EconLog

This is interesting as an art piece, but I think it is easy to intuit from the presentation that the authors are not being very careful thinkers. The truth is that the question of austerity is a fairly complex one. The reason it seems so cut and dried is that the modal promoter of austerity has no training in macroeconomics and is making arguments that are clearly not supported by theory. That said, to portray Krugman as definitely correct on the matter of austerity is very misleading. There are basically two camps of people opposing Krugman, "mainstream Austrians" and market monetarists. Mainstream Austrians isn't really a category, but this is people who make arguments based on analogies with household budgets, and worry about hyperinflation from out of control spending. Most of them have economic theories that are not well-supported empirically. These people say austerity is better and will lead to stronger growth, possibly after a painful period of economic adjustment. Often these are head economists at small banks or other pundits that get a lot of airtime for their opinions. They probably don't actually identify as Austrians 95% of the time, but in this particular instance they are following Austrian thinking. The other major camp is market monetarists, whom Krugman is very dismissive of, despite the fact that their arguments are compelling and their empirical support is probably as strong as pro-spending Keynesians. In his arguments with market monetarists Krugman…

Change mostly happens on the margin in relatively small increments. Libertarians are actually making progress at legalizing pot, which is great because the war on pot has long been a gateway drug driving the increased militarization of the police. They've also been making progress getting rid of dumb archaic laws (like those that prohibit sodomy or gay marriage) and fighting against the growth of new incursions against freedom, even if it is a rear-guard action. Fighting "the regulatory state" as an abstract project seems quixotic, unless you have an actual PLAN for doing so. Besides, when libertarian forces DO try to attack the regulatory state too directly, they tend to get marginalized by the left AND the right, as happened with the Tea Party. One underlying problem is that we don't currently have anyone as prominent and capable as Milton Friedman arguing the issues. There are some great econobloggers (eg, at http://econlog.econlib.org/ ) but none sufficiently prominent to serve as a counterpoint to Krugman. There are a few libertarian celebrities (eg, Penn Jillette) but they don't have the gravitas to get taken seriously in intellectual debates.

One only needs to apply basic game theory and skepticism to come to the conclusion that Assad has no incentives to gas citizens. He's winning the war! On the other hand who would benefit from a gas attack? Obviously, the "rebels" (read islamists). They have been losing ground for the past two years and if the US pulled out (which was planned) and a peace settlement is reached then they would lose. Now consider that the exact same sequence of events happened almost exactly the same time last year -- the US announced that "regime change is no longer a priority" and a few days later we saw reports of a gas attack. See http://www.moonofalabama.org/2018/04/timelines-of-gas-attacks-in-syria… For the game theory see: http://econlog.econlib.org/archives/2018/04/from_game_theor.html

Taxes on capital gains are harmful and don't make sense. It would be more efficient to tax consumption and have no capital, estate, income, or corporate taxes. Scott Sumner has written many excellent articles about taxes on capital gains: - http://econlog.econlib.org/archives/2017/07/do_you_really_w.html - http://econlog.econlib.org/archives/2014/04/theres_only_one.html - http://econlog.econlib.org/archives/2015/09/our_bizarre_sys.html - http://www.themoneyillusion.com/?p=26636 Unfortunately sensible economic policies aren't politically feasible. This is partly because of the economic illiteracy of most voters and the lack of incentive for politicians to adopt economically sensible policies, but also because economists themselves often misunderstand economic theory.

Financial crashes don't have to be bad. The last one wasn't so bad at first, before the central banks in some countries let nominal GDP dip and caused a mild recession to become the Great Recession. See eg http://econlog.econlib.org/archives/2017/11/old_classical_m.html Some countries like Israel, Australia (or to a lesser extent the UK) had more competent central banks. See https://marketmonetarist.com/2014/04/24/how-stan-fischer-predicted-the… for a piece about the example of Israel.

It's not even known whether the subprime crisis even caused the great recession. Causality is very hard to prove when we only have one reality. Some think the crisis was caused most by cautiousness by the Fed; in this case, the 2008 crisis may indeed have been caused by economists. http://econlog.econlib.org/archives/2015/09/how_the_subprim.html

Follow up posts: What Is the Female Marriage Penalty? http://econlog.econlib.org/archives/2012/02/what_is_the_fem.html Policy Implications of the Marriage Premium http://econlog.econlib.org/archives/2013/03/policy_implicat.html 9 Short Observations about the Marriage Premium http://econlog.econlib.org/archives/2013/03/22_short_argume.html

I don't know about "under reported" seeing as the author made a female oriented follow up: http://econlog.econlib.org/archives/2012/02/what_is_the_fem.html It is as equally thoughtful as the source of this HN thread.

There is a great deal of information (in studies and research) that shows post-secondary schooling is a good investment for the individual, but that does not mean that increasing the average amount of schooling is good for the country. A number of people are now making the argument that greater 'educational' achievement is mostly just signalling status, intelligence, socialization, and work ethic, not actually teaching people anything useful. If this view is correct, increasing the amount of education that the average citizen receives is just wasting their time (as most people do not enjoy their time in class), at great expense to them and the average taxpayer.[1] [1] http://econlog.econlib.org/archives/2014/02/why_the_college.html [2] https://en.wikipedia.org/wiki/Signalling_(economics)

Yeah, his problem is he's so lost in his own ego these days he's just a blatant ideologue at this point. He's uncharitable to his opponents, unwilling to acknowledge his own biases, and is more and more like the Bill O'Reilly of the left just better educated. His smugness and amazing ability to totally ignore any evidence to the contrary just makes me roll my eyes. His ability to spin is uncanny, these being but two small examples of many http://econlog.econlib.org/archives/2015/07/krugman_on_cana_1.html http://econlog.econlib.org/archives/2015/04/krugmans_insigh.html

The evidence is at best neutral for education boosters which is really weird. Education increases as the economy grows but it doesn't seem to have any effect on economic growth itself. http://econlog.econlib.org/archives/2012/10/did_nations_tha.html Did Nations that Boosted Education Grow Faster? No. Each dot in the graph below represents a nation: Change in education on the x-axis and change in per capita GDP growth on the y-axis. Between the 60's and the 90's every country in this sample boosted its average years of education--it was a golden age of alleged human capital investment. Some nations boosted schooling more, some less. How did that turn out?

Mostly, yes. There are unusual cases like medicine and some engineering, but for the most part it is just a resume checkbox. Evidence in favor of this: the sheepskin effect is huge. http://econlog.econlib.org/archives/2013/06/baaaa_tremble_b.html http://econlog.econlib.org/archives/2013/02/sheepskin_effec.html So is ability bias: http://econlog.econlib.org/archives/2012/01/correcting_for.html And as a thought experiment, ask yourself which of the following would have had more of an effect on your life. Suppose you failed your humanities classes (assuming you are an engineer/CS and work as such). Would your life have been significantly different than if you forgot what you learned? How about if you cheated and passed? Mine certainly would be. In principle, wearing a suit also has a small positive effect. It arouses some women. But in general it's mostly wasteful signalling.

It's worth keeping this[1] in mind while reading. Someone in the bottom quartile who goes to college has an 11.4% chance of finishing, vastly reducing the expected return of the decision to go to college--even ignoring the fact that people in the bottom quartile are probably attending much lower quality institutions. The most plausible story about education is that graduating from any college used to be an effective signal of intelligence, conscientiousness, and ambition. But everyone realized this, the demand (and therefore the price and quantity purchased) for college educations increased dramatically, and the quality of the signal was significantly diluted--attending an "average" college in the US and getting a non-job-related degree now just shows that you're minimally capable. This is worse for everyone. http://econlog.econlib.org/archives/2014/05/three_graphs_ab.html

People who spend more money win. This is intuitive, and almost universally believed. But all actual data I'm aware of doesn't support this. for example [1] conventional wisdom, especially among progressives, is that money can buy elections. The Citizens United case was supposed to be the end of democracy since it meant unlimited corporate spending on elections. If money really did buy office, 2012 should have been great evidence for the hypothesis. Instead 2012 looks like a case study in the powerlessness of money, in the triumph of the autonomous voter. For instance, the Sunlight Foundation reports that 2/3 of outside cash was spent on losers. [1] http://econlog.econlib.org/archives/2012/11/money_has_littl.html

Here's libertarian economist Bryan Caplan on the difficulty in disputing the causal relationship between marriage and success. http://econlog.econlib.org/archives/2013/03/22_short_argume.html He doesn't talk about the timing per se, but I think a lot of the same arguments apply. Certainty, if you believe that marriage causes success, it's not that great a leap to think that earlier marriage causes more success earlier (with the obvious caveats about getting married when you're 12.)

I'm not sure what blogging niches of the web this author is referring to, but the economic/political blogs that I frequent share links all the time, and they all have blogrolls, too (Ex. [1][2][3]). I even picked up links from a bunch of them on my amateur econ/pol blog a few months ago when I pointed out a mistake in a graph a bunch of them were sharing. So linking is not completely dead from where I sit. It's not even dying. YMMV. [1] http://marginalrevolution.com/ [2] http://econlog.econlib.org/ [3] http://www.volokh.com/

I agree with you that arguing against the Obama strategy is pretty much futile, but I think it's wrong to assume it'll be obvious after the fact whether the bailout made things better or worse, since there's no way to run a controlled experiment. I think the best strategy for people who think they have a good understanding of the situation to follow Bryan Caplan's advice and state publicly how they will interpret different outcomes. http://econlog.econlib.org//archives/2008/09/how_would_we_kn.html

Some recommendations for intro to econ books :) http://econlog.econlib.org/archives/2007/08/for_introductor_1.html

> It is very uncommon for people to say that double taxation has occurred when a nominal (but not real) gain due to inflation is taxed. Note that this was not any part of the model I described; assuming inflation of 0%, capital gains taxes are still double taxation because the value of $100,000 (real, inflation-adjusted, or your favorite equivalent term) today is greater than the value of $100,000 inflation-adjusted dollars 20 years from now. Believing that "the double taxation argument that justifies the capital gains rate" has to do with the corporate income tax is a significant mistake that will cause you disappointment should you manage to eliminate the corporate income tax -- the arguments for a lower capital gains rate will not go away, because eliminating the corporate income tax will not address them. Here's a professional economist making the same point in far-off 2017: ( http://econlog.econlib.org/archives/2017/07/do_you_really_w.html ) > I always find that some people are confused by the claim that investment income should not be included with wage income. I like to explain this with a thought experiment of two equally well off twin brothers. Assume that both earn identical lifetime wage incomes, and neither inherits money from their parents. Then both are equally well off. If one chose to buy two Hondas and the other chooses to but one BMW, you would not say the guy with two cars is better off. If one chooses to buy a BMW at age 25 and the other saves and…

I'd just like to point out that there is a case to be made for noncompetes, they're not just a terrible thing that companies do because they can. I recommend reading "The Case for Non-Competes" by David Henderson (http://econlog.econlib.org/archives/2016/11/the_case_for_no.html). Here's a relevant quote (in which the author is actually quoting Aaron McNay): " Both employers and employees would like to be able to train the employees if the cost of doing so is less than the gains in productivity. However, there is a potential collective action problem here. What happens if the employer provides the training, but the employee then moves onto another job? The employer bears the burden of the training costs, but does not receive any of the benefits. As a result, the employer does not provide the training, and a mutually beneficial trade is not made. By preventing the employee from being able to move, a non-compete agreement eliminates the collective action problem." I'm not saying that non-competes are necessarily good, or necessarily bad. It depends on the circumstances. But I do think that a lot of other commenters in this thread do think that non-competes are necessarily bad, and I think that's incorrect.

I'm a grant writing consultant (see www.seliger.com for more if you're curious) and zero clients out of 1,000+ over 20 years have asked about our education level(s). They want to know if we can write their proposals. It may be that the closer you are to the work itself, so to speak, and the further you are from the bureaucratic apparatus, the more "Can you do it?" questions matter (and can be measured) and the less "What degree do you have?" questions matter. Some others in this thread have noted that there might be a credentials "arms race" going on—I would add, in particular, in healthcare, education in government, per Tyler Cowen's book The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will( Eventually) Feel Better. Parts of big business may have signaling / credentialing disease too. Bryan Caplan is writing The Case Against Education, and he argues that too much of education is a signalling arms race. Here is one introduction to his thought: http://econlog.econlib.org/archives/2015/04/educational_sig_1.html.

This works in small experiments because when you give money to a small group of poor people (A) within a larger group of poor people (B), group A gains leverage compared to their prior position and compared to group B. When you give money to all poor people, the net result is simply inflation[1]. If transfer payments were made to taper up from max(wealth) (receives $0) to min(wealth) (receives $average(wealth)), disparity would be brought to 0, which would naturally lead to everybody doing what they wanted rather than what earned them income. This would be a lot of fun, but it would unfortunately reduce the developmental value of humans to zero[2], and machines would evolve to replace us all (could be gray goo, could be the borg, etc.). The true path to freedom from work is to work collaboratively on a humanoid robot with some basic rules for human interaction: 1) A robot may not injure a human being or, through inaction, allow a human being to come to harm. 2) A robot must obey orders given it by human beings except where such orders would conflict with the First Law. 3) A robot must protect its own existence as long as such protection does not conflict with the First or Second Law. Those should suffice for a while, but I know not what will come of them down the line. That's all for now :) Have a great weekend, everyone! 1. http://www.physicsclassroom.com/class/newtlaws/Lesson-4/Newton-s-Third… 2. http://econlog.econlib.org/archives/2011/05/robots_of_the_f.html

So, right now Greece is living beyond what it can sustain. To go forward Greece need to be both more productive and cut its standard of living somewhat. Unfortunately fixing this in a straightforward way is hard. You have a lot of confusion and bargaining around who has to experience pain and it probably won't be distributed evenly if left to itself. And because of sticky wages/nominal loss aversion efforts to reduce people's pay in nominal terms tends to cause unemployment[1] which means that the pain in even worse. Enter inflation. It sucks, obviously, but it's a great way to spread the pain around evenly between workers, pensioners, and creditors. And it doesn't cause unemployment. It causes a bit of additional pain through things like menu costs but that's small potatoes compared to everything else happening. Of course this is all presupposing a carefully calibrated monetary policy. It worked great for Iceland but I'm not sure I'd trust the current crop of Greek politicians not to give into the temptation to print themselves out of debt. That way lies hyperinflation. EDIT: I tend to think it would be good if the Euro zone could be dissolved somehow and it would probably be good for Greece in the long term to leave. However, I'm not at all convinced that in practice the "no" vote will work out well for Greece or anybody else over the next decade or so. [1]http://econlog.econlib.org/archives/2013/09/why_dont_wages.html

"Move from one stagnant area into a prosperous one to the point of dragging it down to be stagnant as well?" Wrong wrong wrong wrong wrong... 100 times wrong. Productivity is the root of all prosperity. First read this excellent article: http://econlog.econlib.org/archives/2015/02/always_keep_you.html. Workers become on average ~20x more productive when they migrate to the first world. Because we are capital rich and we have sane government and law and order. Imagine if you were moved to Haiti and you got stuck there. How much could you contribute to society in Haiti? You could maybe slice some coconuts on the side of the road - is that gonna make the world a lot richer? Roadside sliced coconuts? Nah, much better for you to be in first world even if you're doing a low skilled job here like delivering catering to a high tech startup. That catering company is able to produce food much more efficiently, and in SF or NYC you're able to distribute it much more efficiently, and you're part of this souped-up economic engine that's changing the world. That's why they make 20x or up to 40x more (in the case of the extreme poor) when they migrate to the first world. It's better for everyone! Economists estimate that moving from the status quo to fully liberalized migration (i.e. open borders) would roughly double global gdp - that's an insane silver bullet. That's everyone getting way fucking richer in one fell swoop. Please see my comment here for more info:…

I don't follow sports, but I also don't go around professing my ignorance. If someone changes the topic to sports, I still engage with them. I ask questions, and they're usually happy to answer. A couple days ago, someone delighted in telling me the story of Marshawn Lynch. (I had to look up the name, but I did remember his antics with the press.) Having common ground with more people is not a bad argument for learning about sports. But I do have some qualms with the author's decision. First, I cannot stress this enough: American football is an odious sport. Players regularly suffer concussions, traumatic brain injuries, and joint trauma. Permanent and debilitating injuries are common. The average player lasts 3.5 years in the NFL. Then they are spat out and left to deal with a lifetime of health issues. Yes, players freely choose their profession. So what? The same argument can be used to defend dueling. Football is bad and people should feel guilty watching it. If you're going to watch a popular sport, watch baseball. But really, what's so bad about being out of touch with most Americans? Why draw the line at political borders? By population, vastly more people love cricket or soccer than American football. I don't mind being out of touch with sports enthusiasts regardless of their country of origin. If you're like me and you spend most of your time with people who aren't interested in sports, there's no point in learning about football or baseball. You already have…

The (usually Libertarian AFAIU) Library of Economics and Liberty isn't my usual stomping grounds, but Bryan Caplan writes well there on just that aspect in "What Bad Students Know that Good Economists Don't" The college premium skyrocketed over the last three decades. B.A.s now out-earn high school grads by 70-80%. College graduation, in contrast, barely rose. In econospeak, the supply of college graduates looks bizarrely price-inelastic. Over the last two months, I've read virtually everything ever written on this puzzle. All of the compelling stories converge on a single factor I've emphasized for years: The return to trying to get a degree is far lower than the return to successfully getting a degree. Why? Because marginal students routinely fail to graduate. The single best paper on this theme: "The Education Risk Premium" by Janice Eberly and Kartik Athreya. http://econlog.econlib.org/archives/2014/02/why_the_college.html For various reasons, I've been saying for a year or so now that "we're not going to educate our way out of this mess". Education helps, yes, but it's also pretty distinctly limited, and I'm seeing increasing evidence that there's only so much potential among most students. Though there are notable exceptions: see "Stand and Deliver". More of my own take: http://www.reddit.com/r/dredmorbius/comments/1y5aq0/the_college_premiu…

I had just submitted the OLD link summarizing last summer's interview to HN today (to answer a question that came up overnight about Google's hiring practices), and I see that the author here was just as struck by the statement from last summer, "G.P.A.’s are worthless as a criteria for hiring, and test scores are worthless. ... We found that they don’t predict anything." In more complete context, from last summer's interview by another New York Times writer,[1] that statement was "One of the things we’ve seen from all our data crunching is that G.P.A.’s are worthless as a criteria for hiring, and test scores are worthless — no correlation at all except for brand-new college grads, where there’s a slight correlation. Google famously used to ask everyone for a transcript and G.P.A.’s and test scores, but we don’t anymore, unless you’re just a few years out of school. We found that they don’t predict anything." So, yes, if you have little work experience and were in full-time school recently, Google will ask you about your G.P.A. But if you have substantial industry experience, Google will ask you about that, or at least such is the claim here about current Google practice. Some comments posted before this comment mentioned the confusing way that "general cognitive ability" is said not to be the same thing as IQ. No psychologist, and especially no psychologist specializing in industrial and organizational psychology, would speak that way. The universal statement in that…

It's pretty easy to find research coming to a different conclusion than the Card/Kreuger paper that most pro-minimum-wage-increase people cite: http://gregmankiw.blogspot.com/2006/06/sperling-on-minimum-wage.html http://cafehayek.com/2009/09/new-study-casts-doubt-on-card-krueger.htm… http://rjwaldmann.blogspot.com/2009/12/in-which-i-disagree-with-paul-k… But the best reasoning I've seen on the subject is Bryan Caplan's: "Suppose you have a weak prior about the disemployment effects of the minimum wage. Suppose further that you think that the best empirical work in economics is very good indeed. Doesn't existing evidence then oblige you to admit that the minimum wage has roughly zero effect on employment? "Hardly. Why not? Because there is far more 'existing evidence' than meets the eye. Research doesn't have to officially be about the minimum wage to be highly relevant to the debate. All of the following empirical literatures support the orthodox view that the minimum wage has pronounced disemployment effects:" http://econlog.econlib.org/archives/2013/03/the_vice_of_sel.html

This was a very enlightening chapter in Modern Times. I truly enjoyed Johnson's work, despite his clear (if transparent) bias towards British colonialism. In general, private armies, political assassinations, and other forms of political violence seldom lead to good outcomes: other examples would be Lebanon during and prior to the civil and (not to Godwin this) Weimar Germany with government-funded but ruthless and private and political Freikorps, as well as KPD/SPD/NSDAP/etc... paramilitary organizations. Finally, if a government enacts and enforces laws and decrees contrary to the constitution and human rights in general (i.e., it is no longer a constitutional state), introduction of political gives government forces both an excuse and the means to start acting fully extra-judicially. I'll note that I'm saying this as a individual with classical liberal/libertarian political leanings and as a strong supporter of a right to bear arms. My view is shared with by David Friedman, an anarcho-capitalist (a view that I don't subscribe to, but respect): http://econlog.econlib.org/archives/2013/07/in_case_of_revo.html

Exactly. Math isn't a set of procedures, it's a way of thinking. Without understanding that way of thinking it is impossible to be an educated person. "Most mathematicians at one time or another have probably found themselves in the position of trying to refute the notion that they are people with "a head for figures." or that they "know a lot of formulas." At such times it may be convenient to have an illustration at hand to show that mathematics need not be concerned with figures, either numerical or geometrical. For this purpose we recommend the statement and proof of our Theorem 1. The argument is carried out not in mathematical symbols but in ordinary English; there are no obscure or technical terms. Knowledge of calculus is not presupposed. In fact, one hardly needs to know how to count. Yet any mathematician will immediately recognize the argument as mathematical, while people without mathematical training will probably find difficulty in following the argument, though not because of unfamiliarity with the subject matter. What, then, to raise the old question once more, is mathematics? The answer, it appears, is that any argument which is carried out with sufficient precision is mathematical, and the reason that your friends and ours cannot understand mathematics is not because they have no head for figures, but because they are unable [or unwilling, DRH] to achieve the degree of concentration required to follow a moderately involved sequence of inferences. This…