More from Mike. A large slice:
When I am discussing the state with my colleagues at Duke, it’s not long before I realize that, for them, almost without exception, the State is a unicorn. I come from the Public Choice tradition, which tends to emphasize consequentialist arguments more than natural rights, and so the distinction is particularly important for me. My friends generally dislike politicians, find democracy messy and distasteful, and object to the brutality and coercive excesses of foreign wars, the war on drugs, and the spying of the NSA.
But their solution is, without exception, to expand the power of “the State.” That seems literally insane to me—a non sequitur of such monstrous proportions that I had trouble taking it seriously.
Then I realized that they want a kind of unicorn, a State that has the properties, motivations, knowledge, and abilities that they can imagine for it. When I finally realized that we were talking past each other, I felt kind of dumb. Because essentially this very realization—that people who favor expansion of government imagine a State different from the one possible in the physical world—has been a core part of the argument made by classical liberals for at least three hundred years.
To paraphrase Hayek, then, the curious task of the liberty movement is to persuade citizens that our opponents are the idealistic ones, because they believe in unicorns. They understand very little about the State that they imagine they can design.
Arnold Kling is correct: this employment pattern cannot plausibly be explained by aggregate demand – but it can be explained by pesky microeconomic factors any reference to which too many macroeconomists consider to be illegitimate when the question is “Why is the labor market sluggish?”
Kevin Williamson reflects wisely on Abenomics and economics. (HT Steve Bradley) A slice:
The battle against scientism in economics is a long one. I am afraid that is also is a losing one. F. A. Hayek, in his Nobel lecture, dropped an Austrian hammer on “The Pretense of Knowledge” in his profession, but the tendency of economists to present their theories as a kind of fiscal physics has, if anything, intensified since Hayek’s time, abetted by the rise of a distinctly phony school of political rhetoric dressing up familiar prejudices as “empirical” and “evidence-based.”
I’ll bet you your next unemployment check that if Japan continues to slide, the answer from the Left will be: “Abe was on the right track, but he didn’t go far enough. And here’s my model proving it. I’m only following the evidence.” But the evidence suggests that there are a lot of moving parts to an economy, and that their relationships are unpredictable. Perhaps Japan benefits from stimulus, but stimulus adds to debt, which in Japan is very heavy — higher, proportionally, than in Greece. That can be offset by tax increases, as with the consumption tax, but those have effects on economic behavior. You might have three balls in the air at the same time, but that doesn’t mean you’re juggling.
For the “Do-you-really-want-to-trust-government-regulators?” file. (HT Henry Manne) A slice:
Wanli Zhao, associate professor of finance, partnered with David M. Reeb, the Mr. and Mrs. Lin Jo Yan Professor in Banking and Finance at the National University of Singapore Business School, and Yuzhao Zhang, assistant professor at the Rutgers University Business School, for the study into insider trading involving supervised industries.
Their findings are being published under the title “Insider Trading in Supervised Industries” in the August 2014 edition of the prestigious “Journal of Law and Economics.”
“Our findings are somewhat controversial in that we’re saying the presumed protectors of the shareholders and general public interests appear to be using their positions to their advantage,” Zhao said. “The evidence shows it is happening. There is more insider trading within regulated firms than within unregulated firms. There is very, very strong indirect evidence that this is due to people involved in the regulatory agencies.”