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September 2013 posts

Time Will Run Back

Jonathan B. Wight

One of the benefits of an iPad (or Kindle, or similar device) is that I end up reading books I would never get to if I had to order them in hard copy or check them out of the library.  Yes, you can tell I am pretty indolent these days; I don’t like romping around library stacks very much. The cost difference is also notable: the Kindle edition of the book below cost $3 compared to the paperback at $28 and the hardcover at $58, not including shipping.

One recent Kindle acquisition is the classic text by the Austrian School economist Henry Hazlitt, Time Will Run Back (originally published in 1951).  In this dystopic novel a communist state has won the Cold War and now controls all of humanity.  To assert control over everyone’s minds, all previous written works on economics, social science, history, and philosophy are destroyed. 

Time Will Run Back

Through a quirk of fate, a young man of compassion becomes the dictator and seeks to discover how to make life better for the citizens.  Along the way he discovers the power of freedom and the marketplace through experimentation and deductive logic.  It is a clever and insightful premise.

The virtues of capitalism may seem obvious to readers of the 21st century—but certainly may not have been at mid-20th century when the Soviet Union was perceived to be booming. Hazlitt provides a fascinating introduction to the ethics behind market systems and the powerful intuition that command economies will lag behind and ultimately fail. 

The book is recommended as an introductory guide to students seeking to understand why markets can produce good outcomes using a fair process. 

One should not conclude that laissez faire is the best policy (indeed Adam Smith never made that claim).  Rather, through books like this, one can demonstrate at a deep emotional level why and how markets are important to society. If markets worked perfectly life would be pretty easy for the economist.  Reality is more complex and students ultimately need more than platitudes about how property rights and competition will automatically solve all problems, including environmental problems.  Lingering questions address the form and function of a mixed market system, under various institutional rules and assuming different degrees of ethical norms among the populace.

Looming Default

Jonathan B. Wight

Let’s get this straight:  A majority in both Congresses and the President passed a health care law.  The Supreme Court determined the law was constitutional.  A majority of Americans voted to re-elect the President in 2012, providing a litmus test of public opinion. 

Now, a small cadre of rebels in the Republican Party are claiming that they, not the voters or Supreme Court, should decide on what is lawful.

They are willing to allow the government to default on legal debts so that they can blackmail the rest of us.  Spineless Republican leaders in the House won’t let the debt ceiling bill come before the representatives for an up-or-down vote.

Whether you agree with government spending or not, it is a legal obligation of the American people and should be honored.

The farce of having to “raise the debt ceiling” should be eliminated.  Spending money implies and demands that those debts be honored regardless of what a small minority in the House says. This is not democracy at work, but represents the sort of crony political shenanigans of a two-bit undeveloped country.

Obamacare Secret Agenda

Jonathan B. Wight

Via David Warsh comes this early April-fools’ day New Yorker post from Andy Borowitz:

NEW YORK (The Borowitz Report)—In a blockbuster documentary to be broadcast tonight, the Fox News Channel alleges that Obamacare is “little more than a thinly veiled scheme to force Americans to live longer.”

ObamacareThe documentary, called “The Ugly Truth About Obamacare,” claims that President Obama “is cynically using the health-care law to achieve his true objective: raising the life expectancy of Americans without their consent.”

 “In America, how long you live has always been your own business,” says the documentary’s narrator, Sean Hannity. “Under Obamacare, though, it’s the government’s business—a government that wants you to live as long as humanly possible.”

The documentary lays out a nightmare scenario of Americans being saddled with sky-high life expectancies for years to come.

 In perhaps the most chilling prediction of the documentary, Mr. Hannity warns, “If Obamacare goes into effect, Americans will be forced to live as long as people in Finland, Denmark, and other socialist countries.”

Speaking with reporters today, Mr. Hannity said he hoped that the documentary would be a “wake-up call about the secret agenda behind Obamacare.”

 “President Obama is playing God with American lives,” Mr. Hannity said. “And if he stubbornly insists on making those lives longer, that could be grounds for impeachment.”

Honor is the Ultimate Goal

Jonathan B. Wight

Krugman has a column today on why the rich feel entitled to feed at government’s trough of bailouts and demand lower tax rates in their hedge fund earnings.  At the same time as the wealth of the top .1 percent has soared, they are increasingly psychologically sensitive and sore. 

“So why the anger? Why the whining? And bear in mind that claims that the wealthy are being persecuted aren’t just coming from a few loudmouths. They’ve been all over the op-ed pages and were, in fact, a central theme of the Romney campaign last year.”

“Well, I have a theory. When you have that much money, what is it you’re trying to buy by making even more? You already have the multiple big houses, the servants, the private jet. What you really want now is adulation; you want the world to bow before your success. And so the thought that people in the media, in Congress and even in the White House are saying critical things about people like you drives you wild.”

Adam Smith nailed it:

“It is not ease or pleasure, but always honour, of one kind or another, though frequently an honour very ill understood, that the ambitious man really pursues” (The Theory of Moral Sentiments, 1982, 65, emphasis added).

Tragedy of the Toilet Commons

Jonathan B. Wight

Liberals want to control boardrooms, conservatives want to invade the bedroom, and now the bathroom—the last refuge in one’s castle—is under attack from the toilet police. 

Too much paper is going down toilet.  Or, to be precise, too much cloth that masquerades as paper is being dumped into toilets.  The supposedly flushable bathroom wipes are clogging municipal sewage systems, costing taxpayers millions to maintain and repair.  Bathroom tissue

Tragedy of the commons, here we go.  If throwing cloth wipes down the toilet clogged one’s own plumbing system that would be a private matter and consumers would quickly calculate the disincentive of this practice.

But the clog happens at pumping stations perhaps miles away.  Not only do consumers not know that their actions are hurting others, the advertising on the cloth package insists the product is “flushable.”  Manufacturers would never lie, would they, about an industry pulling in $6 billion in revenue?  And consumers want to believe a convenient lie if it means they can dispose of more things down the drain. 

Anyone who has had the misfortune of visiting a Port-o-Potty at an outdoor event can testify there is almost no limit to the stuff people try to get rid of down the toilet if they think someone else will incur the cost to clean it up. 

As a follow-up, if you have never read the anthropological satirical masterpiece, "Body Ritual among the Nacirema" it is well worth your time. 


Jonathan B. Wight

Greg Mankiw responded to students who walked out of class during the Occupy Wall Street movement by opining that:

“[L]ike most economists, I don’t view the study of economics as laden with ideology.”

 Of course not, most people do not realize that they are surrounded by, immersed in, ideology.  A fish does not think much about the fact it is surrounded by water. 

 When I ask students what material substance do they most need to survive the longest time in a strange and new land they always reply “water.”  The correct answer is “air,” but who thinks of it?

 Likewise, economists since their undergrad days have been immersed in a culture in which welfare theory and efficiency are concepts uncritically accepted as representing positive “truth” rather than a particular ideological version of the truth. Ideology

 Ideology is “the integrated assertions, theories and aims that constitute a sociopolitical program.”  Joseph Schumpeter wrote that we are all—scientists included—inspired by our ideologies and worldviews.  You know there is a problem, therefore, when a prominent economist and leading textbook writer fails to recognize the ideology smiling in the background of an economic snapshot.  

The Pope Revealed

Jonathan B. Wight

Pope Francis gave an amazing interview last week.  One can sense a person of deep integrity and compassion.  It’s amazing that such a real individual of humility could have survived the vetting process for leadership selection.

Typically we think of leaders as people whose abilities for genuine empathy have been constrained and shrunken.  After all, we ask leaders to make hard decisions, and the psychological torment caused by empathizing deeply with the thousands of workers you have just laid off, or the thousands of soldiers you have just sent in to dangerous battle, would detract from focus and sap the leader’s energy. 

We really don’t want leaders to empathize too much, although they certainly have to pretend to empathize.  Hence, the ubiquity of phony leaders.

Pope francis

But Francis has an answer for this.  He notes that he became a leader too young—at age 36—and that he made his decisions in an autocratic, insensitive way.  He was young enough to learn from that experience that consultation and emotional openness was a better approach, which he intends to maintain.

Francis is clearly a socio-economist:

God attracts us looking at the complex web of relationships that take placein the human community. God enters into this dynamic, this participation in the web of human relationships.

This church with which we should be thinking is the home of all, not a small chapel that can hold only a small group of selected people. We must not reduce the bosom of the universal church to a nest protecting our mediocrity.

I see the church as a field hospital after battle. It is useless to ask a seriously injured person if he has high cholesterol and about the level of his blood sugars! You have to heal his wounds. Then we can talk about everything else. Heal the wounds, heal the wounds.... And you have to start from the ground up.  The church sometimes has locked itself up in small things, in small-minded rules…. 

Tell me: when God looks at a gay person, does he endorse the existence of this person with love, or reject and condemn this person? We must always consider the person. Here we enter into the mystery of the human being. In life, God accompanies persons, and we must accompany them, starting from their situation. It is necessary to accompany them with mercy…. The confessional is not a torture chamber.

In one of the most important discussions, Francis shows a remarkable faith by being willing to trust the flock.  He gives up the notion that a Pope, in descending in a direct line from Jesus, is infallible:

[In] this quest to seek and find God in all things there is still an area of uncertainty. There must be. If a person says that he met God with total certainty and is not touched by a margin of uncertainty, then this is not good. For me, this is an important key. If one has the answers to all the questions—that is the proof that God is not with him. It means that he is a false prophet using religion for himself. The great leaders of the people of God, like Moses, have always left room for doubt. You must leave room for the Lord, not for our certainties; we must be humble.

There’s much more, of interest to non-Catholics as well as Catholics.  American Catholic bishops, who have been pushing the culture wars against gays and women, may not be too pleased by the Pope’s interview, which asks them to reign in their venom and develop love, compassion, and an attitude of inclusivity.

It Don't Worry Me

Jonathan B. Wight

Robert Altman’s finest movie was Nashville (1975), a quirky look at more than 20 mixed-up lives intersecting in Music City and leading up to a presidential race political rally at the climax.  There are plenty of ethical conundrums along the way.

The brilliant filmography, way ahead of its time, gives the impression of watching a documentary or home movie. There are outstanding performances by Lily Tomlin, Ronee Blakley, Ned Beatty, Karen Black, Shelley Duval, and many others. There is wonderful music, of course, including Keith Carradine’s “I’m Easy,” which won an Academy Award for best song. 

I am slightly giving away the ending by directing you to the final scene of the movie set at The Parthenon in Nashville.  Through a series of mishaps and adventures an aspiring singer (played spectacularly by Barbara Harris) is handed the microphone, and slowly builds to a magnificent crescendo.  The song and her rendition are haunting. 

Here are the lyrics to that final song, “It Don’t Worry Me,” also written by Keith Carradine.

The price of bread may worry some, but it don’t worry me.

 The tax relief may never come, it don’t worry me.

 The economy’s depressed but not me my spirit’s high as it can be,

 You may say I ain’t free but it don’t worry me.

 It don’t worry me….

 If you get a chance, revisit this movie and let me know what you think.


Gouging Goes Both Ways

Jonathan B. Wight

A large majority of survey respondents say it is unfair for a hardware store to raise prices on snow shovels after a big storm.  “It is unethical for a business to take advantage of a consumer’s misfortune,” reads one of my student papers.

But is it also unethical for a consumer to take advantage of a business’s misfortune?  Last Thursday an employee error caused the United Airlines’ computer system to allow travelers to buy tickets across the country for as low as $0 plus tax last. 

If you believe it is unethical for a business to gouge a consumer, taking advantage of a misfortune, isn’t it also unethical for consumers to gouge a business?  Do we have a double standard?  

Of course, from a number of different ethical perspectives it may be entirely ethical to raise prices of shovels in a snowstorm.  But as noted previously on this blog, intellectual justifications for market efficiency pale in comparison to the instinctual gut feelings about fairness and sharing that dominate group survival in times of crisis.  

My caution to fellow economists is: don't throw out these important instincts until we understand their role in making society click.  Emotional commitments run deeper sometimes than calculations, and that may be part of the success of some human institutions (the military, the family, exchange in markets, etc.).