Tabarrok v. Tabarrok

Well, you have an actual image to maintain so you have to be nice. For me, if an economist wishes to be ‘skeptical’ regarding the claims that markets in education, health care, social insurance and economic stabilization are plagued by market imperfection, that is an invitation to assume they are an ideologue.

It sounds like Tabarrok thinks Rodrik is presenting an argument that supports Tabarrok’s point of view, so then he must be willfully or ideologically refusing to look at his own evidence. For some reason, I doubt Tabarrok’s interpretation of what Rodrik is doing is correct. Unfortunately, at the moment I don’t have time to read all of Rodrik’s piece, so probably I will not be able to present a convincing argument against Tabarrok’s interpretation. Anyone have the time?

I also think Tabarrok is wrong about what the “conventional wisdom” is, as it happens. So two problems, then, at least.

On the post “Dani Rodrik has painted himself into a corner,” the link for “Worst Argument” (another MR post) is dead. I have noticed that some very important posts have gone missing on MR. For example, Tyler Cowen’s post on “first-best economists” is nowhere to be found, no matter how much you look. This is very troubling, because though I am more left-wing, I regard MR as very interesting and thought-provoking. Erasing posts that you might have regretted posting is disingenuous and makes you look petty

this comment is fake

@andrew.

Huh. I have been looking for that post where TC stated that the only possibility for health care reform was to do nothing and let health care costs reach 30% of GDP, with a lot of bad outcomes (“It’s simply the best we can do”), and I have not been able to locate it. I wonder…

Unless they are libertarians, in which case of course you should attribute malice. ;)

The problem with “Libertarian Economics” is that it is, as a philosophy, an oxymoron. Libertarians don’t want to “practice” economics. They simply want to leave things to the vicissitudes of the “silent hand,” even if that means society gets the back of the hand.

But most of these “Libertarians” are usually just hypocritical neocons who think the role of government is to get everyone else out of THEIR way, while greasing the skids for their schemes to profiteer from their mathematical games. They want us to believe that allowing them to operate crooked carny games in the finance markets is Libertarian, when it’s really exactly as it appears: criminal enterprise. The very laws that exist to protect them from other criminals somehow shouldn’t apply to them.

Government is not a fiction; it is a fact. It is a construct of society created to prevent a few bad players from (literally) killing others. That protection extends beyond just “Thou Shalt Not Kill” to include proscribed behaviors that would weaken society to the point where it would no longer function, thus resulting in more death. Most hypocritical is that these faux Libertarian Neocons think they should be able to do anything and everything with no regard for the very society they demand protect their right to do it.

Neocon “Libertarian” Economics says that their ability to do what they please, as they please to society, and society’s role is to prevent others who try to stop them.

imajoebob @ 14

Well said. E.g. get rid of the government organised, funded and staffed court system and the enforcement of contract law and watch the Libertarians squirm.

@geo

Yeah I knew about that post still live so I took another stab at the google machine and found the post I was looking for. It’s not as bad as I remember, though still quite naive. It does take integrity to preserve these things.

For the record:

http://marginalrevolution.com/marginalrevolution/2007/01/the_bush_health.html

I really, really hate to say what I have to say here because all my instincts are for the economics of a Rodrik or a Robert Wade – and I am certainly not buying the libertarians general approach. But there are several reasons why I think progressives should be much warier of industrial policy than they tend to be (just because something offends Washington Consensus thinking doesn’t automatically make it right):
1. I have lost count of the number of times people assert it worked in Korea and Taiwan. Probably – although even here the devil is in the detail. Plus, I use past tense – these countries appear to have abandoned much of such policies, partly because of external pressure but also because domestic business people wanted to extricate themselves from such relations with the government.
2. If they have worked in Korea and Taiwan they have failed in many other places. Beyond the standard stories of effectively enforced performance criteria – and even this is less clear than it looks (cf. e.g. on Korea David Kang, ‘Crony Capitalism’, CUP, 2002) – we don’t have clear explanations of why, and what determines success or failure. Try getting a coherent answer as to why post-war industrial policy has limited success in India – after all, it had an effective relatively uncorrupt bureaucracy, a political elite committed to development and so on in terms of the conditions usually touted for a successful developmental state.
3. I have lost count of the number of times proponents of industrial policy argue that it has been dismissed by believers in perfect competition and markets. But as reference to libertarians here makes clear, many critics of industrial policy are broadly Austrian economists who don’t believe in stable equilibria under perfect competition either.
4. Industrial policy measures, at least in static terms, strike me as regressive – increasing consumer goods prices domestically, leading to low returns for small household savers and so on to raise industrial profits above what they would otherwise be.
5. The recent arguments from Rodrik, Wade and others have been couched in terms of encouraging countries to develop by exporting products that are higher up the ladder than would be expected by their income levels; this strikes me as problematic from fallacy of composition effects – all countries cannot develop above average exports.

I don’t follow Marginal Revolution or Roubini, but I was fascinated to follow the links here to see this exchange between Roubini and Cowen.

In March 2007, Roubini more-or-less described how everything was going to go down, and Cowen mocked him for it.

Brad Delong has discussed where he erred in assessing the developing crisis. (He says he had too much faith in risk management at financial firms). Has Cowen/Tabarrok ever explained where they went wrong? How has the crisis changed their views? Have they fallen back on blaming Fannie and Freddie or the Community Reinvestment Act?

Yeah I knew about that post still live so I took another stab at the google machine and found the post I was looking for. It’s not as bad as I remember, though still quite naive.

Well, it does contain a libertoonian nugget for the ages:

“The ambitious long-run program should be to restructure the insurance industry –through a judicious mix of regulation and deregulation — to encourage competition across service quality rather than competition across cost-shifting. Frankly I have no idea how to do that but no one has ever convinced me it is impossible or utopian.”

Until such time as someone convinces me that it is impossible or utopian for me to fly from New York to London by flapping my arms, I will continue to maintain that it is possible for me to fly from New York to London by flapping my arms.

Did people see the debate between Jagdish Bhagwati and Ha-Joon Chang on industrial policy on the Economist Website? Chang certainly thinks that industrial policy and indicative planning were effective. that states can gather and act on quality information sometimes better than private actors, and that state regulation of industry solves can basically push an economy to a higher level equilibrium (see his 23 Things They Don’t Tell You About Capitalism, which seems to be driven by a kind of ‘progressive’ corporatist ideal in which state, industrial and financial capital and labor all balance each other out) . That Economist debate however is more about the importance of mfg. In the US Andrew Grove, one of the founders of Intel, has importantly called for industrial policy.

Yes I think Chang would agree with much of what Pitkin has clearly said.

I hope so. Chang’s stuff is very good.

For example, Tyler Cowen’s post on “first-best economists” is nowhere to be found, no matter how much you look.

It’s available if you look here:

http://web.archive.org/web/20090428141048/http://www.marginalrevolution.com/marginalrevolution/2007/08/am-i-a-first–o.html

I’m not sure why it disappeared from from the main MR site, but I certainly don’t see anything embarrassing or that Cowen would disavow now.

Good point, Myles, though I think he would be happy to import a lot of those engineers!
Lemuel, I a bit skeptical of Chang’s vision. He calls for balance among groups or classes, so there is a return from the atomism of neo-classical economics to the class-based thinking of classical economics. Chang is at home with this class based thinking as he is with mercantilism of List. But is balance really possible or possible only under exceptional conditions? What are the prospects for balancing the interests of capital and labor and the state and capital? How is balance to be determined? Are there objective criteria for that? What would be a fair balance–one can hear echoes of Marx’s critique of LaSalle. And how viable are these corporatist ideas in a globalized economy? I think his latest book is a great read.

Satan Mayo, I like your interpretation and that’s why I generally find CT to be pretty trustworthy at least in terms of intellectual honesty – notice how most people who comment here are clearly to the right or left of the posters

Good point, Myles, though I think he would be happy to import a lot of those engineers!

In which case their country of origin, instead of the US, would have been subsidizing Grove’s companies. It’s pretty hard to avoid the conclusion that industrial policy consists of subsidizing one privileged group of plutocrats at the expense of another, as well as at the interest of consumers. It has the additional deficiency of privileging a designated group of established corporate powers rather than, as in liberal capitalism, being indifferent to specifically which group of corporate powers win. As Tim Worstall noted, we have a free economy for the benefit of consumers, not of businesses or businessmen. Industrial policy does the opposite.

Hartal-

Those are good questions. When I had the opportunity to speak with Chang last year, I asked him something similar. He didn’t have much of an answer I’m afraid — he doesn’t seem that interested in the political economy that underlies his economics. I don’t think that’s as damning a critique as some people do. As he says, he’s a pragmatist.

“In which case their country of origin, instead of the US, would have been subsidizing Grove’s companies. It’s pretty hard to avoid the conclusion that industrial policy consists of subsidizing one privileged group of plutocrats at the expense of another, as well as at the interest of consumers. It has the additional deficiency of privileging a designated group of established corporate powers rather than, as in liberal capitalism, being indifferent to specifically which group of corporate powers win. As Tim Worstall noted, we have a free economy for the benefit of consumers, not of businesses or businessmen. Industrial policy does the opposite.”

Name a country in the last 50 years that successfully industrialized using the neo-liberal policies you support.

Oops, sorry. Looks like a double post. Please delete either one if it helps.

Myles,
You distinguish between state-owned enterprises and private-owned enterprises of various kinds in the Shenzhen area. How would foreign-owned enterprises fit within your description?

Myles,
You distinguish between state-owned enterprises and private-owned enterprises of various kinds in the Shenzhen area. How would foreign-owned enterprises fit within your description?

Sorry, I better clarify. The importance and weight of state-owned enterprises (SOE’s) are relatively much lower in advanced regions like Shenzhen, which was meant as a private-sector zone. So in fact the total overall sway that business, whether private or state, holds over the responsible level of government (the Shenzhen government, I am guessing in this case) is in fact reduced, because the overall number of politically salient businesses is proportionally lower.

With regard to foreign-owned enterprises, they actually divide into two broad types. The first type is the large-scale joint venture, typically between a large state-owned enterprise and a large foreign company. These act similarly to other large SOE’s when it comes to political power. The other is direct foreign-owned subsidiaries. The ones that market chiefly to Chinese consumers (such as Walmart or Dolce & Gabbana) are regarded as normal businesses and the provincial and national governments don’t really care about them. The other is foreign-owned enterprises in certain key or technology-intensive sectors. These have some political influence, but not, as far as one can tell, anymore than technologically-sensitive enterprises (such as RIM or Intel or whatever) have in the West, nor anymore than domestically owned sensitive businesses. The other types of foreign-owned enterprises (such as privately operated joint ventures) are treated like their relevant domestically owned counterparts.

The idea that a country without private banks could be considered an example of the liberal model is beyond laughable.

China, in fact, does have privately owned banks. This is in addition to various provincially owned banks (principally Cantonese, I think) that operate outside provincial borders, which for all intents and purposes are private interests. I think it’s relevant to note, however, that even in the most statist of Chinese national banks, control is asserted vertically from the national government downward separately from the main bureaucracy, and even provincial governments (which are again the responsible decision-making units in political economy) have relatively limited influence over bank lending. For example, while good connections within the Chinese bureaucracy can get you very far, the financial side of the Chinese state (the central bank, big banks, the big insurance companies, and so on) will generally ignore you unless they are getting orders direct from the financial side of the State Council (i.e. the relevant deputy PM, the PM, or the People’s Bank of China).

Just curious: IIRC Shenzhen’s status as a private-sector zone implies greater labor mobility than possible in the rest of the PRC. Do you know whether this is , and if not can you correct me?

There is greater labour mobility between Shenzhen and the rest of China, and there’s also probably great labour mobility within Shenzhen itself.

“notice how most people who comment here are clearly to the right or left of the posters”

As DD observed a while back, we (posters) at CT run the gamut of opinion from social democrat to democratic socialist.

Adler linking to his critique of Speth would be like Cowen and Tabarrok linking to their mocking of Dean Baker.

“It takes more than identifying recent exponential trends to demonstrate unsustainability.”
But Speth does more.

” Exponential growth rarely (if ever) continues indefinitely, and the same factors that cause growth spurts can cause them to level off. Nor do negative environmental trends necessarily translate into harmful effects on human well-being.”

A lot of assertions about specific trends for which Speth provides evidence; of course exponential growth will not continue indefinitely—do you think Speth is claiming otherwise?

“he embraces the flimsiest of evidence to support his claims. For instance, he cites a largely discredited World Health Organization report concluding climate change already causes 150,000 deaths per year, and could reach 300,000 by 2030.”

No you chose what you think is the flimsiest of his evidence to dismiss his claims.

“This is an odd claim, as the least capitalist nations of the world also have the worst environmental records.”

By least capitalist what do you mean? The poorest capitalist countries– the former colonies of capitalist countries; the countries with least room for policy maneuver; the industrializing countries that regulate their markets as the capitalist US and Germany once did more heavily? In what ways do they have the poorest records–by environmental damage per capita measure?

“The West’s ecological nightmares were the Soviet bloc’s environmental realities.”

The USSR being worse does not make Western capitalism sustainable. This has no relevance to Speth’s argument.

“Tropical forests in less-developed nations are declining even as most temperate forests in industrialized nations are rebounding. Recognizing these different trends and identifying the key variables is essential to diagnosing the real causes of environmental deterioration and prescribing a treatment that will work.”

It is capitalism to produce that in which you have a comparative advantage.

“Were it not for market-driven advances in technological capability and ecological efficiency, humanity’s footprint on the Earth would be far greater.”

This does not make capitalist growth unsustainable

“Less material is used and disposed of, reducing overall environmental impacts from productive activity.”

Evidence? None! Speth has tons of counter-evidence for the claim claim of any overall reduction.

mw, that post was presumably written before the switch from typepad to wordpress. Posts sometimes disappear in such transitions, but if you let Tyler know maybe it will be restored.

JQ @53:

Umm… what exactly do you have against “Weltschmerz”? One of the best parts of Jeremy Bentham’s work is the nominalistic sense of the rhetorical application of eulogistic and dyslogistic labels. So maybe “Weltschmerz” might be re-defined in terms of possessing a sense of compassion, worldly experience, justice, and outrage, eh? Matters that are “annoying” to the entitled.

As to that being automatically “defeatist”, well, yes, maybe a good defeat is better than a bad victory. especially of the Pyrrhic sort. So how well are your reformist hopes and strategies going, mate? But then again my concern is with hermeneutic accuracy, veracity, in explicating or interpreting certain meaningful or conceptual claims, without regard to opportunistic expediency. If that is “annoying” and produces resentment, maybe I’ve done a good job and hit my aim, with respect to equally “annoying” apologists.

You once asked me what Heidegger could contribute ” epistemologically”, and I responded that he couldn’t, since his work was a critique of the basic epistemological project in modern philosophy. But then, given the lack of such epistemological “foundations”, a good part of knowledge depends on the “authenticity” of the projects of the knowers, the desirability as well as veracity of the ends that they seek. So how is the “authenticity” of economic “knowledge” working out for you? If that’s an annoying question and cause for resentment, then maybe I’ve done my small part.

If I’d known that JQ (@53) was going to link my post, thereby giving my blog a stratospheric spike in traffic (compared to its usual), I probably would have taken a bit more care with it. But my basic point about jch would stand, and it has mainly to do with jch’s tone of (as I see it) pomposity mixed with an occasional air of superiority, as of one who has privileged access to something, which in my admittedly subjective opinion doesn’t serve the goal of “hermeneutic accuracy” in explicating claims, or any other desirable goal for that matter.

Saw you on Beeb. You the star!!!!
:)

There’s no such thing as a “person” either, the world is just a bunch of particles in one configuration or another. How stupid.

@ Pyre

“Government is a fiction in that it doesn’t physically exists.”

So then, what doesn’t exist physically does not exist at all, according to libertarians? For example, friendship doesn’t exist? I find it suprising how libertarians and especially Austrian economists attack positivism, when they selectively exhibit positivism-like tendencies.

By the way, does liberty exist physically?

Slex: I spoke only for myself, not as a representative of libertarians, so kindly don’t take what I said as “according to libertarians”.

From parsing right-wing babble, I gather “liberty” consists of the speaker’s ability to do whatever he wants without anyone else’s interference, including interfering in anyone else’s life on matters of religion, politics, education, science, medicine (e.g. birth control, abortion, end-of-life care) — a “mine-and-not-thine” quality. Other views differ. Apparently the common word doesn’t even have a singular common (=shared) referent; the fingers are pointing in different directions. What “physical object” could we be discussing? This sounds more like a situation of theology… that is, a squabble over abstractions with no agreed definition.

And, yes, “oppression” likewise — cf. Monty Python, “s/he’s oppressing me!”

Try considering “government” as, not a physical object (which is suggested by a noun), but an activity (which in English might be more clearly suggested by a gerund, say, “governing”?)

When we speak of the game “bowling”, we know that it has dedicated places (bowling halls), it has participants (bowlers), it has game rules — just as government/governing has buildings, participants, and rules — but we do not tend to fall into the delusion that “bowling” itself is a physical object, because the verb-form “bowling” (“let’s go bowling!”) does not falsely imply that to us.

Nouns unfortunately do, which is why riddles like “Where does your fist go when you open your hand?” / “Where does the candle flame go when you blow it out?” are such old puzzlers. If we asked “Where does the candle burning go…?”, it would be easier to answer “The burning just stops.”

Corporations (another legal fiction) have been declared “persons” — just like those vortices of particles actually walking around — and if this conveys “physical existence” in your view, I can only exclaim, what sorcery is this!

Slex: “I don’t know where you were going with you last posting exactly, but I think that you think that everybody else thinks that government exists as a physical entity, such as a rock, for example.”

How else could it be “drowned in a bathtub”, as Grover Norquist would have it be?

If a corporation is a person, and a township (or other government) is a “body corporate”, it follows that governments are people too, with rights, opinions, property, good and bad habits, feelings that can be hurt, and social needs. Invite yours over for tea and a long chat sometime; it could probably use the break.

> “Governments, of course, exist as social conventions.”

Remarkably, you’ve nearly restated what I said the first time:

“We have merely agreed to a conventional fiction that such a thing exists, and all acted accordingly.”

(Though my version avoids the statement “Governments… exist” with that firework of an “of course” in the middle of the precise claim at contention.)

As for the Grover Norquist quote, it may have occured to you that it is a figure of speech and is not meant literally.

Quidditch is a sport that exists as a mere fiction. Football is a sport that really exists by a social convention. Respectivelly, the federation in the Star Trek universe exists as a mere fiction. The US government really exists by a social convention.

Slex: After you’d read my earlier statements — including “We have merely agreed to a conventional fiction that such a thing exists, and all acted accordingly.” — and from these concluded “I think that you think that everybody else thinks that government exists as a physical entity, such as a rock, for example.” — I replied with that Norquist example, corporate “personhood”, and the suggestion that you invite your government over for tea and a long chat.

Did you think my suggestion of tea was literal, meant to take place in physical reality? Do you think corporate “personhood” is physically real? (As to legally real: it’s known as a “legal fiction“.) Did you think physical reality was the common thread there?

No. But unfortunately, once a fiction is long-established, it becomes easy to forget that it is a fiction. (Many people may never even know. Is “Big Brother” physically real inside the 1984 storyworld, or a propaganda personification? Do the citizenry know?) Refer to an non-object as a noun rather than a verb, and English grammar itself conveys the presumption the referent is a thing and not an activity. (Benjamin Lee Whorf’s Language, Thought, and Reality discusses how strong and misleading a linguistic presumption can be; fires started because matches were tossed into “empty” oil drums, etc.)

What I am suggesting is that “the government” is talked about so much as a thing unto itself that many people may forget it’s a fiction, or indeed grow up from childhood never questioning the presumption — to the point of cognitive dissonance when you try to explain that government doesn’t physically exist. The non-literality of a metaphor? Never thought about it. The non-literality of a parable? But the Bible is a literally true, and how dare you call Jesus a liar! Norquist himself may know these are all “figures of speech”… but are you sure everyone else does?

Again, if you knew that Norquist may have considered it a figure of speech, why did you give it as an example that people consider government to physically exist? And if, as you wrote in your last post, you think that physical reality is not a common thread, why do you give examples of governments and other socially constructed entities as if they were physical entities – the tea invitation remark which, from my point of view, was literal in the sense that it was ironic, trying to demonstrate the impossibility of a position (to which I actually don’t subscribe)?

As for my position, it is and has always been in this thread that government is a socially constructed reality. But just because it is socially constructed it does not mean that it is not real. And your position, as far as I understand, is that social constructions do not really exist. As for the “legal fiction” term, it is used in a specific context. According to some definitions it does not even require to be based on something false. And yes, corporations really exist as legal entities (they are fiction, i.e. do not really exist, as physical entities). Microsoft is a corporation that realy exists, Wayne Enterprises exists merely as a fiction.

If all you were saying was that government was an invention of the human mind, I wouldn’t have disagreed. But you are saying that because it is invented and exists by agreement, it in fact does not exist.

I’ll stick for now to your definition of “fiction” to elaborate further what I mean and why I think your position is problematic and incorrect:

Pyre: “fiction” and “lie” both refer to things which are “false and not really true”.
The difference is that a fiction is intended to be recognized as false by all parties, so there is no deception involved—whereas a lie is intended not to be recognized as false by at least one party.

And also to your view of government:
“We have merely agreed to a conventional fiction that such a thing exists, and all acted accordingly.”

If I say that Sarah Palin is currently the president of USA, this statement is clearly false and not really true. So, Sarah Palin as the current president of USA is merely a fiction. I think that both you and I will agree on this. But if I say that Barak Obama is the current president of USA, I will say that he is really the current president of USA, and you will say that Barak Obama as the current president of USA is merely a fiction. Because the position of president exists as a social convention and by your criteria, expressed so far, it is a fiction.

So you lump as fiction two very different situations.

Yahweh exists as an object of worship in Judaism. In this sense he is a socially constructed reality. Note that it is true regardless if Yahweh really exists as the creator of the universe and all the other attributes ascribed to him. Now, let us assume that Yahweh the creator does not exist. If that is the case, according to my position, Yahweh really exists as a socially constructed reality (as an object of worship), but does not really exist as the creator of the universe (in this role he exists merely as a fiction).

As for you position, I am not sure what it is exactly. From your previous posts where you wrote about governments, corporations, etc., I would assume you would consider Yahweh existing merely as a fiction. But if we follow your definition, Yahweh is not a “fiction”, because Yahweh the creator is intended to be recognized as real by his worshippers (I take it that people don’t worship gods in which they don’t believe), though could probably be considered a “lie” under some circumstances.

As a matter of fact, most definitions of “fiction” in dictionaries allow for the possibility of deception, so I find your distinction between “intended to be perceived as false/non false” as unnecessary, based also on common usage of the noun and its derivatives. But more importantly, your treatment of “fiction” obscures important differences. There is a reason why we use “fictional/fictious” as adjectives before nouns such as “corporation”, “contract”, “deal”, “marriage” – it is to denote those which really exist as social constructions from those that don’t (and exist only either in works of fiction, as instruments of deception, etc.). If we follow your reasoning, then it would be unnecessary – since all of these exist as social conventions, they are fictions, and we need not use either of these adjectives, since “fictional” or “fictitious” is already contained in the meaning of “marriage”, for example.

Not everything that people imagine, invent or agree upon will become real. If Yahweh did not create the universe, Yahweh the creator will be merely a fiction, no matter how many people subscribe to the view that he actually did it. But if two people consider and treat each other as friends, their friendship will be really existing.