Economists and Societies

by  Tyler Cowen in

That's by Marion Fourcade and the subtitle is Discipline and Profession in the United States, Britain & France, 1890s to 1990s.

I very much liked this book and I might call it one of my favorite history of economic thought books, period.  It skips textual exegesis and looks at what the economics profession actually did — in the comparative sense — in the United States, England, and France.

On France, I liked the data on p.6.  Circa 1981, only 52 percent of French economists thought that rent control reduced the quantity and quality of the housing stock.  Only 49 percent of French economists thought that flexible exchange rates were "effective," compared to 94 percent in the United States and 92 percent in West Germany.  Remember Alex's blog posts on this topic, here and here?

The extent of hierarchy in the profession in England shocked even me:

Joan Robinson, for instance, did not become a professor until the ripe age of sixty-two.  And such a well-respected economist as Roy Harrod never rose higher than a readership at Nuffield College.

Definitely recommended.  Here is the book's home page.

Why creditors should suffer, too

by  Tyler Cowen in

That is my latest column and the core point is straightforward:

What the banking system needs is creditors who monitor risk and cut
their exposure when that risk is too high. Unlike regulators, creditors
and counterparties know the details of a deal and have their own money
on the line.

But in both the bailouts and in the new proposals, the government is
effectively neutralizing creditors as a force for financial safety.
This suggests a scary possibility — that the next regulatory regime
could end up even worse than the last.

Do read the column for a discussion of how we might make creditors suffer.  Here is why the Obama administration is having such a tough time with the issue:

Right now, people cannot understand why A.I.G. received bailout
money, so they feel deceived. A single insurance company, even a very
large one, just does not seem that essential to the American economy,
which makes the company all the more a scapegoat. Much went awry at
A.I.G., but in the context of a bailout, the company should be thought
of as the conduit for helping an entire market that went bust.

This poses a very difficult public relations problem for the government, because the Federal Reserve and the Treasury do not want to discuss the importance of the creditors too publicly right now.

Why not? It would be bad precedent, and mind-bogglingly expensive, to
promise to pick up all future obligations to major creditors. At the
same time, any remarks that threaten to leave creditors hanging could
panic the markets. So silence reigns, the Fed and Mr. Geithner receive
bad publicity over the bailouts, and we are all laying the groundwork
for a future financial crisis.

James Kwak offers comment.  Here is Arnold Kling.  Mark Thoma has very good comments on time consistency problems.

Harvey Mansfield on economists

by  Tyler Cowen in

Kent Guida sent me this very interesting article; here are a few bits:

The economists I know are generally, as individuals, sober and
cautious, the most respectable of all professors and in their honesty
and reliability representing the best in bourgeois virtue. But when
they get together as economists, they give way to boyish irrational
exuberance over the accomplishments and prospects of economics as a
science.

…Overconfidence in overcoming chance is the way of life recommended by
economists. It is the way of life known as progress by liberals and as
growth by conservatives, who are secretly united by overconfidence in
their knowledge of the future which they describe diversely and call by
different names.

…Now, the main consequence of living the over-confident life is to
believe that virtue is not necessary. Perhaps this is the main cause as
well as consequence of that life. Virtue is a chancy quality because
you may not have it or live up to it. It seems less reliable than
self-interest with its allies, fear and greed. Everybody has
self-interest, which is not true of virtue. But at least virtue does
not depend on predicting the future. On the contrary, virtue is a
resource for everyone when bad times come–something to fall back on,
to give cheer, to restore. On top of that, virtue will save you from
being corrupted by good fortune as well. This is the great truth taught
by the Stoics.

New Deal Revisionism

by  Alex Tabarrok in

The NYTimes has a short piece in the arts section on "new deal revisionism."  Rich Vedder gets the best line:

Mr. Vedder playfully offered another analogy: the recession of 1920. Why was that slump, over and done with by 1922, so much shorter than the following decade’s? Well, for starters, he said, President Woodrow Wilson suffered an incapacitating stroke at the end of 1919, while his successor, Warren G. Harding, universally considered one of the worst presidents in American history, preferred drinking, playing poker and golf, and womanizing, to governing. “So nothing happened,” Mr. Vedder said.

Of course Mr. Vedder does not wish ill health – or obliviousness – on any chief executive. Still, in his view, when you’re talking about government intervention in the economy, doing nothing is about the best you can hope for from any president.

By the way, I am looking forward to hearing Bob Higgs on C-Span this weekend.  Higgs is a top-rate economic historian from whom I learn something new everytime I hear him.

Advertising markets in everything

by  Tyler Cowen in

Laptops Direct can help with your Funeral Costs

In
these difficult credit-crunch times we understand that it’s not easy to
give your loved ones the send off they deserve. With funerals costing
up to £5000 it makes sense to get help.That’s why we’ve put together
this unique sponsorship package, giving you the opportunity to cover
all your costs.

We will help you pay for some, or all of the
funeral expenses, depending on the package you choose. We have a range
of subtle and tasteful sponsorship positions available throughout the
service each bringing you a contribution cost. Please note that in
order for us to be able to offer this service we do require a minimum
of 50 mourners, this ensures we will get the exposure required to cover
the cost of the sponsorship.

All our sponsorship opportunities
are designed to be non intrusive to the proceedings. We can tailor the
list of options to your requirements giving you complete control of the
service. You will have a dedicated funeral assistant at Laptops Direct
who can help with any queries you may have.

The clincher is the list of price quotations, in British pounds, find it here.  I thank Erik Walz for the pointer.

Addendum: It turns out this isn't true!  A fraudulent report.

A new and amazing plan for economic stimulus

by  Tyler Cowen in

Indeed, and  I am not being sarcastic. 

Of course there are many illegal markets that would generate stimulus were they to be legalized.  Here are some of the big ones.

  1. Drugs
  2. Guns
  3. Prostitution (except in Nevada)
  4. Gay prostitution (even in Nevada)
  5. Gambling
  6. Trade with Cuba
  7. Liberalized immigration

I can assure you that today Delta stimulated the book trade.  Thank you all for the comments, I am genuinely pleased that I have all of you to complain to.  It is a real pleasure.

The new Facebook design as profit maximization?

by  Tyler Cowen in

Via Finoculous, here is a very interesting post on why you hate Facebook, yet why it will make the company billions.  It is not written for an easy excerpt but the main argument is that finally the company can produce a commercially viable interface between businesses and people.  Here is one part:

When Zuckerberg announced these changes a couple of weeks ago I told
him he was brilliant and that his moves this month would be remembered
for decades. Decades.

Here’s why:

Let’s say you’re walking down University Ave. in Palo Alto,
California in a couple of years (or, really, any street in the world)
and you’re hungry.

You pull out your iPhone or Palm Pre or Android or Blackberry or
Windows Mobile doohickey and click open the Facebook application. Then
you type “sushi near me.”

It answers back “within walking distance are two sushi restaurants that more than 20 of your friends have liked.”

In his view the new Facebook is basically copying Friendfeed, albeit in a more potent way.  If you announce you are having a baby, you will be contacted by product suppliers and you will learn which baby-related services your friends have liked.

I still don't like it. 

A modicum of sanity on choice

by  Tyler Cowen in

I have not had time to read the original study but this rings true to me:

But now Benjamin Scheibehenne and colleagues have waded into the topic with the claim that the "too-much-choice effect" has in fact failed to appear in many experiments, and with the real-life observation that shops that offer more consumer choice tend to be more successful.

In a series of experiments, Scheibehenne's team tested 598 participants who were asked to choose from among restaurants, charities and music downloads. Throughout, they varied factors that they hoped might explain why the too-much-choice effect sometimes occurs and sometimes doesn't.

Examples of these factors included the need to justify one's choice; the perceived variety of choice, as opposed to actual amount of choice; the mean attractiveness of a range of choices; cultural differences (they tested German and US students); and individual differences such as people's tendency to maximise – that is, their consistent desire to find the perfect option.

For most of the experiments, the too-much-choice effect wasn't actually observed and when it did, the only relevant factor which increased the effect was the need to justify one's choice.

"The fact that most of the variables that we tested were not sufficient to elicit choice overload suggests that the too-much-choice effect is less robust than previously thought," the researchers said.

Repeat this fragment after me: "…the real-life observation that shops that offer more consumer choice tend to be more successful."  

Why do I choose that you should repeat that fragment and not some other?  I'm not going to tell you.