Coordination Problem

Time to Play "Spot the Fallacies" - Parenting Edition

Steven Horwitz

Here's a fine example of the sort of nonsense that parents who don't think like economists will spew.  This contains at least one empirical fallacy and one example of bad reasoning.  Feel free to spot more.  It was a comment left on a blog post of Free Range Kids author Leonore Skenazy's at ParentDish.com.

“WHEN ARE PARENTS GOING TO LEARN THAT LEAVING YOUR CHILD WITH ANYONE OTHER THAN YOUR HUSBAND OR TRUSTED FAMILY MEMBER OR FRIEND, FOR EVEN ONE MINUTE IS PUTTING YOUR CHILD AT RISK. WAKE UP PARENTS!!! YOU CAN NEVER BE TOO PARANOID WHEN IT COMES TO THE SAFETY OF YOUR CHILDREN.”

My choices below the fold.  And you can hear my podcast on Skenazy's work here.

Great Short Video on the Broken Window Fallacy

Steven Horwitz

Tom Palmer and Austin Petersen from Atlas have put together a nice, short video looking at Bastiat's Broken Window Fallacy by asking why people think natural disasters are good for the economy.  Tom does an excellent job in explaining the fallacy with several useful examples (if 9/11 footage bothers you, be forewarned).  Along with Sean Malone's nice piece on profits and, of course, the now million views SAMMIE winning "Fear the Boom and Bust," we are getting quite the stable of video treatments of good economics, all of which are highly usable in the classroom.  These are exactly what is needed to reach younger people.  Great work by all.

Bonus points to anyone who emails a copy to DeLong.

Rationality, Intelligence, and Economic Policy

|Peter Boettke|

In January I re-read Frank Knight's "The Role of Principles in Economics and Politics," AER 1951 and I have been struck by his argument concerning the educational task of the economist and the paradox the economist faces in public discourse.  I went from that essay to re-reading Knight's Intelligence and Democratic Action (Harvard, 1960).  This book consists of lectures presented at the Thomas Jefferson Center for Political Economy at UVA in the 1950s.

In this book, Knight makes an important argument about the intellectual prejudices that distort rational public discourse and economic policy deliberations.  The two most pernicious economic policy ideas, according to Knight, are (a) protectionism, and (b) inflation.  And the reason why these ideas keep surfacing in economic policy is because of the failure of individuals to remember that voluntary exchange is mutually beneficial, and the belief that the government has God-like qualities and acts only to serve the public good.

Reading Knight reminds me of sitting attentively in Professor James Buchanan's classes --- the only classes I ever sat in the front row of --- and his statement that: "It takes varied reiterations to force alien concepts upon reluctant minds."  Why is it that economic common-sense is so difficult to communicate?

What Are All These People Talking About?

|Peter Boettke|

How about everything that makes life better --- family, friends, and others connecting to share information --- including information about opportunities for mutually beneficial exchange and wealth creation.

Bill Easterly just has an amazing ability to capture the profound meaning in the everyday lives of individuals throughout the world and communicate it to the rest of us in the most straightforward manner possible.  He is perhaps the best example of why simple economics is not simpleminded economics.  It is instead precisely what needs to be said at the time it is said to get us to understand what is going on and why.

V, U, W, L

|Peter Boettke|

No, this is not an eye test.  It is instead the first slide in Tyler Cowen's very impressive public lecture this evening on the financial crisis.  The letters refer to the potential shape of the current recession.

Which shape of recession do you think we are experiencing?

Dog Bites Man: Congressional Leaders Don't Understand Unintended Consequences

Steven Horwitz

And so it begins.  As many folks predicted, the passage of so-called "health care reform" has sent the signal to major US corporations that their insurance costs will be rising.  The result is that several have already announced plans to take large charges on their budgets to offset the costs.  In the case of AT&T, for example, it's $1 billion due to changes in the tax treatment of their in-house subsidies for the health care costs of their retirees. 

Equally predictable has been the reaction of Congress:  demand that the CEOs come to Washington and justify those charges.  If you didn't think we were on the road to the world of Atlas Shrugged, this should make matters clearer.  

What's most amusing though is the way that Representatives Waxman and Stupak phrased matters in their letter to the CEOs:

“The new law is designed to expand coverage and bring down costs, so your assertions are a matter of concern.”

In other words:  "this law isn't working out how we intended, dammit, and it must be your fault! We said this would bring down costs, so that should be sufficient!"  It really is the equivalent of a five year-old's temper tantrum at not getting his way in a complicated world.

It never occurs to Waxman, Stupak, et. al. that there might be a set of economic laws out there that not even the mighty power of Congress and King Obama can bend to their wishes.  If their law "said" coverage would expand and costs would come down, then only the evil designs of greedy people could be frustrating that result.

It couldn't be that the legislation was doomed from the start and that this is the result that a number of critics predicted, could it?

That Congress would ignore or discount unintended consequences is indeed a "Dog Bites Man" story.  But for those who claim that opponents of ObamaCare were fear-mongering or racists or just opponents of change, I will only suggest that this will be the first of many of our predictions about its effects that are likely to come to pass.  And I will be doing my personal best to document as many as I can, so watch this spot.

Speaking of the Crisis

|Peter Boettke|

I am surprised we haven't discussed the recent paper by Alan Greenspan and the comments by Greg Mankiw dealing with the financial crisis and future policy responses that might mitigate crises. I think it would be good for us to discuss these papers in depth here.

On Monday March 29th, Tyler Cowen will be giving a public lecture at the Center for the Arts at GMU entitled "The Financial Crisis: Where It Came From and Where We Are Headed." Tyler has actually become in my opinion an outstanding public speaker so I am very much looking forward to this, and in fact am bringing my graduate class to the lecture.  When some of the students called for tickets, they were informed that this was the most popular lecture in terms of ticket distribution that they have had in the history of the Vision Series.

Tyler Watts wins Vernon Smith Award

|Peter Boettke|

One of my PhD students, Tyler Watts, learned just the other day that he has won the Vernon Smith Prize for the Advancement of Austrian Economics awarded every year by the European Centre of Austrian Economics Foundation.  Tyler won 1st place for his essay "Entrepreneurial Externalities" and will travel to Liechtenstein to present his paper at the end of April.

Tyler is a humble and hard-working economist and political economist, and an outstanding teacher of economics.  Please join me in congratulating Tyler on his success and wishing him continued success with his work.

Books that Influenced Hayek

|Peter Boettke|

Greg Ransom has an amazing list of the works that influenced Hayek.  What works would you suggest might still need to be added?

My suggestions would be Bertanlanfy's General Systems Theory, Olson's Logic of Collective Action, and Rawl's essays which eventually led to A Theory of Justice.

David Skarbek to Duke Political Science

|Peter Boettke|

During an absolutely amazing Kansas State versus Xavier double-overtime NCAA game, I learned some amazing news about the Duke Blue Devils. It wasn't about Duke's upcoming game against Purdue tonight, but the news made me as wildly happy as the Cameron Crazies during a blow out of cross town rival UNC.

David Skarbek accepted an offer to join the political science department at Duke University as a Searle Assistant Professor, where he will work with public choice superstar (and infamous chauffeur for Keynes in "Fear the Boom and Bust") Michael Munger.

Please join me in congratulating David in having this outstanding opportunity.  And since my bracket is blown anyway, you know who I am rooting for to win the NCAA now! Go Blue Devils.