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.
From the category archives:
Economics/Finance
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…]
Larry Elliott (the Guardian’s economics editor) is in my view right to say that a lot of modern macroeconomics has gone off the rails pretty badly and that most general equilibrium models are a tragic waste of time. But I think he (and most other similar critics of excessive maths in economics) really badly misidentifies the nature of the problem, and his choice of an example of a worthless piece of mathematical formalism is quite unfortunate and unfair. Let’s see if I can explain what “Generalised non-parametric deconvolution with an application to earnings dynamics” is, and why someone might care about it.
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The economic crisis has, as we’ve been discussing, raised a lot of interest in Keynesian economics, but so far it’s been based more on the obvious bankruptcy of alternatives than on successful examples of Keynesian fiscal stimulus. Although there were some big financial bailouts late last year, few countries engaged in large-scale fiscal stimulus before the first few months of this year (Obama’s package was passed in February, and is only now being implemented, so we can’t expect to see evidence of impacts on GDP until late this year).
Australia went early and hard with a substantial cash handout to households in December 2008, followed by another round of cash stimulus delivered a month or two ago, and then a large-scale infrastructure program. The national accounts for the March quarter (which should include the effects of the first round of stimulus) have just come out, and show growth of 0.4 per cent, compared to a 0.6 per cent contraction in the December 2008 quarter[1]
On the face of it, this is a big success for Keynesian fiscal policy. And, there’s pretty general agreement that, despite some qualifications and plenty of concerns about the future, the prima facie interpretation is the correct one.
One could debate and dispute whether implementing a Basic Income Grant would be a good idea in affluent post-industrial societies, as we did (“here”:https://crookedtimber.org/2007/02/28/redesigning-distribution/ and “here”:https://crookedtimber.org/2007/07/10/should-feminists-support-basic-income/ and “here”:https://crookedtimber.org/2009/02/02/feminism-and-basic-income-revisited/) at CT before. Yet for developing societies with serious problems of persistent poverty, it seems to me like a very good idea indeed. One could add as a (desirable) condition that such a society should be able to internally generate the money to fund such a BIG (that is, there must be a big enough section of rich or middle class people whose consumption or income can be taxed). The idea may work wonderfully in countries like South Africa for example. If you give poor South Africans a relatively tiny BIG, they are not given welfare payouts that enable them to sit back and rest (as the critics may have it), but rather people are given some very basic means to take their lives in their own hands: money for food, for basic health care, for school fees, for a roof above their head, and perhaps to set up a small business. No more begging for food needed. The amounts can be tiny and may seem like pocketmoney to people in the global North, but as we know from the relative success of microcredits, poor people can change their lives (and those of their children) when they have small amounts of money.
There is now empirical evidence supporting this line of reasoning, coming from Namibia, where in 2004 “a coalition”:http://www.bignam.org/ of churches, trade unions, NGOs and AIDS organisations decided to run a pilot project to figure out what a small BIG would do to the lives of the extreme poor.
I’m working on a bunch of essays, book chapters and maybe even a book or two in response to the global financial crisis, making the general point that the sudden collapse of the neoliberal order has found social democrats unprepared for the shift from a long defensive struggle to the opportunity (and need!) to develop a progressive response to the crisis. As obvious examples, it’s necessary to reconstruct the global financial system and to ensure that the burden of the debts that are building up so rapidly is not borne by the poor, who did nothing to create the crisis. This piece (PDF) is an example of what I’m thinking.
I have plenty of ideas about policy (though of course I’m always interested in new ones). But, I don’t have much of a feeling for the political strategies that are needed, so I thought I would try the crowdsourcing thing, which has worked pretty well for me in the past.
I wasn’t all that surprised that Bryan Caplan didn’t like my interpretation of our bet on EU and US unemployment rates, which was that the combined rates of unemployment and incarceration in the US would exceed those in the EU over the next ten years. I was, however, surprised by the vehemence with which libertarian-inclined* commenters here and at my blog objected to this interpretation.
A string of them echoed Caplan’s argument that
From a labor market perspective, though, Quiggin’s incarceration adjustment would only make sense if you thought that most or all of the people in jail would be unemployed if they were released.
Caplan has missed my main point. I’m not suggesting that incarceration is disguised unemployment (though obviously it reduces measured unemployment). Rather, I’m saying that, like unemployment, incarceration should be regarded as a (bad) labor market outcome. If you want to evaluate the performance of the labor market, you need to look at both.
Bryan Caplan and I have now agreed on the settlement conditions for a bet on US_EU jobless rates while also agreeing to differ on the interpretation. The stake is $US100 and the agreed criterion is that, for Bryan to win, the average Eurostat harmonised unemployment rate for the EU-15 over the period 2009-18 inclusive should exceed that for the US by at least 1.5 percentage points.
Since the implied difference in the proportion of the population who are unemployed is almost exactly equal* to the difference in the proportion of the population who are incarcerated, I interpret my side the bet as follows
Averaged over 2009-18, the sum of incarceration and unemployment rates in the US will exceed that in the EU-15
Caplan wants to leave incarceration out of the discussion and focus only in unemployment. Since we’re agreed on how to settle the bet, there’s no problem with differing on how to interpret the result.
Have you seen this piece in the Boston Review? “Anti-semitism and the financial crisis”. I honestly don’t know what to make of it and would like your sober opinion. Kindly keep non-sober opinions to yourself, however. The internet already has more of those than it can consume locally.
Basically, a weirdly high number of responses to “How much to blame were the Jews for the financial crisis?” were in the ‘moderate’ to ‘a great deal’ range. 32% of Democrats and 18% of Republicans ‘blame the Jews’ at least moderately for the financial crisis. I realize there is such a thing as the crazification factor. But that’s still pretty high. (I’m guessing the Republican numbers are lower in part because high numbers of them don’t actually admit there’s a crisis. They might be more willing to blame the Jews if it were made clear that they weren’t thereby committed to conceding the existence of the thing the blame is for. But that’s just an unscientific guess.)
The weird thing, of course, is that people are willing to go with ‘the Jews’ as a cohesive, mass-noun sort of designation. In part, people must be responding the way they do on the basis of a vague awareness that there are lots of Jewish names in the stories about the financial crisis. Bernie Madoff, for example. That is, they are saying: among those responsible (if we assume those at the top of the financial world are responsible) there were a number of Jews. Yes. But suppose you asked people whether to blame ‘the Jews’ for all the bad movies Hollywood keeps making. All the vaguely unfunny romantic comedies that keep being inflicted on innocent Americans – on Mainstreet, if you will. Look at the lists of producer and executive names on these productions. See any Jewish names? I’ll bet you see a couple. I like my Blame The Jews For Unfunny Romantic Comedies as premise for a Mel Brooks movie. Kind of a cross between “The Producers” and “Good Night, and Good Luck”. Some sort of hysterical anti-semitic, McCarthyite rumbling across America. Innocent Jewish producers of unfunny comedies having to go into hiding. And Jewish producers of perfectly funny comedies suffering guilt by association.
Suppose you ask who gets credit for America’s first class higher education system. Would people be willing to say ‘the Jews are somewhat or mostly responsible’, just because lots of professors are Jewish. Suppose you asked people whether ‘people whose names start with ‘M’ are somewhat responsible for the financial crisis’. Literally, that’s probably true, in some analytically vastly uninteresting sense. Madoff. I’m sure I could find other bad actors with names that start with M in the financial sector.
Probably you don’t need me to tell you that ‘blaming the Jews’ for the financial crisis is a bad idea. But I’m really at a loss as to what the hell so many respondents thought they were saying. Did 30% think they should answer ‘somewhat’ if they merely believed there were a number of Jewish individuals in the financial sector in positions of authority? Or do substantial numbers of Americans seriously suspect that there might be Jewish conspiracies afoot?
UPDATE: Malhotra and Margalit respond to critics. See this newer post.
Bryan Caplan responds to the data on US and EU-15 unemployment by offering a bet.
The average European unemployment rate for 2009-2018 (i.e., the next decade) will be at least 1 percentage point higher than U.S. unemployment rate. The bet will be resolved when Eurostat releases its final numbers for 2018.
Betting is usually unwise, but nonetheless I’m willing to take Bryan on, with one amendment. I will take the bet provided that people in prison are counted as unemployed. By my estimate, that raises the US rate by about 1.5 percentage points and the the EU-15 rate by about 0.2 percentage points. That is, assuming current imprisonment rates remain unchanged, the bet is that the Eurostat measure of unemployment (which excludes prisoners) should be no more than 2.3 percentage points higher in the EU-15 than in the US.
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According to the latest Eurostat data*, the unemployment rate in the US was equal to that in the EU-15 in March, and is now likely to be higher. Writing in the NY Times, Floyd Norris refers to the conventional wisdom that flexibility inherent in the American system — it is easier to both hire and fire workers than in many European countries implies that unemployment should be lower (at any given point in the business cycle) in the US than in Europe.
I’ve expanded my series on refuted economic doctrines to include an approach I think has been rendered largely obsolete by the global financial crisis (along with earlier developments). I’ll give the short version here, and point to a longer post at my blog, which might be better for more technical points.
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John’s post reminds me that I was giving some grief to Matt Welch about seasteaders and the more … conceptually novel side of libertarianism last week (Matt held his own).
This came up in an argument over Peter Leeson’s new book on the joys of eighteenth century piracy as an exercise in stateless government, and the recent excitement off the coast of Somalia. I suggested that Somalia looked like a libertarian paradise – no government, lots of guns etc – something that Matt certainly didn’t agree with personally. But what I didn’t know (until one of the bloggingheads commenters pointed it out) was that Peter Leeson himself has written an article arguing that “modern Somalia is teh awesome”:http://www.google.com/url?sa=t&source=web&ct=res&cd=1&url=http%3A%2F%2Fwww.peterleeson.com%2FBetter_Off_Stateless.pdf&ei=f1HvSY3bIt6HlAfM_tQp&usg=AFQjCNGG2u3zX0OOHBmfsJ00LJIiuI829Q (or, at least, a lot better than you might think). As he argues in a different, summary essay (linked to below):
Like all other choices, the choices we face in “selecting” governments are constrained. Unfortunately for most developing countries, the political choice set they face is far smaller than the political choice set more developed countries face. Historical features, such as clan tension, rampant corruption, territorial conflicts, and many others, which cannot be changed in the short run, severely restrict the kind of government countries like Somalia can reasonably expect to have if they have a government. Sadly, well-functioning, well-constrained governments like the ones we observe in the U.S. and western Europe are not part of this choice set. Ultra-predatory, corrupt, and abusive governments, however, are. And so is anarchy. As Somalia’s experience illustrates, for many LDCs with these limited options anarchy may very well be the best feasible choice.
I’ll leave the claim here to others who know African politics better than me (Chris Blattman, feel free to chime in) and merely note that these views presents an interesting question for the Princeton people charged with publicizing his book. On the one hand, piracy and Somalia are surely topical issues, but on the other, professor Leeson’s views on piracy and the benefits of Somalian political organization are likely to be unpopular with many people (his current proposed solution for the Somalian piracy problem, by the way, is to privatize the ocean).
I’ve started reading his book on piracy, which is an entertaining enough exercise, but one which I suspect is a bit fishy on the empirics. He clearly has his ideological druthers (see “here”:http://www.cato-unbound.org/2007/08/06/peter-t-leeson/anarchy-unbound-or-why-self-governance-works-better-than-you-think/ for his grand theory of why we don’t really need government), but then, so do we all. While I don’t find his claims for anarcho-libertarianism to be particularly convincing, I am probably not the target audience, and they have their place in the grand ideological debate. What I do find disconcerting though, is his obvious sweet tooth for efficiency arguments and just-so stories. History, when you look at it at all carefully, is much too messy to support any ideological explanation unequivocally. The book (and the academic articles that it draws upon) simply feel too neat to me, and don’t persuade me that he went into his research on these topics looking to be surprised by what he found (which I really think you should, any time you engage in empirical research). Others’ mileage may vary.