I just heard this from a passing radio and initially didn’t quite believe it. Ostrom, in particular, is a terrific choice. She’s at the other end of the spectrum defined on one side by Freakonomics. Which is to say her work is not flashy, it’s very thorough, and it arrives at, you know, correct answers. I bet the Political Scientists are very, very happy today.
From the category archives:
Economics/Finance
I finally read Gillian Tett’s Fools Gold, an account of the development of the derivatives industry centered on credit default swaps (CDS) and collateralised deposit obligation (CDOs) that collapsed so spectacularly last year. The discussion is excellent, but still, I think, too charitable to these instruments and their creators. Tett’s main source is the group at JP Morgan who pioneered many of these derivatives and, largely, got out before the crash. Their line, unsurprisingly, is that the problem was not with the concept as they developed, but its abuse by latecomers.
But a close reading of Tett’s account yields a different story. These innovations were defective from day one.
Paul Krugman’s piece on “Why did economists get it so wrong” has attracted a vitriolic response from John Cochrane, reproduced here. Krugman’s piece was strongly worded, but the reply ups the ante, and I expect further escalation. Economics conferences in the next few years are going to be interesting events.
Given that, as Krugman himself notes, disagreements between economists were notably mild until the crisis erupted, what is going on here?
I’m visiting Berkely at present and just had a chat with Brad DeLong. These are some of the thoughts I had about the great macroeconomics wars as a result.
Reading the current US debate on health care from the outside is pretty dispiriting. It is an example of what happens to rational debate in circumstances of inequality where vested interests and partisan pundits can distort discussion by throwing loads of noise, fear and disinformation into the conversation. Still, that’s no reason not to try to have a conversation about which principles ought to obtain, and I think for that it is hard to beat Ronald Dworkin’s paper “Justice in the Distribution of Heath Care”, _McGill Law Journal_, 38 (1993), pp. 883-98 (though I’m looking at the reprint in Clayton and Williams eds _The Ideal of Equality_ ).
Dworkin’s “central idea”:
bq. … we should aim to make collective, social decisions about the quantity and distribution of health care so as to match, as closely as possible, the decisions that people in the community would make for themselves, one by one, in the appropriate circumstances, if they were looking from youth down the course of their lives and trying to decide what risks were worth running in return for not running other kinds of risks. (C&W, 209)
Megan McArdle has a post up grousing about how ‘but we have rationing already’ arguments are facile. Pardon me for not seeing her point (although I am willing to concede there may be overuse of the term, as we shall see). Let’s say the rationing in question is some guaranteed minimum coverage (public option). Obviously minimum is not maximum. That’s what people mean when they call it ‘rationing’, and that’s an ok use of the word. But lets start by noting that, paradigmatically, rationing needs two elements: it provides a minimum for everyone in a group by forbidding anyone from getting more than a certain maximum. Rationing means using the latter mechanism to ensure the former result. In that sense, the proper thing to say is that the guaranteed minimum coverage doesn’t really involve rationing.
Suppose, instead, we were talking about a guaranteed minimum income (as was proposed in the 70’s, and as such free market luminaries as Milton Friedman thought made a certain amount of economic sense, if memory serves.) Lots of folks would be opposed to guaranteed minimum income today (to put it mildly), but would anyone say a guaranteed minimum income was bad economics because it would amount to ‘rationing of the money supply”? And fiat rationing (as McArdle says) is inefficient. I don’t think economists would see this as a problem. Why not? Because there is no reason why the volume of money overall should be a function of – critically constrained by – some minimal income provision. That’s just not how the money supply would be determined: there wouldn’t be some iron economic law that there couldn’t be more money than everyone times the minimum. [click to continue…]
Belgium has one of the highest per capita public debts in the EU, and a pension system whereby the workers pay for the pensions. So there is a serious challenge of keeping the public pension system viable and sustainable in the near future when the population will be aging.
According to the Dutch-language Belgian newspaper “De Standaard”:http://www.standaard.be/Artikel/Detail.aspx?artikelId=BE2D2NEF, Belgian politicians have decided that the best qualified candidate for the position to lead the Belgian National Office for Pensions will not be appointed. The reason? He is Dutch-speaking, and it was decided that appointing him would bring the balance of francophone versus Dutch speaking high office public servants in danger. [click to continue…]
I’m not writing about the debates over health insurance (as, indeed, I am not writing about most policy debates), because I simply don’t think I’m informed enough to say anything very useful about the pros and cons of the specific options under discussion. Still, “this”:http://www.marginalrevolution.com/marginalrevolution/2009/07/the-uninsured-adverse-selection-problem-or-distribution-problem.html by Alex Tabarrok struck me as a bit odd. [click to continue…]
That’s “a headline”:http://news.bbc.co.uk/1/hi/uk/8147890.stm at the BBC. So it would seem that they do rather less damage to the UK economy tham the various banking groups that needed rescuing ….
Daniel Davies will be moderating a salon with George Soros at “FireDogLake’s Book Salon”:http://firedoglake.com/booksalon/ tomorrow – should be fun …
“Loudon Wainwright III”:http://www.youtube.com/watch?v=AK3-HAdUJx0 on Paul Krugman.
We’ve had various versions of the case for and against the use of (micro)economic rational actor models in the social sciences lately, so I thought I would weigh in with my version of the case against. It has three main elements
[click to continue…]
I’m just back from an excellent Rousseau Association conference at UCLA to find, now I’ve tuned back in to CT, that we’ve been discussing sociology v economics as theories of society. Funny, because one of the the things that came up in LA was the old Robert Nisbet thesis about the conservative origins of sociology. The idea is that sociology has its origins in the counter-enlightenment attempts of Burke, de Maistre, Saint Simon etc to theorize about social order in the light of the Revolution. It turns out that I’ve long since lost or given away my copy of _The Sociological Tradition_, so I haven’t been back to the original, but I’m curious as to what the thinking is on the Nisbet thesis today. I’m perfectly fine with the use of methods drawn from economics in the social sciences (and with other approaches too) but it is worth noting that most economics involves a straighforwardly rationalistic and enlightenement attitude to the social world, one that the Burkean tradition disputes as being inadequate to social understanding.
Yet another in my series of articles on economic theories, empirical hypotheses and policy programs that have been refuted, or undermined, by the Global Financial Crisis. This one, on Real Business Cycle Theory, is a bit econowonkish, but I’m putting it up here because
(a) I hope some econowonks among the readers might find errors and correct me*
(b) Judging by some other recent commentary, RBC still has some interest.
* As indeed, they have. My suggestion of a link between calibration and the GMM has been roundly refuted both here and at my blog. I can only say, it seemed like a good idea at the time. Thanks for the very useful comments on this point, and on RBC more generally.
Also, Lee Ohanian has pointed out that I misattribute to him and Cole the treatment of WPA workers as unemployed.
Henry and a few others suggested I was a bit hard on Douthat for not being hard enough on Helprin. Douthat may be guilty only of the venial sin of obligatory civility in the face of a bad book, not the mortal sin of Higher Broderism. (Although one hopes the critic’s motto is not ‘if you can’t say something nice, don’t say anything at all.’) It really was his last paragraph that set me off, and it’s worth saying why. I’ll leave Helprin and even Douthat mostly out of it. [click to continue…]
Matthew Yglesias goes way too easy on Ross Douthat’s book review of Mark Helprin’s Digital Barbarism: A Writer’s Manifesto
Let’s start with the book itself. It is, I gather, a grossly metastasized, page-wise, rewrite of his shockingly ignorant (it was widely and correctly noted at the time) NY Times op-ed from a couple years back, “A Great Idea Lives Forever, Shouldn’t Its Copyright?”. And why exactly does it follow that terrible ideas deserve book deals, one might ask? (Here’s the exhaustive wiki-buttal that op-ed inspired.)
Larry Lessig wrote a long review of Barbarism last month, which he followed up here. Having not read Helprin’s book – and I even read Jonah Goldberg’s book, sweet heaven help and forgive me! – I’m not in a position to add anything except that Lessig’s response leaves me in little doubt that Helprin has contrived to learn nothing from that initial op-ed debacle. He still has no idea whatsoever what the other side’s views are, let alone what the grounds for them might be. (I guess there’s something inadvertently apt about the ‘barbarism’ in his title, if it’s true that the term derives from some Proto-Indo-European speaker’s sense that foreigners are just going ‘bar-bar’, not actually saying anything.) [click to continue…]