Can economics change your mind?

by on January 15, 2016 at 1:00 am in Economics, Education, History, Uncategorized | Permalink

Adam Ozimek wrote the blog post everyone else is talking about; he gives good examples there.

Where to start?  I could write a whole ongoing blog on this question (wait…).  In any case, here are just a few examples of where I have changed my mind due to economic evidence:

1. Before 1982-1984, and the Swiss experience, I thought fixed money growth rules were a good idea.  One problem (not the only problem) is that the implied interest rate volatility is too high, or exchange rate volatility in the Swiss case.

2. Before witnessing China vs. Eastern Europe, I thought more rapid privatizations were almost always better.  The correct answer depends on circumstance, and we are due to learn yet more about this as China attempts to reform its SOEs over the next five to ten years.  I don’t consider this settled in the other direction either.

3. The elasticity of investment with respect to real interest rates turns out to be fairly low in most situations and across most typical parameter values.

4. In the 1990s, I thought information technology would be a definitely liberating, democratizing, and pro-liberty force.  It seemed that more competition for resources, across borders, would improve economic policy around the entire world.  Now this is far from clear.

5. Given the greater ease of converting labor income into capital income, I no longer am so convinced that a zero rate of taxation on capital income is best.

6. The social marginal value of health care is often quite low, much lower than I used to realize.  By the way, hardly anyone takes this on consistently to guide their policy views, no matter how evidence-driven they may claim to be.

7. Mormonism, and other relatively strict religions, can have big anti-poverty effects.  I wouldn’t say I ever believed the contrary, but for a long time I simply didn’t give the question much attention.  I now think that Mormonism has a better anti-poverty agenda than does the Progressive Left.

8. There are positive excess returns to some momentum investment strategies.

Overall I find that history and theory-laden observation tend to be the forms of evidence which have convinced me the most.  #3 and #8 are examples of “sheer econometrics,” but that is not usually how minds are changed, mine included.  But I don’t intend that as an anti-econometrics remark, rather econometrics is a very useful check on our theory-laden historical observations.  If you can’t get your synthetic, empirically-driven intuitions to work out in the numbers more formally, and that is indeed sometimes the case, your views probably still need more tweaking.  And for some questions, especially in number-heavy, numbers-mean-clear-things finance, it’s sheer econometrics from top to bottom.

Here is Paul Krugman on the topic; he seems to hold a broadly similar view of econometrics.

1 j r January 15, 2016 at 1:18 am

Doesn’t #7 have to come with the qualification that you mean LDS Mormons? From what I know, there is lots of poverty among non-LDS fundamentalist Mormons. And there is also the question of how much of LDS’ success is a function of being able to kick out those who don’t perform.

2 Mark Thorson January 15, 2016 at 1:29 am

Kick out those who don’t perform? Most of my close relatives are Mormon, and I don’t know what you’re talking about. One went through bankruptcy, but he’s in good standing with the church.

3 j r January 15, 2016 at 1:31 am

By perform, I mean adhere to the religious and moral stipulations of the LDS church. That’s not a knock on LDS, but it is a pretty big consideration when comparing a church’s anti-poverty program to one that any government might implement.

4 Mark Thorson January 15, 2016 at 1:48 am

If you smoke tobacco or drink alcohol, you will not be kicked out of the Mormon church for that. Many Mormons do either or both of those things. You can anticipate your bishop chastising you for that, but he will be trying to keep you in the church and get you closer to its teachings.

5 dan1111 January 15, 2016 at 3:30 am

The bias that j r suggests might be there to some extent, but it is more likely to be people who don’t follow Mormon teachings self-selecting out of it than being kicked out.

6 Ed January 15, 2016 at 10:44 am

However, if you are a single woman or a man who has multiple sexual partners and does not repent, you can be kicked out. If you are in a gay relationship or marriage, you can be kicked out. If you are married and have an affair, you can be kicked out. If you work in the sex industry, you can be kicked out. If you publicly question the teachings or history of the church, you can be kicked out

The LDS church makes frequent use of excommunication.

I do agree that leading a “Mormon lifestyle” could indeed be a good path out of poverty, for an individual, as it emphasizes self discipline and self responsibility. However I would shudder to think of promoting Mormonism for any alleged economic benefits — there’s a whole lot of unpalatable stuff that goes with Mormonism as well.

7 The Original D January 15, 2016 at 2:59 pm

An old girlfriend of mine got kicked out after she divorced her first husband. I don’t know if that’s common, but they were serious about it. She wasn’t allowed to attend the wedding ceremony for her twin sister. (Who also later divorced. LOL.)

8 Matt January 16, 2016 at 4:32 pm


In response to your comments below… It is completely untrue that missionaries are uniformly educated today to find men in suits. That comment of yours is either misinformed in some way (maybe one missionary was told that as a good “tip” for something that worked in the area they were serving, or maybe as a way to keep them safe) or is a lie.

Also, rich people do not not self select to be Mormon. Ask a representative sample of Mormon’s and you will find that it is actually much easier to convert a poor person than a rich person. Further evidence of this is the astronomical growth of the Church in the poorer countries of South America vs. the very slow rate of growth in the developed countries of Europe.

If you want even further evidence, I would point you to the Bible. The account of Jesus Christ clearly indicates that he had a much more difficult time among the “elites” of Jewish society than he did with poor people. There is a mountain of evidence that shows wealth has always deterred people from being religious more than it has helped them to be religious.

Not trying to be confrontational, but want to set the facts right.

9 So Much For Subtlety January 15, 2016 at 1:49 am

What does the LDS Church ask of its members that the government cannot or should not?

Welfare should be a two-way street. If the Mormons have found something that works, why not adopt it? Why, for instance, shouldn’t divorce be seriously penalized by the state when it comes to handing out welfare?

10 Millian January 15, 2016 at 4:24 am

Magical thinking. Should those ghetto welfare queens you fear also be forced to wear a sheet while making love?

11 So Much For Subtlety January 15, 2016 at 4:35 am

Abso-frickin’-lutely. Even if it doesn’t work. Not that anyone else does.

You missed the bit where I said “If the Mormons have found something that works”? If not, what makes you think having sex through a sheet would help?

12 Dave January 15, 2016 at 9:48 am

what’s this about a white sheet?

13 Mark January 15, 2016 at 10:29 am

>Welfare should be a two-way street. If the Mormons have found something that works, why not adopt it?

I just posted more detail up a level but it doesn’t look like Mormonism has found a way to reduce poverty, they’ve just found a way to not let in as many poor people. So people who self-select as Mormon may not be as poor, but there are just as many poor people as before. Firstly, Mormons focus their proselyting on middle and upper class people–missionaries are often told to “find men in suits.” Second, rules on alcohol, tea, coffee, smoking, and paying 10% of income to the church are likely to filter out people who are or will end up in poverty. But those people don’t just disappear. It works for Mormons because they can say those people aren’t Mormon and then not worry about them. But a government can’t adopt that because those people are still there, just as poor as ever, they’re just not joining the Mormon church (or they stop self-identifying as Mormon).

For example, if the US government said, “We’ll take any refugees who are willing to donate 10% of their income to a church” American poverty rate would probably decline, but without actually getting anyone out of poverty. Those other refuges who couldn’t afford to give that money are still there, just not being counted as Americans.

14 A Definite Beta Guy January 15, 2016 at 11:32 am

“But those people don’t just disappear”
Can those people be lifted out of poverty? How? The government has many advantages the Mormon Church does not, for instance, a multi-trillion dollar budget. If those people can still not be helped, then lifestyle DOES have a major impact on their poverty. In that case, NOTHING the government provides is going to help, and only the Mormons are going to help.
And yes some people are going to be kicked out because they don’t comply. One bad apple=ruined bunch.

15 So Much For Subtlety January 15, 2016 at 5:01 pm

Mark January 15, 2016 at 10:29 am

People don’t really self select as Mormon though do they? Gift from God and all that. You would have to show they are not letting in poor people. It is definitely not my experience of Mormons which, like most fringe Churches, recruits almost entirely from the lower middle class at best and the working class most of the time.

I would like to see evidence that they focus on converting the middle and upper classes. Again, not my experience of Mormons.

If you think that bans on alcohol and smoking will weed out those with poor impulse control, I am inclined to agree with you.

16 Steve S January 15, 2016 at 5:13 pm

Replying to Ed:

Based on my entire community of Mormon family and friends (I grew up Mormon but no longer am, still I’d say n=1000+) I would challenge that they make “frequent” use of excommunication, since I know exactly 0 people who have been officially excommunicated and somewhere north of 50 Mormons who unabashedly live pretty “worldly” lifestyles. Even I haven’t been to church in over 10 years and I still have missionaries knocking on my door. I’m guessing most people just quietly leave and never come back.

Replying to The Original D:

Getting excommunicated and not being allowed in a temple (where wedding ceremonies are held) is 2 completely different things. I didn’t get to go in for my brother’s wedding ceremony but I was still on the church roster of members. And I can still walk into a church building any day of the week.

17 Ray Lopez January 15, 2016 at 1:35 am

Mormonism is somewhat popular here in the Philippines, you see white boys sweating in the tropical sun preaching, and quite a number of Filipinos have joined the Mormon church.

18 Mark Thorson January 15, 2016 at 1:39 am

They recently relaxed their rules on missionaires wearing their “garment” in hot climates, if you know what I mean. So they should be more comfortable in the Philippines. This was only last year that they changed the rules.

19 John Gardiner January 17, 2016 at 1:24 am

I’m sure they haven’t changed any rules on wearing the “temple garment.” You’re probably thinking of something else. This maybe?:

20 Ed January 15, 2016 at 10:47 am

Hey Ray, what’s your take on the relationship between Mormonism and the Iglesia Ni Kristo in the Philippines? They both seem to be similar in a lot of outward ways. Do they both “target” the same demographics for conversion? Ever convert each others followers?

21 Mark Thorson January 15, 2016 at 1:36 am

I do know someone who was kicked out of the LDS church, but that was for apostasy (preaching false doctrine), which is probably the most common way someone is kicked out of Mormonism. I’ve never heard of anybody being kicked out for any other reason.

22 j r January 15, 2016 at 1:56 am

The point is that the tenants of Mormonism that work as an effective anti-poverty program are voluntary and enforced by social/family pressures. That leads to two questions:

1. What is the overall effect of Mormonism as an anti-poverty program once you correct for all the demographic factors and once you account for all the people who leave the church because? and
2. How do you replicate this outside of the population of people already willing to submit themselves to a series of strict religious and moral rules?

23 So Much For Subtlety January 15, 2016 at 2:03 am

What demographic factors do you have in mind?

If people leave poverty programs that is a good thing. But there is no reason to think that people are dropping out of the Church because they are poor. So why would it matter?

You cut off their benefits if they do not comply. Solves two problems at once. Then they can stay or they can stop getting money. Either way the welfare trap is ended.

24 Virginia Postrel January 15, 2016 at 2:05 am

Pet peeve: *tenets*, not tenants. Tenants are renters. Tenets are principles or beliefs.

25 j r January 15, 2016 at 2:25 am


I didn’t say anything about people leaving LDS for being poor.

What you are describing is a conditional cash transfer program. I fully support those as an alternatives to most of our present social transfer schemes. But what does that have to do with LDS or other strict religions? I suppose you could have a program that dispensed benefits based on membership in some approved church, but there are all sorts of problems with implementing such a thing. And I mean problems besides the obvious First Amendment ones.


Typo. Thank you.

26 So Much For Subtlety January 15, 2016 at 3:32 am

j r January 15, 2016 at 2:25 am

If people leaving the Church has any impact, it must be because of the reason they leave. It looks like you are implying that the statistics are good because all the feckless are driven out. If you drive out the poor you are left with the middle class and hence your results look good. It can’t be that believing in women priests has much of an impact on your income and earnings potential.

If the LDS demands something of their believers and it has an impact on their poverty rates, why shouldn’t the government demand it too? Not the membership as that in itself cannot confer benefits. But they are making them do something that does provide benefit. What is it? Suppose it is getting and staying married? Unlikely as Mormon divorce figures aren’t that good. Being married before having children? That is likely to have an impact. Why shouldn’t the state demand that?

27 j r January 15, 2016 at 3:47 am

Did you miss the part where I said this?

“What you are describing is a conditional cash transfer program. I fully support those as an alternatives to most of our present social transfer schemes.”

28 Harun January 15, 2016 at 11:32 am

If it works mainly because of local knowledge and punishment/shaming, then the answer would be to not have federal agencies 3,000 miles away fill up your card electronically.

29 Pshrnk January 15, 2016 at 2:32 pm

@ Virginia Postrel

Mormons, being relatively prosperous, are also more likely to have tenants. 🙂

30 Bemac January 15, 2016 at 11:14 pm

The tenants of Mormonism will occupy the apartment tower the LDS Church is building in Philadelphia.

31 Kent G. Budge January 15, 2016 at 5:43 pm

I suffer from the disadvantage of actually being a practicing Mormon who has actually helped administer the welfare program, so take what I say with a grain of salt. 😉

I have known a modest number of Mormons who have been excommunicated. None were excommunicated for being poor or for failing to pay tithes. By far the most common reason has been for cheating on a spouse after being married in the temple, which the Church does not look kindly on. I’ve known just two members in 40+ years who were excommunicated for apostacy, and one was excommunicated at his own request. It’s not that common. If you are looking only at cases that make the news, well, cheating on a spouse isn’t interesting news, but playing the brave free thinker is the kind of thing the press eats up, so the sample is very heavily skewed.

Given how expensive breaking up a family is, the strong disapproval for extramarital affairs could very plausibly be reflected in a lower poverty rate.

32 Mark Thorson January 15, 2016 at 9:02 pm

I suppose my impression of the reasons for excommunicatiion are biased by a) people I meet on the Internet and b) articles I read in the SL Trib. You have a much less biased sample, so I defer to your knowledge of the subject.

33 Derek January 15, 2016 at 1:42 am

Like Michael Brown? Do the LDS shoot people that don’t perform?

34 Mark January 15, 2016 at 10:17 am

Came here to say the same thing. One of the biggest things in Mormonism is obedience to the “word of wisdom.” To join, you have to be willing to not smoke, drink alcohol, coffee, or tea, or do other drugs. You also have to give 10% of your income to the church. They won’t let people join who don’t agree to those rules. People who are born into the church who don’t want to follow those two rules often will leave and stop self-identifying as Mormon. These two policies have a huge selection effect with the result being that “Mormonism” ends up being fairly synonymous with “middle class.” So when you look at people who self-identify as Mormon, you might see very low poverty rates but that might not actually mean anyone who would have ended up in poverty didn’t.

Also, probably a smaller effect, but Mormon missionaries are also often told to find “men in suits” to proselyte to. If they’re actively trying to recruit upper and middle class people, it doesn’t say much if they end up not having as many poor people.

I’ve done a bit of exploratory analysis looking into this, and the only social effects visible to the naked eye seem to be those related to smoking. Utah is one of the most homogeneous states in the country, and when comparing poverty, health, etc. to states with similar demographics, Utah doesn’t seem to stand out (except in stats clearly related to smoking). Looking at their poverty stats, for example, they’re number 7 and seem about average for states with their demographics. Not what I’d expect if Mormonism reduced poverty. However, I’m willing to be swayed by further evidence if you can point me to studies that do proper controls.

35 Steve S January 15, 2016 at 5:22 pm

“You also have to give 10% of your income to the church. They won’t let people join who don’t agree to those rules.”

Hi. This is a “rule” but 1) you don’t HAVE to do it, most people give what they can if money is tight and nobody is shaking you down with a collection plate every Sunday, it’s done in private, 2) they only guilt you about it once a year at “tithing settlement” where they basically tell you what you’ve given the past year and ask you if you think you did well, or if you want to do better next year…

Basically it’s not as much of a shakedown as you portray it. You could pay $0 and nobody (except maybe your bishop who knows) would treat you any differently. And even the bishop would probably just kindly ask you in private if you were doing OK financially, out of pure concern not out of coercion.

36 Mark January 15, 2016 at 9:44 pm

Yes but when trying to attract converts, if a person doesn’t agree to those rules, they can’t be baptized. Once a member, they won’t be kicked out for not doing them. But doing this to begin with is still going to self select against a certain type of people who are more likely to be poor.

37 D. Linstrom January 16, 2016 at 3:57 am

The idea that poor people don’t join the Morman church because they can’t afford to tithe is nonsense. I am not LDS but the first time I tithed I was so poor I had to break a five dollar bill. And my church didn’t provide financial assistance like the LDS do. It is actually harder to tithe when you are middle class than when you are poor.

38 efp January 15, 2016 at 12:43 pm

Discipline in one area of life spills over into others. That, and having a strong social network is beneficial in many ways. The question for me is, can we capture those benefits without also believing in hilariously ridiculous things. I think of the New Atlantins (and other such phyles) from Stephenson’s Diamond Age.

39 Floccina January 15, 2016 at 3:40 pm

At risk of making an fool of myself, I assume that people who study how Mormonism effects poverty adjust for that.

40 Derek January 15, 2016 at 1:37 am

4 and 7 are essentially the same thing. Liberalization and flow of information ends up being an amplifier; trends or tendancies become more powerful. Stupidity being the universal law of everything means that bad ideas will spread faster and further.

Technology makes it possible to know and control everything except what you didn’t think you needed or something different that becomes important. I’m amazed at how impossible it is to deal with large firms that are highly infested with business intelligence and automated highly controlled systems. There has paradoxically never been a better time for a small firm to have a large reach, all the while the large firms are eating up the mid sized and getting as large as the technology allows them to manage.

41 Doug January 15, 2016 at 2:03 am


MOM only, or would you also endorse any other market anomalies (HML, SMB, carry, quality)?

42 anon January 15, 2016 at 2:30 am

Why has the market not erased that premium? And how long will it last before the big players arbitrage the premium away?

43 Gimlet January 15, 2016 at 8:11 pm

That question is basically the subject of Tyler’s conversation with Cliff Asness here:

44 andy January 15, 2016 at 3:24 am

. Before witnessing China vs. Eastern Europe, I thought more rapid privatizations were almost always better. The correct answer depends on circumstance, and we are due to learn yet more about this as China attempts to reform its SOEs over the next five to ten years. I don’t consider this settled in the other direction either.

Living in ‘Eastern’ Europe, I wonder how anyone could conclude less privatization would be better. Not that there wasn’t lots of fraud during the privatization, but the state companies didn’t work well either, unless they were given monopoly power.

45 Jeffrey Deutsch January 15, 2016 at 9:27 pm

I think it’s a question of incremental versus “one fell swoop” reform. Good theoretical arguments on both sides.

46 mulp January 15, 2016 at 3:25 am

The past decade has changed my mind on the core of monetary theory – as in, when I read monetary history of the US 1850-1950, I felt friedman had the data to back his monetary policy advocacy. But the total failure of monetary policy over the past decade to produced promised results has led me to study alternative theory, and I see in FDRs speeches, and Keynes writings in the 30s, far superior explanations and theories that make fiscal policy equally or greater in importance.

Further, I have come to understand that by public policy extolling rent seeking, we have seen high inflation in the 21st century, but the rent seeking has shifted it from the goods and services measured for inflation statistics, to the old and decaying assets that inflate far beyond both value and replacement cost. The rentiers need and have monopoly power to block building of new productive assets which would crater the asset prices they control (but often do not own).

Bottom line, the rentiers have concentrated the inflation the Fed has sought to create into higher old asset prices economists do not consider inflationary. And the higher asset prices depend on higher rents which depend on increased scarcity engineered by increased idle factors of production: lower employed labor, lower savings building productive assets, lower use of productive capital (hidden by scrapping assets and not building replacements).

47 Effem January 15, 2016 at 1:52 pm


A very under-discussed problem

48 JC January 15, 2016 at 5:35 am

Professor Sachs was used to be my hero on developing economics… today I oppose most of his percriptions to fight poverty

49 Econchic January 15, 2016 at 3:09 pm

I was trying to think about something that economics changed my mind the most on and you reminded me:
Development. I opposed both Sachs and RTC’s way of fighting poverty, one thinks numbers don’t matter, and the other one thinks their numbers are the only ones that matter.
New studies changed my mind on both things.

50 dan1111 January 15, 2016 at 5:57 am

Paul Krugman complaining about economists being too ideological is interesting. I did think this section of his post was very good, though:

“I’m also skeptical about the persuasive power of complicated econometrics; my sense is that mind-changing empirical work almost always involves not much more than simple correlations, usually from natural experiments — that is, even multiple regression turns out, in practice, to be too complicated to persuade.”

The problems with complicated analysis are 1) few understand it 2) it tends to be based on many assumptions. Generally, you can only be persuaded by analysis if you understand it and agree with the assumptions it uses.

51 James Choy January 15, 2016 at 6:08 am

My new year’s resolution is to engage in more shameless self-promotion, so in that spirit here is a link to my paper on #7, explaining why religion improves family life (which may help to raise incomes, especially for people who would otherwise have dysfunctional families). Also data on who is likely to leave strict churches (answer: children of the poor).

52 Jan January 15, 2016 at 6:54 am

6) This is true to some degree, but you can’t can’t value ‘health care” as all the same. The specific type of care and how well it is delivered to whom and when varies widely.

This is why the Obama administration and indeed private insurers are moving toward value based payment mechanisms and away from the old paying volume instead of outcomes and quality model of care. Medicare and Medicaid are leading this transition.

53 Urso January 15, 2016 at 10:31 am

They are certainly at the forefront of giving lip service to those concepts.

54 Jan January 15, 2016 at 1:29 pm

Half of Medicare payments by 2018. And a good share of them already. Value and quality are already a factor in every Medicare provider’s payment rate, started last year.

55 A Definite Beta Guy January 15, 2016 at 10:56 am

Bundled payments have been around in some form since the 1980s. They are not obviously superior and introduce their own problems. Everything sounds splendid when you discuss it at 10,000 feet.

56 Jan January 15, 2016 at 1:33 pm

Not really. There were so few ways to accurately measure quality and outcomes in the past decades that it wasn’t really feasible. Also, costs hadn’t grown high enough to make it THE health care priority. If you disagree that paying for value (which is NOT the same as bundled payments), then you are an outlier.

57 A Definite Beta Guy January 15, 2016 at 1:37 pm

“There ARE so few ways to accurately measure quality and outcomes in the past decades that it wasn’t really feasible ”
I changed one word and that accurately describes part of my skeptical viewpoint. Everyone wants to pay for value, but value is not easily measured, even today. Other nations that have held down payments can hold them down in a fee-for-service context by simply….holding down payments.

58 Jan January 15, 2016 at 3:54 pm

Value is inherently subjective seems to be your main argument. That’s true, but I think there is much more agreement among stakeholders than you might assume. And now that measurement is getting better through EHRs and, unfortunately, consolidation’s information sharing benefits, paying for value is getting easier.

59 lxm January 16, 2016 at 9:56 am

I agree.

If you break a bone and a doctor sets it and it heals, then the money spent provides lots of utility.

I’m not sure exactly what “social marginal value of health care” means. Does it mean that overall we pay too much for medical care and the medical care providers are just ripping us off? Does it mean that we seek out medical care that has no real utility to heal? (And the medical care providers are only too happy to provide) Or does it mean that medical care is more hoax than effective? (I’ve got this bottle of snake oil…)

60 Tom G January 15, 2016 at 7:38 am

“The social marginal value of health care is often quite low, much lower than I used to realize.”
Depending on how health outputs are “valued”. Ted Kennedy had terminal problems for some 18 months. Assuming $100k/ m of medical care, the net benefit is certain to be quite low.

A huge amount of health care cost is spent on folks in the last year, or last 2 years of their lives. Letting them die is obviously cheaper in money, but not obviously better, so equating “marginal value” to money is, for health care, wrong.

Maybe every decision “rule” will be “wrong”. That might why there is no solution to the health care problem. At least, until we have robot nurses and doctors manning the old-age nursing homes and caring for the sick (including the young).

61 John Thacker January 15, 2016 at 7:54 am

The elasticity of investment with respect to real interest rates turns out to be fairly low in most situations and across most typical parameter values.

Rather remarkable 10% decline in the stock market since the Fed raised rates in December, though.

62 Gochujang January 15, 2016 at 9:03 am

August 2015 at The Motley Fool:

According to investment firm Deutsche Bank, the stock market, on average, has a correction [10% or more] every 357 days, or about once a year. Our last correction was nearly 1,000 days ago, the third-longest streak on record. For those curious, we went around 1,800 days without a correction in the mid-1990s. Long story short, corrections are an inevitable part of stock ownership, and there’s nothing you can do as an individual investor to stop a correction from occurring.

63 Harun January 15, 2016 at 11:37 am

Do corrections happen randomly then, or are they based on actual events, such as China melting down, or the Fed raising rates, but these occur on average every 357 days?

But yeah, you can’t stop a correction. But you can know that steel prices are lower in Asia and cut your supplier’s prices.

64 Gochujang January 15, 2016 at 12:18 pm

I once read Mandelbrot’s Misbehavior of Markets. Based on that I would distrust the word “correction.” It is loaded.

Per Mandelbrot, markets are noisier than they should be, if they were reacting to news.

65 Honeyoak January 15, 2016 at 7:55 am

I think that the private value oh health care (at the margin) is quite low as well. Evidence is showing up all the time that checkups, surgeries, orthodontia are pretty much worthless

66 Gochujang January 15, 2016 at 8:57 am

Most people are healthy, which complicates analysis.

Are most poor people healthy as well? If so, that would confirm Tyler’s claim, while sadly leaving the poor and unhealthy off the table.

67 Urso January 15, 2016 at 10:33 am

One easy way to increase the marginal value of healthcare would be to introduce a series of crippling, but easily treatable!, diseases into the public.

68 rayward January 15, 2016 at 8:05 am

Economics and law are very much alike, each requiring analysis, collection and presentation of proof, and clarity of communication. Where they have historically differed is in advocacy, which is the role of the lawyer but not the economist (who practices science not advocacy). Today, the roles of lawyer and economist have merged, both now primarily advocates, the lawyer for her client and the economist for her ideology. When economics changes one’s mind, is it the result of proof or advocacy? Ozimek (and Krugman) would argue that advocacy cannot conceal the truth, the truth supported by the data (econometrics). Lawyers LOL!

69 prior_test January 15, 2016 at 8:24 am

‘The social marginal value of health care is often quite low, much lower than I used to realize. ‘

Spoken like a man who thinks that the Nazis were merely a roadbump on the path to the better world that eugenics offers.

And spoken like a man that has never pulled a rotten tooth out of their mouth. Which at least means a certain shared experience with a poor European and a tenured American university professor, even if they would disagree on the social marginal value of health care, apparently.

70 Nancy Lebovitz January 16, 2016 at 9:20 am

The idea isn’t that no health care would be optimal, but that once you get to some level (well below what’s typical in the US), adding more doesn’t actually help.

Considering that medical professionals generally don’t want most of the typical amount of end of life care, we have some evidence that a lot of what’s spent actually makes things worse.

71 NNM January 15, 2016 at 8:50 am

My theory-laden historical observation tells me that Tyler needs to change his mind about Tony Parker.

72 Gochujang January 15, 2016 at 8:52 am

I am only an amateur, but I have read a lot of economics in the last 15 years. I came to it with a skepticism that human beings really were economic creatures, or “could be treated as such.” Thank God for Behavioral Economics, eh?

I still have great interest (it’s money, after all) and see great value, but I think economics is still overweighted as an explainer of human experience. It is an aspect of our nature, but probably a minority. It is a lender to look at a problem, but not the only perspective.

Monkeys refuse cucumbers as poor payment.

73 Gochujang January 15, 2016 at 8:53 am


74 Ted Craig January 15, 2016 at 8:59 am

Several of these show why economists should study more anthropology/sociology.

75 Gochujang January 15, 2016 at 9:15 am


76 Jeffrey Deutsch January 15, 2016 at 9:28 pm

Not to mention psychology, experimental economics and behavioral economics/finance.

77 Jeffrey Deutsch January 15, 2016 at 9:30 pm

And history. Economic and otherwise.

78 Rock Lobster January 15, 2016 at 9:17 am

I used to be a libertarian back in the day. I had something of a fiat justitia ruat caelum attitude toward issues like Social Security, healthcare, education, financial regulation, foreign policy, drugs, zoning, and so on. Supplementing that was an unrealistic estimate of elasticities, which is to say, how much private actors would compensate in response to the government letting go of the wheel.

But since then I’ve come around to realizing, the Sabbath was made for man, not man for the Sabbath. These days I’m a moderate to centrist liberal in most respects.

79 Jeffrey Deutsch January 15, 2016 at 9:32 pm

Hear, hear! (Except for the last sentence anyway; liberalism is one of several perfectly acceptable political roads out of capital L-Libertarianism.)

80 John Mansfield January 15, 2016 at 9:34 am

Tyler Cowen has touched before on the benefit of religion for the poor, specifically mentioning Mormonism. I am curious what specific observations he has made. As a Mormon myself, I happened to fill an assignment last week at our bishops’ storehouse near Andrews AFB, a couple dozen miles from the George Mason campus, where a concentrated dose of Mormon ministry to the poor can be observed. I wonder if it something like this, or observing the lives of poor converts and their congregations, or studies by others is the evidence that has informed Cowen’s thoughts on this topic.

81 lxm January 16, 2016 at 9:46 am

In Ted Koppel’s book Lights Out there is a chapter on the Mormons. According to Koppel the strong organization of the church and its history has made the church and its members able to survive crises much better than just about anybody else, including the US government. A notable example was Katrina. As the storm bore down on New Orleans, the Mormon church notified its members to evacuate and told them where they should evacuate to. After the church provided support to its evacuated members until they could return home. The Mormon church was much better prepared than the US or state governments.

Koppel also talks about other aspects of the strong Mormon community. He says “…I witnessed a determination not to consider or treat any member of the community as anything other than productive.”

So maybe it’s the strong community ties that provides the anti-poverty power.

He also talks about the high priority the church places on volunteering, which your work at the storehouse illustrates. And, no doubt, that storehouse would be a source of food and other items in case some Katrina-like crisis struck in the Washington, DC area.

82 Dan Cole January 15, 2016 at 9:45 am

A more interesting question for me is whether facts can change economics.

83 slow clap January 15, 2016 at 6:34 pm


84 Dave January 15, 2016 at 9:51 am

What are the economic studies that link Mormonism (and other rel strict religions) and anti-poverty? I’d curious to read those!

85 Donald Pretari January 15, 2016 at 9:53 am

I’m sorry, but most of these admissions/ confessions sound completely self-serving. It’s more than likely that these are just-so stories/ after the fact rationalizations economists tell themselves when their opinions change because they’re not the sort of people who enjoying saying things like “It just started tasting rancid to me when I said the minimum wage was the root cause of all of our problems.” This goes along with the mental contortions some economists go through to prove to themselves they were’t wrong when they said inflation was about to explode. Human, all too human.

86 dearieme January 15, 2016 at 10:20 am

“The correct answer depends on circumstance”: a little pearl of wisdom there.

87 asdf January 15, 2016 at 10:23 am

Good list

88 tedm January 15, 2016 at 10:34 am

Unfortunately for applied economics (and many other empirical studies), practitioners sometimes forget that a single word can have multiple meanings. One way this matters is that people who are not familiar with the details will think that a study says something that its author has explicitly excluded. OK, sure, danger for the non-specialist. But a bigger problem is that the specialists use words inconsistently and they seem to be clueless about it. This matters because people who construct mathematical models seem to believe that they have been more precise than people who have explained the same information using careful prose.
Let greek letter be… (meaning 1)
Insert greek letter in model and manipulate
Measure (or collect measures using meaning 2) and apply statistical inference
Interpretation… tell readers that issue being studied (now using greek letter as meaning 3) is highly correlated with whatever or is consistent with whatever.

Examples in economics
The word bank. Use word meaning only the services of accepting deposits and making loans, but then measure or interpret using the word to include collateral administration, market-making, or broker-dealer services.
The word liquidity. Use word meaning the relative abundance of the medium of exchange relative to transaction demand but then combine with meaning the ability of a firm to obtain a short-term loan in unsecured credit markets. Or use liquidity to mean a person’s ability to obtain a loan by pledging current assets as collateral, or the volume of trading of an asset in frmal markets within a short period of time. Personally, I think that no one trying to persuade the public policy process should be allowed to use the word liquidity for five years – use the full phrase of what you are analyzing.

Some math-majors-turned-economists seem to be unaware that their model does not say what they say it says. As long as the papers are being used merely to sort and promote people in their academic careers, no problem. However, if researchers want to persuade policymakers, then they need to do a better job of communicating what their studies do and do not say.

Contrary to popular belief, policymakers are in general above average in intelligence and education. Either they or their staff or the people coming to lobby them are likely to pick up on what a study does not say.

Sorry economists, the lawyers have better training in identifying inconsistent usage of words (score one for Rayward).

89 dsgntd_plyr January 15, 2016 at 11:05 am

“I now think that Mormonism has a better anti-poverty agenda than does the Progressive Left.”
I’m an atheist and I agree with this. To call back to an earlier Tyler Cowen talking point, Mormons deserve to have their status raised.

Economics has helped me see the light on immigration (cut it by 50+%). Build a Wall, Build it Tall, Deport Them All.

90 Brandon Berg January 15, 2016 at 11:11 am

Isn’t the problem of disguising labor income as capital income easily avoided by replacing the income tax with a consumption tax?

91 msgkings January 15, 2016 at 4:32 pm

Many problems are solved by that, doesn’t make it easy to accomplish

92 Dave January 18, 2016 at 12:42 pm

Largely though I think not completely.

There would still be analogous situations requiring a definition of the difference between “savings” and “consumption”. For example, is purchasing a high-priced artwork “savings” or “consumption”? How about owning thoroughbred racehorses? Will ownership of housing be treated purely as consumption, or as a mix of savings and consumption? What about spending on education – is that consumption or investment in human capital?

93 Yancey Ward January 15, 2016 at 11:33 am

Economists have changed my mind for sure- I used to think they were worth reading and listening to. I now think they are an active impediment to understanding almost everything they write and talk about. They mostly seem to be prostitutes for politics, and cheap ones at that.

94 Jimmy January 15, 2016 at 6:36 pm

What do you read instead? Genuinely asking because I tend to appreciate your comments.

95 Floccina January 15, 2016 at 12:01 pm

The economics class that I took in college and later learning radical changed my views on everything from free international trade to the minimum wage.My experience working for the state also changed my views on giving money and power to the state.

96 Dzhaughn January 15, 2016 at 4:41 pm

Krugman claims he now supports a $12 or $15 national minimum wage on the basis of studies like Card and Kreuger.

Ha ha ha. Because even teenagers know that if no one notices you playing music with the volume at 1, it is okay to turn it up high.

Naturally, his employment by the EPI had nothing to do with it. Money and prestige only corrupt the immoral, after all, who are our opponents!

Also irrelevant is the proof of politically viable urban minimum wage increases, and the wish to argue that it is not a mechanism to protect utopia from the riff raff. We outlaw their jobs for their own good.

Economics is a trivially low barrier to taking a politically convenient position.

97 Steve S January 15, 2016 at 5:26 pm

Side note: Does Adam have something against Russ Roberts? He obviously listened to the recent episode of EconTalk with Noah Smith and got very excited about it, but almost seems to go out of his way to avoid referring directly to that. He says ‘the skeptics’, etc. Why not just say “Hey I was listening to this interesting conversation on EconTalk and wondered how many of you have had an economic study change your mind?”

98 Jr January 15, 2016 at 6:00 pm

I am sure that there are benefits of Mormonism but simultaneously strict Mormonism includes the requirement to give 10% of year income to the church. That seems like a very poor cure for poverty.

99 Matt January 17, 2016 at 2:39 pm

That conclusion makes sense if you think poverty is strictly a money problem. But it’s generally accepted that poverty goes way beyond money. You should read Arthur Brooks work on wealth and giving. Fascinating findings that illustrate giving actually tends to make people wealthier, not poorer.

100 JWatts January 15, 2016 at 6:57 pm

Krugman says this: “but the accumulation of evidence when some states raised minimum wages while neighbors didn’t — a classic natural experiment — made it clear that at least for the US, at current minimums, there is little or not negative effect on employment.

Which I tend to agree with. Current US minimum wages aren’t that high compared to the effective minimum wages across the country. But that’s still doesn’t mean a $15/ hour US minimum wage won’t cause a negative effect on employment. I suspect that Krugman knows full well that a $15/hour minimum wage would have a significantly negative effect on the employment rate in certain areas of the country (Mississippi for example). But he’s carefully dancing around the issue so as to not upset his ideological allies.

101 Garett Jones January 16, 2016 at 2:14 am

I served briefly as an LDS missionary in 1989, and I know a lot of LDS and former LDS people, many of whom were missionaries. I’ve never heard of anyone who was told to try to convert “people wearing suits.” Heck, you’re usually just glad to find someone willing to talk to you at all: it gets boring just talking to your missionary companion all day long.

Where do these false theories come from, and why are they taken for granted? Motivated reasoning, the urge for a quick answer, rules the minds of many.

102 freethinker January 22, 2016 at 7:44 pm

“Motivated reasoning, the urge for a quick answer, rules the minds of many.”. But Garett, all religions, including yours, are motivated by “the urge for a quick answer”. I hasten to add this applies to fundamentalist atheists too.

103 Steven Coleman January 16, 2016 at 4:33 am

The Perpetual Education Fund is a great example of LDS charity that lifts people out of poverty. It funds the education of LDS individuals too poor to pay for college and is repaid after the education process is completed. It is available for non U.S. citizens.

104 Steven Coleman January 16, 2016 at 4:39 am

Here is a church link containing information on the to the Perpetual Education Fund.

105 Jr January 16, 2016 at 12:19 pm

I think Tyler should clarify just what he thinks mormonism is doing against poverty. That it is against drug use is one thing I would see as a good anti-poverty program. Drugs may be fun, but they do not help your income.

What other things does Tyler like? Does it encourage studies or hard work? (I do not know.) Does he think its prudish sexual morality and its conservative gender roles is a help or hindrance?

106 Jason January 20, 2016 at 6:26 am

Where’s the evidence for all of these points?

107 Kyle Leary January 22, 2016 at 12:30 pm

As a private-sector health economist, I find #6 very interesting although it is vague to me. By specifically invoking the margin, are we meant to think that “today, in the US”, there is pretty much “enough” health care? I mean this at the societal level; I don’t necessarily seek a response meandering into inequality/distributional issues. Although, I am Canadian, and we understand this is eventually relevant as well.

108 Aron Milberg January 26, 2016 at 3:32 pm

Also, not only is the elasticity of investment low with regard to real interest rates, so is labor with regard to the real wage. For example, a study on lottery winners found that the relation was -.2 (; similarly, studies of basic income find that jumps in unemployment are low and highly concentrated on pregnant, mothering and teenage employees.

Also, public health and infrastructure seems to have high social gains. Its single person healthcare that has low or even negative social benefits! Daniel Cohen discusses, for example, how specialized medical care can be inflationary at the margin, thus increasing the costs for those who would benefit the most from it (while there is decreasing returns to care for the healthy or very old and sick). But vaccines, sanitation, taxation on cigarettes, pollution regulation etc can have positive social benefits.

Additionally, some other ‘paradoxes’ of interest:
Credit impulse–its rate of rate of change–bears a .89 correlation coefficient with changes in unemployment.

One study found that credit rationing affects production through current labor and material costs, not fixed investment cost (

Studies have found that the elasticity of imports and exports with regards to the real exchange rate is quite low. Constant changing real exchange rate changes are needed for adjustments, rather than single ones.

An article in QJE found that the lump sum costs required to remunerate inefficiency in centralized market exchanges are larger than the benefits from increased competition, in the presence of asymmetric information.

One interesting book (Full Industry Equilibrium) shows that when competition operates in capital markets, several things emerge: one, that primary and consumer products’ prices behave very differently, with the former acting ‘un well behaved’ and two, that one can never change just one price, if its part of the ‘wage bill’ or the needs of capital production.

Patents seem to slow, rather than speed up, innovation.

The natural rate of interest may be zero.

Quantitative easing has almost no effects on non-capital markets inflation or unemployment.

In other words, money, credit and labor markets are not well behaved and their behavior depends as much on ‘quantity’ and ‘quality’ as it does on price adjustments. Markets and information don’t mix as well as previously thought. Prices in the GE setting behave differently for different classes of goods.

109 Rohit January 27, 2016 at 1:35 pm

If there is anything that could change our mind in anyway then it has to be Economics, I believe we need to be good and we can do really well in any field. I mainly work on Forex trading and there economics is everything. I have learned a lot from sites like Baby Pips and I regularly practice to make myself perfect with OctaFX broker, as they have excellent demo contest like Champion where I can win up to 1000 USD plus regular practice.

110 Roshan January 27, 2016 at 1:51 pm

If there is anything that could change our mind in anyway then it has to be Economics, I believe we need to be good and we can do really well in any field. I mainly work on Forex trading and there economics is everything. I have learned a lot from sites like Baby Pips and I regularly practice to make myself perfect with OctaFX broker, as they have excellent demo contest like Champion where I can win up to 1000 USD plus regular practice.

111 Ammar January 27, 2016 at 1:53 pm

If there is anything that could change our mind in anyway then it has to be Economics, I believe we need to be good and we can do really well in any field. I mainly work on Forex trading and there economics is everything. I have learned a lot from sites like Baby Pips and I regularly practice to make myself perfect with OctaFX broker, as they have excellent demo contest like Champion where I can win up to 1000 USD plus regular practice to help making profits.

112 Ali January 27, 2016 at 2:14 pm


113 Kumar January 27, 2016 at 2:17 pm

Nice work.

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