Coordination Problem

Are Recessions Healthy?

David L. Prychitko

In the September 28 issue of the Proceedings of the National Academy of Science University of Michigan researchers found a negative correlation between recessions and mortality rates:

Population health did not decline and indeed generally improved during
the 4 years of the Great Depression, 1930–1933, with mortality
decreasing for almost all ages, and life expectancy increasing by
several years in males, females, whites, and nonwhites. For most
age groups, mortality tended to peak during years of strong
economic expansion (such as 1923, 1926, 1929, and 1936–1937). In
contrast, the recessions of 1921, 1930–1933, and 1938 coincided
with declines in mortality and gains in life expectancy. The only
exception was suicide mortality which increased during the Great
Depression, but accounted for less than 2% of deaths. Correlation
and regression analyses confirmed a significant negative effect of
economic expansions on health gains. The evolution of population
health during the years 1920–1940 confirms the counterintuitive
hypothesis that, as in other historical periods and market economies,
population health.

Do recessions -- as economic corrections -- also contribute to health corrections?  Of course, what we have here are correlations that cannot establish cause and effect.  Granados and Roux suggest that recessions cause a slowing down of business, a reduction of workplace stress (which more than compensates for the stress of unemployment), a tendency to care more for sickly home-bound family members and so on that all contribute to improved health. 

That's their hypothesis.  I tend to side with the claim that there are significant lags and that the health problems emerge some years later, as the Granados-Roux model only captures up to three years after a downturn. 

What's your hypothesis?

New Podcast: Health Care Costs

Steven Horwitz

SLU has restarted my podcast series for the year.  The first one for the fall is on health care costs.

Happy Birthday to Mises

Steven Horwitz

Born today in 1881, Ludwig von Mises was one of the 20th century's most important intellectuals and one of its most passionate defenders of freedom.  He is the economics equivalent of the giants of all the other disciplines (e.g., Einstein).  And as Mario Rizzo notes over at ThinkMarkets, he is responsible for what is probably the most important single economic idea of the last century:  rational economic calculation is impossible under socialism, and attempts to put such a system in place will only impoverish the citizenry.

I need not say more to this readership about the importance of Mises.  I will just add two other brief thoughts:

1.  In a just world, college students would be reading Mises with the same frequency and breadth as they now read Marx.  After all Marxism as a political-economic system is dead, thanks to Mises and others, so if there were any justice...

2.  Despite the impression that sometimes comes in my own work and that of other so-called "GMU Austrians" that it's all about Hayek, it isn't.  There would be no Hayek without Mises and there would be no Austrian economics as we know it without Mises.  For all of Hayek's brilliance and for all the ways I find his work to be endlessly fascinating and challenging, he is always standing on Mises's shoulders. 

I was cleaning out some old files last week and found several syllabi and notes from Don Lavoie's graduate level Austrian II course in the late 80s, at the height of the hermeneutics stuff.  What's interesting about them, at least the 1987 one, is that we covered enormous sections of Human Action as well as the classic Hayek essays on money and cycles.  What's most interesting is that in the section on "The Knowledge Problem and Economic Systems," there was only one Hayek reading (one of the 1935 essays), while the rest was from Human Action.  And in Jack High's Austrian I course from the previous semester, there were only two required texts:  The Economics of Time and Ignorance and Human Action. 

So happy birthday to the man who is responsible for both the intellectual destruction of the most pernicious idea of the 19th and 20th century and the rebirth of freedom and the Austrian economics that is the best systematic approach we have to understanding human action and its consequences, both intended and unintended.

Entering The World Of Twitter

David L. Prychitko

After listening to Russ Roberts' podcast interview with Tyler Cowen, and his case for the possible intellectual productivity of Twitter, I've signed up myself.  No, I won't be twitting (is that what it's called?) about my hair.

A Video Tour of FEE

Steven Horwitz

Last July when I spoke at "Evenings at FEE," I did an interview with the guys from Motorhome Diaries.  Earlier that day, Wayne Olson the chair of FEE's board took them on a tour of the mansion and gave them a history of FEE and a sense of its ideas.  That video is now available.  If you've never been to the beautiful home of freedom, here's a chance to get a feel for it.  Careful viewing will get you a shot of four of your hosts from summer of 2008, with one of us flashing some kind of Austrian gang sign (Chris...).

The Economics and Political Economy of Fear -- Stiglitz and Prescott edition

| Peter Boettke |

Alex Tabarrok links together the separate discussion from 2 Nobel Prize winners -- Stiglitz and Prescott -- on how the environment of fear generated both the crisis last year and the policy responses.  Stiglitz says "Economics would have suggested that if you did a debt to equity conversion, converting long-term debt into equity, the financial institution would be well capitalized, there would be no reason to panic, and there would be more confidence in the market. But those who saw an opportunity to use scare tactics to get what they wanted did use those scare tactics, and it worked."  Prescott argues that with "benign neglect the economy would have come roaring back quite quickly..."

What do you think about these fear-based arguments?

What is Going on with Fed Policy?

| Peter Boettke |

In the comment section of Mario Rizzo's excellent blog post on the policy of reinflating the bubble, Jerry O'Driscoll explains what is going on:

I think it is both economics and politics. Anna Schwartz remarked that Ben Bernanke studied the Great Depression, but learned the wrong lesson. He is obsesssed with debt deflation, and I doubt he worries about microeconomics and resource allocation. On the political side, he is deferential to the Executive branch. The result is politicized monetary policy.

Don Lavoie's Lectures on Comparative Economic Systems (GMU, 1985)

David L. Prychitko

I apologize for filling up this blog by posting links to my articles within the past couple days.  But this one should be of great interest to our readers. No more self-promotion after this.

I went to GMU in 1984 to study under Don Lavoie, having discovered his early work on the market socialism debate (in the Journal of Libertarian Studies).  I turned down several acceptances from other grad programs (including Clemson, Florida State, Illinois, UCLA, Chicago) at what I thought (correctly) was the top graduate institution to offer a concentration in Austrian economics.  Acceptance deadlines, which I took seriously, led me to turn down several offers (assistantships)  while I waited for a GMU offer.  It paid off when I received a phone call from Don during Easter break.  It was one of the most exciting experiences I can recall.  I had taken a huge risk.  Looking back now, however, I wouldn't recommend that to anyone.

In any event, I wrote dozens and dozens of pages of notes in Don's CES course, whose volume and content would rival that of a courtroom stenographer -- I must have been in some kind of hypomanic state during the entire semester.  These notes have been published this year in Research in the History of Economic Thought and Methodology, and have recently become available to download online thanks to Virgil Storr. 

ADDENDUM:  The pdf contains several "typos" and formatting problems that are not in the original published article.

Habermas

David L. Prychitko

I spent quite a bit of time reading, and trying to make sense of, Habermas's works.  That began in the late 1980s and continued up to a couple years ago.  It was a difficult and time-consuming process, but I thought his effort in political economy (backed by his own methodology) was important, as a large cottage industry arose inspired by his work.  Looking back, the opportunity cost was too high, but at least it did result in a Cambridge Journal of Economics paper that Virgil Storr and I co-authored.  If any of you are interested --and I'm sure most of you are not -- here's a downloadable copy.

A Vist, Some Talks, and a Bet

| Peter Boettke |

As has been reported by Tyler Cowen, this last week Scott Sumner visited us for a few days.  On Tuesday he spoke on what he terms "neoliberalism" (by which he means the 'third way' and the success of Denmark*), then joined us for a talk by Deirde McCloskey on Bourgeios Dignity as well as dinner with McCloskey, and then he gave another seminar on Wednesday on monetary policy and the current crisis.