In a moment of weakness after my furnance broke down I bought a service contract.  Now every few months I get a "free cleaning" during which the furnace repair guy tells me about all the other products I need.

The salesman, sorry, I mean furnace repair guy, seems honest and genuinely concerned about my ambient body temperature.  Of course, I never listen to him or buy anything and this makes me very happy.  See, I figure that most people do purchase additional services from such a fine young man.  If so, then perhaps the real purpose of selling the insurance contract is not the insurance- it’s to get the salesman in your door several times a year.  And that means that the insurance qua insurance contract ought to be reasonably priced, maybe even under-priced, or at least not jacked up as high as it would be if it didn’t lead to further sales.

Thus, I have cleverly reasoned my way out of foolishness and towards brilliance –  such reasoning is to be distrusted.  Nevertheless, I wonder whether the argument does not generalize.

Daniel Gross’s best argument for FDR is that FDR was better than Hitler. 

Roosevelt scared investors and businessmen? Did he scare them as much as, oh,
Stalin, who controlled one of the world’s largest economies and was expanding
his influence? or as much as Mussolini? Or as much as the fascist government of
Japan? Or as much as Hitler, who was confiscating property of Jewish
investors and businessmen?

So there you have it.  FDR not as bad as Hitler, therefore, FDR a good president.  Compare with Bryan Caplan’s actual argument.

Readers will not be surprised to know that I am not normal.  Indeed, I have not been normal for a long time as this post from 4 years ago attests:

Roosevelt and the Great Depression

I was amused to see Conrad Black writing with shock:

Jim Powell of the Cato Institute (cited approvingly in a recent column by Robert L. Bartley) argues in a new book that FDR actually prolonged the Depression!

Of course, Powell is correct. Imagine, increasing the power of
unions to strike and raise wages during a time of mass strikes and mass
unemployment. Imagine thinking that cartelizing whole industries
thereby raising prices and reducing output could improve the economy.
Not everything Roosevelt did was counterproductive – he did end
prohibition (although in order to raise taxes) – but plenty was and
worst of all was the uncertainty created by Roosevelt’s vicious attacks
on business. (See, for example, the work of Bob Higgs especially this important paper and historian Gary Dean Best’s overlooked classic Pride, Prejudice and Politics.)
Business investment failed to recover because business people
legitimately feared a regime change like that which had occured in
Germany and Italy. Sound extreme? Roosevelt himself threatened/promised
this in his first inaugural:

…if we are to go forward, we must move as a trained and
loyal army willing to sacrifice for the good of a common discipline,
because without such discipline no progress is made, no leadership
becomes effective. We are, I know, ready and willing to submit our
lives and property to such discipline, because it makes possible a
leadership which aims at a larger good… I assume unhesitatingly the
leadership of this great army of our people dedicated to a disciplined
attack upon our common problems….in the event that the Congress shall
fail to take one of these two courses, and in the event that the
national emergency is still critical, I shall not evade the clear
course of duty that will then confront me. I shall ask the Congress
for… the power that would be given to me if we were in fact invaded
by a foreign foe.

My wife was not at all happy about my recent post on the wild self.

The bottom line?  If you want to please the economist in me, send me
cash.  If you want to please my wild self (you know who you are!) use
your imagination.

Her words: "Your wild self is getting socks and don’t think any different.  Thank goodness my friends don’t read your blog." Uh oh, now I am in real trouble.

Comments are not open.

Regarding global warming and what to do about it, Brad DeLong approvingly paraphrases Tyler, "uncertainty is not the friend of doing nothing."  Bearing in mind the obvious dangers of contradicting both Brad and Tyler let me counter with "uncertainty is the friend of delay."

If you are faced with two environments one of which has outcomes somewhere between -10 to 10 and the other somewhere between -100 to 100 then I agree that the greater uncertainty of the latter provides no necessary reason for doing less relative to the former. 

Suppose, however, that we are uncertain about which environment we are in but the uncertainty will resolve over time.  In this case, there is a strong argument for delay.  The argument comes from option pricing theory applied to real options.  A potential decision is like an option, making the decision is like exercising the option.  Uncertainty raises the value of any option which means that the more uncertainty the more we should hold on to the option, i.e. not exercise or delay our decision.

Imagine, for example, that there are 100 doors before us.  We can enter any door but once we enter it will be costly to exit.  If we don’t decide then over time we learn a little bit about what is behind each door.  If our uncertainty to begin with is small, we know that behind each door is more or less the same thing, then learning has little value and we should decide now (assuming some modest cost to waiting).  But if our uncertainty is large then learning has a lot of value and we should delay our decision until some of our uncertainty has been resolved.

Applying the theory to global warming isn’t easy because our decisions involve many options and exit costs but if we think that our knowledge of the extent, cost, cause and solutions to global warming are increasing at a faster rate than the danger of global warming then delay of any major decision is a rational policy at the present time.