The popular press has begun to mention Martin Feldstein as a possible successor to Alan Greenspan. The other listed candidates, Stanley Fischer and Larry Summers, probably do not have sufficient “right-wing credentials” to get the job. Feldstein offers some recent thoughts on monetary policy. He also endorsed the Bush tax cuts, arguably a sign that he is angling for the job. Feldstein tends to favor targeted fiscal incentives in lieu of traditional Keynesian remedies. Overall he commands the respect of his peers and has had significant administrative experience in building up the National Bureau of Economic Research. But it is hard to tell what kind of monetary policy he would pursue, and how strong an independent stance he could define, if he held the office.

Here is the ever-insightful Brad DeLong on why the current productivity and employment data are so hard to understand. Read Brad here and here (a longer, more technical post) for more context. The key point is this: many companies are prospering, and increasing absolute output, even as they are laying off workers. The implied numbers for productivity increases, per remaining worker, are simply astounding.

This essay by the deceased Robert Nozick has a few years on it, but I never knew there was an on-line version. It is the best piece I know on why so many intellectuals oppose capitalism. See my earlier blog post on the inability of some researchers to find a single registered Republican within some departments of MIT and other universities (of course Republicans commonly fail capitalism but I suspect that is not the objection of the MIT faculty). With thanks to Cato, Newmarksdoor, and BrianMicklethwait.com.

Here is one excellent sentence of many:

“The intellectual wants the whole society to be a school writ large.”

Nobel Laureate Daniel Kahneman is engaged in some fascinating work, read this summary:

“…the duration of an experience plays essentially no role when evaluating how well it becomes etched in our memories.

Kahneman believes the most direct way to evaluate experienced utility is to ask people how they feel at a certain moment, a notion he calls “moment utility.”…But because researchers are more interested in extended outcomes, more often the question they ask is memory-based: “How was it?” Kahneman said this is a different question that reflects the individual’s global evaluation of an entire episode in the past and it may not be a direct assessment of the individual’s real-time state. This “remembered utility,” said Kahneman, is not a very good guide when predicting outcomes. The “total utility” of a state is derived from the moment-based approach of measuring the real time pleasure or pain experienced by the individual.”

In other words, one of our selves does the living, another keeps the memories.

“”When people make decisions, the remembering self is in control, Kahneman explained. “We make our decisions in terms of our memories and basically, we maximize remembered utility, not the actual total utility,” he said. “The only thing we can learn to maximize through personal experience is remembered utility.””

And don’t you forget that.

Also read our earlier blog posts on whether people understand their own happiness, here, and here.

No, says Andrew Rose, economist at UC Berkeley. His recent paper finds that countries don’t move towards more open trade policies after joining WTO. He views the WTO as “small and impotent…by design”, click here for a summary of the research.

“You are wrong to believe that a new kitchen will make you happy for as long as you imagine.”

Conversely, a tense marriage or a trick knee will give you more agony than you think. But most things matter less than we think they will, an old theme from the seventeenth century French moralist La Rochefoucauld. There is a good deal of experimental evidence that we make these “happiness mistakes” time and again, failing to learn from experience.

So argues Daniel Gilbert, professor of psychology at Harvard, profiled in today’s New York Times Magazine (registration required). Daniel Kahneman, last year’s Nobel Laureate in economics (with Vernon Smith), once told me that time spent with friends, not new gadgets, is what people really enjoy.

Our brains are trying to regulate our behavior, not trying to make us happy. According to Tim Wilson,

“We don’t realize how quickly we will adapt to a pleasurable event and make it the backdrop of our lives. When any event occurs to use, we make it ordinary. And through becoming ordinary, we lose our pleasure.”

We systematically fail to realize how powerful our psychological defenses are, once those defenses become activated. But Gilbert suggests we might need these carrots and sticks to get things done, even if they are illusions.

George Loewenstein, an economist at Carnegie-Mellon, says

“…he [Loewenstein] doesn’t see how anybody could study happiness and not find himself leaning left politically; the data make it all too clear that boosting the living standards of those already comfortable, such as through lower taxes, does little to improve their levels of well-being, whereas raising the living standards of the impoverished makes an enormous difference.”

I buy the basic claims about happiness, but dispute the political conclusion. To the extent we should care about happiness, our imperative is to boost the rate of economic growth, strengthen Western civilization, and hope that Western-style institutions spread around the world. All of these mean a heavy reliance on markets, incentives, and the rule of law.