Curt Doolittle

Category: Economics, Finance, and Political Economy

  • What’s the Purpose of Economics?

    [A] central argument in economics is unsettled: what is the purpose of economics?

    1) A social science (political economy) that describes human behavior in a monetary economy, regardless of policy wants or demands, so that we construct institutions that provide the least resistance to cooperation. (The german Austrian school)

    2) A means of extending the rule of law (moral cooperation) to economics (production distribution and trade): the discovery of rules which determine policy actions. (Chicago and the freshwater school)

    3) A means of justifying discretionary action independent of rules. (Krugman and the Saltwater school) I include our host John Quiggin in this group.

    The first is the least hubristic, the second more so, but allows planning, the third most hubristic, least moral, and least trustworthy.

    Discretion is for choosing flavors of ice cream. There is no room for discretion in law or economics.

    Curt Doolittle
    The Propertarian Institute,
    Kiev, Ukraine

  • Elegant New Weapon in the Anti-Krugman Wars

    —“The real difference between Chicago and MIT macro is Chicago’s commitment to rules over discretion. Milton Friedman’s endorsement of a constant 3% increase in the money supply was meant to minimize the chance of hyperinflation and to make running the Fed a boring job such that investors had clear expectations of how Policy would be set. When “leaders” have discretion with respect to how they set policy, they have more fun on the jobbut “uncertainty” increases and this reduces investment.”—Matthew Kahn

    [I]n other words, the Chicago program seeks to define rules that will eliminate discretion. The MIT program seeks to identify opportunities for discretion. Rule of law = Lack of Discretion.

    I wasn’t able to come up with that myself. And it’s wonderful.

    MORE

    ANTI-KRUGMAN — THIS IS SO GOOD THAT I HAVE TO POST MORE OF IT.

     —-“At M.I.T., however, Keynes never went away. To be sure, stagflation showed that there were limits to what policy can do. But students continued to learn about the imperfections of markets and the role that monetary and fiscal policy can play in boosting a depressed economy. And the M.I.T. students of the 1970s enlarged on those insights in their later work. Mr. Blanchard, for example, showed how small deviations from perfect rationality can have large economic consequences; Mr. Obstfeld showed that currency markets can sometimes experience self-fulfilling panic.”—-Paul Krugman 

    “Point #1 Note the eagerness to introduce ideas from behavioral economics into economic policy making. A dangerous precedent arises here. If the “people are foolish“, then this creates an ugly elitist possibility that only the wise technocrats (the MIT graduates) can protect us. I don‘t like this worldview on a number of levels. Moral hazard lurks when sophisticated investors and economic decision makers are aware that the technocrats will step in and “save the world“ when ugly economic events take place (such as a plunging stock market, or rising unemployment). 

    “Point #2: The real difference between Chicago and MIT macro is Chicago‘s commitment to rules over discretion. Milton Friedman‘s endorsement of a constant 3% increase in the money supply was meant to minimize the chance of hyperinflation and to make running the Fed a boring job such that investors had clear expectations of how Policy would be set. When “leaders“ have discretion with respect to how they set policy, they have more fun on the job but “uncertainty“ increases and this reduces investment. 

    “Point #3; Dr. Krugman also refuses to acknowledge the power of Ed Prescott‘s work on time consistency and policy. Clear rules of the game create dynamically stable rules and this fosters investment. In Dr. Krugman‘s short run focus on the business cycle, he ignores the long run growth implications caused by the activist policies that he supports. 

    “Point #4; In the absence of randomized trials, the MIT trained technocrats (the 5 people listed above) do not actually know what policies are effective in mitigating business cycles. If they know that they do not know how the macro economy really works, then does this affect Dr. Krugman‘s optimism that MIT has won the policy debates. His piece isn‘t that modest (or honest) about the modeling uncertainty that now exists in modern macro economics. He makes the past debates sound settled. If he attended MIT‘s current 1st year PHD macro sequence, he would see a variety of different models being worked on and taught and I bet that the policy conclusions are very sensitive to the modeling choices.” —- Matthew Kahn (Environmental and Urban Economics )

  • Elegant New Weapon in the Anti-Krugman Wars

    —“The real difference between Chicago and MIT macro is Chicago’s commitment to rules over discretion. Milton Friedman’s endorsement of a constant 3% increase in the money supply was meant to minimize the chance of hyperinflation and to make running the Fed a boring job such that investors had clear expectations of how Policy would be set. When “leaders” have discretion with respect to how they set policy, they have more fun on the jobbut “uncertainty” increases and this reduces investment.”—Matthew Kahn

    [I]n other words, the Chicago program seeks to define rules that will eliminate discretion. The MIT program seeks to identify opportunities for discretion. Rule of law = Lack of Discretion.

    I wasn’t able to come up with that myself. And it’s wonderful.

    MORE

    ANTI-KRUGMAN — THIS IS SO GOOD THAT I HAVE TO POST MORE OF IT.

     —-“At M.I.T., however, Keynes never went away. To be sure, stagflation showed that there were limits to what policy can do. But students continued to learn about the imperfections of markets and the role that monetary and fiscal policy can play in boosting a depressed economy. And the M.I.T. students of the 1970s enlarged on those insights in their later work. Mr. Blanchard, for example, showed how small deviations from perfect rationality can have large economic consequences; Mr. Obstfeld showed that currency markets can sometimes experience self-fulfilling panic.”—-Paul Krugman 

    “Point #1 Note the eagerness to introduce ideas from behavioral economics into economic policy making. A dangerous precedent arises here. If the “people are foolish“, then this creates an ugly elitist possibility that only the wise technocrats (the MIT graduates) can protect us. I don‘t like this worldview on a number of levels. Moral hazard lurks when sophisticated investors and economic decision makers are aware that the technocrats will step in and “save the world“ when ugly economic events take place (such as a plunging stock market, or rising unemployment). 

    “Point #2: The real difference between Chicago and MIT macro is Chicago‘s commitment to rules over discretion. Milton Friedman‘s endorsement of a constant 3% increase in the money supply was meant to minimize the chance of hyperinflation and to make running the Fed a boring job such that investors had clear expectations of how Policy would be set. When “leaders“ have discretion with respect to how they set policy, they have more fun on the job but “uncertainty“ increases and this reduces investment. 

    “Point #3; Dr. Krugman also refuses to acknowledge the power of Ed Prescott‘s work on time consistency and policy. Clear rules of the game create dynamically stable rules and this fosters investment. In Dr. Krugman‘s short run focus on the business cycle, he ignores the long run growth implications caused by the activist policies that he supports. 

    “Point #4; In the absence of randomized trials, the MIT trained technocrats (the 5 people listed above) do not actually know what policies are effective in mitigating business cycles. If they know that they do not know how the macro economy really works, then does this affect Dr. Krugman‘s optimism that MIT has won the policy debates. His piece isn‘t that modest (or honest) about the modeling uncertainty that now exists in modern macro economics. He makes the past debates sound settled. If he attended MIT‘s current 1st year PHD macro sequence, he would see a variety of different models being worked on and taught and I bet that the policy conclusions are very sensitive to the modeling choices.” —- Matthew Kahn (Environmental and Urban Economics )

  • Q&A: Curt I Don’t Understand Your Criticism of Mises

    QUESTION

    —“I’ve seen you criticize Mises and I’m not sure I’ve fully understood your critique. Would it be fair to compare your criticism to modern science’s correction of the Greeks? I’m referring to the definition of modern science as inductive reasoning based on observation (empiricism) in contrast to the Greeks’ deduction based on self-evident truth. (Intuition vs. sensory information)”—

    ANSWER [W]ell, if it was easily reducible to something simple, someone would have figured this problem out before. And it wouldn’t have stumped mises, hayek, popper and dozens of others in other fields.”—

      [I] could be lazy and point you to the series of posts on this topic: http://www.propertarianism.com/propertarian-posts-by-chapt…/ Scroll down to (or search for) “REFORMING THE SCIENCES” That section covers it pretty thoroughly. [O]r, I could try to make it easy for you and point you to this single post: http://www.propertarianism.com/…/mises-praxeology-as-the-f…/ [O]r, I could spend a little effort and tell you that a whole bunch of philosophers failed to expand the scientific method in the 19th and 20th when our means of instrumental measurement exceeded our understanding of the limits of our perceptions. Mises is one of the philosophers who failed. In failing he created a pseudoscience. Whereas the others merely failed to understand what they had discovered. Economics is as empirical as any other science. But just as we cannot state that a formula is existentially possible in mathematics without a proof that it can be constructed from possible mathematical operations, we cannot state that an economic statement is possible if we cannot construct it from possible human operations. Conversely, we cannot possibly deduce all of economics. Yet we can explain all of economics if we try. Mises made a profound mistake of conflating a negative test – a form of falsification – with a positive means of discovery. He made the error all germans did: that justification can be used in matters of science. It cannot be. Contracts and moral arguments can be justified, but truth propositions merely survive criticism. This is a very advanced bit of a failure of philosophy in intellectual history so it’s not trivial to grasp. Curt Doolittle The Propertarian Institute Kiev, Ukraine.

  • Q&A: Curt I Don’t Understand Your Criticism of Mises

    QUESTION

    —“I’ve seen you criticize Mises and I’m not sure I’ve fully understood your critique. Would it be fair to compare your criticism to modern science’s correction of the Greeks? I’m referring to the definition of modern science as inductive reasoning based on observation (empiricism) in contrast to the Greeks’ deduction based on self-evident truth. (Intuition vs. sensory information)”—

    ANSWER [W]ell, if it was easily reducible to something simple, someone would have figured this problem out before. And it wouldn’t have stumped mises, hayek, popper and dozens of others in other fields.”—

      [I] could be lazy and point you to the series of posts on this topic: http://www.propertarianism.com/propertarian-posts-by-chapt…/ Scroll down to (or search for) “REFORMING THE SCIENCES” That section covers it pretty thoroughly. [O]r, I could try to make it easy for you and point you to this single post: http://www.propertarianism.com/…/mises-praxeology-as-the-f…/ [O]r, I could spend a little effort and tell you that a whole bunch of philosophers failed to expand the scientific method in the 19th and 20th when our means of instrumental measurement exceeded our understanding of the limits of our perceptions. Mises is one of the philosophers who failed. In failing he created a pseudoscience. Whereas the others merely failed to understand what they had discovered. Economics is as empirical as any other science. But just as we cannot state that a formula is existentially possible in mathematics without a proof that it can be constructed from possible mathematical operations, we cannot state that an economic statement is possible if we cannot construct it from possible human operations. Conversely, we cannot possibly deduce all of economics. Yet we can explain all of economics if we try. Mises made a profound mistake of conflating a negative test – a form of falsification – with a positive means of discovery. He made the error all germans did: that justification can be used in matters of science. It cannot be. Contracts and moral arguments can be justified, but truth propositions merely survive criticism. This is a very advanced bit of a failure of philosophy in intellectual history so it’s not trivial to grasp. Curt Doolittle The Propertarian Institute Kiev, Ukraine.

  • ECONOMIC HISTORY? NO: ECONOMIC LAWS Wmmbb (All), I’m a little concerned that eco

    ECONOMIC HISTORY? NO: ECONOMIC LAWS

    Wmmbb (All),

    I’m a little concerned that economic history is a vehicle for justification one way or the other. The central argument in economics is unsettled: what is the purpose of economics?

    1) A social science (political economy) that describes human behavior in a monetary economy, regardless of policy wants or demands, so that we construct institutions that provide the least resistance to cooperation. (The german Austrian school)

    2) A means of extending the rule of law (moral cooperation) to economics (production distribution and trade): the discovery of rules which determine policy actions. (Chicago and the freshwater school)

    3) A means of justifying discretionary action independent of rules. (Krugman and the Saltwater school) I include our host John Quiggin in this group.

    The first is the least hubristic, the second more so, but allows planning, the third most hubristic, least moral, and least trustworthy.

    Discretion is for choosing flavors of ice cream. There is no room for discretion in law or economics.

    Curt Doolittle

    The Propertarian Institute,

    Kiev, Ukraine

    Source date (UTC): 2015-07-27 06:47:00 UTC

  • ANTI-KRUGMAN — THIS IS SO GOOD THAT I HAVE TO POST MORE OF IT. —“At M.I.T., h

    ANTI-KRUGMAN — THIS IS SO GOOD THAT I HAVE TO POST MORE OF IT.

    —“At M.I.T., however, Keynes never went away. To be sure, stagflation showed that there were limits to what policy can do. But students continued to learn about the imperfections of markets and the role that monetary and fiscal policy can play in boosting a depressed economy. And the M.I.T. students of the 1970s enlarged on those insights in their later work. Mr. Blanchard, for example, showed how small deviations from perfect rationality can have large economic consequences; Mr. Obstfeld showed that currency markets can sometimes experience self-fulfilling panic.”—Paul Krugman

    “Point #1 Note the eagerness to introduce ideas from behavioral economics into economic policy making. A dangerous precedent arises here. If the “people are foolish”, then this creates an ugly elitist possibility that only the wise technocrats (the MIT graduates) can protect us. I don’t like this worldview on a number of levels. Moral hazard lurks when sophisticated investors and economic decision makers are aware that the technocrats will step in and “save the world” when ugly economic events take place (such as a plunging stock market, or rising unemployment).

    “Point #2: The real difference between Chicago and MIT macro is Chicago’s commitment to rules over discretion. Milton Friedman’s endorsement of a constant 3% increase in the money supply was meant to minimize the chance of hyperinflation and to make running the Fed a boring job such that investors had clear expectations of how Policy would be set. When “leaders” have discretion with respect to how they set policy, they have more fun on the job but “uncertainty” increases and this reduces investment.

    “Point #3; Dr. Krugman also refuses to acknowledge the power of Ed Prescott’s work on time consistency and policy. Clear rules of the game create dynamically stable rules and this fosters investment. In Dr. Krugman’s short run focus on the business cycle, he ignores the long run growth implications caused by the activist policies that he supports.

    “Point #4; In the absence of randomized trials, the MIT trained technocrats (the 5 people listed above) do not actually know what policies are effective in mitigating business cycles. If they know that they do not know how the macro economy really works, then does this affect Dr. Krugman’s optimism that MIT has won the policy debates. His piece isn’t that modest (or honest) about the modeling uncertainty that now exists in modern macro economics. He makes the past debates sound settled. If he attended MIT’s current 1st year PHD macro sequence, he would see a variety of different models being worked on and taught and I bet that the policy conclusions are very sensitive to the modeling choices.”

    — Matthew Kahn (Environmental and Urban Economics )

    Source date (UTC): 2015-07-26 00:18:00 UTC

  • WEAPON IN THE ANTI-KRUGMAN WARS —“The real difference between Chicago and MIT

    http://greeneconomics.blogspot.com/2015/07/dr-krugmans-discussion-of-mit-vs.htmlELEGANT WEAPON IN THE ANTI-KRUGMAN WARS

    —“The real difference between Chicago and MIT macro is Chicago’s commitment to rules over discretion. Milton Friedman’s endorsement of a constant 3% increase in the money supply was meant to minimize the chance of hyperinflation and to make running the Fed a boring job such that investors had clear expectations of how Policy would be set. When “leaders” have discretion with respect to how they set policy, they have more fun on the job but “uncertainty” increases and this reduces investment.”—Matthew Kahn

    In other words, the Chicago program seeks to define rules that will eliminate discretion. The MIT program seeks to identify opportunities for discretion. Rule of law = Lack of Discretion.

    I wasn’t able to come up with that myself. And it’s wonderful.

    Source date (UTC): 2015-07-25 18:46:00 UTC

  • THE MEDIA AS DRUG DEALER It doesn’t make financial sense to operate a newspaper.

    THE MEDIA AS DRUG DEALER

    It doesn’t make financial sense to operate a newspaper. The FT generates 35M of profit per year on over 500M in revenues. That’s what, 7%? The reason to own a newspaper is influence: gossip.

    Now the financial times is, like the Journal, a financial rather than political newspaper. So by definition it’s an empirical and heroic medium rather than one of complaining, for the purpose of rallying shaming, and power accumulation.

    I went through five daily issues of Canada’s main newspaper a few years ago, circling correspondent articles (what I consider truthful) and you could find about three small articles a day. The rest were entertainment, created by appealing to the anglosphere’s erroneous sense of moral superiority.

    In other words, the newspaper business sells advertising to marketers, and then consumers buy signaling: a form of conspicuous consumption, that carries signals.

    And quite the opposite of what we expected: people are not able to insulate themselves from the most influential drug after sex: signals of moral fitness.

    If we look at the evolutionary reasons why this all works, it’s obvious: moral fitness makes us generous, and moral violation makes us punish.

    But we should look at the non-financial media as what they are: drug dealers.

    They’re causing suicide through addiction.

    Source date (UTC): 2015-07-24 05:07:00 UTC

  • THE RELATIONSHIP BETWEEN ECONOMICS, COOPERATION, And ACQUISITION 0) Existence 1)

    THE RELATIONSHIP BETWEEN ECONOMICS, COOPERATION, And ACQUISITION

    0) Existence

    1) Acquisition (Property, Planning, Calculating)

    2) Cooperation (Necessary Morality, Property, Rights)

    3) Micro Economics (Causation, Reducing Friction of Cooperation)

    4) Macro Econometrics (Correlation, Observation of Externalities)

    5) Macro Economic Monetary Policy (Interference, Coercion)

    Source date (UTC): 2015-07-21 11:31:00 UTC