The final version of Casey Mulligan’s important new paper is published; it appears in the hot-off-the-epress issue of the B.E. Journal of Macroeconomics.  (An earlier version – the one I read – is here.)  The abstract:

Factor supply increases (depresses) output for many of the same reasons that the government spending multiplier might be less (greater) than one. Data from three 2008-9 recession episodes—the labor supply shifts associated with the seasonal cycle, the 2009 federal minimum wage hike, and the collapse of residential construction spending—clearly show that markets absorb an increased supply of factors of production by increasing output. The findings contradict the “paradox of toil” and suggest that government purchases and marginal tax rates reduce private consumption, even during the recession [link added].

Speaking of the weaknesses of Keynesian ‘economics,’ in today’s Wall Street Journal Stanford University economist John Taylor writes:

Big government has proved to be a clumsy manager, and it did not stop with monetary and fiscal policy. Since President Obama took office, we’ve added on complex regulatory interventions in health care (the Patient Protection and Affordable Care Act) and finance (the Dodd-Frank Wall Street Reform and Consumer Protection Act). The unintended consequences of these laws are already raising health-care costs and deterring new investment and risk-taking.

If these government interventions are the economic problem, then the solution is to unwind them. Some lament that with the high debt and bloated Fed balance sheet, we have run out of monetary and fiscal ammunition, but this may be a blessing in disguise. The way forward is not more spending, greater debt and continued zero-interest rates, but spending control and a return to free-market principles.

Cato’s Sallie James makes a powerful case for ending the species of corporate welfare that is the Export-Import Bank of the United States.

EconLog’s David Henderson reports on yet more of his e-debate with proud protectionist Ian Fletcher.

Carpe Diem’s Mark Perry documents another instance of private markets doing what textbooks and popular notions hold can be done only by government: supplying unemployment insurance.  (Markets earlier made headway into this business, only to be thwarted by, among other politicians, F.D.R. -  that supposed great champion of working, and out-of-work, Americans.)

Dirk Mateer and Frank Stephenson explain how to use film clips to better convey to students the lessons of public-choice economics.

Bob Higgs on the debt-ceiling tussle.

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{ 132 comments }

Kendall July 21, 2011 at 8:22 am

“marginal tax rates reduce private consumption”

The only tax proposal I know of with a marginal rate of zero is the FairTax.

Don Boudreaux July 21, 2011 at 8:26 am

It is a poorly worded abstract; it should be read to mean “higher marginal tax rates.”

Subhi Andrews July 21, 2011 at 5:36 pm

BTW, here is very well done youtube video on current spending frenzy in D.C.

http://youtu.be/5k_TLz_f8SU

indianajim July 21, 2011 at 9:15 am

Posted Higgs and Taylor’s pieces to my Facebook friends to read: Thanks for posting them here!

Justin P July 21, 2011 at 9:16 am

“The way forward is not more spending, greater debt and continued zero-interest rates, but spending control and a return to free-market principles.”

How long before Taylor is demonized by De Long and PK?

Mesa Econoguy July 21, 2011 at 1:31 pm
Justin P July 21, 2011 at 4:47 pm

Taylor says in that post, multipliers less than 1 (.5). Why do Keynesians always assume a multiplier greater than 1?

Mesa Econoguy July 21, 2011 at 6:04 pm

Because that’s what it says on p. 2 of the Church of Keynes and Large Interventionism pamphlet.

You get that when you attend college Democrat functions.

vikingvista July 21, 2011 at 6:49 pm

“Why do Keynesians always assume a multiplier greater than 1?”

It certainly isn’t because that’s what the data always show. Funny how they claim macroeconomics is empirical, until the data don’t fit.

But no matter. There can never be any such thing as data that don’t support keynesianism. If a keynesiac explained a data set, and the data collectors later published a correction with opposite results, the keynesiac would have an explanation for that as well.

Justin P July 22, 2011 at 11:59 am

*like*

muirgeo July 21, 2011 at 10:54 am

“The unintended consequences of these laws are already raising health-care costs and deterring new investment and risk-taking.”

I just LOVE it when the neoliberals with exact certitude explain how we can get out of the mess their policies created.

JW July 21, 2011 at 10:59 am

I love the phrase “exact certitude.”

Kirby July 21, 2011 at 12:09 pm

I think he means exacting certitude, it has certainly taken a toll on his arguments.

vikingvista July 21, 2011 at 3:57 pm

The troll pays a toll for a change.

Ken July 21, 2011 at 11:40 am

muir,

Like when Obama, et al, guaranteed unemployment would stay below 8% if only their “stimulus” package were passed? From that alone you should be able to figure out the Keynesians either don’t know what they are talking about or a just lying.

Regards,
Ken

Kirby July 21, 2011 at 12:06 pm

Oh and regulating that redistribution of wealth so as to cripple the afflicted industry.

Kirby July 21, 2011 at 12:07 pm

Oops, should be a comment on Muir’s next one, not this one. Still works, though.

matt July 21, 2011 at 3:04 pm

I just LOVE that you’re a jackass!! YAY!

muirgeo July 21, 2011 at 10:59 am

Ian Fletcher pantsed David Henderson…. BEAUTIFUL… neoliberalism laid bare..it ain’t pretty. Fletcher sounds like he is borrowing my arguements.

Henderson wrote;
Ian Fletcher responded to my last post as follows:

You accuse me of wanting “the government to interfere in people’s lives.”
I’d like to plead cheerfully 100% guilty as charged to that.
Although a government that doesn’t “interfere in people’s lives” certainly sounds good, and would make a superb subject for an after-dinner speech, the reality is that all governments, of any ideological stripe, exist precisely and solely to “interfere in people’s lives.” Governments are coercive; they exist precisely because a functioning society sometimes requires people to do things they won’t do voluntarily. Things people will do without being told don’t require government.
The fact that you can’t drive 150 MPH on the freeway is government “interfering in your life.”
So is the fact that you can’t walk into a liquor store with a gun and take the owner’s money.
So is the fact that you must (on pain of going to jail) hand over part of your income to fund everything from the Navy to the National Science Foundation.
A government that never interferes with anybody’s life is a teenage anarchist fantasy with no basis in America’s political heritage. (Among other things, it is not what the Founders intended by the remotest stretch of the imagination.)
Therefore, if you’re going to argue against my proposal for an import tariff, you’re going to need to find a better argument than that it causes “the government to interfere in people’s lives.”

Bruce July 21, 2011 at 11:11 am

The fact that you can’t “walk into a liquor store with a gun and take the owner’s money” is not government interfering in your life. It is government performing one of its few intended functions which is to protect the owner from others who would infringe upon his life, liberty or property. It is when the government attempts to protect you from yourself (mostly by coercing you to do “good” things you might not do of your own volition) that government infringes upon those basic rights and exceeds its mandate. I seem to recall Jefferson writing about this very thing somewhere. If only I could put my finger on it. Oh well, it’s not like he used it as the basis for the founding document of America or anything.

muirgeo July 21, 2011 at 12:24 pm

Who made YOU the authority of what government should and shouldn’t do? There are over 300 million others here who have a say as well.

Is this the TJ quote you were looking for;

” I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.

- Thomas Jefferson

Bruce July 21, 2011 at 12:38 pm

No one made me the authority. Our nation was founded on principles of government first espoused by Locke (building on St. Thomas Aquinas’ concept of natural law). I simply defer to those principles. Your allusion to the will of the masses earns you no points. In the Lockian model, the will of the masses cannot take an innocent man’s belongings, incarcerate him or put him to death. In your world all those things can happen if the masses agree to it. Remember my friend, true democracy, which you seem to fall back on at every opportunity to justify the oppressive power of the state, is nothing more than two wolves and a sheep voting on what’s for dinner. Cheers.

Slappy McFee July 21, 2011 at 12:47 pm

“Who made YOU the authority of what government should and shouldn’t do? There are over 300 million others here who have a say as well.”

It’s almost like the thoughts in your head fight amongst themselves. The fact that you acknowledge that there are 300 million people should show just how impossible the task of daily meddling in the lives of those individuals really is. The same 300 million people you ‘worry’ about by ‘protecting’ them from ‘evil’ corporations are the same people who make the same choices when they vote. How can their judgement be incorrect when they trade, but magically correct when they vote? Shall we have an indoctrinated ‘elite’ to provide the plebes with suitable choices when they vote so they don’t make the ‘incorrect’ choices? You know, to protect them from themselves?

BTW — What makes the 51% majority the authority on what the government can and can’t do?

morganovich July 21, 2011 at 3:26 pm

methinks-

“Don’t interrupt him, Morganovich. He’s busy lending arguments to Ian Fletcher.”

well, we have to stop this feedback loop of stupidity somewhere…

Dan J July 21, 2011 at 5:10 pm

We might be better of with a jail system for 250million and the the other 50million plus who tend to the prisoners. Since the people are incapable of choosing ‘correctly’, or making choices that muirgeo and other elites think is thee nest choices, we should jail all for their own good.

Methinks1776 July 21, 2011 at 5:56 pm

Morganovich,

The feedback loop of stupidity is an unstoppable force that will grind your patience into dust. Once one falls into the Vortex of Moron, it’s a rare person who can climb out again.

Mesa Econoguy July 21, 2011 at 6:06 pm

Actually, you two (methinks & morganovich [good to see you here]) may have stumbled upon cold fusion/perpetual motion here….

Dan J July 21, 2011 at 6:17 pm

All in honor of economic retardation.

morganovich July 21, 2011 at 1:01 pm

muirgo-

you seem to completely misunderstand our form of government, what has made it successful, and from what freedom derives.

democracy is merely another form of tyranny, that of the majority over the minority.

if 51% of us vote that your computers should be taken away and you should be forever banned from commenting online about economic or social issues, that would be democratic.

would it be just?

would you feel free?

freedom comes from rights, not democracy. they are the only thing that keep it from being tyrannical.

rights exist to limit the demos and protect the freedom and property of individuals.

the recognition of this need was the genius of our constitution. the recognition of inalienable rights that derive from personhood, not government fiat is what has made it so successful.

your “well the majority would prefer to vote itself largess from a minority” is anathema to freedom and to the tenets that have made america succeed.

i don’t think you understand what jefferson was saying at all. he was saying that companies too much be subject to the rule of law.

that is not the same thing at all as your rants.

Methinks1776 July 21, 2011 at 1:24 pm

Don’t interrupt him, Morganovich. He’s busy lending arguments to Ian Fletcher.

Slappy McFee July 21, 2011 at 1:46 pm

AWESOME MeThinks– AWESOME

Metryll July 21, 2011 at 7:36 pm

Democracy come frol greek Demokratos and mean power by the people. Unlike what Hayek wrongly believed and wrote it say nothing about how the power is exercised. The ‘how’ is the purpose of institutions.

And before you jump on US Constitution and Madison, Ancient greek created the concept 2.000 years before Madison even learned to spell the word.

Dan J July 21, 2011 at 6:07 pm

Still, should I spend a year harvesting and refining a raw material into ‘super food’ like honey… Muirgeo and his band of Marauders would show up and declare that democracy dictates I relinquish 50% of it to him and those who did nothing to produce the product.

Justin P July 21, 2011 at 2:25 pm

The funny thing about that argument is that Government doesn’t stop people from doing that now anyway.
No amount of Govt would have stopped Casey Anthony from killing her kid. (Sorry but when the juror said the only reason they didn’t convict is because….they didn’t like the Death Penalty, that’s personal political ideology getting in the way of justice)

Govt can’t stop the Dahmers of the world, so that entire line of reasoning is just loony.

vikingvista July 21, 2011 at 3:04 pm

“The funny thing about that argument is that Government doesn’t stop people from doing that now anyway.”

That’s just because we haven’t yet given the government enough power.

Justin P July 21, 2011 at 4:39 pm

Obviously. We should just keep everyone in jail for their own good.

muirgeo July 22, 2011 at 12:57 am

You and Justin might want to take a little trip to Somalia and see how having no government is working. But neither of you have the guts to do so. You’ll sit here protected by your government whining and nsiviling about it… I bet there are some Somalis that would just love to bitch slap your pathetic unthinking faces into next week.

vikingvista July 22, 2011 at 2:18 am

“You and Justin might want to take a little trip to Somalia and see how having no government is working.”

So it is your contention that Somalia was working better when it had a government than now? Funny, but it seems most experts disagree with you.

anthonyl July 24, 2011 at 12:44 am

The people of Somalia are probably better off with what little government it has left compared to the corrupt thieving regime it had in the past.

anthonyl July 24, 2011 at 12:47 am

Can gov. ever make any crazy people do what they are going to do. Good or Bad. Government is only about coercing those that are not crazy to bend to its will.

JW July 21, 2011 at 11:31 am

Fletcher’s argument is not strong. We all understand that governments are coercive, but how does this help show the benefit of a particular type of intervention (ie tariffs). He appears to be arguing that since the government has the power to do something it should enact that policy. In other words, the government has the power to intervene in our lives, therefore it should intervene. The government has the power to enact tariffs, therefore it should enact tariffs. There is no logic here. The fact that the government has the power (or legal authority) to do something does not mean that it should do it.

Gil July 21, 2011 at 11:50 am

Yeah there are Libertarians who believe there should be no speed limits.

Ken July 21, 2011 at 12:30 pm

Gil,

There shouldn’t be. Your argument for speed limits likely goes something like this: driving fast could lead to a collision, therefore driving fast should be illegal. Guess what? Driving at all could cause a collision, so by the same logic driving should be illegal.

When I throw a punch I could hit someone in the face, but I could also hit a heavy bag. Throwing a punch should NOT be illegal, only where it lands. Similarly, driving shouldn’t be illegal, nor should driving fast, only causing collisions should be illegal.

While it’s true, driving faster increases the odds of collisions, just getting into a car increases the odds of having a collision by an even larger magnitude. Highway laws are also some of the most disrespected laws in the country because people widely recognize the idiocy of those laws.

Speed limits, as well as most other driving laws, by and large are about revenue completely independent of safety. In fact, many red light and speed cameras actually cause more collisions (people slam on their breaks when they see them, causing collisions), but politicians insist on using them because they are cash cows. Politicians know they can increase their revenue through these types of punitive laws because people like you mindlessly back them thinking that if a law is enacted because politicians say it’s about safety it must absolutely be about safety. Because they can use police to increase their revenue, many police resources are diverted into traffic enforcement, instead of high crime areas where they are most needed.

Why is it when a subject comes up that is about reducing liberty for the sake of increasing gov power, you always go for it? Do you really not think it’s wiser to err on the side of liberty?

Regards,
Ken

PS: A 55 mile an hour speed limit causes congested traffic. Search youtube for “55: A Meditation on the Speed Limit”.

Jim July 21, 2011 at 3:47 pm

The argument against Cafe laws shares many many similarities to your issues with speed limits.

What I do know is that I would much prefer law enforcement spent more time making neighborhoods safe than collecting revenue on roadsides.

Justin P July 21, 2011 at 5:37 pm

http://www.fhwa.dot.gov/publications/research/safety/97084/97084.pdf

Changing speed limits actually don’t change driver behavior one bit. Imagine that?

anthonyl July 24, 2011 at 1:00 am

Your right about that. I don’t think I would drive any differently if the limit were eliminated but already drive 10 miles above the posted limit.

anthonyl July 24, 2011 at 12:57 am

Your applying some inalienable right to driving. There is none. The road operator makes the rules if you want to use their property.

Ken July 25, 2011 at 1:08 pm

“Your applying some inalienable right to driving.”

Where?

Regards,
Ken

anthonyl July 24, 2011 at 12:53 am

Speed limits are set by the road operator. The state in this case.
The state has every right to set a speed limit for the safe operation of a vehicle on the road. The idea of eliminating speed limits means the situation that causes the most accidents on the road heterogeneous speed and short reaction times would become more common.

Kirby July 21, 2011 at 12:04 pm

You’re right, there is a direct correlation between protecting people and redistributing wealth to the lazy.

Rugby1 July 21, 2011 at 1:41 pm

I was going to post a reply to your awful reposting of Fletcher’s horrendous arguments. But since Hnderson has already done it, I will just repost his concluding sentence.

“It’s that tariffs are a coercive measure initiated against peaceful people doing peaceful things. That distinguishes them from his case of a government stopping someone from robbing a liquor store. I’m guessing that he can appreciate that distinction. Can he?”

Also isn’t that a tad arrogant to assert that it sounds as if Fletcher “is borrowing your arguments.” Course having said that I have realized that arrogance is the hallmark of our liberal betters.

Having been on the blog for awhile now I have realized you have no original arguments, just the rehashed garbage of statists everywhere.

The Other Tim July 21, 2011 at 1:49 pm

Poor Fletcher… so close and yet so far. The recognition that government is coercive is usually the first step on the road to solid libertarian thinking. If government is foundationally not peaceful, it stands to reason it shouldn’t be allowed to interfere in situations which are foundationally peaceful, thereby causing peaceful situations to degenerate into violent situations through the introduction of coercive measures. To actually argue that it’s proper to attack people for failing to hand over money to the National Science Foundation only illustrates how barbaric and juvenile the statist mind is.

Young children will beat and pound other children who won’t relinquish something they want. Adults who will not grow out of that behavior either end up in prison or governments.

matt July 21, 2011 at 3:07 pm

Muirjack,

Let’s play the jackass game…
Here’s how we play: you say something, anything… and I yell “jackass” really loud!

Dan J July 21, 2011 at 5:05 pm

Muirgeo’s democracy is two wolves and a sheep voting on what to eat for dinner…… Muirgeo is fine with it as long as he is not the sheep.

Methinks1776 July 21, 2011 at 5:59 pm

Dan J,

You’re not labouring under the mistaken assumption that Muirdiot understands who the sheep is, are you?

In Poker, if you don’t know who the fish is, it’s probably……

matt July 22, 2011 at 11:24 am

I know what he wants with the sheep, and it ain’t dinner.

brotio July 22, 2011 at 6:53 pm

Vacaville, CA: Where men are men, and sheep are nervous!

:D

Methinks1776 July 22, 2011 at 8:44 pm

LMAO! :)

Dan J July 22, 2011 at 9:02 pm

You know he has read these posts and whistles by the graveyard of his ideology.
Anyone care to remind me of the author of the quote I changed up a little?

Kirby July 22, 2011 at 9:18 pm

This just in! Constructive debate now counterproductive!

Dan J July 22, 2011 at 9:26 pm

There is never constructive debate with George.

Kirby July 22, 2011 at 9:31 pm

Then theoretically George never debates counterproductively. You have two lives left!

Dan J July 22, 2011 at 9:50 pm

He doesn’t debate… Just screeches inanely.

anthonyl July 24, 2011 at 12:36 am

Things that people won’t do voluntarily are things that people don’t want to and probably shouldn’t do. Why not let the individual decide? The road operator is the state and just like a private operator sets the rules for its use. Taking property forcefully is never appropriate.

DG Lesvic July 21, 2011 at 12:16 pm

Public Choice Economics? There is no such thing. There is just economics and non-economics, and Public Choice Theory is not economics at all but Psychology, and a retreat from economics, and the best of free market thought.

I know we’ve had this debate before, and you don’t agree with me. You insist that it is not psychology, and advances economics into political theory. To which I responded that economics has always been political economy, and so I suppose we’ll go round and round on this till the end of time.

But to me, Public Choice is right up there with math and field experimentalism as economics for the profession and not the science.

Don Boudreaux July 21, 2011 at 12:46 pm

You repeatedly speak as if you know what public-choice economics is, but you haven’t a clue. Yet because somewhere in your past you encountered some misinformed misfit who misled you to think that public-choice economics is something that it emphatically is not – that it is some branch of psychology or some such thing – every time you see the term used you fly into an embarrassing harangue against what you delusionally imagine to be public-choice economics.

Public-choice economics is nothing more or less than the use of economics (and mostly the sort of economics that you approve of, DG) to study the political sector. It’s no different in this regard than using economics to study international trade or history. Yet were you consistent you’d fly into one of your uninformed rages against “international trade economics” on grounds that it’s not really economics, or against “economic history” on grounds that it’s not really economics.

Learn what you’re talking about before you talk about it.

DG Lesvic July 21, 2011 at 2:23 pm

Sorry, but I just can never resist the temptation to gore sacred oxen.

Don Boudreaux July 21, 2011 at 2:32 pm

But you gore nothing but a phantasm.

If I were to describe an intellectual endeavor as being “economics used to explain the actions of government officials, special-interest groups, and voters” – something that Mises himself often did – would you think that that endeavor is necessarily not economics? That it is harmful? That it is necessarily a branch of psychology or biology or oncology or whatever you might imagine? I suspect not.

The term “public choice economics” is simply a shorthand to describe the use of economics to explain government and politics; “public choice economics” is three words instead of the 14 words used in the phrase in the previous paragraph.

Your continued ignorance on this point, and insistence on displaying your ignorance on this point, cause you only to gore your credibility.

Oh, to be clear and to avoid giving unintended offense: Richard Ebeling has told me by e-mail that he does NOT agree with your assessment of public-choice economics. I mention this fact only to be clear that I emphatically did not have Richard in mind in my earlier comment when I mentioned a misinformed misfit who misled you into misunderstanding what public-choice economics is. Whoever (or whatever) that misleading source is, it’s certainly not Richard.

vikingvista July 21, 2011 at 2:49 pm
DG Lesvic July 21, 2011 at 4:23 pm

Prof Boudreaux,

I never thought you had Prof. Ebeling in mind. It could never enter my head that my two favorite economists today could have anything but the admiration for each other that I feel for both.

Can’t help but notice the difference between your reaction to disagreement over Public Choice and other matters. In the others, disagreement doesn’t bother you at all. Unlike so many of your peers, and your guests here, you don’t take it personally. Even the rudest criticism just rolls off you like water off a duck. But while we may say what we like about you, you’ll be damned if your’re going to let us get away with any disrespect for your old Public Choice professors.

Good, I respect your loyalty, and while I hate to give you grief over anything, I still respectfully disagree with your old profs.

DG Lesvic July 21, 2011 at 4:28 pm

Vike,

sorry but I don’t have audio so couldn’t check out the DG Serenade. But I’m sure it was love song.

DG Lesvic July 21, 2011 at 7:23 pm

Methinks,

Thanks for telling me how to spend my time and money.

But what makes you think it would do any good?

You’ve already called me a moron.

indianajim July 21, 2011 at 2:44 pm

DG, Here is something that might help you to do what Don is patiently trying to persuade you to do: Learn what Public Choice really means:

http://econfac.iweb.bsu.edu/research/workingpapers/bsuecwp199301mcclure.pdf

DG Lesvic July 21, 2011 at 4:26 pm

Ji,

Thank you for the link. I will check it out.

DG Lesvic July 21, 2011 at 4:34 pm

Jim,

Couldn’t access the link, but thanks anyway.

But don’t worry about it. I’ll get along alrigh without Public Choice, and it will get along alright without me.

As far as I’m concerned, it’s one of the more minor vices of economists. The big one is math. That’s the one I won’t let go of.

Methinks1776 July 21, 2011 at 6:02 pm

DG,

Gordon Tullock wrote a book about it. Type his name into Amazon and you can have it in two days. Although, you seem pretty tech savvy, so you may be able to get it right away on kindle (it is available on kindle).

I’m sure you’ve gotten along without a great many things in life, as we all have. By why deny yourself things you don’t have to?

vikingvista July 21, 2011 at 6:24 pm

indiana,

It’s amusing that you think you can reason with him. It’s a long frustrating tunnel, but there is a light at the end of it. Once you realize reason isn’t one of his capabilities you can play party tricks with him, like a trained circus animal. For instance, watch this…

Hey DG Lesvic! Four questions for you:

1. Is mathematics applicable to quantities?
2. Are prices applicable to economics?
3. Are quantities applicable to prices?
4. Is mathematics applicable to economics?

DG Lesvic July 21, 2011 at 7:16 pm

Viking,

You’ve shown that you could attack my character. All you had to do was lie about statements not immediately before us. Now, let’s see if you can attack my economics. That’ll be a bit harder, for the logic is right before our eyes.

You wrote:

2. Are prices applicable to economics?

The answer most emphatically is NO!

Show us how smart you are. Explain why that is so.

DG Lesvic July 21, 2011 at 7:25 pm

It just goes to show you.

You can take the girl out of the Gulag, but you can’t take the Gulag out of the girl.

Still and all, what a girl!

Love ya, babe.

vikingvista July 21, 2011 at 7:45 pm

indiana,

“Are prices applicable to economics?
The answer most emphatically is NO!”

See what I mean? And you don’t even have to throw him a treat.

DG Lesvic July 21, 2011 at 8:17 pm

Vike,

You disappoint me. I was sure you were smarter than that.

Oh well, I guess I’ll just have to explain it to you.

Price is applicable to economics.

Prices are not.

And you actually explained why, apparently without realizing it, with your very sound argument against empirical economics.

Prices are empirical data, and as you stated, irrelevant to economics.

Price, that is, the concept of price, rather than actual prices, is certainly essential to economics.

I don’t have your exact words belong about empirical economics right before me, but I’m pretty sure you’ll find the confirmation of what I’ve said.

But don’t worry. You missed this one, but you’re still a helluva good economist, in addition to being a helluva good liar.

vikingvista July 21, 2011 at 11:21 pm

“Price is applicable to economics.
Prices are not.”

If you promise to perform for us again, by all means substitute “price” for “prices”. Your interpretation is no less amusing. But wait ’till I get my camera…

…okay, ready.

juan carlos vera July 24, 2011 at 1:09 am

Sorry Don: Your request to DG!…
“Learn what you’re talking about before you talk about it.”
You are asking something that is not possible…

DG Lesvic July 21, 2011 at 12:24 pm

I take that back. Nothing is up there with math. Experimentalism is just a boondogle and distraction and Public Choice a pretension and something of a step backward, but math is the absolute cancer of economics.

DG Lesvic July 21, 2011 at 12:26 pm

I just tried to take back most of what I had just said and it got flagged as a duplication. I hope it gets through because I had been too hard on Public Choice, which is a minor fault compared to math.

DG Lesvic July 21, 2011 at 12:29 pm

And, by the way, my offer to leave the Cafe if anyone can give us an example of mathematical economics is still open, and whether Greg likes it or not.

Daniel Kuehn July 21, 2011 at 1:06 pm

If I recall, you’ve gotten lots of examples in the past. Since you’ve proven yourself unwilling to make good on your end of the bargain, it’s no wonder people have stopped supplying you with those examples.

DG Lesvic July 21, 2011 at 2:24 pm

Touche, Daniel, you have once again burned me to the ground.

Greg Webb July 22, 2011 at 12:39 am

DG, Daniel just spoke truth to The Weasel.

DG Lesvic July 22, 2011 at 2:00 am

Greg,

It looks like your friend Daniel isn’t around to back you up.

Maybe he’s been kidnapped by aliens.

Greg Webb July 23, 2011 at 12:46 am

DG, my guess is that Daniel just got bored arguing with a fool like you.

DG Lesvic July 21, 2011 at 2:32 pm

By the way, Daniel, the last example I was given was The Equation of Exchange.

But there are no equations in economics. If you and I exchange my A for your B, it is because I value your B more than my A, and you value my A more than your B. If we both valued A and B equally, there could be no exchange, for nothing could be gained by it, and it would be a waste of time and effort.

While there are no equations in economics, the notion of equilibrium is essential to it, and equilibrium does imply equations. But it is the notion of them and not any actual equations that are essential. And, without any actual equations, there can be no mathematical operations, and no such thing as mathematical economics.

So the Equation of Exchange was not a genuine but spurious example of the so-called mathematical method in economics.

And, now, Daniel, please do not dodge this question.

Would you agree with Greg that a spurious was as good as a genuine example, and obligated me to make good on my promise?

Again, don’t dodge this one. And give me straight answer, with none of your “nuances” and tap dancing around it.

Kirby July 21, 2011 at 4:38 pm
DG Lesvic July 21, 2011 at 5:11 pm

Kirby,

I didn’t ask for a description of mathematical economics but an example of it. There was no example of it in the link you provided. And that’s all “mathematical economics” ever is, a lot of talk about nothing.

Neither you nor all the writers at Wike Whatever will ever be able to provide us with the example I ask for. And before you waste your time and ours trying to do so, you’d better understand what economics is and is not.

Here are some excerpts from

A Declaration of Economics

Since we live in a world of scarcity, we must all economize. But that doesn’t make us all economists. Economics implies something beyond Home Economics, and Ma Kettle in her kitchen. It implies Political Economy, the problems of nations and social classes in the market, and not its passing data, but eternal truths.

The data by itself is a meaningless jumble. It is only through the logic of economics that we can make sense of it. But while the logic is essential to an understanding of the data, the ever changing data is irrelevant to the eternal logic. So though the macro-economic plotters of the data and governors of the nation’s economy use economics, they do not contribute to it. And, however more complex the data of the overall economy than that of the corner grocery store, they are still more like Ma Kettle, adjusting to changes in the data, than Adam Smith, discovering eternal truths, and not economists, like Smith, but economic managers, like Ma Kettle, though on a larger scale.

All of the talk of mathematics in economics confuses the passing data of econometrics with the eternal truths of economics. Since there is none of the passing data in the eternal truths, there are no quantities and no mathematics. It is irrelevant to economics, and, its only effect, to obscure it.

They tell us that the test of an economic theory is its success in predicting the future, but betray themselves every time they get up to go to work in the morning, like the rest of us. For, if they could really predict the future, and with mathematical precision, wouldn’t they all be stock market millionaires?

Though economics is explanatory rather than predictive, it is essential to prediction, for you could not predict the interaction of the complex factors of change in the real world without a theoretical comprehension of each one by itself.

Economics is not blind faith but reason, not “the facts,” as related by others, and to be taken on faith, but the logic before our very eyes. It is not even the facts before us, but the Invisible Hand, not the seen but unseen.

The empirical economists could never explain how you observed the Invisible Hand, and, if you couldn’t observe it, measure, count, or calculate it. Since statistical measurements are always of past events, never exactly repeating themselves, they are irrelevant to the eternal and immutable laws of economics, always exactly repeating themselves.

You cannot construct an economic theory upon the shifting sands of statistics, nor, without the statistics, have anything to calculate. There is no mathematical because there is no empirical economics.

Kirby July 21, 2011 at 7:20 pm

well there is certainly math in economics;
MPC/MPS, the multiplier, stimulus/tax effect, Foundations of Economical Analysis, http://en.wikipedia.org/wiki/Mathematical_economics#Mathematical_optimization, http://en.wikipedia.org/wiki/Mathematical_economics#Nonlinear_programming,
heck, on the page alone there is differential and variational calculus. Sounds like math to me

DG Lesvic July 21, 2011 at 7:18 pm

Maybe we’d better send some St Bernards out to look for Daniel.

Dan J July 22, 2011 at 12:42 am

Exchange of A for B = happy

Equation

Dan J July 22, 2011 at 12:43 am

That should be… Exchange of A for B = happy *2

Greg Webb July 22, 2011 at 12:36 am

DG, Don provided the example that you requested, and you immediately began weaseling out of complying. Since then, you have proven your despicable character by:

*Maliciously and falsely claiming that others were assassinating your character,
*Defaming the character of others,
*Pretending to be victim while assassinating the character of others,
*Sleazily editing another’s comments to intentionally misrepresent what was said,
*Calling other people silly names,
*Implying that other people are subhuman,
*Falsely claiming to be like Wlliam F. Buckley,
*Publishing a really stupid book on the Internet entitled “Dumb Jews,” and
*Demeaning you wife by calling her an “unreasonable and illogical creature”.

Then, you implied that you had friends at Cafe Hayek. But, as I read the posts on this thread, I can see that you, once again, did not mean what you said.

DG Lesvic July 22, 2011 at 2:01 am

And that isn’t the half of it.

Dan J July 22, 2011 at 2:10 am

Whew!!! You have had much difficulty, here. I have not yet had discussion with ya, so maybe I, too, shall find difficulty in conversing with you………. Buuuuutttt………. Much preferable to muirgeo

DG Lesvic July 22, 2011 at 3:11 am

What difficulty? Just another day at the office.

Anyway, Dan, I’ll be looking forward to our conversation, if you don’t mind conversing with a stupid, malicious, pretentious, sleazy weasel.

vikingvista July 22, 2011 at 2:25 pm

“stupid, malicious, pretentious, sleazy weasel”

Don’t forget perseverating, obnoxious, pathetic, and clueless.

Greg Webb July 23, 2011 at 12:48 am

Also remember, schmuck, douche bag, ass, clown, and fool.

vikingvista July 21, 2011 at 1:07 pm

Higgs’ hits a home run. He could’ve more explicitly sliced and diced the Democrat talking point endlessly spewed here by muirparrot by simply suggesting this:

Let’s go back to the spending levels under Clinton, when the economy was sooooooo good.

Methinks1776 July 21, 2011 at 1:26 pm

:)

vikingvista July 21, 2011 at 1:41 pm

Keynesianism is dripping in grease. It will handily slide around Mulligan’s findings, just as it is prepared to slide around any imaginable findings. Keynesianism should come with a warning sign: “Slippery when confronted”.

When you (mistakenly) believe data are sufficient to understand macroeconomics, it behooves you to model from the data, not deconstrain an old a priori model to fit whatever data you might ever encounter.

Gabriel July 21, 2011 at 4:45 pm

I am but a humble Economics student so pardon my stupidity but when you say it is a mistake “to believe data are sufficient to understand macroeconomics” what exactly do you mean?
Are you saying it is dangerous to use data? OR
That data is necessary on some limited level but not sufficient?

vikingvista July 21, 2011 at 6:03 pm

Data must be explained, but it is a mistake to think they are explanatory. And as we see all the time, they are rarely (for good reason) persuasive, only confirmative of existing beliefs. The reason it is a mistake to deduce economics from data is:

1. Economic data are almost always intractably confounded. This is in contradistinction to controllable experiments about physical phenomena that do not depend upon human action.

2. Knowledge about human nature results in significant a priori economic truths that not only can be, but must be, accounted for in any economic interpretation. This is in contradistinction to physical phenomena where we are relatively lacking in a priori knowledge, and so only have tentative models.

Knowledge about physics has the advantage over economics that controlled experiments can usually be performed.
Knowledge about economics has the advantage over physics that we already know some things from which we can logically deduce further knowledge and constrain interpretation of observations.

Empiricism in economics not only lacks sufficient constraints to produce any useful knowledge, but ignores the nonempirical knowledge which exists that makes economics even possible.

Mesa Econoguy July 21, 2011 at 6:15 pm

Excellent explanation, vike.

I would add this (you touched on it above): it is extremely difficult to hold variables constant while letting others change in complex dynamic systems like economies. There simply is no way to run “control” experiments to get baseline readings the way you often can in physical sciences.

So data interpretation in economics is a very tricky proposition.

Metryll July 21, 2011 at 7:52 pm

No economic theory can claim to not use data as explantions.

If you think that Austrian can, then write a book :you’ll earn several Nobel prizes in a row. Basically stating that such a theory has used mathematics to render human nature and behavior is equivalent to state that using it you could use it to pass Turing test. And AFAIK no one has ever been able to pass it.

If you dont know what Turing test is, search about it. Once you’ll have grasped what it is about you’ll discover why your literature score so high on BS meter…

vikingvista July 22, 2011 at 12:03 am

“No economic theory can claim to not use data as explantions.”

No. No rational economic theory can claim to use ONLY data as explanation, to the extent tentative models are used in physics.

“If you think that Austrian can, then write a book :you’ll earn several Nobel prizes in a row.”

I don’t need to write a book, because one already has. And another (who accepted most of the theory) has already won a Nobel Prize, though not specifically for work on that matter.

“Basically stating that such a theory has used mathematics to render human nature and behavior is equivalent to state that using it you could use it to pass Turing test. And AFAIK no one has ever been able to pass it.”

First, “stating that such a theory has used mathematics to render human nature and behavior” would imply a serious misunderstanding in the one stating it. And since you are the only one I’ve heard state it, that means you.

Second, “mathematics” is not synonymous with “algorithm”. It is all unrelated to anything I wrote anyway, but any advanced text on set theory should help you clear your misunderstanding.

“If you dont know what Turing test is, search about it.”

I looked it up. Apparently only two *humans* have ever failed it. One was Muirbot. Was the other one you?

“Once you’ll have grasped what it is about you’ll discover why your literature score so high on BS meter…”

First I’ll have to grasp your grammar.

Look Grasshopper, I’m so glad someone let you into a Junior CompSci class, you must be very proud of your immense knowledge. But you are clueless about what is being discussed here. If you ARE interested, and from your tone I seriously doubt you are, read the first chapter in _Man, Economy, and State_ which is available free online. The idea is not original with Rothbard, but he explains it in a simpler way than Mises, so that may even you can understand it.

vikingvista July 22, 2011 at 12:08 am

“No economic theory can claim to not use data as explantions.”

No. No rational economic theory can claim to use ONLY data as explanation, to the extent tentative models are used in physics.

“If you think that Austrian can, then write a book :you’ll earn several Nobel prizes in a row.”

I don’t need to write a book, because one already has (_Human Action_). And another (Hayek, who accepted most of the theory) has already won a Nobel Prize, though not specifically for work on that matter.

“Basically stating that such a theory has used mathematics to render human nature and behavior is equivalent to state that using it you could use it to pass Turing test. And AFAIK no one has ever been able to pass it.”

First, “stating that such a theory has used mathematics to render human nature and behavior” would imply a serious misunderstanding in the one stating it. And since you are the only one I’ve heard state it, that means you.

Second, “mathematics” is not synonymous with “algorithm”. It is all unrelated to anything I wrote anyway, but any complete text on set theory should help you clear your misunderstanding. I recommend Dover’s _Set Theory and Logic_ by Stoll. It’s very clearly written, and quite inexpensive.

“If you dont know what Turing test is, search about it.”

I looked it up. Apparently only two *humans* have ever failed it. One was Muirbot. Was the other one you?

“Once you’ll have grasped what it is about you’ll discover why your literature score so high on BS meter…”

First I’ll have to grasp your grammar.

Look Grasshopper, I’m so glad someone let you into a Junior CompSci class, you must be very proud of your immense knowledge. But you are clueless about what is being discussed here. If you ARE interested, and from your tone I seriously doubt you are, read the first chapter in _Man, Economy, and State_ which is available free online. The idea is not original with Rothbard, but he explains it in a simpler way than Mises, so that may even you can understand it.

Metryll July 22, 2011 at 1:23 am

I assumed that you had at least some basic knowledge about how maths are used in hard science and its limits. It’s now crystal clear that you dont.

“I looked it up. Apparently only two *humans* have ever failed it. One was Muirbot. Was the other one you?”

Turing test has been designed for Artificial Intellignece not humans, hence no one pass it, but AI designed by human do. Obviously you have not understand what Turing test is about.

You argue that at least one school dont rely on data only. That implies that such a theory is able to model human nature and behavior. Problem is if such a mathematical model existed it would be then used to create an AI for which sucess criterion is the Turing test. Hayek use in AI field is exactly equal to zero . But Turing, a British mathematician, has a great influence.

About logic may be you should start to understand the book you ask me to read. And read any book related to modelisation in computer science. Anything related to relationnal database would do the job.

If you still believe that informatics only deal with algorithms, do one in PROLOG. Have fun while trying…

What you fail to understand is that amount of use of mathematic formalism does not relate to model accuracy.

All depend of the heuristic used to ‘bidge’ between partially mathematic based model and reality. Keynes recognised that maths could not provide, and still cant, the tools needed for a complete explanation of economic reality. Keynes heuristic is psychology, which is still the better tool for humans action analysis.

vikingvista July 22, 2011 at 2:23 am

ME: “I looked it up. Apparently only two *humans* have ever failed it. One was Muirbot. Was the other one you?”

YOU: “Turing test has been designed for Artificial Intellignece not humans, hence no one pass it, but AI designed by human do. Obviously you have not understand what Turing test is about.”

If you were familiar with the Turing Test, then you would’ve understood the joke. A assumed you were at least bright enough to notice the emphasis on humans. Trust me, idiot, The Turing Test is way below my grade.

Instead of making an obnoxious fool out of yourself, why don’t you take my advice and read Chapter 1 of MES, so at least you have some clue about what you are responding to.

Metryll July 22, 2011 at 10:13 am

In the above read A + AH is equivalent to B + HB is equivalant to C. For an unknown reason mathematical operator were stripped once my post sent.

Metryll July 22, 2011 at 9:59 am

To be correct your assertion need me to be an AI. I’m not, hence your assertion is false, childish attempt to bad mouth another poster or not.

“Instead of making an obnoxious fool out of yourself, why don’t you take my advice and read Chapter 1 of MES, so at least you have some clue about what you are responding to”

In this case you’ll have no problem providing here the equation that modelize an emotion.

Nothing in MES Chapter 1 ? Too bad. Try again with economic work of your choice, again and again if needed.

Once you’ll have realized that no such equation and even mathematical model exist you’ll finally enter in real world. By this time may be two cells will make contact in your brain and you’ll be able to understand what I’m talking about.

“Trust me, idiot, The Turing Test is way below my grade.”

Yet you still fail badly to understand the constraint it create in AI field and modelization of knowledge use. If such modelization does not exist for AI it does not for ANY field of human science as well. Capice ?

And this is this constraint that lead to the impossibilty to compare economic model (or any model involving human like war) based only on maths. (May be you’ll begin to understand why military use ‘Art of War’ and not ‘Science of War’).

Let’s assume a phenomenon to be explained by 3 components P1, P2, P3 and 3 theories :

A explain P1, but not P2 and P3
B explain P1, P2 but not P3
C explain all.

All take a set of Data D to yeld a Result R with a level of incertitude I.

If C does not exist only A and B can be used. But nothing can be said about accuracy of B over A. Why ? Because to yeld R, both A and B will have to rely on heuristics so that IF nominal HA and HB exist :

(A + HA) (B + HB) C

The problem is the ‘IF’. Nothing guarantee that any selected HA or HB are nominals (By nominal I mean ability for A and B to yeld R based on D within I). Hence it’s perfectly possibe for A + HA accuary to be higher than B + BH one. (Read A + HA incertitude is lower than B + HB incertitude).

In other word it’s not the amount of mathematics which is important, but the non mathematical part.

This problem of heuristic quality is well known to everyone having dealt with A* or genetic algorithms. Seem that you and your grade never had…

Metryll July 22, 2011 at 10:10 am

Read (A + HB) is equivalent to (B + HB) is equivalent to C.

For an unknown reason logical operator were stripped when my post was sent.

vikingvista July 22, 2011 at 1:09 pm

What the hell are you ranting about, you incoherent moron? This is about praxeology. I’m a former engineer and computer programmer with extensive experience in numerical methods and nonlinear systems. I researched AI and learning algorithms extensively in grad school as I developed adaptive software (using highly templated c++ objects with multiple inheritance) for structured neural networks used to model statistical correlations between biological variables. And somehow, I cannot find a way to apply that to praxeology.

Get over yourself, junior, you’re just not that special. And nothing you have to say is even close to relevant, let alone grammatically correct.

Metryll July 22, 2011 at 2:08 pm

“What the hell are you ranting about, you incoherent moron?”

No rant, only covering a subject you dont grasp, obviously.

If you cant provide a full fledged model of human behavior, then you have nothing and calling me a moron only show your patent lack of argument.

“And somehow, I cannot find a way to apply that to praxeology.”

Because it has nothing to do with praxeology. Your argument that incomplete models can be compared only trough comparison of their mathematcal contents is simply false. Reread your grade school notes, you missed important points.

“I researched AI and learning algorithms extensively in grad school as I developed adaptive software (using highly templated c++ objects with multiple inheritance) for structured neural networks used to model statistical correlations between biological variables.”

Well I guess that despite my 30 years of developement including 15 in C++ I have to be impressed. I’m not. Probably because I dont make grade project but real life professional AI programming.

“Get over yourself, junior, you’re just not that special. And nothing you have to say is even close to relevant, let alone grammatically correct.”

About grammar, English is not my native language. Mais si vous le souhaitez nous pouvons continuer en Français.

vikingvista July 22, 2011 at 4:33 pm

Where do all you Internet fidiots come from? Is there a land called “Personalitydisordervania” that I’m unaware of? Or is it just California?

Metryll July 22, 2011 at 5:47 pm

In others words you have no arguments at all.

Now if you like to show yourself as an egocentric idiot, version 15 years old teenager, it’s your problem, not mine.

Slappy McFee July 21, 2011 at 1:42 pm

After following links upon links starting at the Cafe (thank God for breadcrumbs) I ended up over at the Money Illusion and Scott Sumner summed up my thoughts on the debt ceiling debate better than I could:

“PS. I’ve avoided talking about the debt ceiling thus far, partly because I don’t know much about it, partly because these things always seem to get resolved at the last minute, but mostly because the whole idea of a debt ceiling seems incredibly stupid. This morning when I woke up up the first thing I heard was that the Gang of Six had agreed to massive spending cuts, abolition of the hated AMT, and reduction of the top rate to between 23-29%. Oh, and a slash in the corporate top rate too. I thought I was dreaming. Surely this is too good to be true! And then I heard that Obama endorsed the plan. Now I knew I was dreaming. Then I heard that it wouldn’t pass because of GOP opposition in the House. Ouch, I was brutally shaken out of my reverie. If only life could be like our dreams. Unfortunately, there’s always the House GOP to keep it real.”

ArrowSmith July 21, 2011 at 3:37 pm

So what if raising marginal rates reduces sales of private jets and yachts? It’s time the rich had their own austerity. This isn’t about creating jobs for the middle class – this is about punishing the rich. Make them feel some pain.

vikingvista July 21, 2011 at 4:33 pm

Hey, if my circumstances are painful, it is only fair that everyone else’s be made painful too.

Come to think of it, that reasoning passes well across party lines, including current social security beneficiaries, government bond holders, and those who rail against tax dodgers (of the non-hypocritical variety, of course).

The Other Tim July 21, 2011 at 4:42 pm

If I’m to take that at face value, it’s good to know people are beginning to be open about their real motives. Screw the rich for the sake of screwing the rich. If it destroys jobs for the middle class, who cares, really?

As an aside, am I the only one who can’t keep a straight face when I hear Democratic politicians talk about “the middle class” and “the super rich?” Seriously, could you try using even a little subtlety when you try to convert us to your class-warfare paradigm?

Dan J July 21, 2011 at 6:14 pm

Forced austerity by those Not inclined to be productive themselves or who sit with their political connections is not land of the free.
Interesting to step on the heads of the productive. Just what we need……. The lazy, unproductive masses leading the charge.

Kirby July 21, 2011 at 7:23 pm

I hate to break it to you, but Marx got there first.

Mesa Econoguy July 21, 2011 at 9:12 pm

Bingo. And Veblen.

DG Lesvic July 21, 2011 at 11:39 pm

Viking,

You wrote,

If you promise to perform for us again, by all means substitute “price” for “prices”. Your interpretation is no less amusing. But wait ’till I get my camera…

…okay, ready

For what? I don’t know what you’re talking about.

Prices are data, and as you just said above.

“it is a mistake to deduce economics from data”

So it is a mistake to deduce it from prices, as I have said.

Your quarrel with that is with yourself.

You just got caught outsmarting yourself.

Stop trying to be so cute, and just be a man and admit it.

DG Lesvic July 22, 2011 at 1:22 am

Viking,

I thought I was supposed to be the dishonest one.

Could it be that you people are really just a bunch of self-righteous hypocrites?

Oh, not, that couldn’t be.

juan carlos vera July 22, 2011 at 10:10 pm

“Paradox of toil” … a Keynesian paradox …
In fact the whole theory of general equilibrium is a device used by socialist. In the introduction to Human Action it’s stated: “…These economic theorists under the influence of the general equilibrium approach advocated the mathematical solution to the problem of socialist calculation…”. Then Mises argued: “They failed to see the very first challenge: How can economic action that always consists of preferring and setting aside, that is, of making unequal valuations, be transformed into equal valuations, and the use of equations?
General equilibrium theory has been buried by the theory of Monetary calculation of Mises. What the general equilibrium theory says or does not say, I do not care…

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