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July 2017 posts

Retrospectives on Hayek

By Jonathan B. Wight

HayekFor those who love Hayek but don’t subscribe to laissez-faire (I’d put myself in that camp, and I’d include Adam Smith from the grave), you might want to read the latest piece in the Journal of Economic Perspectives 31(3)(Summer 2017): 

Samuel Bowles, Alan Kirman, and Rajiv Sethi, “Retrospectives:  Friedrich Hayek and the Market Algorithm.”

The authors argue that although Hayek had a prescient understanding of decentralized information and competitive markets, he failed to acknowledge how opportunistic behaviors could lead the market astray from social welfare. 

Disequilibrium (rather than equilibrium) can be profit-maximizing at the level of the entrepreneur, especially when speculative behavior is introduced.  (It is also the critique of speculation that led Adam Smith to argue that financial market regulations could promote the social welfare.)

If you are cynical, you will argue that economic researchers continue to search until they find a model that agrees with their preconceptions.  Bowles et. al. fit this bill—but so does Hayek—and probably every other economist.  Our biases may affect how we evaluate the truthfulness of a model.

{Image: https://commons.wikimedia.org/wiki/File:Mises,hayek,shumpe.jpg]

Biological Ethics

By Jonathan B. Wight

Following up on Dawkins, a friend just recommended Robert Sapolsky’s new book, Behave: The Biology of Humans at Our Best and Worst (2017). 

SapolskySapolsky is a neuroendocrinologist and professor of biology and other departments at Stanford.  Unlike Dawkins, who posits that greed is the only instinct that survives the evolutionary process, Sapolsky takes a more nuanced (and I think modern) approach to see humans as evolving along complex lines that entail empathic cooperation as well as competition.  

I obviously haven’t read the book yet but I did peruse its epilogue.  One quote immediately stood out, because it agrees with my preconceptions (and the way I teach economic development):


At various points when writing Ethics in Economics I joked to friends that in next thirty years, economics departments would be merging with biology and psych departments.  That seems to be where we are heading, and that would not be all a bad thing, except that the concept of “exogenous preferences” might disappear, as well as the concept of free will. 

Everything is always and everywhere about context, especially the social context:


The key point--even as we continue to struggle along--is to be humble about what economists think we know about human behavior, and brave enough to leave our silos to find out what other disciplines have discovered while many economists have had their heads in the proverbial sandbox for the past century, playing only with other economists.  (Is that too harsh--certainly--but I'm not responsible!  It was my genes interacting with my environment that made me write it.  Blame Sapolsky!)

More later….

[Thanks to journalist and environmental author Stephen Nash for the link.]

Dawkins Silenced

By Jonathan B. Wight

I don’t agree with Richard Dawkins on many things, including his views on Islam. Dawkins

But canceling his radio appearance because he might offend people is giving in to a view that all speech must be agreeable in advance to the listener.  Don’t listeners have the right to hear his views, even if misguided?  Those that don’t agree with him can change the station, voting with their marketing dollars to stations that they like.

If spewing bile were to be avoided on the radio, would Rush still be on the air? 

Pardon Me

By Jonathan B. Wight

“Pardon me,” you say when you accidentally step on someone’s foot.

“Pardon me” said by our current President means something else entirely!

Beyond saving his own skin, hinting that he might pardon his aides and family members sounds like the first salvo in a Prisoners Dilemma game, in which one party wants to shore up cooperation among one’s fellow thieves to reduce back-stabbing—in this case by becoming a state’s witness and testifying against higher-ups.

Issuing a blanket pardon (or hinting that one will) would mean that conspirators have every incentive to lie and obfuscate to investigators, secure that they will walk free. 

One commentator wrote that issuing such pardons “would destroy any legacy of Trump’s and demean his office.” Has demeaning the office ever stopped this president before?

I’ll never forget the outrage I felt against President Ford when he pardoned Richard Nixon.  Ford was not complicit in Watergate, and thought that a pardon was best for the healing of the country.  But the lack of closure and accountability was equally damaging to our country. 

There are good and legitimate reasons why Presidents might pardon someone.  By contrast, giving an implicit guarantee of pardon to one’s henchmen engaged in dishonest or treasonous activity is an outrage, even if legal.

32 Million

By Jonathan B. Wight

What do these cities have in common?


Yes – they’re the largest 19 cities in the nation, comprised of about 32 m. people.  And if Obamacare is repealed next week as planned by the Senate leadership, 32 million people will eventually lose health insurance coverage, according to the CBO.  17 million would lose their health insurance next year alone.

To be fair, some of these are young and would be thrilled to lose the mandate to buy something they don’t want.  But the vast majority of these would involuntarily lose it through reductions in Medicaid. 

The loss of insurance doesn’t mean there would be an immediate health crisis, because uninsured people do go to emergency rooms. It does mean that the public cost of treating those 32 million uninsured will likely be much higher.  And over the long haul we would expect to see problems with patients not staying on medication and not going for follow-ups or not receiving preventive care.  Sicker people means lowering of worker productivity and tax revenues from growth.  It seems very short-sighted and anti-progress to go down this path.  

So, when you’re wondering what 32 million “means” in relation to the U.S. population, it’s a whopping 10 percent of the population.  It would be equivalent to ripping health insurance from everyone living in our largest 19 cities and is a horrific concept.  It is no less horrific to realize that many people who will lose it are likely to be in poor rural areas. 

Existential Threats

By Jonathan B. Wight

Does the West face an existential threat?

That is the conclusion of one columnist, who wrote recently: “The news media in the West pose a far greater danger to Western civilization than Russia does,” and that “The real threat to Western civilization is Western civilization ceasing to believe in itself” (emphasis added).

There is no question that loss of confidence in key institutions is a detriment to the survival of a culture or peoples.  And the constant harping on our deficiencies as a Western society is one thing that could undermine that confidence, particularly in young people who will either carry on our traditions or adopt some new ones.

But criticism and open debate are the very things the West stands for, isn’t it? 

Putin.trumpWe live at a time when the current holders of power in the U.S. do not believe in facts—either scientific facts (evolution or climate change), or political facts (who won the popular vote, or how many people showed up for the inauguration).  Our fearless leader also eschews accountability and transparency, other traditional hallmarks of an advanced civilization. He holds up dictators and despots as role models.  Aren't these the signs of the beginning of the end for Western civilization?  

What brought me to this particular article was an an “Adam Smith” alert that I’ve set up for the New York Times.  Turns out, Adam Smith has something pithy to say about the decline of the West, namely, “There is a great deal of ruin in a nation.”

He was referring to Britain’s loss of Burgoyne’s army to America at the Battles of Saratoga in 1777, marking the beginning of the end of colonial rule.  Smith’s insight is that—despite what many have tried to force down his throat—he is not a believer in nirvanas or Edens or paradises on earth.  They don’t exist.  We only have messy stuff to sort through and live with.

The media that criticize and expose our foibles are part of that messy stuff, without which we would not have a thriving Western democracy.  Holding up Putin as a role model is a far greater threat to our morals and existence than the media who report that our emperor is buck naked.

Political Compass

By Jonathan B. Wight

I’ve been incommunicado for several weeks while traveling in Asia (some blogs may eventually appear on what I learned). 

Meanwhile, I saw an interesting graphic on determining one’s political compass.  These surveys and tests are probably meaningless, but for fun I took it (link here).  In the interest of transparency to any readers of this blog, here it is:  Political compass

No surprises—I’m generally pretty confused!  What is a left-leaning libertarian? 

To me I think it means I’m a pluralist.  I’m not satisfied with simplistic answers, but rather always try to overcomplicate things.  That’s both a negative and a positive.   In terms of ethics it means I am not an absolutist, so I wouldn't make a good Kantian.  At least as I understand it, Kant would require you never to lie, even to the madman who comes to your door wanting to find your father to kill him.  

I tend toward libertarian ideals but like Adam Smith have pretty big exceptions. Smith, for example, favored financial market constraints--he didn't trust financial markets to allocate capital without causing too much risk for society.  

Readers—where do you fit in?