and effect. However, this doesn't preclude the idea of "free will" in some sense - because we don't understand how ideas are "caused" - and ideas have a significant impact on human action.

This is what distinguishes human action from, say, physics. Human action is impacted by ideas - and we all know this is true. So, while it is true that if EVERYTHING is constant, two "different" people will act in the same way, the problem is that, in reality, it's never the case that everything is constant. My actions are determined by my current state and my ideas. But, my ideas are impacted by my history - and it's not entirely clear how history impacts ideas.

One interesting point Mises makes: there's a tendency to misapply statistical arguments in both physics and human action.

Physics - "statistical physicists" claim that the only thing that is observed are "statistical tendencies", and as such no deterministic laws exist. They only SEEM to exist at the macro scale because of the law of averages.

Mises's point: Not so. Rather, there are deterministic laws that govern the micro level - but we don't have a good understanding of those laws, and as such the preconditions are not understood.

Human Action - statistics proves that there is no free will, since there are tendencies in human behavior.

Mises's point: Not so. All that statistics proves is that there are TENDENCIES in human behavior - that is not the same as denying free will.

Mises also has some jabs in there at Marx's determinism - basically saying "So, Marx, if the Revolution is inevitable, why bother trying to get it started?"

My thoughts:

On the whole, an okay chapter. Honestly, I found myself wondering what the actual point was. I think it had to do with distinguishing the study of human action from physics. In the study of human action, Mises says that any statistical work is "historical" in nature. That is, it can't be used to derive universal principles, because ideas are a precondition that change over time - and as such any statistical work in one period may not be valid in another. On the other hand, statistical work in physics is truly "science", because it is aimed at understanding universal principles that WILL be universally valid.

This puts Mises in an interesting "camp" - and I think that's actually the point of the book, as I'm reading it. Mises agrees with the historicists that statistical/empirical studies will reveal different "laws" operating at different points in time. On the other hand, Mises believes that there ARE universal laws of human action - that can be derived a priori.

It's an interesting position, and actually helps me understand some others' thought patterns as well. For example, Paul Krugman. In his writings he makes it very clear that he believes that there are two different "Economics" - there's "normal" economics that operates when things are going well, and there's "Depression Economics" that operates when things are going horribly wrong. The laws that govern these two worlds are totally different - and the recommendations that Krugman makes in them are also totally different. For example, in the Bush years, Krugman hated government spending - now he loves it. Some would write this off as simple partisanship, but I don't think that's accurate. He does the same thing with other issues that are less partisan - like arguing whether free trade is good or bad. Normally, he says that it's good - but recently, he's become a protectionist. Why? Because we're in a period with Depression Economics, not Normal Economics.

So, why does Krugman act this way? Because he is, at heart, an empirical economist. And, if Mises is right, then empirical economics should reveal DIFFERENT economic laws when conditions are significantly different. This is also what Keynes himself was "all about". The reason he was looking for a "General Theory" was because he was convinced that the Classical Theory was simply a "special case" - that is, that there are conditions where it stops applying. And, he was convinced that the Great Depression had those conditions present.

The big difference between Mises and the Keynesians is that when Mises talks about general laws, his conclusions lead to laissez faire. Meanwhile Keynesians suggest that - at times - massive government intervention is necessary - and, in fact, good.

Meme - Year in Review

Sat, 12 Dec 2009 16:48:11 GMT

Post the first sentence of your first entry of each month in 2009.

January -
Just a little update.

February -
So, statistics seem to say that savings are up.

March -
So, a while back, I sent Sens. Brown and Voinovich e-mails about how they should resist the ARRA.

April -
So, I'm doing something I thought I'd never do.

May -
I just want to say briefly that I can recommend Wesley's Sermons.

June -
Apparently, the US government will have a 60% stake in GM when it emerges from bankruptcy.

July -
So, I was watching Big Brother UK, when this exchange happened between two of the housemates...

August -

Psalm 2

¹ Why do the nations conspire ^[a]
and the peoples plot in vain?

September -

Article here. Apparently, the $700 billion TARP bailout isn't going to cost $700 billion.

October -

So, I just spent about an hour and a half coding a new HP filter that can handle larger data series than the current code I have.

November -

So, Macro seminar today is a speaker presenting on "Learning and Discovery".

December -

In his second chapter, Mises discusses "knowledge and value".

Actually, I think that this meme sums up my year pretty well...

Miscellaneous Notes

Fri, 11 Dec 2009 22:05:07 GMT

(1) I just got an interview at another school. So, yay! 2 interviews!

(2) My wife and I just got back from Christmas shopping. We were only out for 2 hours, but they were a LONG two hours. We still have a bit more shopping to do, so we'll probably have to go tomorrow night, too.

Alright, I think that's it for now.

Have a good weekend y'all!

Ludwig von Mises's Theory and History - Chapter 4

Thu, 10 Dec 2009 21:20:02 GMT

A very short chapter, just summing up the previous 3 and introducing the 5th.

So, this is where we've been:

(1) We've established that judgments of value are subjective, and are taken as given.

(2) We don't claim that they are a "primary fact" on which the universe is built. Most likely, these judgments are influenced by the external world. However, we don't know HOW this works - this matter is complicated by the fact that what seems to be the same stimulus often evokes different reactions in different people, or even in the same person at different points in time. So, we can't discover the connection between stimulus and value judgments.

(3) The next section focuses on Determinism and Materialism. So, we'll see where it goes!

The Office Phone and Freeriding

Thu, 10 Dec 2009 16:36:31 GMT

So, our office suite has a shared phone that sits out near the entrance to the suite.

It's been ringing quite a bit today, and no one has answered it.

Why not?

Because each of us is waiting for other people to answer.

I definitely need to put in my syllabus that trying to call my office is a VERY bad idea, since we often don't answer the phone.

Mormonism and Bella and Edward

Wed, 09 Dec 2009 03:11:56 GMT

WARNING: For those who don't want to see spoilers for the Twilight series, you should avoid reading this.

So, tonight I was being silly and declaring that my wife was undead. (This isn't actually that strange for us...) At that point, we realized that if she was undead, we wouldn't be married any more ('til death do us part!).

At that point, I thought "Wait a minute! That means that Edward and Bella aren't married either! She was alive when they married, but was then turned into a vampire!"

Then I realized.

That's not true, because Stephanie Meyer is Mormon. In the Mormon tradition, marriage is an eternal covenant.

I think that's interesting, because that's the first distinctly Mormon thing that I've found about the story (at least as far as I've heard about it...). This is opposed to Mormon authors like, say, Orson Scott Card, who is VERY Mormon in the Ender series.

In other news...

Wed, 09 Dec 2009 02:31:50 GMT

It appears that Christina Romer is a Slitheen in disguise.

I find myself unsurprised.

To make me feel much better...

Tue, 08 Dec 2009 18:06:04 GMT

... I got an interview at the Conference! And it's with a school that I think would be a pretty good match!

Woo hoo!

DS9 and Mage Seekings

Tue, 08 Dec 2009 02:23:42 GMT

So, my wife and I are watching DS9, and we just saw a scene that was in one of Paul's Seekings.

A few years ago, I played in a Mage: The Ascension game by GCStoryteller. Part of that game involved "Seekings" in which your character learns something about the mystical nature of the universe.

Anyway, Seekings were generally broken into a number of scenes. In one of Paul's Seekings, there was a scene where he was in a room where there was food and drink - he didn't take any, in part because he had self-imposed dietary restrictions. Anyway, the room started filling with smoke, and he began choking. He took a drink, and then could breathe again, and he heard clapping.

In this episode of DS9, a few of the characters are stuck in a game. There's a scene where they're in a party where there's a drink - they refuse to drink it and the room begins filling with smoke. They're choking, drink the drink, and can breathe again - and the people at the party begin clapping.

So, here I am, 5 or 6 years after that Seeking, and I finally ran across what I'm assuming was the inspiration - if it wasn't, it's a wild coincidence.

Things will look better in the morning...

Tue, 08 Dec 2009 00:45:54 GMT

One thing I learned in college: problems always seem much worse at night than in the morning. This is why rational people go to bed at 10:30PM. They avoid the "Oh, no! Everything in life is terrible" moods that come along around 11:30PM or so. As you know, last night I got myself in one of those moods.

This morning, three things helped:

(1) On Facebook, Jing Han suggested that my estimation procedure for the number of jobs was bad. Ends up he was right. Even just counting the particular types of jobs I was trying to count, I vastly underestimated them.

What I did: Assume 1 listing per page in the JOE PDF. Count number of pages in the PDFs. Then # of jobs = # of pages.

Now, I knew that this wasn't strictly true. But, eyeballing suggested that some listings were a little over a page, some a bit under. So, it seemed reasonable.

However, there was better data available. At the JOE website, you can view listings on the site rather than through PDF. And they tell you how many listings there are. I checked. In the October + November + December JOEs, there are 485 listings for full-time academic jobs in the US. This is much better.

(2) On LiveJournal, fox_c brought up the idea of looking at local community colleges. It ends up that there are two colleges in Columbus looking for part-time adjuncts in economics. This opened my mind to other possibilities. If there are two in Columbus, then there may be others in places that are more "locationally advantageous". For example - in Western PA. I checked, and it's better than I thought. Slippery Rock University (just 10 miles from my alma mater) has a full-time temporary Instructor position open. Seeing as the "good news" that I got from them was that they'd like to hire me eventually - once they can justify the finances of it - a position like this one would make a transition relatively easy. I'm still not sure that it's what I'd want to do, but it is an idea. I'm waiting on advice from my advisor about whether it's a good idea to apply for Lecturer/Instructor/Adjunct positions at this stage. But, it's something that I'll keep in mind. Like I told fox_c , that decreases the number of paper routes I'll have to do! Which is probably a good thing, since the newspaper industry is slowly dying...

(3) My wife opened the blinds today and said "It snowed! And it's snowing!" I like snow.

So, you know, things are looking up.

Note: I had planned to post this this morning... For some reason I didn't... Anyway, here it is now.

Job Market Worries

Mon, 07 Dec 2009 06:09:29 GMT

So, today a bunch of things converged to make me convinced that I'm never going to get a real job.

Until recently, I've been pretty upbeat. See, I knew two things: (1) I had a good lead at my alma mater. and (2) about 95-97% of new econ PhDs find a job in the "typical job market year".

As you know, (1) fell through. Honestly, I'm surprised how little impact that had on me in itself. My reaction has been, more or less, "God closed this door so that I'd find the one I'm supposed to go through", and I moved on. Naturally, it's not quite that simple. But, it has been far easier than I expected. I think that my knowledge of (2) helped with that.

Here's the problem. Things that happened just today made me think that (2) is going to be false this year. And, not only false, but VERY false.

Let me lay these out for you:

(1) Rich Wilcke (of U of Louisville) reports that they have 490 applicants for a position there. This indicates that there are at least 490 applicants in the Economics job market this year. Based on the October-December JOEs, there are probably about 340ish full-time academic jobs in the US right now. Doing the math, that means that at least 150/490 = 31% of applicants are going to find themselves jobless. This is TEN TIMES the 3% that I thought was "normal". This makes the odds very bad, especially since the top 10 schools provide a large percentage of new PhDs to the market - and I don't go to a top 10 school. (Harvard alone has about 30 people on the market this year - multiply that by 10, and you find that roughly 90% of the available jobs are going to go to people from top 10 schools.)

(2) I just got an e-mail tonight from our Department Placement Officer. It was sent to everyone on the job market, letting us know that faculty occasionally ask about who has interviews where, so we should e-mail him with any interviews we currently have scheduled for the conference in January. Here's the thing: I don't have any. Now, I wasn't worried about that fact before. I just assumed that I'd hear sometime this week or next - or maybe even later. Apparently, I was wrong.

So, a matter of a few days ago, I was trying to figure out how much of a premium other schools would have to offer to make it worthwhile for me not to go to my alma mater. Now, I'm trying to figure out how many paper routes I'm going to have to do to pay the rent...

[Note: obviously, I'm being a bit dramatic here. But, I do find the numbers to be quite disturbing.]

Bad News

Sat, 05 Dec 2009 04:39:44 GMT

For those who are interested - the lead at my alma mater fell through. So, it ends up that my job search is actually a job search.

So, we'll see what happens.

Ludwig von Mises's Theory and History - Chapter 3

Fri, 04 Dec 2009 05:10:49 GMT

Basic Premise: Social cooperation is the most important means that most people (except the occasional hermit) use to attain their ends - whatever those ends may be.

This chapter was entitled the "Quest for Absolute Values". Mises's argument goes along several lines, as he seeks to establish that this "quest" is in vain.

Line 1: Supporting Social Cooperation

Darwinism implies that every member of a species is in competition with every other member of that species. The basic reason: food is scarce. So, if I eat a particular thing, then the guy next to me can't. So, we have intraspecies competition for most species.

However, human beings, as a rational animal, has learned that this doesn't have to be true. If we cooperate, we can often increase the total output available, so that humans can live in peaceable cooperation with each other. And, there's no reason that we can't ALL live in peaceable cooperation with each other.

Mises goes on to mention that, because of the increased productivity that arises because of the division of labor in society, being in society is a primary means for anyone to attain any end that they have.

The problem: once we recognize that different people have different values, intolerantly insisting on one set of "absolute" values becomes disruptive to social cooperation because it replaces the cooperative relationship with one that is competitive - since there can only be one correct set of absolute values.

Line 2: Defeating Natural Law

Mises says that the most momentous attempt at a set of eternal, absolute values is that made by natural law. However, he suggests that this attempt ultimately failed - actually on the basis of its own grounds. Here's why:

First: Natural law philosophy rightly found that there's a set of laws that govern the universe and mankind much adjust his actions to abide by these laws.
Second: Natural law philosophy rightly found that the only way of grasping these laws of the universe is through human reason, and all institutions should be subject to discursive reasoning.
Third: There is no standard available for appraising any mode of acting except the effects produced by that action.

In the end, natural law doctrines lead to rationalism and utilitarianism.

However, one can only perform "utilitarian calculus" by acknowledging that the effects produced by an action must be valued subjectively.

Line 3: Defeating Revelation and Intuition

Basically, it goes like this: Reveal Religion disagrees with itself - both with respect to which texts should be used, and with respect to how to interpret them. Intuition, similarly, varies by person.

Thus, these don't provide any ground for eliminating the basic, fundamental conflict between two sets of values.

Line 4: Defeating nonutilitarian notions of "justice".

In short: justice SHOULD be defined as "doing what is most conducive to social cooperation" - which is a fundamentally utilitarian definition. So, there's no such thing as "Doing justice, even if it destroys the world."

In the end, Mises suggests that the quest for absolute values is absolutely necessary if we want to establish a totalitarian order. But, doing so is not a good thing, so the quest is no good. (Obviously, this is a paraphrase that isn't totally fair.)

My comments:

This is probably the chapter that I disagree with most so far. Mostly because I'm not a utilitarian.

Here are some of my problems with utilitarianism:

(1) Utilitarianism can only declare an act "right" or "wrong" after the fact, and as such is a useless guide for action.

As long as we believe that actions should be judged by the consequences, we can only judge an action once we have complete knowledge of its consequences. However, as long as our knowledge of scientific laws is incomplete, any calculations involving consequences must be, at best, approximations. And approximations can be FAR off.

Now, we can get around this to some degree with a particular form of Misesian Subjectivist Utilitarianism. We'll just claim that any unforeseen consequences have a "value" of 0, and, as such, don't matter. Of course, such a claim is silly, as everyday experience proves that unforeseen consequences DO have a value to us - leading to the phenomenon of "regret", for example.

(2) When there are disagreements about values, there is serious potential for conflict, and utilitarian calculus would require interpersonal comparisons - which are not possible if you buy subjectivism (and I do, as does Mises, for that matter).

Example: Kill Bill Gates and take his stuff. Suppose that we all agree that Bill Gates is filthily wealthy, and that we should, therefore, kill him and take his stuff. Subjectively, we all judge that the consequences of this are better than the consequences of leaving Bill alone. Bill, of course, disagrees.

So, how do we come to a decision? Can we really say that refusing the will of the community encourages "social cooperation"? Perhaps - but we'll need a pretty precise definition to figure that out.

That said: Mises is correct that some sort of "absolute values" is a vital component of any totalitarian tendency. However, it is certainly possible to come up with an absolute set of values that doesn't lead to totalitarianism. For example: Rothbardian anarchocapitalism. The entire POINT of Rothbard's natural law argument is that natural law forbids governments from taking things that rightfully belong to other people - and taxation is the mark of government - therefore, government should be forbidden (at least as we know them). Personally, I found the argument that Mises made about natural law arguments leading into utilitarianism to simply be false.

Ludwig von Mises's Theory and History - Chapter 2

Tue, 01 Dec 2009 15:39:47 GMT

In his second chapter, Mises discusses "knowledge and value".

Basic premise: many arguments against the market take the form of "But capitalists are biased". Even if true, this does not prove the unsoundness of what is being put forth by them.

Honestly, that sums up the argument. Mises also has a little digression on how free trade increases wealth. More or less, Mises says "Ricardo said that free trade increases wealth. This is very different from saying that free trade is 'good'."

My Comments:

I liked this chapter a lot. It's really a marvelous refutation of the "Bias Doctrine", which, as a side effect, is a refutation of part of the more radical relativistic strains of postmodernism. Highly recommended.

Ludwig von Mises's Theory and History - Chapter 1

Mon, 30 Nov 2009 18:27:32 GMT

In his first chapter, Mises describes what he calls "Judgments of Value" and distinguishes them from "Propositions of Existence".

A proposition of existence is a proposition that is either true or false. For example, "The sky is blue" is a statement of such a proposition, as is "God exists", and so on. All of these are either true or not.

However, a judgment of value is not necessarily "true" or "false". In fact, it's not open to argumentation at all. When I think about two possible states of the world and decide that I prefer one to the other, no one can argue with my decision about my own preferences. It should be taken as a "given".

However, statements of preferences or these judgments of value can be true or false. For example, when I say "I like chocolate ice cream better than vanilla ice cream", I might be lying. However, at that point, the statement is actually one of existence - that is the existence of that preference. It isn't really a statement of value.

An additional point: judgments of value are, by nature, subjective. That is, I can only know my own valuations, not those of anyone else (except in so far as they reveal them). What this implies: when something is a judgment of value, it can't be proven "wrong". For example, I may discuss with a Communist about the terrible consequences of Communism vs. Capitalism. If, at that point, they declare that these awful consequences don't seem that awful, then I can't really make another argument. Since we disagree on the nature of "good" and "bad", we can completely agree about the objective consequences but disagree about the preferable course of action.

In the end, human action comes from judgments of value.

My Comments:

This is the Mises that would disagree with Rothbard/Hoppe on certain important points. Rothbard and Hoppe argue that some "ultimate values" are things that can be declared "right" or "wrong". Both of them argue that property rights are a necessary part of an internally consistent ethic. Mises, however, doesn't really concern himself with "internally consistent ethics". Instead, his view of property rights is utilitarian. Effectively: "Property rights lead to prosperity. Most people like prosperity. Therefore, we should protect property rights." Notice that Mises's argument rests on subjective preference. Hoppe's argument rests on certain implications that arise from argumentation. (In particular, argumentation requires the existence of the other's mind, and their freedom to make up their mind. Therefore, when I argue with someone, I must recognize their right to their mind, which further implies their right to their body and property. Hoppe then points out that it is logically inconsistent to argue for a system without private property rights - since argumentation itself implies the right to property. Yeah, I think it's kind of weird argument, too.)

On these issues, I have to disagree a bit with Mises. I do believe that there are objective standards by which at least some judgments of value can be declared. That said, from a practical perspective, it's often best to go the Mises route when you're presenting an argument. The fact is that arguments about judgments of value tend to be unproductive, as the reasoning requires is so obscure that it tends not to be convincing to anyone except "the choir". So, while I'm not a consequentialist, I'll often argue in favor of capitalism based on its good consequences. Am I being dishonest when I argue that way? Not really. I'm simply taking as given that many people are consequentialists. Since my goal is to convince them of the goodness of capitalism, arguing for good consequences is likely to be effective. Imagine if, instead, I tried to shake them out of their consequentialism first! It's not hard to come up with cases where consequences are good, but the method clearly immoral. But, the likely response is something along the lines of: "Well, I wouldn't take it that far!" The fact is that most people judge morality/value by some internal "moral sense". Moral philosophy is largely built around trying to take the moral sense we have and getting it codified into some sort of simple rules. However, moral philosophy has largely been either (1) unsuccessful (I think of utilitarianism), or (2) largely successful, but very vague (I think of "virtue theory"). So, it's often best to avoid pushing people into the mire of moral philosophy, and instead argue about the consequences of particular actions - taking their moral philosophy as given, even when you disagree with it.

Okay, I've gone on long enough. More to come later.

Note on Krugman's Blog Post

Wed, 25 Nov 2009 13:06:17 GMT

So, Paul Krugman is worried about people being worried about the deficit. More or less, he uses standard Keynesian arguments to declare that deficits are awesome, so we shouldn't worry about them. He's also worried because people seem to believe that the economy's doing fine - even though professional forecasters believe that high unemployment rates (in excess of 8%) will persist until 2012, and that inflation rates will be very low through that time.

Here's my problem with this: why should we trust professional forecasters?

Why I have my doubts. If you look at the second page, you'll see that in the 3rd quarter of 2008 - just before the financial crisis hit - professional forecasters were forecasting 6% unemployment in 2009. That's right. 6%. Where are we now? Over 10%. Good job, guys.

Okay, okay. I was unfair. "No one" saw the crisis coming (except, you know, Peter Schiff, Mark Thornton, and many other Austrian economists - and even some Keynesians, for that matter). So, what kind of predictions did they make after the crisis hit. Apparently, they thought unemployment would get up to 7.7% by the end of the year.

What's my point? Professional forecasters aren't very good at what they do. Sure, they do fine when times are "normal" - because when times are "normal", the present is a good predictor for the future. So, prediction isn't that difficult. (Actually, I read this great paper by Mankiw, Reis, and Wolfers that estimates that normal people update their forecasts of the future about every 12 months - professional forecasters do so about every 10 months, on average.) But, when times aren't normal - like now - professional forecasters aren't very good.

So, here's the question: if professional forecasters didn't see how bad the crisis would be - even after it started - then why should we trust their forecasts about the recovery?

Don't get me wrong - I expect things to be bad for a while. (I agree that unemployment is likely to remain high, though I think that inflation will be significantly higher than professional forecasters are predicting.) My point is that Krugman's case for people being crazy is poorly founded.

Ludwig von Mises's Theory and History - Introduction

Tue, 24 Nov 2009 16:12:12 GMT

Introduction - Methodological Dualism

In his Introduction, Mises lays out what he calls "methodological dualism".

Basic premise: one method works in the natural sciences, another works in economics.

Here's why:

In the natural sciences, we can appeal to "constants" or, at the very least, "constants for all practical purposes". That is, under exactly the same conditions, the same stimulus will evoke the same response.

However, this is not true for a field like economics.

The fundamental problem is that science doesn't have a complete understanding of how the physical world impacts thought - in particular, the formation of goals. So, even if we accept that the physical world is all that exists and that, therefore, our goals must come, ultimately, from physical (or physiological) causes, we have to confess that our knowledge of these connections is woefully inadequate.

So, where does that leave economics? Actually, it doesn't hurt economics much at all. Economics simply takes as given that people have goals - and leaves the content of their goals as ambiguous. The laws of economics apply, regardless what specific goals a particular individual has. So, finding what causes the goals is not essential.

In some sense, what economics does is say "We don't know how we got here. But, the fact that we are here has implications as we go forward."

The problem is that economics has some very clear predictions and suggestions. For example, economics suggests that consumers should be allowed to make choices without legal restrictions, that redistribution is harmful to production, that socialism doesn't "work", etc. Some who are interested in economics don't particularly like these conclusions. So, they try to overturn them. However, they face a problem. The logic behind these conclusions is undeniable. So, rather than attack these conclusions on logical grounds, they attack them on methodological grounds. They claim that these results aren't "scientific" because they are based on aprioristic reasoning rather than on empirical science.

Which brings us back to Mises's point. Empirics only works if we believe that there are underlying constants that we can estimate. But, human choice - at least as we can observe it - appears to be devoid of constants. Sure, there are "trends", but trends and constants are very different things. Even if we find that something related to action is "constant" for a few years, we can't really say that it will stay that way - as change is pervasive in everything related to human action.

Now, that's not to say that empirical work in economics is useless. It most certainly isn't. However, empirical work should be considered from a historical standpoint, not a "physics" standpoint. That is, when we do empirical work we should do it to get an understanding of the forces that caused a particular event - this doesn't necessarily allow for extension into a general law.

My Comments:

Actually, I feel like Mises's argument is significantly better than my summary of it. But, as I was reading, a few things crossed my mind.

(1) I wonder what Mises would think of "Neuroeconomics" - a field that seeks to use neuroscience to understand human decision making. If successful, neuroeconomics might fill the gap between our understanding of the physical world and our understanding of human motivation. I'm curious what Mises would think of that. My sense is that he'd side with Gul and Pesendorfer, who are not fans of neuroeconomics at all. But, I can't be sure.

(2) In some ways, Mises's critique is a precursor to the Lucas Critique (authored by Nobel Prize winner Robert Lucas). The basic idea behind the Lucas Critique is that it's silly to use econometric models to predict responses to changes in policy. The problem is that behavioral relationships depend on the "rules of the game". So, when you change the rules (for example, when you change policies), the relationships will change. So, any econometric analysis of policy changes is invalid. His critique has been widely accepted, and has led to the estimation of "deep parameters" - parameters that aren't supposed to change as policies change. Of course, Austrian economists would claim that these "deep parameters" are also policy dependent. For example, Hoppe has argued that time preference depends on the political structure. (So, social time preferences are higher in a democracy than in a monarchy.)

More to come as I read more...

My Moral Foundation: Purity - no shock there...

Tue, 24 Nov 2009 04:21:33 GMT

Moral Foundations Questionnaire - http://www.yourmorals.org/explore.php

Interesting, though not really surprising to me. I know that my morality is based on the concept of Christian holiness - so, sensibly, "purity" would be the driving factor in my moral sensibilities. Also, as a libertarian, I place significant weight on "harm". Neither of these really give me an inherent reason to appeal to "fairness" (by which is meant something like "equality"), loyalty, or authority.

Anyway, interesting quiz.