Your body and Keynesianism

by Russ Roberts on November 21, 2011

in Health, Podcast

This week’s EconTalk is Gary Taubes talking about how much was decreed by “experts” about our bodies based on very little evidence. His discussion of the complex system known as the human body reminded me of macroeconomics–a complex system where correlation is often mistaken for causation, where omitted variables play a crucial role, where aggregates (such as total cholesterol) often mask more than they illuminate, and where policy recommendations often fail to achieve their purported goals without having anyone challenge the received dogma. The creepiest part is that the early champion of the view that fat is bad for your heart was a man named Keys. Keys relentlessly pushed the idea that eating fat was bad for you despite a remarkable lack of evidence. For this Hayekian, Keys reads a little too much like Keynes, which probably tells you as much about me, alas, as it does about Keys and Keynes. But the parallels between your body and the macroeconomy and the alleged “scientific” understanding of both are very interesting.

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{ 106 comments }

Krishnan November 21, 2011 at 9:14 am

Fascinating talk. The problem of ignoring evidence that does not support a theory already formed is such a problem – at so many points, I was reminded of the “Global Warming” issue about how “we MUST do this today or else” – and worse, even as evidence mounts that the Global Warming issue is a NON ISSUE, the forces seem to be even more determined to prove that we MUST spend trillions to do this/that to allay warming/etc

A key lesson (for me) is that we MUST be able to step back and take into account what may not make sense according to structures we may have built/accumulated – that we must step outside of our comfort zones, understanding and stare at what we may not be able to accept as rejecting what we may have believed

David Fish November 21, 2011 at 11:02 am

I had the opportunity to have dinner with Gary Taubes earlier this year and I brought up the parallels that I saw between nutrition science and climate change science. I tried to convince him that he should turn his focus to that field when he was done eviscerating nutrition science. Unfortunately he didn’t see any downside to limiting CO2 emissions. I’m not sure he heard me mention the economic ones.

jjoxman November 21, 2011 at 11:47 am

Does that mean he understands the blind spots in the field he has studied, but doesn’t think those blind spots are don’t exist? Or has he failed to transfer that knowledge from one field to another?

Basically it sounds like he’s doing exactly what he calls out Keys and others for doing.

Daniel Kuehn November 21, 2011 at 1:00 pm

re: “Or has he failed to transfer that knowledge from one field to another?”

Or he thinks the analogous blindspots are on the side of the climate change deniers.

re: “Basically it sounds like he’s doing exactly what he calls out Keys and others for doing.”

Or you and David Fish are doing exactly what Keys did. These things can get circular very quickly. Everyone thinks everyone they disagree with has oversimplified the problem and advocated bad solutions as a result. If we didn’t think that, we wouldn’t be in a state of mutual disagreement! To me Keys sounds more like Russ than he sounds like Keynes.

GAAPrulesIFRSdrools November 23, 2011 at 4:39 pm

climate change deniers.

The word is skeptic. Everybody knows the climate changes.

Where I am at, a couple hundred million years ago was a tropical swamp, and 10-20 thousand, a glacial area. I continue to deny than humanity had anything to do with those changes.

David Fish November 21, 2011 at 2:41 pm

I’m pretty sure he understands the blind spots. He came to research the field of nutrition after researching and reporting on Physics (reporting on the cold fusion fiasco was his first claim to fame). It is certainly a topic I wish he would delve into but as he said, his schtick is nutrition science and there’s a lifetime of work covering that field alone.

tdp November 22, 2011 at 1:25 am

All we know about climate change is what HAS happened, which is that the Earth had gotten slightly warmer, there has been some rise in sea levels and lots of melting ice, but the predictions of increased temperature, increased natural disasters, climate refugees we were supposed to have by this time, as predicted in 2000 and 2005, have been dead wrong. Global warming will have some effects, even some negative ones, but anyone who claims to know the weather in 2100 is full of shit since weathermen frequently get the weather wrong for the next day (snowstorm trajectories in the DC area anyone?). Either way, hamstringing the world’s economies with draconian carbon regulations will damage the wealth of first world countries, limiting their ability to deal with the effects of climate change, whether through behavioral adaptations or new technology, and their ability to help the Third World, whose development will be halted and will thus remain mired in poverty.

Krishnan November 21, 2011 at 12:55 pm

Re: David Fish – Interesting. I am curious as to why he may hold the view that there are no downsides to limiting CO2 emissions – or worse, perhaps he IS a global warming apologist like many rational thinking scientists are who refuse to accept any data, paper that does not agree with their preconceived ideas, theories. Taubes did tangentially address the issue with meat/etc – and how today, the environmentalists are talking about limiting meat consumption to “help the planet” – he did not express an opinion on that issue though …

David Fish November 21, 2011 at 2:46 pm

I’m not really sure and I hope some interviewer might ask him more questions on this topic but since he devotes a vast amount of time and energy to researching the field of nutrition it is understandable that he might not be following the climate change debate that closely. My take on him after reading his two books, numerous articles and having met him and talking with him for a couple of hours (along with a group of about six other people) is that he has a healthy dose of skepticism that most likely extends beyond the field he focuses on.

muirgeo November 21, 2011 at 4:43 pm

Climate change deniers do so specifically because of the impications it has for their free market perspective just like creationist deny evolution to keep their creationist perspective.

CO2 is a greenhouse gas. There’s no debate. It photospectral properties are not in dispute. Just curious if you are creationist as well and if not what evidence you chose to support your Darwinist position.

David Fish November 21, 2011 at 6:54 pm

And surely global warming alarmists are paragons of virtue who have no financial incentive for pushing their argument. http://wattsupwiththat.com/2011/11/18/dr-james-hansens-growing-financial-scandal-now-over-a-million-dollars-of-outside-income/

But that, and your original paragraph are not germane to this thread. My point was that there is bad science being conducted in numerous fields and the antics that Taubes points out in his books are very similar to what you hear about in the field of climate change (e.g. Climategate).

The discussion isn’t whether CO2 is a greenhouse gas or not, it is a question of is that the only factor causing climate change and are the computer model projections accurate. Also, is the cure worse than the illness? The science with regard to these questions is definitely not settled.

tdp November 22, 2011 at 1:27 am

The greenhouse gas effect is also logarithmic (According to an MIT climate scientist), meaning increasing amounts of greenhouse gases (of which CO2 is a WEAK one) are needed to maintain a constant temperature increase. Emissions in the US declined from 2009 to 2010, and new technology is being developed that makes an exponential increase in carbon emissions unlikely, even as the third world industrializes.

Nikolai Luzhin, Eastern Promises November 22, 2011 at 4:04 am

muirgeo

of all people, you should realize that there should never have been a straight line between climate change and cap and trade as promoted especially by Goldman Sachs.

The lack of common sense about solutions has been beyond appalling. What is especially difficult is to get one’s arms around the science of using technology to control emissions.

This is where democracy really breaks down. Vendors of solutions will hire lobbyists to get congress to buy their solution (a bill to make pizza a vegtable). We now have no ability to judge what we should do, if anything, when, or how, because the environment in which the gov’t is operating is so full of friction.

This an area where, my 2 cents, Obama really jumped the dog. We have an wide open internet. Why can’t one go the White House website and get hour after hour of fact finding hearing before the Dept of Energy, for example on the problems and solutions. God bless Brian Lamb, but mostly when I think of Obama I say to myself, “What we have hear is a failure to communicate.”

GAAPrulesIFRSdrools November 23, 2011 at 4:41 pm

You two can’t seem to do much but spew gas all over the Cafe.

Interesting to see the two personalities have taken to mild criticism in order to convince everybody else you really aren’t just two different personalities.

Daniel Kuehn November 21, 2011 at 9:14 am

I would imagine these parallels could be drawn with anyone that anybody thinks takes an oversimplified view of things and makes arguments about policy accordingly.

Amidst all the acrimony from people like muirgeo, you do realize that his primary beef with you is that you oversimplify the problem and then appear before Congress to provide bad solutions to the problem based on your oversimplified explanation, right?

Krishnan November 21, 2011 at 9:24 am

It should be about intellectual honesty – if I claim that because I see a correlation between A and B and conclude that A causes B and enables the creation of more A and B DOES NOT follow, then I MUST state that I was wrong. An example is about the 2009 stimulus – and how the claims were about 8% unemployment – etc and how it zoomed to above 10 % (?) – and the explanation was “it was worse than we thought” – Perhaps, PERHAPS. But what is the evidence that it was WORSE? And yes, as Roberts points out, this is far harder to do in economics than say diet ….

And yea, who knows, the insulin hypotheses may itself be wrong …

Krishnan November 21, 2011 at 9:28 am

Oh and that spending MORE would have helped also?

Daniel Kuehn November 21, 2011 at 9:34 am

Right but that’s a misrepresentation of the argument.

I’m sure some politicians or some journalists probably phrased it this way, but that’s something you and I can agree on in criticizing them over.

Fiscal stimulus has been zilch for a while now, but the economy isn’t improving and things have gotten much worse in Europe. What do pro-austerity people say to this? “Well we haven’t had enough austerity!”. Sound familiar?

My point is simply that we ought to recognize that this is exactly the criticism that gets leveled against you guys.

The problem, I think, is a fundamental difference in assumptions and ways of talking about the way the world works. It’s not that I’m oversimplified and Russ is nuanced, and it’s tiring to continue to hear that.

I do agree with Russ, though, that the task is hard.

rbd November 21, 2011 at 9:40 am

How can you say fiscal stimulus is zilch? For fiscal year 2011, the US gov’t spent nearly $3.6 trillion dollars, and ran another trillion dollar deficit – the third trillion dollar deficit in a row.

Not sure how you call that zilch.

Daniel Kuehn November 21, 2011 at 9:44 am

What’s the rate of change relative to the output gap, rbd? Let’s not move the goal posts here.

We’re in the Hoover situation. Nobody likes what he did. And that’s the whole point. To Russ I sound like I’m saying “we just didn’t do enough”. To me, Russ sounds like he’s saying “we just didn’t do enough”. That’s the whole problem we’re faced with.

Silas Barta November 21, 2011 at 11:58 am

@Daniel_Kuehn: So you get to define a nebulous, subjective “output gap” that allows you to decree any amount of deficit spending “not stimulus” whenever the results don’t agree with your theory?

Nice.

Daniel Kuehn November 21, 2011 at 1:01 pm

No Silas – you’re misunderstanding something because that’s not my view at all.

Silas Barta November 21, 2011 at 3:06 pm

@Daniel_Kuehn: You *just* tried to defend the claim that several years of huge deficits is not “stimulus” on the basis that it’s not large enough relative to the (highly-subjective) output gap. What exactly did I misunderstand, and where do you get off claiming you were misrepresented, liar?

Seth November 21, 2011 at 10:20 am

“It’s not that I’m oversimplified and Russ is nuanced, and it’s tiring to continue to hear that.”

Where did you hear that?

Nikolai Luzhin, Eastern Promises November 22, 2011 at 4:13 am

Krishnan,

We know three facts that moot your argument

1) at the time, the amount of stimulus was based on political considerations and was substantially (50% +/-) lower than those who were advocates for such thought their models justified.

2) we how that the forecast data in Dec 2008 and thereafter was wildly optimistic. As even Richard Posner has conceded, the reason the targets were meet showed how bad we are at forecasting.

In addition, we have all of Friedman’s arguments, of which the most important is that low interest rates is very substantial evidence of tight money, and tight money would be very substantial evidence that the stimulus was not large enough.

Sam Grove November 21, 2011 at 12:59 pm

Amidst all the acrimony from people like muirgeo, you do realize that his primary beef with you is that you oversimplify the problem and then appear before Congress to provide bad solutions to the problem based on your oversimplified explanation, right?

Really?

How about this for a simplified view of the problem: greed, deregulation.

steve November 21, 2011 at 9:36 am

First, you need to separate out what was in the scientific literature vs what was in the popular press. The popular press often distorts the science or picks out parts that it understands and ignores the rest. Beyond the press, a lot of people made money by promoting low fat diets. Those people were not really that interested in the science.

More broadly, in medicine you are always limited by the current level of science. While we know that many of the things we doing now will likely be proven wrong, we dont really have the option, much of the time, of doing nothing. We have recently changed our massive trauma protocols, having found better ways to treat patients. We didnt really have the choice of not treating trauma until we found these protocols. When we find deficiencies in these, we will again change.

Steve

Daniel Kuehn November 21, 2011 at 9:41 am

re: “First, you need to separate out what was in the scientific literature vs what was in the popular press.”

This is a very important point too. We shouldn’t hold the analysis accountable for what reporters and politicians say and do.

And before people caution that Keynesianism gives politicians license to do bad things – just remember that Alan Greenspan and Ronald Reagan felt they had license from libertarianism and the Austrian school.

If you put crude Keynesian politicians on us, you have to take responsibility for the housing bubble and the military industrial complex.

Krishnan November 21, 2011 at 9:54 am

I’d say that this “us” versus “them” is the problem because it is difficult to argue with data that we can agree on and what caused what.

Russ is not always “us” versus “them” – In a recent podcast (with Steven Kaplan) Russ advanced the argument (as he has) about the moral hazards of bailing out lenders and not letting people with equity take their losses – Kaplan pushed back with examples that showed that, no, there are cases where people have been greedy and lost a lot even though they did not know they would NOT be bailed out …

Daniel Kuehn November 21, 2011 at 9:58 am

Moral hazard arguments are good arguments – but I wish the people who made those arguments would then talk about contagion, externalities, cascades.

If the only thing we had to worry about was moral hazard of course nobody would want any bailouts. That goes without saying. Unfortunately the world is more complex than that – moral hazard is not the only thing we can talk about when we talk about bailouts.

steve November 21, 2011 at 10:21 am

I would agree that moral hazard arguments are good ones, but I think incentives also matter. Just to use an example, arguments were made about the importance of moral hazard in the financial crisis. A bubble that was built over many years was thought to be influenced by knowledge that banks would be bailed out. Yet, how do you weight that future possible influence in comparison with the immediate incentive of earning large sums of money? I am absolutely certain that money is an incentive at all times for many people. A moral hazard event that may or may not occur many years in the future seems like less of an influence.

Steve

Daniel Kuehn November 21, 2011 at 10:27 am

I think that’s right steve. Russ has failed to convince me that moral hazard was a major factor here. Perhaps it played an important role in Lehman’s decisions in 2008, but I doubt it created the crisis. The thing is – even people who do take moral hazard to be more important still don’t consider the complexity of the issues involved when we are considering bailouts. Nobody involved in this discussion needs to be reminded about moral hazard, and if that were the only problem on the table, opposition to bailouts would be unanimous. But it’s not the only issue on the table.

Seth November 21, 2011 at 12:37 pm

“Yet, how do you weight that future possible influence in comparison with the immediate incentive of earning large sums of money?” -steve

By looking at how they considered the risks involved with earning such large sums of money.

Was the potential of earning large sums of money the only thing that made folks willing to take such large risks?

Sam Grove November 21, 2011 at 1:06 pm

Cascades and contagion will play out and conclude and you will still be left with moral hazard seeding the next event.

Scott Scheall November 21, 2011 at 10:14 am

But, surely the “politicians don’t know what they’re doing” argument is a bigger problem for the Keynesian — whose system places a rather high epistemic burden on the policymaker — than for the Hayekian: that’s one of F.A.H.’s main points, i.e., that politicians don’t have the combination of theoretical and factual knowledge required to make discretionary policy of the Keynesian sort effective.

If the evidence supports the claim that politicians are bad at applying economic theory, whatever the theory may be, that especially does not bode well for the theory that, comparatively speaking, places the higher epistemic burden on the policymaker.

Daniel Kuehn November 21, 2011 at 10:23 am

I don’t know – I have a lot to complain about Obama, but I think Obama has done a better (though pretty bad) job implementing Keynesianism than Reagan or Greenspan have done implementing libertarianism. Doesn’t that say something to you?

When Keynesianism fails you open the door to a bad policy response, but better than the counterfactual.

When libertarianism fails you open the door to crony capitalism – rent seekers filling the vacuum left by constitutional democracy.

Both are bound to fail to some extent, it’s not clear to me one has the upper hand.

Besides – there’s not THAT MUCH of an epistemic burden. Back of the envelope calculations are about as burdensome as it gets. Nobody is expecting perfection here.

Seth November 21, 2011 at 11:42 am

“Doesn’t that say something to you?”
Reagan and Greenspan tried to implement libertarianism?

“When libertarianism fails you open the door to crony capitalism – rent seekers filling the vacuum left by constitutional democracy.”

For there to be crony capitalism, there first has to be a gov’t powerful enough to grant rent-seekers their favors. That does not follow from libertarianism. That derives from a populace that expects gov’t to solve all problems.

Scott Scheall November 21, 2011 at 12:32 pm

I would never say that Reagan / Greenspan tried to implement libertarianism. I suspect you and I have different conceptions of the particular policies that word represents, but, oh well. So, you’re never going to get me to assent to this conditional: If libertarianism is tried and fails, then crony capitalism.

Moreover, I suspect you and I have different conceptions of the epistemic burden involved in closing an output gap, much less keeping it closed. It seems to me that in order to close such a gap, policymakers need to be aware of its size at the time their policies will take effect (within some acceptable range of accuracy), the size of the multiplier at that same time (again, within some reasonable degree of accuracy); they need some means of administrative control to ensure that their policies are implemented as designed (assuming they’re properly designed), and finally, they need to know that the public will respond to their stimulus measures as the theory predicts. The first two items MIGHT be calculated “back of the envelope”-style (though I highly doubt anyone would be pleased with the effects of stimulus measures so calculated), but the last two items, which we might consider to be burdensome both epistemically and administratively, seem to me to be virtual unknowns.

The problem, from my perspective, is not necessarily that policymakers can’t handle all of these burdens, but that, unless we KNOW that these burdens have been handled, predictions about what some stimulus measure will and will not do are utterly unfalsifiable (because it can always be claimed, in the event of an apparent failure, that the problem is not with Keynesian theory, but with the particular experimental apparatus in which it is tested; see Duhem and Quine on the underdetermination of theories by evidence).

Now, I would be the first to claim that Hayek and the Austrians are in roughly the same position vis a vis falsifiability, but, then again, unlike the Keynesians, Austrians have never pretended that they were making falsifiable predictions. Hayek thought macroeconomic theories made what he called “pattern predictions,” and that these were (in a very limited sense) falsifiable. I think he was wrong on that last point, but the gist is that Austrians aren’t playing at the prediction game to the same extent that Keynesians claim to be, so, though both theories are unfalsifiable to my mind, Keynesians are in deeper trouble, because they want (and, in fact, if there’s anything to Keynesianism as a political program, need) to make predictions that can be shown to be false by the evidence. Otherwise, demand management becomes only so much blind dart throwing.

Sam Grove November 21, 2011 at 1:07 pm

You evidence a simplistic view of libertarianism.

Sam Grove November 21, 2011 at 1:11 pm

I think you are so steeped in Keynesianism that you have never really investigated, to any depth, the opposing school.

Daniel Kuehn November 21, 2011 at 1:22 pm

Sam and others -
I was pretty clear the first time, but let me make this clear: I don’t think Greenspanism is libertarianism. I don’t go around on these posts blaming Reagan and Greenspan on libertarianism.

But that is the analogous argument to blaming everything politicians do wrong on Keynesianism. It’s a bad argument, but if you want to make the argument you need to make it symmetrically.

You also have to do a better job explaining why I shouldn’t worry about crony capitalism running amok once constitutional democracy gets rolled back by a libertarian polity.

yet another Dave November 21, 2011 at 1:36 pm

I think Obama has done a better (though pretty bad) job implementing Keynesianism than Reagan or Greenspan have done implementing libertarianism.

I agree, but that’s not saying much since Reagan and Greenspan didn’t try to implement libertarianism. You do, perhaps inadvertently, support my point about the most obvious failing of Keynesianism.

Sam Grove November 21, 2011 at 3:10 pm

You also have to do a better job explaining why I shouldn’t worry about crony capitalism running amok once constitutional democracy gets rolled back by a libertarian polity.

I think you need to show that crony capitalism isn’t already running amok.

Freedom isn’t the door to crony capitalism, it’s the end of it.

Sam Grove November 21, 2011 at 3:11 pm

Richard Nixon: “We’re all Keynesians now.”

The formation of the Libertarian party was in response to Nixon.

Russ Roberts November 21, 2011 at 3:21 pm

Later in this thread you write:

“I was pretty clear the first time, but let me make this clear: I don’t think Greenspanism is libertarianism. I don’t go around on these posts blaming Reagan and Greenspan on libertarianism.

But that is the analogous argument to blaming everything politicians do wrong on Keynesianism. It’s a bad argument, but if you want to make the argument you need to make it symmetrically.”

There is a small difference. There are politicians who actually implement Keynesianism. There is no scientific evidence that this has been successful. The model they used to justify spending an extra $800 billion made an explicit prediction about the impact of that policy. It was off by 25%. That means that we are not in the realm of science.

Scott Scheall November 21, 2011 at 3:35 pm

“The model they used to justify spending an extra $800 billion made an explicit prediction about the impact of that policy. It was off by 25%. That means that we are not in the realm of science.”

Russ: not to be overly pedantic, but I think what you mean is:

“The model they used to justify spending an extra $800 billion made an explicit prediction about the impact of that policy. It was off by 25%. BUT, BECAUSE KEYNES REFUSED TO ACKNOWLEDGE THIS AS A CONCLUSIVE FALSIFICATION OF THEIR POSITION, we are not in the realm of science.”

A theory that is acknowledged to be false can be scientific, but an unfalsifiable one (at least, according to Popper, et al), cannot be…and that’s where (I believe) we are with respect to J.M.K. & Co.

Seth November 21, 2011 at 5:52 pm

Call it what you will. Spending $800 billion didn’t work.

GAAPrulesIFRSdrools November 23, 2011 at 4:43 pm

I don’t know – I have a lot to complain about Obama, but I think Obama has done a better (though pretty bad) job implementing Keynesianism than Reagan or Greenspan have done implementing libertarianism. Doesn’t that say something to you?

Snake oil always sells.

Sam Grove November 21, 2011 at 1:04 pm

Alan Greenspan and Ronald Reagan felt they had license from libertarianism and the Austrian school.

People take license from where ever they want.

I don’t see where Greenspan OR Reagan gave any policy evidence of libertarian or Austrian school influence.

Greenspan manipulated interest rates and Reagan grew the budget and the deficit. All policies counter to libertarian Austrian prescription and closer to Keynesian prescription.

yet another Dave November 21, 2011 at 1:33 pm

We shouldn’t hold the analysis accountable for what reporters and politicians say and do.

I wouldn’t suggest holding an inanimate object accountable for anything, but people who espouse Keynesianism obviously should be held accountable for what politicians do. DK, I understand why you hold such a position – naturally, you don’t want to be blamed for the results of your prescriptions since the implementation wasn’t what you think it should have been. But you’re just making excuses – the inescapable truth is Keynesianism calls for political intervention in the economy. That requires giving the power to do so to politicians. So Keynesians absolutely must be blamed for the actions of the politicians they empower. This is the most obvious failing of Keynesianism – it completely fails the reality test.

Daniel Kuehn November 21, 2011 at 1:47 pm

yet another dave -
I only expect people who level this criticism to be serious about it, and so far I haven’t seen it.

I know politicians face problematic incentives, I know that democracy introduces externalities. All this stuff that gets repeated – we’re all aware of it. Knowing that, I and most others have always supported a constitutionally limited federal republic. The record of demand management under constitutionally limited federal republic of course isn’t perfect – although it does get better and that’s very encouraging (this time was nothing like the 1930s, although it easily could have been). I’ve always accepted the failings but have generally concluded the constitutional limitations on a government of a free society, that also does demand management – the post-war United States in other words – is pretty good for the most part.

I’ve always recognized that I have to take into account how you put this stuff into action in the real world.

What I’m waiting for is a little seriousness from the other side on the same question. We have had politicians embrace libertarianism and Austrian economics before – nominally at least. I understand you don’t like how that turned out. But if you’re going to blame politicians on my side, you need to step up and provide a better reason why I should expect any different if we push more libertarianism. Why shouldn’t we expect crony capitalists taking advantage of the power vacuum left by the rolling back of constitutional democracy?

Sam Grove November 21, 2011 at 3:15 pm

We have had politicians embrace libertarianism and Austrian economics before – nominally at least.

Can you cite?
I’m not aware of any libertarian politicians that have held high office.

I was quite annoyed with RR when he began talking a few libertarian points and I certainly didn’t see any actual implementation of libertarian policies from him. Carter and Clinton score better than RR in that regard.

Sam Grove November 21, 2011 at 3:32 pm

What I’m waiting for is a little seriousness from the other side on the same question.

I am serious. I think it is you who have never taken or examined libertarian arguments seriously.

BTW, this is an old and common put down of libertarians, that they aren’t “serious.

Well, libertarians are quite serious about moral principles and that majority rule offers no “serious” justification for ignoring (violating) them.

yet another Dave November 21, 2011 at 4:53 pm

We have had politicians embrace libertarianism and Austrian economics before – nominally at least. I understand you don’t like how that turned out.

I’m not sure what you’re referring to here. At the national level, some politicians have spouted kind-of libertarian rhetoric on very limited points, but I don’t recall any successful implementation of libertarian or Austrian ideas from Washington (at least not in my lifetime). Reagan was certainly not libertarian in any of his actions and his Austrian leanings seem to have been limited to rhetoric.

Why shouldn’t we expect crony capitalists taking advantage of the power vacuum left by the rolling back of constitutional democracy?

What crony capitalists take advantage of is the power of government, not a power vacuum. If the scope of government was limited to enforcing contracts and prosecuting fraud (i.e. not able to pick winners and losers and implement “regulations” that protect established cronyists from competition), competitors would have a much easier time than they do now entering the marketplace. Put another way, competition is the bane of cronyism. Without government favors, where could a would-be cronyist turn for his cronyizing? Who would protect him from would-be competitors?

Sam Grove November 21, 2011 at 11:31 pm

Apparently you aren’t serious unless you accept a huge, interventionist (very expensive) government and it’s militaristic, self centered foreign policies.

Yergit Abrav November 22, 2011 at 2:23 am

@Daniel

“constitutionally limited federal republic”

To what limits are your referring? Would those be the enumerated powers in the US constitution? I don’t think so. If I’m not mistaken you had repudiated those in a separate thread here at Cafe Hayek.

If you really do believe we should be limited by the constitution that would mean you accept those constraints on what keynesian policies can be implemented.

I seriously doubt this your comment above which seemingly respects constitutional limits is a fair representation of your true position on the matter.

Skinny Dave November 21, 2011 at 9:57 am

So the fact that I will always feel guilty eating fat is a Keysian Cross I will have to bear?

rbd November 21, 2011 at 9:59 am

Well, you’re skinny, so I wouldn’t worry too much. ;)

Bob Apjok November 21, 2011 at 10:07 am

Of course, it’s also another example of why the government should just stay out of all this stuff. The government decides they want people healthier so they enact laws or taxes to make you buy certain types of food like following the food pyramid, but not only is freedom restricted, but it’s restricted based on poor science. I know that eating fat is much healthier than eating carbs, but if the government enacts legislation that makes me buy the carbs because the fats are deemed bad, then not only am I poorer as a result of supply and demand being artifically shifted, I have less freedom and I am less healthy to boot.

Gil November 21, 2011 at 10:28 am

How on earth do you figure eating fat is more healthful than eating carbs? Fats have over twice the energy density for the same mass thus it will make you fatter sooner if you were to eat fat as you used to eat carbs. Basing it on what the proverbial caveman would have eaten is bunk considering he was always active and needed many calories just to live which is a far cry from the modern day teletubby.

David Fish November 21, 2011 at 10:50 am

But fat is more satiating so you don’t get hungry again as soon as if you ate carbs. Fat doesn’t raise your insulin level like carbs do and insulin is what drives energy into your fat cells. Certainly we aren’t as active as our caveman ancestors but we needn’t be couch potatoes. Fat consumers are more active while carb consumers tend to be more lethargic. In other words we aren’t fat because we are lazy. We are lazy because we are fat. Your statement is an example of the point being made that people often get cause and effect wrong.

Bob Apjok November 21, 2011 at 1:13 pm

The science is there and David Fish has explained it to an extent. I have lived it, I know. I was over 400lbs and now am under 300. Of course, I am not saying “all carbs” are bad or anything like that. But I am much healthier turning the food pyramid upside down and eating much more meat and much less carbs, opposite to what the government has said is correct. But again the point is that other people believe differently so having the government tell eveyone how to eat is ridiculous because there is not a consensus.

David Fish November 21, 2011 at 2:50 pm

That’s great Bob! There are certainly a lot of success stories related to low carb dieting. I went from 220 lbs to 180 lbs following a low carb/paleo diet and it was the most effortless weight loss I’ve ever had. When I fall off the bandwagon (usually while on vacation, during holidays, and when traveling) it is pretty easy to get back on track by limiting carb intake. I’ve also added intermittent fasting which really has lots of health benefits besides weight loss. High carb eaters would struggle with fasting but I can go 16-18 hours with no hunger as my body uses fat for fuel.

Gil November 22, 2011 at 12:18 am

Some guy showed you could lose weight with Twinkies – it’s energy in versus energy out. It’s not about protein, carbs and fats per se.

David Fish November 22, 2011 at 12:31 pm

You might want to read this about the Twinkie Diet professor. It wasn’t really a junk food diet and no it isn’t about energy in vs. energy out and Taubes explains why in his books.

http://www.fathead-movie.com/index.php/2010/11/16/the-twinkie-diet/

nailheadtom November 21, 2011 at 1:39 pm

My caveman grandfather basically didn’t do anymore than he had to do to get by and loved fatty meat. I, on the other hand. ride a bike everywhere and don’t watch television.

Jeff Y. November 21, 2011 at 10:12 am

Taubes’ book “Good Calories, Bad Calories” is really great history of nutrition science. The role of George McGovern in the government take-over of nutrition science is profoundly disturbing. (I originally used the word “insane”.) It has parallels in the climate science debate.

How can this happen in “objective”, positivistic science? Read W.V.O. Quine’s “Web of Belief”.

Seth November 21, 2011 at 10:24 am
Randy November 21, 2011 at 10:32 am

The common factor is the desire to clarify. The human brain just doesn’t deal well with complexity. Complexity equates to potential threat. So it finds an answer that satisfies and then rests.

Becky Hargrove November 21, 2011 at 10:46 am

I now realize just how lucky I was to witness the complexity of genes firsthand: my skinny and long-lived grandmother ate the fattiest and tastiest part of the chicken. Same here.

David Fish November 21, 2011 at 10:57 am

Yes but you can affect gene expression through your diet and exercise. By eating the fattiest parts of the chicken she probably wasn’t as tempted to eat the carb-laden foods that would have made her plump and shorten her life. We can’t control being born with good or bad genes but we can influence how those genes are switched on or off through our lifestyle.

Jeff Y. November 21, 2011 at 11:07 am

Good point. Few people are aware that there are non-heritable pathways for gene expression.

Greg G November 21, 2011 at 11:57 am

Excellent podcast Russ. And your point about how medical epidemiology shares many of the same difficulties as macroeconomics is well taken.

Even so, I hope that doctors never give up on epidemiology the way you guys have given up on macroeconomics.

vikingvista November 21, 2011 at 1:12 pm

“Even so, I hope that doctors never give up on epidemiology the way you guys have given up on macroeconomics.”

The standard for epidemiology is a randomized double-blinded placebo-controlled prospective study with sufficient power to detect a significant difference. And skepticism of the results are still widespread and respected.

The standard for macroeconomics is a nonrandomized non-blinded retrospective historical survey with selective post-hoc controls and essentially no power at all. And skepticism is treated as anti-science.

By medical epidemiology standards, macroeconomics doesn’t rise to the level of a joke, and provides no reliable evidence. And it certainly isn’t science.

Daniel Kuehn November 21, 2011 at 1:13 pm

No, skepticism is not treated as anti-science. You need to get your facts straight before you make accusations like that.

vikingvista November 21, 2011 at 1:31 pm

“skepticism is not treated as anti-science.”

Of course it is. When you dare criticize the “data” or the preferred inferences, you are anti-science. I’m sorry if it strikes home for you, but empirical macro is a mess of scientism, and waste of time for any but political purposes.

Fred November 21, 2011 at 1:38 pm

No, skepticism is not treated as anti-science.

Showing skepticism of experts is indeed treated as anti-science. Unless you are an expert with the same credentials, then you have no authority on which to base your skepticism.

Therefor you are anti-science. It is the only explanation.

Oh, and italics are fun!

Daniel Kuehn November 21, 2011 at 1:51 pm

I think what you’ll find is that people without credentials often, out of ignorance, make low quality arguments. And those low quality arguments are rightly criticized. But don’t confuse that with an aversion to skepticism. It’s an aversion to low quality arguments.

vikingvista November 21, 2011 at 1:54 pm

“It’s an aversion to low quality arguments.”

If only they had an aversion to low quality data. But then the whole field would all but disappear, so…

Fred November 21, 2011 at 1:58 pm

“It’s an aversion to low quality arguments.”

Except that I see criticism more often laid on the person making the argument than on the argument itself.

No need to even consider the argument if you can discredit the person who is making it.

Methinks1776 November 21, 2011 at 8:52 pm

Daniel, fine. But, low quality arguments made by the credentialed are even worse.

Jeff Y. November 21, 2011 at 2:04 pm

Exactly. Vikingvista is right.

Greg G November 21, 2011 at 2:22 pm

vikingvista

You make a good point that we can get better controls in medicine than macroeconomics. I think a better analogy is to the study of weather. We can make relatively short term weather forecasts that are reasonably accurate but predictability drops off quickly with a longer time horizon. This is typical of emergent systems. That doesn’t mean we should stop studying weather or macroeconomics but it does mean we need to be careful about what we claim for them.

I realize that you will never agree to the value of any Keynesian macro analysis but what about Milton Friedman’s work on how the reduction in the money supply was a key driver of the Great Depression? Do you not see that as a valuable bit of macroeconomics?

vikingvista November 21, 2011 at 2:51 pm

“That doesn’t mean we should stop studying weather or macroeconomics but it does mean we need to be careful about what we claim for them.”

I never said macroeconomics, per se, should not be studied. But drawing inferences from hopelessly confounded and biased data, is not studying macroeconomics. And yet, that is exactly what contemporary empirical macroeconomists both advocate and do. Just because you cannot get useful data does not mean you should treat useless data as useful.

To be useful, macroeconomic data can only supplement an extensive theoretical formulation. There is no other way to get any useful information from it. Complex theories leave open accusations of ideology and logical error (and a large dollop of reality denial), but there simply is no other way. And since all correct economic theory is only derivable from the actions of individuals–i.e. microeconomics–macroeconomics cannot stand alone.

Greg Webb November 21, 2011 at 3:20 pm

Well said.

Methinks1776 November 21, 2011 at 8:50 pm

I agree with Greg Webb. Well done, as usual.

This simple truth is so often overlooked. It bears repeating:

Just because you cannot get useful data does not mean you should treat useless data as useful.

Greg G November 22, 2011 at 7:00 am

Still interested to know if you guys think that Milton Friedman did a valuable piece of aggregate macro analysis with his work on how the shrinking of the money supply fueled the economic decline during the Great Depression?

vikingvista November 22, 2011 at 1:08 pm

“Still interested to know if you guys think that Milton Friedman did a valuable piece of aggregate macro”

A tour de force of selective history and data correlations? Perhaps, but I’m in no position to judge. An empirical verification of the exchange equation? I suppose. A reasonable discussion of monetary theory? Sure. A rational drawing of statistical inferences and demonstration of causality? Not at all. A solidification of bipartisan support for central planning of money and banking? Absolutely. A reinforcement of the acceptability of scientistic economics? You bet.

Here’s a germane quote from AMHofUS (from summary section, location 16085, Kindle version):

“[Monetary authorities] actions are taken amidst many other circumstances, and it may not be at all clear whether their actions or some of the other circumstances produced the results observed. This is equally true of the experiments of physical scientists

…Like the crucial experiments of the physical scientists, the results [of 'experiments' in the monetary record] are so consistent and sharp as to leave little doubt about their interpretation.” (bold mine)

A scientist, MF was not.

Sam Grove November 21, 2011 at 1:13 pm

I wonder that medical science has given such short shrift to nutritional science.

nailheadtom November 21, 2011 at 1:45 pm

From “The Dregs of Life”, Royal Charles, Antonia Fraser

” The responsibility for making the first decision about treatment fell upon Bruce, the senior gentleman present. By this time one of the doctors, Sir Edmund King, had arrived in the bed-chamber and had witnessed the incident. Bleeding was the obvious remedy of the time. And bleed the King this doctor now proceeded to do in style, while a panic-stricken message was sent off to the Duke of York and the rest of the Privy Council were summoned as hastily as possible. By the time a Privy Council of sorts had gathered together in the outer room at midday, Charles had had sixteen ounces of blood removed via a vein in his arm, a task for which the doctor was afterwards paid L1,000.

Soon other doctors came flocking in as the news of the King’s collapse reached them. A series of remedies were frantically applied. The King’s head was shorn. Cantharides (Spanish fly or blister beetle) was used as a blistering agent. A further eight ounces of blood was removed. And as a result of these steps-or despite them-the King did actually recover. Two hours later his speech had come back.

__________________

In the general relief, the doctors at least did not let up on the application of their remedies. It was actually in the presence of his physicians – twelve of them by this time – that next morning, Tuesday, 3 February, the King was seized with another ‘fit’ or convulsion. Immediately and with renewed frenzy the remedies were stepped up and new ones were imported.

Lord Macaulay described Charles II on his death-bed as being tortured like an Indian at the stake. The comparison is apt, except that one doubts whether any tormentor of Indians ever had quite such a battery of instruments at his command as the seventeenth-century royal doctors. It has been estimated that a total of fifty-eight drugs were administered over five days, many of whose names are as exotic to us as their effects were painful to the King.

There was hellebore root (a sneezing powder to clear his nose) and plasters of combined spurge and Burgundy pitch (these were applied to his feet), as well as plasters of cantharides on his head. The ingredients of the enemas which were applied frequently were rock salt and syrup of buckthorn. As an emetic, an orange injfusion of metals, made in white wine, was employed. White vitriol was dissolved in paeony water; other remedies varied from the homely, such as the distillation of cowslip flowers to the more striking spirit of sal ammoniac. An anti-spasmodic julep of black cherry water, oriental bezoar stone from the stomach of an East goat and spirits of human skull were amongst other cures named.

The poor King’s body was purged and bled and cauterized and clystered and blistered. Red hot irons were put to his shaven skull and his naked feet. His urine became scalding through the lavish use of cantharides. Cupping-glasses and all the many weird resources of medicine at the time were applied. They all had one thing in common: they were extremely painful to the patient.

These prodigious efforts were much admired at the time. Colonel Thomas Fairfax, an Irish officer visiting London, hastened to write to Dublin of the employment of ‘all the means that the art of man thought proper for the King’s distemper’. The doctor’s report afterwards spoke of ‘every kind of treatment attempted by Physicians of the greatest loyalty and skill’. The doctors did not exaggerate the universality of their treatments; their loyalty was doubtless incomparable; but they did somewhat gloss over their own incompetence. The King’s mouth and tongue became ‘much inflamed’ with scalding medicines and where his teeth had been forced apart during convulsions. Not all the doctors were as skilled at blooding as Edmund King. James Pearse, Charles’ Surgeon in Ordinary, and Surgeon General to the Navy and Land forces, could not find the jugular vein successfully, a desperate experience for the patient. Another doctor, Thomas Hobbs, who lived in nearby Fleet Street and Surgeon to the Household and the King’s troops of the Horse Guards, had to finish the job: for this efficiency he was later rewarded by inclusion in Dryden’s poem on the King’s death, ‘Threnodia Augustalis’.

The need to keep up the patient’s strength through all this was however fully recognized: from time to time the King was given draughts of emulsion, light broth and liquid posset. At the same time the purges and emetics continued remorselessly to drain his resistance from him. Once again the comparison with torture arises, as when the tormentors are determined that their victim shall not finally elude them through death, and therefore fortify him.”

______________

As terrifying and disgusting as this account is, as soon as one’s revulsion abates one may be able to distinguish parallels between the medical expertise of the seventeenth century and the economists of the present. Just as blood letting was the automatic treatment for almost any ailment then, contemporary economists prescribe government spending for almost all economic ills. If human freedom survives in some stunted form into the future, our descendants may well be as appalled by the attempts to alleviate economic failures as we are by the measures used to treat hapless King Charles II.

Chris O'Leary November 21, 2011 at 3:45 pm

Semi-random thought based on listening to 6 hours of econtalk this weekend while at a swim meet…

Liberals love to criticize trickle-down economics, but isn’t that what the Keynesian multiplier represents?

MikeF November 21, 2011 at 5:40 pm

There’s no such thing as a “Keynesian” multiplier, really. Austrians believe in a multiplier as well: they just think it is lower; even below 1.0 depending on whom you ask. Trickle-down economics basically just holds that the multiplier for a dollar in tax cuts (or spending) increases with the wealth/income of the recipient, which I hope we can all agree is bizarre regardless of our baselines for the various multipliers.

Chris O'Leary November 21, 2011 at 9:59 pm

If it’s less than 1, then it’s not a multiplier. It’s just a measure of overhead.

Jon Murphy November 21, 2011 at 10:01 pm

You can have a multiplier of less than 1. It means that for every dollar spent, it creates $1.50 in the economy.

Jon Murphy November 21, 2011 at 10:02 pm

If the multiplier was 0.5, for example.

muirgeo November 21, 2011 at 5:30 pm

The stimulus… watered down as it was..still worked. And now that austerity is in vogue we see it NOT working and making things worse.

When the issue is complex and the data doesn’t support your position the approach is to claim the data is unclear or too complicated.

From the WaPo;
Here are the nine studies, organized by the conclusion and method used. Click on each one to see my summary of the study, how it reached its conclusions, and potential problems with its approach.

It worked (econometric):

Feyrer and Sacerdote.

Chodorow-Reich, Feiveson, Liscow, and Woolston.

Wilson.

It worked (modeling):

Congressional Budget Office.

Council of Economic Advisors.

Zandi and Blinder.

It worked a little bit (modeling):

Oh and Reis.

It didn’t work (econometric):

Conley and Dupor.

Taylor.

http://www.washingtonpost.com/blogs/ezra-klein/post/did-the-stimulus-work-a-review-of-the-nine-best-studies-on-the-subject/2011/08/16/gIQAThbibJ_blog.html

muirgeo November 21, 2011 at 5:40 pm

I’d love to see the Hayekians put forward something as well that supports why they are Hayekians… They simply like to tell you this is NOT a Hayekian economy but all the good things about it are a result of free markets. All of our advances in quality of life and technology ect.. are some how the results of free markets in spite of government dragging down market forces. It’s bunks because the economies success and efficiency clearly seems to be policy driven with in the bounds of a mixed economy that it is. The two biggest economic collapses clearly occurring after drifting too far toward the free market direction. Likewise the longest most prosperous period of civilization when we pushed towards a more mixed economy with nearly 50 years of no major crashes is a clear result of the success of one policy milieu over another. These are facts of historical reality and market fundamentalist only can deny it the same way climate cynics deny climate change and the same way creationist deny the evidence for evolution… call out those revealing the facts …BLASPHEMERS!

SmoledMan November 21, 2011 at 7:22 pm

The problem with liberals is there’s so much they don’t know.

Jon Murphy November 21, 2011 at 7:25 pm

The problem with humanity is there’s so much we don’t know. That’s the fatal conceit.

Jon Murphy November 21, 2011 at 7:59 pm

The whole thrust of Hayekian economics is that we just don’t know. This is Hayek’s greatest contribution to Economics. Some say his greatest work is Road to Serfdom. I wholeheartedly disagree. His greatest work was The Uses of Knowledge. In this speech, he clearly lays out the complexity of economics and our “fatal conceit” that we can even pretend to know all the consequences of our actions. This often gets lost as people struggle with details. They cannot see the forest through the trees.

With all due respect to Dan K., Paul Krugman, and all the other Keynesians, I believe this is the one thing you cannot answer. How to we account for the “unseen?” There are literally infinite different consequences that could occur. How do we account for them? Hayek says we cannot and to pretend we can isn’t science. Dan, I think your blog is one of the better ones out there. I love reading it. But I just feel this is a major failing of Keynes.

Nikolai Luzhin, Eastern Promises November 21, 2011 at 8:42 pm

correlation is often mistaken for causation

that’s the rule around here, except when the outcome is against the rich

Sam Grove November 21, 2011 at 11:22 pm

Straw men are abundant.

vikingvista November 22, 2011 at 3:00 am

Never a match when you need one.

Carl November 22, 2011 at 1:04 pm

Russ,
I’d like to see your response to Daniel’s post about your comments in this thread: http://factsandotherstubbornthings.blogspot.com/2011/11/from-russ-roberts.html

Contemplationist November 23, 2011 at 4:19 pm

Russ

I’m frankly baffled. I love Gary Taubes, but he holds no candle to Art DeVany who actually uses non-linear fractals to model the mody as _an economy_. I highly, highly recommend you email him for another interview on the human body as a complex, non-linear system which _economizes_ on nutrients with modular parts acting in a distributed fashion, interacting via hormones, a complex combination of which actually controls behavior of organs!

Vance Armor November 25, 2011 at 2:57 am

One of the interesting themes of American Progressivism, at least to me, is its totalitarianism with regard to state’s relationship to the human body. The Soviet Bolsheviks did not care if their hapless proletarians got drunk on their own downtime as long as they showed up for labor army duties on Monday morning (Stalin prescribed very severe penalties for showing up late to work). In the United States, Progressives (especially the early religious Progressives of the William Jennings Bryan variety) successfully wrote into the Constittuion an abolition of the sale and manufacture of alcoholic beverages. It was in the Wilson administration that we got the first federal controlled dangerous substances laws. American Progressives, whether they be Right-Progressives (Republicans) or Left-Progressives (Democrats), will enact “wars” against inchoate entities, such as a War on Drugs or Michelle Obama’s War on Obesity. There is now a war on vitamins and supplements. They will be effectively illegal in a few years, mostly due to the public choice results of Big Pharm capturing the regulatory and patent apparatus of the FDA, yet Progressive ideology gives the green light to such regulatory captures by the Big Pharm oligopoly. Obamacare is not just a health insurance law. It is also a centralizing apparatus to control the human body’s development by and for the federal government. It goes hand in hand with the Patriot Act, the militarization of local police forces, extraordinary regulation and control of agriculture, and the enforcement of federal laws limiting gardening, private food growing, farmers’ markets, and the roll-outs in federal crackdowns on raw milk sales (such as certain recent arrest of Amish farmers who have sold raw milk). In a few years they will be microchipping babies like we microchip dogs, so that the government’s satellites can track our bodies at will — apparently triangulating our positions with the cell phones we carry involves too much hassle for the Department of Homeland Security (transl. German: Geheimstaatsichersdienst).

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