Spivonomy

Euvoluntary Exchange: Heirs Eat Oats and Does Eat Oats

2012-02-15T19:37:00.000-08:00

Euvoluntary Exchange: Heirs Eat Oats and Does Eat Oats

I like mocking the rich. If I could, I would punch them in their smug faces.

But I'd never condone taking their stuff. Mild assault (especially considering my weak, birdlike wrists) isn't remotely as awful as theft or taxation.

Get the lead out

2012-02-15T19:01:00.000-08:00

You know what they say: the trouble with lead in your gas is the... um, well, there's no saying about that, but there is plenty of research to suggest that a drop in environmental lead may be a causative factor in declining violent crime rates.

Holy smokes! What if this is related to the Flynn Effect? Curious.

I am working on some slow-moving research pinning atmospheric lead to AFQT scores, with the hook that the National Guard may act as a sort of third option for intellectual eccentricity.

Need the data still. I asked someone who has already done some leg work, but I've not heard back. I think I may have to do my own FOIA request from the, well, I forget the acronym, but it's the good folks who monitor air quality on behalf of Congress.

A Dreddful Appetite

2009-11-16T12:56:00.000-08:00

Those of us who have at one time or another, sheepishly or otherwise, have cracked open a D&D book know of the character alignment system. Two dimensions are plotted: a good vs evil dimension and a law vs chaos dimension. Neither dimension is especially well defined, not at least to my satisfaction. Ostensibly, a lawful good character will obey the law and serve his fellow man, but what happens if you find yourself living in a land ruled by a tyrant whose idea of law is to imprison dissidents and, I dunno, raise an army of ghouls to wage war on his neighbors? The same dude who might have been all law-abiding and junk in his home country is now at odds with the law, and becomes chaotic good. The Platonist in me tells me that this arrangement is smellier than a haversack that's been sitting under Smaug's dorsal vent for well nigh on a month.

I like to think of law as arising as that set (bundle if you will) of rights and protections that best serve the community from which they arise. A corrupt dictator no sooner makes law than a Vogon makes fine poetry (pardon the liquid universe borders). His decrees are arbitrary and serve only him. Obedience to spurious legislation is not necessarily lawful, and so say the Civil Rights Movement. However, just as the cleric of Tymora in Thay, so Martin Luther King in Alabama. The good Reverend was following natural law, divine law if you will, in that he righteously opposed the unjust rule of man. This was an inherently lawful act, even if it was illegal. MLK was LG.

Chaotic Good is arbitrary do-goodiness. You find this sort engaged in humanistic radicalism and optimistic social engineering. It's chaotic for the very reason that it's untested, whimsical social engineering. Anti-goblin discrimination legislation might be fine and dandy for homo-gobloid relations in the marble chambers of Waterdeep, but without the Hayekian emergent order, history has shown again and again how nature points out the folly of men.

Godzilla.

On the evil side, LE is tough to categorize. Traditionally, and according to Bryan Caplan's comment on my facebook page, LE types cherish obeying the letter of the law, especially if it means getting to smash a few faces in. These are the guys responsible for holocausts, purges, and the worst sort of organized violence that the imagination has to offer. Okay, I can buy that, but on the condition that "lawful" in this sense means "predictable", as if the cruelty and violence runs consonant with the emergent order of that particular society. In a world populated by multiple sentient races, it's utterly conceivable that one race will be completely inimical to another. Indeed, one can well imagine orcish bedtime stories where mama snoutface tells her wee little porker to go to sleep or the vicious dwarves will come and eat him in his sleep. Evil is relative, see? It then becomes a matter of identifying predictable vs unpredictable behavior. If I'm in a country with a known predilection for slaughtering those of my particular race, I can consider the inhabitants of that land to be lawful, so long as that sort of behavior results in some sort of evolutionary advantage for that race. Elves (some of them anyway) can be considered lawful in this sense because they rarely skip an opportunity to dispatch members of the so-called evil races without so much as a how-do-you-do.

I still haven't made up my mind about the conditionality of goodness. The right kind of political assassination can be considered a good act, though again, the view changes whether you're near or far, and an outsider or an insider.

Maybe there are other dimensions along which we could expand the character alignment space. Perhaps we could have attributes that illustrate political beliefs as well as beliefs about the size and scope of government, or about interracial tolerance.

Then again, it's just a game. I'm almost positive I'm fretting over nothing.

eXXXecutive pay

2009-10-29T10:10:00.000-07:00

There's an old logical fallacy. It lives in a grubby tin hut in the middle of an Alabama swamp, tends bar on weekends, draws disability insurance, and chews homegrown tobacco. The name of this bucktoothed error in reasoning is Slippery Slope. Slippery Slope finished a year and a half of vocational school before retiring to the middle of the Alabama swamp to herd alligators and brew potent corn moonshine. Slippery Slope, bumpkin though he may be, nevertheless makes frequent stops all o'er this great wide world of ours, his shoeless, unwashed shanks parading through the halls of parliament as often as he is splashed across the opinion page of your local paper.

Slippery Slope tells us about giving an inch, then watching as they take a mile. Slippery Slope warns of razor-edge equilibria. He tells us that if we allow homosexuals to marry, the next thing you know, crazed citizens will be flocking to the courthouse, demanding nuptuals with barbecues, sheep, and vinyl hoop skirts (perhaps all three, and at once). Slippery Slope wants us to think that there is a think red line dividing Civilization from Chaos. You know what's funny? Sometimes, even though he's often dead wrong, Slippery Slope is, and this is just once in a while here folks, 100% correct.

Other times he's just a little right. I tend to think he's a little right in the case of offering authority figures additional authority. When it is in the power of people to usurp more power, we've often seen over the course of history that they do just that.

So it is to the dismay of at least a few economists and both big and little-L libertarians that Government has elected themselves the authority to cap pay. Yes, it's only for seven companies (for now), and only for firms that have accepted relief money, and one might even make an argument that it could pass a Constitutionality test (and with this SCOTUS, they might be right). Still, the clear fact remains that this farce (and it is a farce, as it's a hell of a lot like calling the fire brigade after the embers have cooled) could very easily spread.

I won't belabor the good observations already made, or even the predictions cast by those far smarter than me (see Alex Tabarrok's posts on MarginalRevolution.com). I'll just mention that in the event that executive compensation limitations do spread, as well they might (I'll give it a 2% chance), you can probably expect Wall Street to pull up stakes and move to the Grand Caymans. If automobile manufacturing can move Detroit to Seoul, you can be sure that investment banking can move Manhattan to George Town.

And then what? Barriers to foreign investment? Could be. Another 2% chance. The US could be a banana republic in the twinkling of an eye.

Boy, I sure hope ol' Slippery Slope is talking out his butt again, all drunk on his corn moonshine. The possibilities are terrifying if he isn't.

The Economics of Vulgarity

2009-10-27T05:42:00.000-07:00

Claims that modern society is somehow more vulgar or coarse than our whitewashed memory of yore strike a chord with the thumb-twiddling conservative lurking somewhere around our left ventricle. Notions of equity with respect to ethnicity, faith, gender, sexuality or disability join a growing herd of sacred cows whose names we dare not utter lest we attract the scorn of the high-collared progressive checking his e-mail in our right atrium. This combination of historical myopia and a propensity to meddle, cross, and censure make for easy tirades against the slack moral fiber of society, often culminating in the all-too-frequent Sticking of Noses into the Business of Other People.

Indeed, we have substantial industries and endeavors devoted to the marginal refinement of our frumpy Civilization. Apart from assigning frequencies to operators, no small portion of the job of the FCC is to monitor the content of public (ha!*) broadcasts. Corporations hire sensitivity consultants to tell low-level executives not to pinch secretaries' butts. Concerned Mothers band together to oppose pornography, junior high school kids band together to oppose swearing, nonsmokers (probably many of them ex-smokers, like me) band together to oppose tobacco in public; banding together to oppose peeves is as common as it is noisome. The preceding list, as I'm sure you well know, is far from comprehensive.

*I chortle because radios and televisions are hardly public goods

So we have at least two possibilities: either society really has taken a significant turn for the worse and it needs to be corrected, or meddling meddlers like to meddle. Since I was born into the sordid debauchery of the 1970s, I can’t really vouch for the accuracy of claims of heightened moral turpitude (of course, it could always be a level effect, and not a growth effect), but there’s no shortage of evidence that folks have been wailing about the corruption of virtue since antiquity. After all, what were Luther’s theses if not a condemnation of vice? What indeed was the point of the Ten Commandments if not an indictment of the behavior of the Israelites? So, perhaps society has become more vulgar, perhaps not. While I find myself inclined to believe the latter, the more interesting investigation is in finding what factors lead to either refinement or vulgarity.

I submit to you that civility is the astroglide of social intercourse. Being nice is uncomfortable, but it is a discomfort we gladly bear when we expect reciprocation. Sure, putting it on is kind of gross, but imagine how much more unpleasant things would be in its absence.

So, as with other things, we adopt civility so long as the marginal benefit of it exceeds the marginal cost. In the event that being rude becomes relatively less expensive, we will naturally be more inclined to consume more of it. Heck, if you like, you can think of partisan politics as an example of the relative price of civility. Anonymity reduces the cost of rudeness, as it becomes less likely to be on the receiving end of unlubricated social contact.

Of course, all of this is on the margins. Plenty of people will be unfailingly nice to strangers no matter the circumstances. I call those people bozos because what are they going to do about it? Offer me a cup of tea and a biscuit?

Glove Slap

2009-10-24T00:01:00.000-07:00

Duels are consensual acts of violence. Why prohibit them?

Ex ante, both parties expect to be better off having dueled. Only ex post do we identify a clear loser. Is the same logic regulating payday loans and lemon sales that which bans honorable single combat?

Aaron Burr. What a character.

Tubes, Rubes, and Boobs

2009-10-22T12:10:00.000-07:00

Question: why aren't jobs advertised on the television?

Answer: I don't know. The history of the television and its regulatory environment ensure that early in its history, the near-monopoly of the major broadcasters all but homogenized television viewing, perhaps a bit similar to some aspects of radio. This may have made it impractical and expensive to put help wanted ads up on the idiot box. Plus, TV is a recreational device, and who wants to think about being productive when it's time to relax? There seems like there might be both supply and demand side reasons for this seemingly odd phenomenon. You'd think that at least someone would have tried it. Or is it a volume issue? TV reaches a lot of eyeballs, and at a very low relative cost. One might inundate the HR department with applications, and possibly poor applications. Is this a signaling issue? What signal would it send to put out help wanted ads on the TV? What signals are embedded in the relative difficulty in obtaining information about potential jobs? Is there a status argument in there?

I need to ask someone about this. Professors Hanson or Cowen might be good resources.

An Energetic Concern

2009-10-17T09:03:00.000-07:00

How good are prices? How efficient? Prices exist as a universal shorthand that allow people to communicate across time, across space, and across insurmountable language barriers. Prices distill relevant information into one single signal that everyone understands without having to learn troublesome conjugation or weird syntax. Prices hit us right where we care, with all the force of a swift kick to the groin. But are they really as useful or as efficient as we might like to imagine. There's no good way for the average person to untangle the galaxy of individual effects on any given list price, just as there's no good way to trace the whole, complete, and unmolested chain of production leading to any given final product (don't believe me? Try to think of the entire set of inputs that go into making, say, a comfortable pair of shoes. Be thorough; incomplete answers will be marked down).

So how can anyone tell when and where price distortions arise? Sometimes, the answer is clear enough that there isn't much room for debate. It's pretty well clear both analytically and empirically that something like direct price controls for gasoline create artificial shortages, but when interference is milder, more diffuse, or further up the supply chain, tracing the thread of causality becomes vastly more challenging. Take the CPSC for example. The Consumer Products Safety Commission creates regulation for a really quite impressive array of consumer goods. Indeed, I never really understood how many until I just checked, just now. If you're interested in the legislation, here's the most recent version of the Consumer Products Safety Act: http://www.cpsc.gov/businfo/cpsa.pdf. This agency is charged with keeping potentially harmful products out of the hands of individuals who, due to ignorance, inattention, or carelessness, are unable or unwilling to discover the hazards of products on their own. Similarly, this commission exists to help provide a buffer between consumers and producers, the latter or whom may have an incentive to hide or otherwise obscure the hidden costs of their products, including but not limited to health risks from dangerous chemicals, choking hazards, injury risks, or radiation poisoning.

Let's pick one product at random. My random product generator (scrolling down blindly) lands on isobutane, ostensibly used as cigarette lighter fuel. This chemical is regulated under the Federal Hazardous Substances Act, which gives labeling and banning authority to the CPSC (and probably other agencies too, for all I know; I'd imagine OSHA relies on this legislation as well). Anyway, here's the relevant passage from the Code of Federal Regulations:

(29) Cigarette lighters containing butane and/or isobutane fuel are
exempt from the labeling requirements of section 2(p)(1) of the act
(repeated in Sec. 1500.3(b)(14)(i)) insofar as such requirements would
otherwise be necessary because the fuel therein is extremely flammable
and under pressure, provided that:
(i) The lighters contain not more than 12 grams of fuel at the time
of sale; and
(ii) The fuel reservoir is designed to withstand a pressure of at
least 1\1/2\ times the maximum pressure which will be developed in the
container at 120 [deg]F.

Now, for a large, well-diversified lighter company, like, say, Bic, the cost of compliance per unit is pretty low. Sure, the QA division might have a few more rules to remember, but overall, it's not too tough to ensure that there aren't more than 12 grams of fuel are in the lighter and that the fuel reservoir is strong enough to contain the pressure of warmed fuel. Indeed, this seems like kind of a fluff regulation, hard to object to. Nobody wants lighters blowing up in their faces when they're about to take the small stroll to Flavor Country, right?

Right. Especially not Bic. It isn't really in their interest to have their customers maimed when using their product, so how could it be at all possible that they might develop a pocket-sized time bomb ready to detonate under a hapless smoker's schnozz at the drop of a hat? Well, to answer my own smug question, if it's possible, it's unlikely, at least as long as the costs of developing better quality control standards are outweighed by the ex ante expected costs of litigation. So what does this have to do with price distortions? Bic would probably comply anyway, so what's the fuss?

Well, the fuss is about off-brands. Large firms can eat the costs of regulation and come back for seconds. As I pointed out, the cost of compliance per unit sold is insignificant so long as you have a whole bunch of units sold. Bic has a whole bunch of units sold.

Okay, this is kind of a sidebar note, but at this point in the blog post, I'm compelled to go look up the annual report for Bic, and it turns out the SEC doesn't have a filing more recent than 1995. The company's own website lists the most recent annual report as 2005, and more interestingly, it looks like Bic moved to Europe a while back. I had no idea about this. How amazing.

Anyway, 1st Half 2004 earnings for Bic were 683 billion euros. EBIT were 90 billion euros. EPS ratio was 1.04, and they did a stock buyback. Pretty strong for 2004, particularly considering some of their more interesting expansions, including an increased presence in the kayak sector.

Kayaks, huh? How about that.

So, Bic shouldn't have much trouble keeping up with isobutane regulation. In fact, I daresay they support such regulation wholeheartedly. After all, they've always put a premium on safety and even if one of their cherished customers decides to make the decision to switch to another brand, Bic is almost certainly dedicated to their safety (this is not, as far as I've been able to find, Bic's official position, but if Bic decided to take the contrapositive stance, it would assuredly raise eyebrows). Bic can easily make a humanitarian case for supporting regulation, the same way concerned citizens and legislators can.

Now, it may be that Bic honestly and truly believes that they are helping to make the world a better place, and it's just coincidence that their weaker competition is unable to meet the testing requirements to ensure that fuel reservoirs for isobutane lighters are sufficiently rugged to meet standards, but Bic benefits nonetheless through regulatory protection. Bic can charge monopolistic prices (or, at least, prices closer to those a monopolist might charge) on this variety of lighter by letting the sickle of government harvest the weak, nascent firms who might have otherwise been able to compete on an unregulated field. Voila, distorted prices from well-intentioned, otherwise sensible regulation. Meanwhile, consumers pay double for this, both in the higher prices paid for the lighters and in government expenditures needed to provide monitoring and enforcement of the isobutane regulation (see how charitable I am? I'm not even mentioning deadweight bureaucratic waste).

I don't want it to seem like I'm picking on Bic specifically (though the CPSC regulates both ink cartridges and razors as well), since my selection of isobutane really was random. Because of this, it should be clear that regulation favors incumbents, and we (by we, I mean frazzled, shocked first year economics PhD. students) should refrain from thinking that prices contain the sort of utility-maximizing, cost-reducing calculus we embrace in the classroom. Hell, I didn't even talk about the demand side of inefficient prices, so maybe I'll get to that in another post. I wanted to spend the remainder of our time together talking about James Buchanan's 90th birthday party.

James Buchanan turned 90 last Wednesday, or at least had his party for his 90th birthday last Wednesday. Both Dan Houser, the new department chair and Don Boudreaux, the former department chair, made some stirring remarks. Don's can be found here. After Don spoke, the wizened Dr. Buchanan made some rather... I think compelling is the right word here... yes, compelling remarks. Well, compelling in the sense that they generated a small flurry of discussion about just what he meant and what the implications might be. The first comment that caught my attention was the the 2007- crisis was sparked by a constitutional failure. At least, I heard it as a small "c" constitutional. I think others heard it as a big "C" Constitutional failure, especially once he started talking about one of the enumerated powers of Congress: to coin money. The way I heard "constitutional" was in the medical sense, that the body of law (I use the word law to represent something other than legislation, as I normally do) had become sick though repeated insults to its character and integrity. In this sense, I think the cherished old man had it right. The body in this case is not just the perverse regulatory environment that rewards vasty financial enterprises, but the odd set of incentives in place for lenders, as well as the thinned green blood pumping around the shambling beast (if that metaphor is too abstruse, I mean the tidal increase in the money supply). Various promises abounded from this quarter and that, not the least of which was the implicit guarantee of good ol' Unk Sam, coal shovel in hand, ready to stoke the furnaces of crony capitalism every time the engine threatened to falter. Oof. Now I'm really starting to mix my metaphors. I better quit while the quittin's good. I think you get the picture anyway. There was no one specific failure you can point to. The elephant in the room is that there's a fucking elephant in the room, not a snake or a trash can or a rope or whate'er. As far as the mahout astride the beast, he wears many faces, but one hat: interference. I'd like to say that it's misguided interference, but in the case of central planning, all interference is misguided interference. That is to say, there is no pure signal, free from interference, that can possibly tell any central authority how best to direct resources other than the wisdom of a well-ordered crowd.

Anyway, that's my inner Austrian grumbling. I better feed him or he'll be liable to pillage a coastal fishing village. Dr. Buchanan's other controversial comment was that if money is a natural monopoly, then it makes sense to auction off its production to the highest bidder. That was, rents will be captured by the public. Well, the conclusion makes sense, but it seemed like the audience had a hard time swallowing the premises. The audience, including me. My friend Garrett even asked how, under this system, exchange rates would be managed (a sensible question for which he received no answer), but the next question appeared to be the one on the tips of almost everyone else's tongue: under what circumstances could money be considered a natural monopoly? I still find myself puzzling over this one. With purely fiat money, the case for a single issuer might be slightly stronger for a monopolist, but not by much. Under any commodity standard, especially one with a 100% reserve requirement (which I still don't support, no matter the arguments I hear), it shouldn't matter one fig, jot, or tittle whence the script. You could have competing currencies even within a town of 1,000 citizens. As far as a fractional reserve system with fiat money, a private, independent currency rating firm would mop up the slobbery mess of uncertainty. I have a hard time imagining a case for a monopoly in money apart from perhaps interbank exchange rates, but again, this is a problem supremely easy to overcome, especially with today's communication efficiencies.

At any rate, he did mention the big-C Constitution, as I noted earlier, with respect to Congress' charge to utter currency. I'd like to hear what he would have had to say about a competing world currency, and idea I suspect might have some merit. Well, that and I would have like him to sign my copy of Cost and Choice, but he was being so thronged by faculty (understandable) that I would have needed a forklift to get anywhere near him.

Anyway, happy birthday sir. Here's to hoping for another decade of your uncommon wisdom.

GULAG

2009-08-31T12:38:00.000-07:00

Why was (is) the Gulag such a feared place? Why does the casual mention of Siberia transmit bone-chilling horror to people thousands of miles away, comfortably insulated by double-glazing, hot chocolate, and lazy Retrievers napping by the hearth?

To be sure, the spectre of Dr. Zhivago's icy transportation lingers in the memories of anyone who has sat through the whole film. Still, that depiction isn't of the desperation found in a true-red gulag. It was just some dude having a fling with a saucy bolshie wench in the countryside. A real gulag is indeed a horror on earth, and it's nothing to do with tundra.

The horror of a gulag is in its lack of specialization and trade in the context of the frozen North. Indeed, if the Kremlin wanted to punish dissidents, it could have done so via banishment to any old place in Mother Russia and the effects would have been a difference in scale, but not in kind. As soon as you remove the ability of people to ply their trade, particularly if its a trade of the mind rather than of the hands, you doom them to ineffectuality, poverty, and misery. Cut off from the ability to trade, the flower of humanity withers on the grave of its stillborn sons and daughters. The harsh climate of Siberia was insult to injury, but the real injury was in making the expunged fend for themselves. That is indeed a terrifying fate, one that would spell a prolonged doom for the very large bulk of us. A doom likely punctuated by cannibalism, rape, murder and pottery, not always in that order.

The Myth of the Pendulum

2009-08-06T19:31:00.001-07:00

There is no political pendulum, swinging back and forth between left and right. There is only the steady march, sometimes faster, sometimes slower to greater and greater state control. If there is ever a drive to increased self-determination, less central planning, and more government accountability, it is so easily marginalized or subverted as to be meaningless.

It's a liberating time to believe in freedom. You can rant and rave at the top of your lungs, and you'll still end up being on the hook for other peoples' cars, prostate exams, investment strategies, and electricity.

I can see the appeal of becoming a fringe whacko. It's not like I could hurt the cause of liberty more than it's already been injured.

Mike Patton is the greatest vocalist of a generation

2009-07-01T19:22:00.000-07:00

Social "scientists" spend much of their time explaining phenomena. Part, if not most of the challenge in this lies in addressing influences. Statisticians understand this quite well. Indeed, since many of the social "sciences" rely so heavily on statistics, you probably won't be able to find one social "scientist" (okay, I'm getting fed up with the quote marks; I think you get the point) in a million who won't blurt out, "correlation does not necessarily imply causation" with little to no prompting. Despite this, we are routinely treated to a near non-stop torrent of vacuous, feeble reasoning centered on either a false or a proximate cause. Why does this happen?

Let me first explain what I mean by a proximate cause, then move on to some possible motivations for their use. A proximate cause stands apart from the root cause in that it is merely one link in a chain of events that leads to some outcome. For example, suppose a dog bites your toddler. Better yet, suppose an infected dog bites your toddler and he turns into a zombie. Proximate causes for the zombification of your child would include: a) failure of the owners to obey leash laws b) the natural disposition of zombies to consume raw flesh c) your decision to take the kids for a walk in the dog park following a zombie outbreak or d) your child had half a dozen severed toes in the back pocket of his Garanimals (or whatever the hell it is brats are wearing these days). However, each of these proximate causes has a root cause, as follows: a) the owners themselves were zombies, and less likely than the fully-living to conform to city ordinance b) the virus that causes zombification attacks the prefrontal cortex, resulting in unususal appetites c) you didn't know about the outbreak, and you wanted to take a nice stroll; after all, it's a nice day, and the dog park is close by and d) your kid has yet to break the habit of picking up stray debris he finds on the sidewalk. By digging a little deeper in each of these instances, we can fund a more fundamental cause of the situation. Note also that there may be more than one underlying cause. In the above example, we face a situation of multiple causality. This is actually quite common when we have multiple agents interacting. It is the job of the social scientist to untangle the web of events to find and expose the fundamental causes of stuff, to better provide reliable advice on how to avoid future zombie outbreaks.

One proximate/fundamental cause issue that intro macro students often see (I know I did) was on the causes of inflation. I, like probably far too many students, was taught about cost-push and demand-pull inflation. If you haven't heard of this, don't worry. The former simply says that prices rise because the price of input goods rise and that these costs are passed along to consumers. The latter just says that if more people want a fixed amount of goods, they will bid up the price. We actually see this in action when plywood and bottled water prices shoot up during natural disasters. Still, these are both just simple mechanisms by which inflation manifests itself. The underlying cause of all inflation is more banknotes chasing the same number of products (or some variation on this theme).

The issue so many economists seem to be squabbling over now is the 2008/2009 (and beyond?) financial crisis. Some folks are blaming private firms run amok, others blame a naughty Federal Reserve, yet others point to poorly designed legislation, or the development of arcane financial instruments, or badly executed deregulation... the list goes on and on. It's rather fascinating stuff, and it will certainly keep economists busy for some time to come. I just hope that the discussion doesn't get stuck on some inconsequential proximate cause, because that often spells disaster for corrective action.

I, and folks who think like me, tend to believe that bad outcomes arise from the intersection between business and politics. To those on my team, we see favortism, rent-seeking, protectionism, and piles of moral hazard flowing out from under the crack of the door to the back room where deals between corporate officers and politicians are brokered. This is often what we see as the fundamental cause of no shortage of modern woes, from persistent poverty, to crime, to corporate plunder and beyond. Still, we do live in a representative democracy, and we tend to get something at least vaguely resembling what we vote for, so perhaps we've no one to blame but ourselves and each other. Perhaps there is a statistically significant chunk of us that thinks that banning Chinese imports is good, or that our children will be worse off than we are. If this is the case, then we free-market types (and I use the label very loosely) haven't yet identified the fundamental cause ourselves and we're just barking up the bad side of the wrong cedar.

I'll save my thoughts on this line of reasoning for another post.

The danger in resting on proximate causes, especially close ones (like saying the housing market collapsed because of greed) is that conclusions like these usually lead to solutions that end up being worse than the problems they were meant to solve. One of the primary doctrines in economics is the doctrine of unintended consequences, which basically states that no matter how well-intentioned a piece of legislation is, there are often unforseen results which may or may not please the people who wrote or the people who hope to benefit from the legislation. For example, CAFE standards encouraged people to buy Japanese automobiles, sugar quotas make Americans fat, and the minimum wage encourages chronic poverty. As long as we continue to incorrectly identify proximate causes as the target for legislation and regulation, we will exacerbate the problems of unintended consequences. Thoughtful, careful diagnosis is needed to figure out true fundamental causes. Only once this is done should be even begin discussing possible remedies. This, I believe, is a truism regardless of political bent or school of economic thought. Our first duty is to the truth. Our second duty is to stop the zombie infestation. Remember kids, aim for the head.

Battle of the Century: stocks vs. flows

2009-06-26T10:17:00.000-07:00

"The rich get richer while the poor get poorer". The famous rallying cry for more equality used to impress me before I bothered to take the time to be more thoughtful about it. Usually, the above statement (which, by the by, to save you the suspense, is false) is accompanied by income statistics showing rising inequality of incomes over the course of the 20th Century. I could reproduce some of those graphs here, but criticisms of their methodology and conclusions have been handled by people a hell of a lot smarter and accomplished than me. No, the problem I have with looking at income statistics is that it misses the point completely. Inequality concerns should stem from income immobility, wealth differences, and the source of the inequality. I have a really hard time begrudging a wealthy business owner his billions. After all, he took the risks and provided the public with something they wanted, be it delicious cake, useful software, or the better living we enjoy through chemistry. I do however have a problem with wealth accumulated by force, usually these days under government sanction. I cannot condone theft, be it by a common thug in the street or by a sponsored thug in a boardroom, giggling over a no-bid defense contract. Also, if you don't think the former proliferates because of government sponsorship, ask yourself how much crime occurs because peddling drugs is the most attractive opportunity for a lot of young people. Then ask yourself if holding down a part time job below the government-mandated minimum wage might be a better use of their time. Then press the issue by wondering what might happen to streetcorner purchases of drugs if their sale were legal. No one buys corn furtively or shoots someone else for stealing their stash of sofa cushions.

Enough preaching though. Rants against the minimum wage and drug laws are best left for another post (if at all, since all the good arguments have already been made, and made better by proper economists). No, I wanted to talk briefly about stocks and flows, and we can imagine this in several ways. If you're mathematically inclined (and I suspect you'll read this, mom, so this one's for you), you can think of a stock as the initial function, f(x) and a flow as its first derivative, f'(x). Indeed, that's how economists usually think of it. Well, that's at least how I've often heard it described to me. For the rest of us, we can imagine a stock as a pond, and the flows as the streams leading in and out of the pond. Or perhaps the stock is a balloon, and the flows are the guy blowing it up, as well as the pinhole leaks deflating it. When we think of income and wealth, we see income as a flow and wealth as the stock. Well, we see income as an inflow to the stock of wealth, but we can easily imagine outflows as well: consumption expenditures, like ice cream and hookers (more of a service, really, but let's not pick nits); consumer durable expenditures, like cars and mailboxes; and investment goods, like houses and financial instruments.

Now, any good economist should be hopping up and down, ready to put a big fat F with a circle around it across the end of my last paragraph. I know I would if I were grading this. Consumer durables and investments do not drain the wealth pond. Consumables do, of course, but your car is part of your wealth, as is that deck you built last summer and the new siding and the shed out back. Sure, these things depreciate, but they're more a conversion into an illiquid form of wealth than any sort of consumption. Yes, we get pleasure from seeing our beautiful home; we enjoy driving up to a manicured lawn, but these things increase our total wealth in a way that enjoying a snifter of VSOP brandy never could. So, the point is, it's a mistake to mistake cash for wealth. Hell, there's a good case to be made that friendship makes us wealthy. Indeed, I pretty clearly recall Bryan Caplan making just that very argument in the not-too-distant past. I thought it was a great point. Look at your friendships as stocks instead of flows, and you will be able to forgive minor slights much more easily. Do the same with your intimate relationships and your business relationships, and your family and you might very well find yourself making more rational decisions, as well as improving your forbearance and spiritual charity.

Now, before I go getting all maudlin, I should move on to the reason I decided to write this post. I really wanted to address so-called government regulation. Like many other things we commonly mistake for flows, this one is, in fact, a stock. Every bureaucrat that makes up another little rule we have to follow adds to the already-impressive burden of compliance we face at work or elsewhere. Don't believe me? Look for an unabridged OSHA manual.

I doubt many readers caught Veronique De Rugy's testimony on midnight regulation. The YouTube clip boasts a whopping 72 hits, three of which are mine. Yet, she makes an almost obscenely obvious point: as if the normal progression of increased regulatory agency burden isn't bad enough, lame duck administrations have even more incentive to pile on the bureaucracy, especially when it seems likely that power will shift to the other party. It's like opening the sluice gates into our little pond. It will certainly drown out marginally poor swimmers.

The causes of the run-of-the-mill increases in regulatory burden are pretty plain to see. Bureaucrats need to justify their existence and their budget. Of course they have every incentive to craft new regulations. And when our legal system makes it all but impossible to challenge shitty regulations, we just adjust to things and move along, looking for the next loophole and contorting in an effort to comply. This is human nature, no different than adjusting to living with lions in the neighborhood (solution: get in the car) or dealing with drought in Kansas (solution: go West [life is peaceful there] go West [in the open air]). Still, the more contorted we get, the greater the regulatory burden, the harder it is for new folks to jump in the pond, so we end up with porcine natators, bobbing on their government-issued flotation devices, urging the regulators (who very, very, very often once worked, or expect to work in the future for the very companies they regulate) to keep the faucets running. The threat of nimble competition is frightening, as well it should be. It's in their best interests to have a formidable stock of regulation to keep them well-insulated against the speedo-bedecked Michael Phelpses of the world who could swim circles around them if they could just manage to get in the water.

Okay, so that analogy got dumb. So what? The point is, with the regulatory burden getting bigger and bigger all the time, we can probably expect big corporations (those organizations that have the resources to comply with the regulations) to take up an increasing share of the business world. This is not Hayek's emergent order. This is something else. This is artifice, brought on by the intersection of private greed and public coercive authority. This is the ongoing threat to liberty and prosperity we face, and these are the sluiceworks from the ponds of our wealth to theirs.

TEToDiHT

2009-06-22T09:53:00.000-07:00

Economists love models. They luuuuurve models. In fact, models are to economists the way mudkipz are to anonymous. Some of the models are simple, straightforward affairs, such as ye olde law of demand, while others can be massive, multivariable monstrosities replete with scary-looking matrices and bone-chilling equations that, in other circumstances, might explain the origins of the Universe. Whatever the interesting phenomenon however, as long as it involves the interaction of people, you can slumber in comfort knowing that somewhere, there is some economist ready to man the trenches and provide the world with a mathematical interpretation of the goings-on.

In contrast to the luuuurve economists have for models, most drivers have an abiding hatred for traffic. It's a loathsome irritant, a delay, a fly in the ointment, a nettlesome, needling, noisome bother that all motorists have to put up with at one time or another.

I won't bother to catalog the differences in driving styles here. I'm sure anyone reading this has read a Dave Barry column or something similar in the past, and can well imagine how to caricature doddering grannies, gun-rack libertarians, NORP commuters, and enraged mall punks. The point is, we have a heterogenous blend of drivers on our roads, each with their own preferences, patterns, and peccadilloes.

I feel I should pause here for a moment to explain one of the foundations of economic thinking: margins. If you've been through an econ course or two, you've likely been browbeaten into thinking on the margin. If not, you should have been. Margins are simply what happen at the cusp of indifference. That should clarify things. Let's move along.

Just joshing. Oh, what a splendid jape. Let me be more clear. Any time when large groups of people interact, the interaction produces changes. The interesting thing is that these changes happen with a relatively few number of actions. For example, imagine a busy restaurant. Say, 50 covers for dinner. Naturally, there will be some level of background noise, from diners eating to kitchen noise to music to what-have-you. If but one table begins a conversation, there is an increase in overall noise experienced by everyone in the restaurant. Interesting, eh? We see this phenomenon everywhere. The standard classroom usage is with prices. If you raise the price of apples by a penny, there will be some people on the margin who will stop buying apples. This is a marginal change and the people who stop buying apples are marginal consumers. It is they who define the environment and they who determine prices (and I use a very broad definition of "prices" here). In the context of traffic decisions, we have a few types of marginal drivers: those who change lanes, hoping for faster travel; those who exit and enter the system; and those who create noise. I'll explain the latter later. The lane-changers are the interesting folks, so I'll spend a bit more time illustrating how they affect the dynamics of a traffic jam.

Let's start the way all economists start: we'll build a road (don't let the title and the tenure fool you; economists are actually well-dressed construction workers). We'll start with a simple 2-lane road with no exits, no blind curves, and nothing blocking the smooth flow of automobiles. Got that built? Well done. Crap. I just splattered ice cream on my shirt. Okay, ice cream notwithstanding, let's put some drivers on this sucker. No sense in having empty roads, right Ted Stevens? We'll say in our model that one lane holds 50 cars per minute. That is to say that at the average driving speed, any given point along the road will see 50 cars pass in one minute. No problems so far, but what happens when we double the number of drivers that want to use the road? We have to increase the traffic density, say, by double. Now, at a given speed, this means less following distance. Invariably, with an upper limit on speed (which there will be for any number of reasons), this leads to congestion, slowdowns, and short tempers.

Enter the next lane. With two lanes to choose from, we are back to a situation where each lane once again holds 50 cars per minute. No sweat. We can keep adding cars and lanes until we've got, say 4 lanes of 50 car per minute traffic, all zipping along, happy as clams on the road to nowhere. This is kind of boring. Let's add a little chaos. Let's add some exists, and maybe a David Byrne concert at the fairgrounds. The concert lets out and a monsoon of middle aged tax accountants and barbers hits the road in their Pontiacs and Mitsubishis. As they merge into the right lane, they greatly increase the density in this lane, creating an incentive for motorists there to switch to a relatively sparsely populated lane. These shifts propagate as the density information gets transmitted throughout the system. Well, at first, it's easy to see that it makes sense to move over a lane. There is clearly no sense in traveling in a lane moving at 20 mph when there's one going 60 a mere flick of the wrist away. The cost of switching lanes is small (though it does exist), and the benefit is quite noticable. However, a half mile down the road, things have started to even out, and the lane differentials are lower. Yet, we still see the North American Weaverbird, switching lanes madly, edging for that small advantage, hoping to make good time, despite only moderately discernible differences in average lane speed.

This driver is what we call an arbitrageur. We see this same sort of behavior in financial markets. These are the people who look for small differences in price in order to make profits from sytemic irregularities. In the stock market, they are the marginal actors, and prices swirl around their skirts as they drive inefficiency out with the ruthlessness of a rat exterminator or a Britsh Schoolmaster. On the roads, they provide much the same function. By exploiting small differences in the density of traffic in each lane, they help to provide uniformity across every lane. They are why if there's an accident in the right lane, the traffic in the left lane slows down.

The typical economic explanation stops there. Often glossed over are the hidden cost of traffic arbitrage. I can tell you from my own driving experiences that these drivers put the rage back in arbitrage. They are the buttholes who cut you off just when you manage to get a confortable driving distance, or who leapfrog across three lanes just to pass one car, then swerve back over, tracing a pattern that would dizzy a professional seamstress. To use more economic jargon, these are externalities, costs imposed on others. Sometimes, they occur as actual threats to safety and can produce collisions (though distracted and drunk driving probably poses more of a threat), or as irritants, as we fume at the aggressivve jerk who just tore ahead of us, zipping back and forth. The former is pretty clearly illegal under reckless driving statutes and the tort of negligence, while the latter, though annoying, is well within the purview of the law (which is probably why we find it so infuriating).

Well, take heart, for even though that aggressive jerk can get on our nerves individually, by exploiting arbitrage opportunities for his own gain, he is providing a valuable service for the rest of us by eliminating lane speed differentials and allowing the rest of us non-marginal drivers to coast along in our own lane, fairly well confident that, on average, we won't be much better or worse off than in any other lane. Those guys do all the adjusting, so that we can enjoy one price. The only thing we have to worry about is whether or not we choose to drive or take the train, or bus, or camel, or teleporter. My advice is to just relax, listen to some Vivaldi (or Slayer [or both]) and realize that even if that douche in the Toyota just cut you off, you'll still get where you're going at pretty much the same time anyway and that you spend more time at red lights than you can reasonably expect to make up by going 5 mph faster on the freeway. Or something. Try the math yourself.

Also, this whole lane change thing makes for a rather interesting mathematical model. You can assign probabilities to gains made from lane changes, quantify costs, add in the noise term, and do all sorts of cool shit with the numbers. I might keep this in mind for a term paper later on.

The Good Ol' Days

2009-06-18T11:25:00.000-07:00

I got a whiff of pessimism bias yesterday. Someone said to me something along the lines of, "people have to work so much these days", as if the amount of time people spent working was somehow beyond their control. I tried to explain to him the benefits we enjoy now as well as the fabulous, nearly opulent wealth virtually everyone in the secular West has access to. I'm not sure how successful I was with this explanation.

The way I like to look at it is that there is an interesting list of things I can do that my parents were unable to do at my age. I then substitute "grandparents" for "parents", then "great-grandparents" for "grandparents", etc. Here are some off-the-cuff samples:

Things I can enjoy at my age:

Good CGI in movies
Cheap whole bean coffee in the local grocery store
Encyclopaedia Dramatica
Easy air travel to St. Petersburg (the one in Russia: who wants to go to Florida?)
Hundreds of television channels in vibrant digital color

Things my parents could enjoy at my age:

Good set design in movies
Premium ground coffee in the local grocery store
USENET trolls
Easy air travel to St. Petersburg (the one in Florida)
Dozens of television channels in technicolor

Things my grandparents could enjoy at my age:

Good dialogue in movies
Yuban
IRL trolls Lenny Bruce and Richard Nixon ("I am not a crook" is pretty much his way of saying "YHBT")
Easy road travel to St. Petersburg (the one in Florida)
Less than a dozen television channels in monochrome

Things my great-grandparents could enjoy at my age:

Newsreels
Joe black drip coffee for a nickel
IRL trolls Hitler and Helen Keller (probably the lulziest American communist to have ever lived)
Difficult road travel to St. Petersburg (the one in Florida)
Radio

Things my great-great-grandparents could enjoy at my age:

Silent film
Joe black drip coffee for a nickel
IRL trolls Woodrow Wilson and V.I. Lenin
Difficult sea travel to St. Petersburg (the one in Russia)
Barn dances

And so on it goes. The interesting thing is that I am free to choose from anything on any one of those lists. Yes, even joe black coffee for a nickel, once we adjust for inflation. Well, okay, I guess I can't be trolled my Chairman Mao anymore, but the very nature of lulz is that they are fleeting. I have a vastly richer, more varied set of choices available to me than any of my ancestors had when they were my age, no matter what their income. I have the ability to enjoy the massive stock of public goods we now have, I have access to the accumulated knowledge and wisdom of thousands of years of human endeavor quite literally at my fingertips, and I can enjoy it in the comfort and peace of my own home.

Importantly, I have the ability to opt out of the sea of choices I have arrayed before me. For example, I have opted out of the hundreds of channels of television. I own a set, but have no service. Similarly, I do not avail myself of the countless millions of consumer products available in my area, nor do I subscribe to the many fine print publications available at my local tobacconist. Indeed, should it be my wont, I am very nearly able to reproduce the living standards enjoyed by almost any one of my ancestors either near or distant. Furthermore, I could do so and by working fewer hours. Oddly, I choose not to. Why might that be?

Because that would suck.

Have you ever done laundry by hand? I have. It sucks. Have you ever had to bake your bread from scratch, every time? I have. It's admittedly delicious, but it's a lot of work, and once I found a decent baker, I have to admit that I'm nowhere near as good as a lifelong professional. Have you ever had to slaughter, clean and dress livestock? This I haven't done, nor would I have the first clue how to. If you really pine for the good old days, you might want to figure that out, because you might not be able to find a competent butcher near your den.

How about getting around without major highways? Eating only local food and only when it's in season? How about chucking comfortable shoes or clothes or furniture? How would you like to do without penicillin or tampons or aspirin or skilled surgery or adequate police and fire protection or the comfort of knowing you're not under the constant threat of conscription?

The truth is, the past just wasn't as great as our romantic imagination might like to think. I'm not saying the present is perfect, far from it. However, looking over your shoulder to see where you're going is a good recipe to fall on your face. The complement to this is that hand-wringing over an imagined future decline can be counter-productive if channeled improperly. I think I'll save details on that for another post. This one is already tl;dr enough.

The Time Value of Time

2009-06-17T08:39:00.000-07:00

A common economics question to answer runs along the lines of: "why do people eat at restaurants so much"? Apart from the pat response, "because they want to" (which is certainly true at face value), those of us drenched in the economic way of thinking immediately drag out one of our favorite horse corpses (horpses): opportunity cost. We plaster on a dastardly, sometimes smarmy grin and crow that, as a nation, we are quite wealthy (true) and that our time is increasingly valuable (also true).

There is, however, a dreadful flaw committed when we press the point. The reasoning goes something like this:

1. Wages are efficient (this is to say that workers are paid according to their productivity). I won't belabor this point or try to prove it here, as this is given ample attention in most intro micro courses. I will say that this is generally true, with a few notable exceptions.

2. Time is a finite resource (unless you're the Highlander, but even then, there can be only one).

3. The opportunity cost of an hour of leisure is an hour of labor.

This last point justifies additional division of labor while a worker is off the clock. That isn't entirely unreasonable. Most of us could pick up an hour or two of overtime for a wee bump on the first or fifteenth, or we could call in sick to go fishin' down at the ooooooool' fishin' hole. In these cases, yeah, that time is precisely worth the marginal cost (product) of labor. However, as anyone who's worked double shifts for any extended period of time knows, you get sloppy when you don't have enough time off. The fancy economist way of saying this is that there are diminishing returns to labor in the absense of leisure. Well, I reckon that might be close to the fancy economist way of saything that at any rate.

4. Since leisure time is equally as valuable as time spent laboring, this time is best spent as efficiently as possible, taking the greatest advantage of the division of labor as befits a marginal cost/marginal benefit analysis.

Whoa. #4 is just a bunch of economic jargon. Spivonomist, you're just trying to make yourself look smart, you great douche. Speak clearly. Well, okay. Look, if I'm making 10 bucks an hour stocking shelves at the grocery store, then my time off should be worth ten bucks an hour to me. This seems kind of fair, since that's how much I give up when I call in sick. So, when I choose off-hours activities, they have to be able to be just as profitable to me as my work is. In other words, I have to be able to get ten bucks of enjoyment out of every hour I spend at home. Since I'm hucking cans of green beans in this example, that ain't so tough. I could probably get my money's worth by trolling some pudgy nerd on deviantART. Easy enough. The marginal cost is fairly low and so is the marginal benefit, but there is a difference there, and it is in fact, oh exploitable! Indeed, I'll troll until the lolcow has been milked of its fresh, creamy lulz (this touches again on the idea of diminishing marginal returns).

By the same token, suppose I'm now a record company executive, raking in millions every year. Now all of a sudden, my time is vastly more valuable. It would be insane of me to piddle about cooking my own meals, tending my own garden, and washing my own car. What a waste of time! Look at it this way, instead of spending 30 mins scrubbing my Mercedes, I could be cutting a multi-million dollar deal. Which is a better use of my time?

...and so the standard argument goes. And a convincing one it is. There are extremely good reasons to exchange services, especially as income rises (note I say "income" here and not "wealth"). Income is our proxy for the value of our time.

It is my contention that it is an imperfect proxy, and occasionally, dead wrong.

The value of our time is heterogenous. This is especially true during the hours of sleep, when no one is productive, except perhaps laboratory test subjects. But I maintain that it's also true in the routine course of things. Even for creative types (including economists), nobody can be running full throttle all the time, and the real opportunity cost of time is, and this is important, the productivity capacity we possess at that time. I'm generally not well aligned with Keynesian thinking, but I don't think even Murray Rothbard would suggest that wages should be a continuously variable function of productivity, varying throughout the day. There is indeed some stickiness in there, and I think it's fatuous to suggest otherwise, or to suggest that anyone's time is precisely worth their wage at all times in the course of a normal human day.

If my productivity declines working 100-hour work weeks (which I have done in the past), and it does, then not all of my time is worth what I earn. Therefore, I have some wiggle room in determining which services I can rationally farm out and which I can do myself. This wiggle room explains why salaried professors can waste time blogging or puttering about in the garden when they should, by all rights, be publishing and attending conferences. It is my contention not that the division of labor is a dumb idea, but that Smith was right when he pointed out that someone who overspecializes is a dull and stupid creature, or words to that effect.

Yep, heterogenity of productivity. Leisure time isn't quite as valuable as the rational economist wants you to believe.

Irrationality: Normal Goods(?)

2009-06-16T11:20:00.000-07:00

A normal good is one that sees a rise in demand as income increases. Demand for an inferior good drops as income increases. For example, I'm happy to cram my piehole full of ramen noodles and PBR when I'm unemployed and living on my musty sailboat in a discount marina just north of Bremerton, but once I've got a job with a decent wage, I'll dine on nigiri sushi and guzzle chilled sake on Lake Union.

On average, products are normal. That is to say, as our income rises, we consume more stuff. This includes tangible stuff like housing, transportation, clothes, and haircuts. More interestingly, it may or may not include intanglibles: friendship, love, faith, curiosity, and humor (among many, many others). Disaggregated, each product will display certain characteristics to certain people. Take the interesting case of gardening... for the very poor, gardening is an inferior good: they will soon substitute away from subsistence farming the moment they are able, but for the wealthy, gardening is a normal good: a charming, rewarding hobby that reconnects the practitioner with the bounty of the soil (or whatever). Point is, the same activity (plowing soil, planting seeds, fertilizing and watering) displays different characteristics depending on the intersection of the person and the product.

To the question of rationality (or lack thereof), context is everything. Most of the time, irrationality is mondo expensive. Imagine walking into a used car dealership and plunking down $45,000 on a '78 primer-gray Pinto with a rusted-out driveshaft. Sometimes, however, irrationality can be pretty close to free, as Bryan Caplan illustrated in The Myth of the Rational Voter. There can be some psychological comfort gained from holding irrational beliefs like "the minimum wage is good for society" or "Wal-Mart exploits its workers" or even "unions were responsible for American prosperity". There are a whole host of irrational, incorrect beliefs that make people feel good but that, importantly, never hit them where it counts: in the checkbook. Where it does hit them is in the voting booth. As Caplan argues, this is why we consistently have bad policy, and why plenty of people support it. Of course, his argument is far more detailed and convincing, and my contribution is to ask a fairly simple question: is voter irrationality a normal good?

I hesitiate to look to cross-sectional data to answer this question. Differences in income and income growth and their correlation to irrationality at the polls face a vexing problem: hidden variables. As a person gets richer, they may or may not consume more voter irrationality, but what if a hidden variable, like talent or good genes could be driving both the increase in income and the tendency to vote one way or another? What if part of the process to becoming wealthy included exposure to economic thinking, either good or bad? No, measuring today's upwardly mobile with today's constant wage earners might be less than fruitful. I think it might be more valid to look at longitudinal attitude changes.

It's far too premature for me to make any definite claims, but I think it might be possible to show some sort of correlation with a rise in income with a rise in irrational policy. This is under the assumption that terrible opinion shows up as terrible policy in accordance with the guidelines of public choice theory. I can cherrypick a few instances in recent US history: the 1920s were a period of general prosperity, but they were followed by close to a decade and a half of abysmally irrational policy, including preposterously high tarriffs, outrageous marginal tax rates, and simply silly price controls. Conversely, the 1970s saw a thundering gut-punch to the American economy, and it was only after we suffered through that we saw the benefits of controlling the money supply (though I might not want to make this a central point) and easing the tax burden on the rich.

Well, whatever the case may be, if I end up nosing more deeply into public choice, I think this would be an interesting question to investigate. I have a follow-up question about the source of irrational beliefs, but I'll tuck that away for another post.