Did Keynes favor planning?

by  Tyler Cowen in

Barkley Rosser and Brad DeLong say no, but it depends on definition and context. Barkley tries to talk his way out of it, but Keynes in the General Theory did advocate “a somewhat comprehensive socialisation of investment.”  “somewhat” — that’s my kind of weasel word!  In any case this was not the same as classical central planning circa 1920, but in a rap video I consider that acceptable license.  By my count “central plan” comes up once in a ten-minute video and most importantly Keynes does not accept the characterization but rather responds that the debate is about spending.  The video is not suggesting that each and every rapped point is true at face value, and if the two characters seem to debate past one another that too reflects the reality at the time.

Also consider another piece of evidence, namely the Keynes-approved preface to the German-language (uh-oh) edition of the General Theory:

Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.

Points in response are: a) Keynes does not seem to actually favor the German system, even if he thinks it is better suited to Keynesian doctrine, b) the Nazi system was not “central planning,” and c) this was written in 1936 before the worst acts of the Nazi state, planning or otherwise.

Nonetheless, in Keynes’s time enthusiasm for significant socialistic planning was common.  Keynes had it too, at least for a while in the 1930s.  It was a milder planning than the worst ideas circulating at the time, but it’s fair game to contrast it with the anti-planning sentiments of Hayek.  Can you imagine Hayek writing a preface like that?  I don’t think so.

Assorted links

by  Tyler Cowen

1. Why is this an equilibrium (video of cheetahs)?

2. The real Hayekian answer should be, and sometimes was, nominal gdp targeting, to minimize price distortions.  There is much more on Hayek and nominal gdp here (pdf).

3. Via Chris F. Masse, Pepsi Social Vending System Spam Markets in Everything.  Egads, can’t you just buy a soda?  What’s wrong with monetary exchange?

4. Extending Tim Harford’s idea, are economic facts disappearing (Hernando de Soto)?

5. Brazil is massively violating PPP, I can attest to this.

The Lost Eden of Childhood. Not Lost. Not Eden.

by  Alex Tabarrok in

Jim Manzi warms to Paul Krugman’s nostalgia:

It’s difficult to convey the almost unbearable sweetness of this kind of American childhood to anybody who didn’t live it. The safety and freedom that Krugman describe are rare now even for the wealthiest Americans – by age 9, I would typically leave the house on a Saturday morning on my bike, tell my parents I was “going out to play,” and not return until dinner; at age 10, would go down to the ocean to swim with friends without supervision all day; and at age 11 would play flashlight tag across dozens of yards for hours after dark. And the sense of equality was real, too. Some people definitely had bigger houses and more things than others, but our lives were remarkably similar. We all went to the same schools together, played on the same teams together, and watched the same TV shows. The idea of having, or being, “help” seemed like something from old movies about another time.

Who doesn’t look upon their childhood with wistfulness for what has been lost?  Exile from Eden is one of the oldest stories on record. But don’t mistake personal narrative for reality.  When Manzi says “we all went to the same schools together, played on the same teams together, and watched the same TV shows.” He isn’t talking about African Americans. And was the idea of having or being help, really “from a different time”? Again, not for African Americans. In 1950 more than 40% of African American women in the labor force were domestic servants. (Moreover, given these numbers a back of the envelope calculation suggests proportionately fewer homes with maids today.) See also Megan McArdle on Manzi’s vision and women staying at home.

Growing up in Northern Virginia, my children experience far more ethnic, cultural, racial and sexual diversity and equality than just about any child growing up outside of a commune did in the 1950s and 1960s.

Has childhood freedom been lost?  No. Childhood freedom hasn’t been “lost,” it has been taken away by parents. As a child, I too was free to play in the woods but then again my parents didn’t buckle me up in the car, either.

Has safety decreased? It is true that one of the most horrible things we can imagine, homicide, is up. For kids aged 5-14 homicide mortality went from 0.5 per 100,000 in 1950 to 0.8 per 100,000 in 2005. Overall, however, kids are much safer today than in the 1950s. Accident mortality, for example, is down from 22.7 per 100,000 in 1950 to 6.2 per 100,000 in 2005 (see Caplan’s Selfish Reasons for more details). Maybe buckling up and ocean supervision isn’t so bad. Maybe parents today worry too much. Probably some of both.

There have been big improvements in accident risk since even my childhood years.  I remember those idyllic summers of the 1970s earning a few extra dollars mowing lawns–80,000 amputated fingers, hands and mangled toes and feet every year back then and just 6,000 today. Would I even let me kid use a mower from the 1970s?  Disease mortality is also way down, from 36.6 per 100,000 in 1950 to 8.6 per 100,000 in 2005.  For good or for ill, parental fears have increased even as risks overall have fallen.

There is nothing wrong with a bit of personal nostalgia but when nostalgia is taken for reality it biases our thinking in counter-productive ways. One wonders, for example, what those who look back longingly at the freedom of their childhood would say about Lenore Skenazy and her free-range kids. Skenazy let her fourth-grader take the NYC subway home alone.  Would Manzi applaud Skenazy for giving her kids the same freedoms he had?  Or would he denounce her, as many parents did, for something tantamount to child-abuse?

Car thieves are not locavores, or the law of one price

by  Tyler Cowen in

The men who carjacked Dunkley on March 17 were professional thieves, members of a sophisticated transatlantic car theft ring, police said. Their plan — thwarted by Prince George’s County detectives who arrested them this month — was to ship her 2009 silver Toyota thousands of miles to Lagos, Nigeria, authorities said.

The story is here.  What is the incentive to steal?

In the Prince George’s ring, the thieves are paid according to the vehicles they carjack or steal — $1,500 for a Toyota Camry, $2,500 for a RAV4, $5,000 for a Porsche Cayenne…

Did you guess that tariffs on legitimately imported cars to Nigeria are quite high, much higher than those fees?

The spiral in health care costs

by  Tyler Cowen

It affects many different nations:

The American Pet Products Association estimates that Americans will spend $12.2 billion on veterinary care this year, up from $11 billion last year and $8.2 billion in 2006.

And this:

Pet health insurance is a booming industry, growing more than 20 percent every year, although only an estimated 3 percent of pet owners have bought policies.

First, at least at low levels of cost, relying on out of pocket expenditures isn’t controlling cost growth.  Second, the insurance is available to begin with, albeit with restrictions:

But like health insurance for humans, pet insurance can be complicated and highly restricted. Some policies will not cover older pets or genetic conditions that certain breeds are known to have, such as hip dysplasia in retrievers.

Others limit coverage to only one treatment per illness. So if your dog develops asthma, for instance, some policies will cover just the first trip to the vet although treatment will require multiple visits.

Is this what free market health insurance would look like for older humans?  The full story (1/20) is here.

Here is the pet health insurance blog.  September is pet health insurance month.  Here is a question I had never heard before:

Have you ever forgone health insurance for yourself to cover your pets?

A simple model of a reluctant Fed

by  Tyler Cowen in

Imagine there is incipient downward pressure on real wages, just as real wages have fallen in Japan and male real wages have been flat or falling in the United States, both across longer-run periods of time.  Yet for the usual reasons of morale and uncertainty, employers do not wish to cut real (or nominal) wages.  An extra three to four percent price inflation would cut real wages by three to four percent for a large segment of the employed.  It would accelerate a trend which is already underway, and will eventually happen anyway, yet it will telescope a lot of that trend into pre-2012.

There are more employed than unemployed, by a considerable margin, plus many of the unemployed do not vote or do not vote strategically.  The inflation may be a Pareto improvement, desired by benevolent central bankers, but why should an office-holding politician desire this outcome?  Which politician wishes to accelerate a decline in real wages?

Most generally, I suspect that electoral opposition to inflation will rise to the extent median wage stagnation is a problem.

*Adapt*, by Tim Harford

by  Tyler Cowen

I was excited to read Tim’s book because I have been thinking about similar issues.  He explores the fact that the division of labor, and division of knowledge, keeps on progressing, and that such progress brings surprising and sometimes frustrating results.  He starts with a vivid anecdote about how hard it is for a single person to invent a toaster:

The toasting problem isn’t difficult: don’t burn the toast; don’t electrocute the user; don’t start a fire.  The bread itself is hardly an active protagonist.  It doesn’t deliberately try to outwit you, as a team of investment bankers might; it doesn’t try to murder you, terrorise your country, and discredit everything you stand for…The toasting problem is laughably simple compared to the problem of transforming a poor country such as Bangladesh into the kind of economy where toasters are manufactured with ease and every household can afford one, along with the bread to put into it.

Tim remains a wonderful expositor and popular economics writer but this is also a book of ideas, and it is ahead of what most other people are thinking.  One implication is that greater specialization makes innovation much harder — hardly anyone has a good grasp of the whole — and Tim cites the work of Benjamin Jones.  Another implication is that we must rely more on particular kinds of experimentation to make progress on hard problems.  This is all taking Michael Polanyi and Hayek and Whitehead and Ortega y Gasset and turning the heat up a notch; we are increasingly alienated from a knowledge of the whole and yes that matters.

Ultimately Tim shies away from making this a book of breakdowns, but I would have enjoyed seeing him postulate a Don van Vliet Trout Mask Replica equilibrium and then trying to put the pieces back together again.  Is there some non-linear point at which some institutions can no longer be reassembled in working form?  There is plenty of material on this question, but perhaps not quite a full confrontation with pessimistic scenarios.  That will have to wait for the sequel.

The bottom line: I was never reading this because it will be popular and I wanted to review it, I was always reading it to ponder the ideas.  You can buy the book here.

Mexico facts of the day

by  Tyler Cowen

From the Mexican census, via Andrew Sullivan:

In 1990, one in five dwellings had a bare-earth floor. Now only 6% do. … More interesting still is what Mexicans put in those homes. More houses have televisions (93%) than fridges (82%) or showers (65%). In a hot country with dreadful television this is curious.

I don’t find this puzzling at all.  A lot of Mexico has elevated altitude and many of the homes are open air.  Mexican TV is more fun than taking a shower, too.

Natural Gas

by  Alex Tabarrok in

The graph is from Peter Tertzakian who notes:

To put this in perspective, 1,000 Tcf of natural gas contains the equivalent energy to 166 billion barrels of oil – a staggering amount considering that the discovery of 10 billion barrels of conventional oil these days is a rare occurrence, worthy of many headlines…

Estimates of recoverable shale gas have doubled in just the past year and shale gas is only part of the supply with the total being 2,552 trillion cubic feet (Tcf) of potential natural gas resources in the U.S. alone. Per unit of electricity, burning natural gas results in significantly fewer carbon dioxide emissions than coal. It is possible, however, that fracking may leak more methane to the atmosphere so the net climate benefit is unclear, at least given current methods of development.

Hat tip: Paul Kedrosky.

MaLa Tang

by  Tyler Cowen in

It is on 3434 Washington Boulevard, in Arlington, adjoining the George Mason University School of Law buildings (with Mercatus and School of Public Policy and ICAR), home page here.  It is real Sichuan hot pot, excellent flavors all around, reminiscent of Uncle Liu’s Hot Pot (same owner), superb cold dishes and appetizers, and the best MaPo Tofu in the entire area.  They’ve made the decor chic, the wait staff “normal,” and you can just walk up to a counter and get ready-to-eat Sichuan street food to your heart’s content on a moment’s notice.  I predict this will serve  as a major breakthrough for real Sichuan food in northern Virginia and also in the United States.  Here is one good review.

File under “Now Open for Business.”