Coordination Problem

Wicksteed Reprinted -- eBook version thanks to Laissez Faire Books

|Peter Boettke|

Jeff Tucker, as he has for over 20 years, continues to enrich the world by making sure that no classic text in economics goes unavailable to new generations of readers.  Jeff's role in the world-wide spread of market oriented thinking and Austrian ideas in particular cannot be overstated. LFB has just reprinted in an eBook version Philip Wicksteed's classic text The Common Sense of Political Economy.  This edition contains not only Lionel Robbins excellent introduction from the 1932 edition, but also Israel Kirzner's essay on Wicksteed as the British Austrian, and appreciations by Jeff and also myself of Wicksteed classic work and its place within the economics literature.

My contribution was also published at the LFB website.

Wicksteed is a great read for anyone who loves economics, and anyone who is struggling with economics Wicksteed might actually provide the "cure" to that problem and help you fall in love with the beautiful logic of economic reasoning.

Living Economics Podcast at EconTalk

|Peter Boettke|

My podcast with Russ Roberts is now avaiable at EconTalk.  Thanks Russ for the opportunity.

Russ also has posted at Cafe Hayek a good summary of some of the broader implications of what we talked about as it relates to the economics profession and public policy.

Welfare for the Well-To-Do

|Peter Boettke|

Former student and co-author, and now economics professor at James Madison University, John Robert Subrick, pointed me on FB to this article --- The Unequal State of America --- about the economic situation in DC and its suburban surroundings.  These passages particularly struck me:

Two decades of record federal spending and expanding regulation have fostered a growing upper class of federal contractors, lobbyists and lawyers in the District of Columbia area. The federal government funneled $83.5 billion their way in defense and other work in 2010 - an increase of more than 300 percent since 1989, even after adjusting for inflation. Private industry poured more than $3 billion into lobbying to influence the government, nearly double what it spent a decade ago.

Like spokes on a wheel, the high-rise offices of this elite radiate out from Capitol Hill along major arteries deep into suburban Maryland and Virginia. The latest Census figures placed 10 of the capital's surrounding counties in the top 20 nationwide for median household income - up from six in 1990.

There probably isn't much society can do to stop some causes of the spreading class divide, such as technological change. But there's one factor that is changeable - public policy.

Reading this reminded me of Milton Friedman's discussion in Free to Choose of how public policies designed to help the least advantaged often result not in improving the lot in life of those at the bottom of the economic ladder, but those higher up on the ladder who administer such programs.  Here is the segment from the TV series:

 

And here is Friedman giving a public lecture on middle-class welfare:

One of my teachers -- the great Gordon Tullock -- wrote a fantastic book entitled The Economics of Income Redistribution (1983) as well as a more popular treatment of the issues published as Welfare for the Well-To-Do.  Since that time, as this article shows, the problems has only grown more obvious for anyone who will open their eyes to see.  What are we going to do about it?

 

 

Compare and Contrast --- Economic Analysis of Mercantilism and Its Contemporary Relevance

|Peter Boettke|

Here is Dani Rodrik writing on Januray 9th of 2013.

Here is Murray Rothbard writing in November 1963.

Rodrik claims that "The liberal model has become severely tarnished, owing to the rise in inequality and the plight of the middle class in the West, together with the financial crisis that deregulation spawned."  But the reason for this is precisely because for the past 6 decades it hasn't only been the Asian countries that have pursued Mercantlist policies (as Rothbard explained 50 years ago).

So while Rodrik is basically right when he says: "The history of economics is largely a struggle between two opposing schools of thought, liberalism' and 'mercantilism.'" He is off the mark when he states that: "Economic liberalism, with its emphasis on private entrepreneurship and free markets, is today’s dominant doctrine."  This is true only in rhetoric, but not in the reality of economic policy practice.

I often wonder what world folks are looking at, let alone studying, when they make claims that the laissez faire model of economic liberalism is dominant.  Every where we turn in our economic lives we can see the grabbing hand of the state.  Throughout the western world we have bloated public budgets, the manipulation of money and credit, obstructionist regulations, and numerous measures to weaken the discipline of profit and loss.  In short, we have state controlled market economies.  We are living the policy reality of mercantilism, while rhetorically emphasizing economic liberalism.

Time to read Rothbard closely and straighten this mess out.

 

Disruptive Education --- Comparative Political Economy Spring 2013 Edition

|Peter Boettke|

I have been teaching a variant of a course on comparative political economy since the mid-1980s -- to undergraduates, MBAs, and MA and PhD students in economics.  I have experimented with different books and different approaches.  But this year, inspired by a lecture I attended by Jeff Sandefer, I have decided to switch things around again.  We will see how it goes, and how good I am at learning new tricks.

Please share your thoughts on your own experience with disruptive education.

 

Spring 2013 Schedule for Workshop in Philosophy, Politics and Economics

|Peter Boettke|

We start the semester off next Thursday (1-24-13) with Casey Mulligan of the University of Chicago discussing The Redistribution Recessions.

Schedule can be found here.

Graduate Study in Economics at GMU and the Mercatus Center

PhD Fellowship

Fact Sheet | February 1, 2013 Application Deadline

The PhD Fellowship is a three year competitive fellowship program for students who are pursuing a PhD in economics at George Mason University. The PhD Fellowship includes full tuition support, a stipend, and a research assistantship position with faculty in the Mason economics department. PhD fellows take courses in Virginia political economy, Austrian economics, and institutional analysis and work on projects that use these lenses to understand global prosperity and social change.

MA Fellowship

Fact Sheet | March 1, 2013 Application Deadline

The MA Fellowship is a competitive, full-time fellowship program for students pursuing a master’s degree in economics at George Mason University who are interested in gaining advanced training in applied economics in preparation for a career in public policy. The MA Fellowship includes full tuition support, a stipend, and a research assistantship position with Mercatus scholars. That is a total award of up to $80,000 over two years. Successful MA Fellows have secured public policy positions in federal and state government, and at prominent research institutions. Ideal candidates are students who are interested in pursuing a career in public policy rather than academia.

Adam Smith Fellowship

Fact Sheet | March 15, 2013 Application Deadline

The Adam Smith Fellowship is awarded to graduate students attending PhD programs in a variety of fields including economics, philosophy, political science, and sociology. The aim of this fellowship is to introduce students to key thinkers in political economy that they might not otherwise encounter during their graduate studies. Smith Fellows spend three weekends during the academic year and one week during the summer in residence at George Mason University participating in workshops and seminars in Austrian economics, constitutional political economy, and institutional analysis.

Here is the website for Graduate Student Programs at the Mercatus Center.

Why We Fight

|Peter Boettke|

One benefit of coping with the flu, is the opportunity to catch up on things you wanted to watch but haven't had the opportunity to watch.  So I watched the documentary Why We Fight, which is about the rise and maintenance of the military-industrial complex.

 

This documentary describes what Milton Friedman referred to as the "iron triangle" (special interest groups, politicians, and government bureaucracies) within the context of the military-industrial complex.  Friedman isn't invoked in the documentary, that is me making sense of the discussion via the economic way of thinking.

In many ways, the documentary is a good compliment to Chris Coyne's After War: The Political Economy of Exporting Democracy.  Given our ongoing budgetary woes, it makes sense to read (re-read) this book and realize just how costly our military efforts have been for so little benefit.  Don't jump to conclusions, I know that military spending is not the only bloated aspect of our budget.  There are cuts required across all aspects of government.  As I have argued, our public debate has to switch from discussions of scale, to questions of the scope of government. Until we do that, not much progress will be made.  As Keynes said, 'you don't make a fat man skinny by tightening his belt.'  Starving the state of resources isn't the effective way to tackle these problems, starving the state of responsibility is.  But that requires that we build the intellectual case for how the private sector and civil society can effectively address the social ills that led to increased calls for state action to address them.  A robust case for the voluntary sector (market and civil society) can address poverty, ignorance, squalor must be made and communicated effectively to the general public.

That is a tall order, but we can first start with an eyes-wide open approach to the extent of the costs associated with our current policies, and the limited benefits.  Documentaries such as Why We Fight are one way to alert citizens to this reality.  Books likes Coyne's Afer War provide the cool-headed analysis that explains this reality.

Some Economic Education Opportunities

|Peter Boettke|

One of my former students from NYU -- Joseph DiFiglia -- after a very successful career on Wall Street is now pursuing a new career as Executive Director of the New Jersey Council for Economic Education.  If you have kids in NJ or are a teacher in NJ, I strong encourage you to look at the programs that NJCEE will be offering.  If you don't have any connection to NJ, but nevertheless care about economic education at the K-12 level, please "like" their page on FB and "tweet" about their work at Twitter.

With the launch of the website, Joe decided to use a quote from Living Economics on the banner. I love this for at least two reasons: first, the mission of NJCEE in educating the youth of NJ in basic economics, and second, the message that the particular quote conveys.

For college students, the Foundation for Economic Education is now accepting applications for their summer 2013 seminars.  If you are a college student interested in free market ideas, there is no better organization to get involved with than FEE.

And if you are an advanced student, the Institute for Humane Studies is accepting applicants for their Humane Studies Fellowships.

 

Market Monetarism and the Monetary Constitution

Steven Horwitz

An important post from Lars Christensen at The Market Monetarist this morning.  Lars argues that many folks have misunderstood the argument for monetary easing in order to target NGDP growth by framing it in terms of discretionary policy.  The market monetarists, he argues, are not imagining a world in which the central bank is constantly fiddling with the money supply, nor does their view reject the idea that sometimes monetary policy can be too expansionary.  They are neither "doves" nor "hawks," because both of those are, again, couched within a framework of discretion.

Instead, he argues that what they want is what Buchanan wanted:  a monetary constitution. 

Buchanan was a constitutionalist. He was concerned about one thing and one thing only and that was how to define the rules the game – also in monetary matters. This to me is what Market Monetarism to a large extent is about (or at least should be about).

We want central banks to stop the ad hoc’ism. In fact we don’t even like independent central banks – as we don’t want to give them the opportunity to mess up things. Instead we basically want as Milton Friedman suggested to replace the central bank with a “computer”. The computer being a clear monetary policy rule. A monetary constitution if you like.

The problem with today’s monetary policy debate is that it is not a Buchanan inspired debate, but a debate about easier or tighter monetary policy. The debate should instead be about rules versus discretions and about what rules we should have.

Obviously Market Monetarists have been arguing in favour of monetary easing in both the US and the euro zone, but the argument is made within the framework of NGDP level targeting. We not always “dovish”. In fact most of us would probably have argued that monetary policy in the US and in most Europe have been overly easy for the last 40 years. But that is besides the point. The point is that we really should not have a discussion about easier versus tighter monetary policy. We should debate the rules of the game – James Buchanan would have told us that.

Free banking types might wonder whether NGDP targeting really does operate "like a computer" give the complexities of ensuring that a given change in the monetary base will have the desired effect.  However, Lars does make an important point in arguing that NGDP targeting is a rule and that debates over the desireabilty of further monetary expansion (which Lars, I believe, does not favor at this time) should be framed in terms of what we would want a good "monetary constitution" to generate, rather than our preference over what sort of discretionary path the Fed should take.

I have written on free banking, Buchanan, and the monetary constitution in "Do We Need a Distinct Monetary Constitution?" which is part of the Buchanan symposium in JEBO.  The ungated SSRN version is here.

Cross-posted at Free Banking.