Author Archive for Steve Landsburg

Are These The Good Old Days?

I am not well versed in Keynesian business cycle theory. Therefore I have a very naive question for the Keynesian economists:

Why aren’t you thrilled with the current state of the economy?

Here’s why I ask: According to what I take to be an orthodox Keynesian view, we are now in a liquidity trap. (My question does not apply to Keynesians, new or old, who believe otherwise.) That means that people want to hold lots and lots of money instead of spending it. Cool! We can provide money at almost zero cost. So it should be easy to make people very happy. What’s the problem?

Of course, people are working less, but that makes perfectly good sense in a world where people prefer to consume less. Why spend all day on an assembly line churning out widgets that people prefer not to buy?

A quick and obvious answer is that the people who are choosing to accumulate money and the people who are out of work are not the same people. In other words, to put this in slightly more technical language, you can’t address this question in a so-called “representative agent model” — a model that abstracts from interpersonal differences.

Still: The theory, as I understand it, is that vast numbers of people are choosing to hold vast amounts of money. Since money can be produced costlessly, this ought to count as a very good thing — which should offset a lot of very bad things, no?

Whatever answer there is might vary from one Keynesian economist to another, so let me subdivide my question into two:

  1. Why aren’t “old Keynesians” perfectly happy with the current state of the economy?
  2. Why aren’t “new Keynesians” perfectly happy with the current state of the economy?

Continue reading ‘Are These The Good Old Days?’

Share

A Tale Told By an Idiot

In sixth grade, I did not read My Side of the Mountain, though it was assigned for class. In eighth grade, I did not read Little Women and in ninth grade I did not read Great Expectations and The Good Earth. As I passed through high school, I worked my way through much of the western canon, not reading The Scarlet Letter, Bartleby the Scrivener, The Return of the Native, and dozens more. In eleventh grade, we were assigned two books by Steinbeck, two by Hemingway, two by Sinclair Lewis and two by William Faulkner. I did not read the Steinbeck, Hemingway or Lewis but for some long-forgotten reason I violated years of established tradition by tackling the Faulkner — specifically As I Lay Dying and The Sound and the Fury.

As I Lay Dying went down pretty easily, but I remember many nights struggling my way through The Sound and the Fury, Cliff notes at my side. It felt like scaling Everest, and the vistas at the top were worth the climb.

A couple of weeks ago, as part of my ongoing project to read great novels, I decided to revisit The Sound and the Fury, and I’m more than glad I did; I finally have an answer to give the next time I’m asked what one novel I’d bring to a desert island. But what I’m flabbergasted by is this: How did this book ever get assigned to high school students in the first place? I ask for at least two reasons:

Continue reading ‘A Tale Told By an Idiot’

Share

Survival of the Fittest

The Wall Street Journal reports that `daily deal’ sites like Groupon are dying fast, casualties of the expensive competition for new users. Groupon now spends about $8 to lure one active user.

This looks like a good example of Darwinian competition yielding an inefficient outcome — as we should expect. (See Chapter 8 of my book The Armchair Economist for more on why Darwinian competition is nothing like market competition, and far more likely to yield bad outcomes.) Vast sums are being spent in an arms race with relatively little social value. Surely consumers benefit from all this competition, but it’s highly implausible that they benefit enough to justify such high expenditures. Even after the recent Great Winnowing, about 350 of these sites remain; surely consumers (none of whom have the time to visit 350 sites a day) would be almost equally well served by 50 sites, at about 1/7 the cost.

Continue reading ‘Survival of the Fittest’

Share

Compassion Play

One thing I like about the study of economics is that it fosters compassion. When part of your job is to predict human behavior, you quickly learn the value of understanding other people’s problems. When the other part of your job is ferreting out the unseen global consequences of our choices, you’ve taken the first step toward caring about those consequences.

For example: Suppose a guy with no health insurance and no assets shows up at a hospital emergency room with an urgent life-threatening condition. Should you let him die? Ordinary compassion says no. The heightened compassion of the economist says, at the very least, maybe.

First, a policy of providing emergency health care to everyone is pretty much the same thing as a policy of providing emergency health insurance to everyone. It was specified here that this was a guy who didn’t want health insurance. So let’s recognize for starters that such a policy runs counter to — I am tempted to say runs roughshod over — the guy’s own revealed preference. It’s an odd sort of compassion that forces people to buy things they don’t want.

Now you might object that nobody’s forcing this guy to buy emergency health care; we’re trying to give him emergency health care. Not so fast. Here’s the first place where a little economic training goes to hone one’s sense of compassion: The emergency health insurance we’re foisting on this guy has a cost. We can spend that money on emergency rooms or we can spend it on a myriad of other things the guy might prefer. How is it compassionate to give him one thing when he prefers another?

This is particularly true if the guy happens to be very poor. Poor people have a lot of problems, and emergency health care is only one of them. They need better education, they need better transportation, and they need a little help buying groceries.

There is room for lots of debate and lots of disagreement about how much we as a society should be spending to help poor people. That’s not the issue here. The issue here is: Given that you’ve decided to spend an extra such-and-such many dollars a year helping poor people, why would you spend it in this particular way rather than one of the many other ways they could use it? For God’s sake, why not at least ask them if they’d rather have the cash?

Continue reading ‘Compassion Play’

Share

Cats, Dogs and Quantum Mechanics

The game of Cats and Dogs works like this: You and your teammate are placed in separate rooms and forbidden to communicate. You are each asked a randomly chosen question: Either “Do you like cats?” or “Do you like dogs?” (Each of your questions is determined by a separate fair coin flip.)

You win if your answers agree — unless you were both asked the “cats” question, in which case you win if your answers disagree.

A little reflection should convince you that if you are allowed to meet with your partner and plot strategy before the game, then the best you can do is agree to always agree — say by both always answering “yes”. That way, you win 75% of the time, and there’s no way to do better. In particular, there’s nothing to be gained by randomizing your answers.

That, at least, is true, in a world governed by the laws of classical physics and probability theory. But in a world governed by the laws of quantum mechanics — which is to say, in the world we live in — you can in principle do better. Namely: You each carry with you one of a pair of entangled “quantum coins” (actually elementary particles, but I prefer to think of them as coins, since you’re going to use them as randomizing devices).

Continue reading ‘Cats, Dogs and Quantum Mechanics’

Share

Thursday Puzzle and More

Yesterday’s post on taxation generated a whole lot of comments that deserve responses; unfortunately I’m too swamped right now to respond. Worse yet, I’ll be out of town — and probably not blogging — for the next few days. Sometime next week, I’ll try to craft a new blogpost addressing much of what was said in those comments.

Meanwhile, here, courtesy of our frequent and invariably interesting commenter Mike H, is a puzzle to keep you busy while I’m gone:

Continue reading ‘Thursday Puzzle and More’

Share

The Romney Plan

I have not read or even skimmed Mitt Romney’s 160-page economic plan; all I know is what I’ve seen in the headlines. So all of this is subject to revision. But:

Continue reading ‘The Romney Plan’

Share

Moral Matters

The ever-insightful philosopher Peter Smith has a number of interesting things to say about abortion, but I found one of those things particularly striking — partly because I don’t recall ever having thought of it before, and partly because, in retrospect, I don’t see how I could have failed to think of it.

Namely: The argument is made that zygotes/embryoes/fetuses, even at a very early stage, have the full moral status of human beings. Yet if that were true, surely we’d want to divert a substantial portion of the medical research budget away from relatively minor scourges like, say, cancer, to the spontaneous abortions that take the lives of something like 30% of these full-fledged humans. In a typical year, there are about 8 million cancer deaths worldwide; the number of early-stage spontaneous abortions must be at least twice that.

In Smith’s words:

very few of us are worried by the fact that a very high proportion of conceptions quite spontaneously abort. We don’t campaign for medical research to reduce that rate (nor do opponents of abortion campaign for all women to take drugs to suppress natural early abortion). Compare: we do think it is a matter for moral concern that there are high levels of infant mortality in some countries, and campaign and give money to help reduce that rate.

Smith is struck by the fact that this attitude is very widespread; I am more struck by the fact that it seems to be very widespread even among those who characterize themselves as pro-life.

Continue reading ‘Moral Matters’

Share

Recap

Some commenters still seem confused about the locus of disagreement in this week’s back-and-forth with Paul Krugman. I post today not to beat a dead horse, but to clarify the issues for those who are interested in understanding them. Please keep any discussion both civil and on-topic. I’ve numbered the points below for easy reference.

Continue reading ‘Recap’

Share

Krugman Followup

What I like about people in academics is that when we disagree, we actually care about figuring out who’s right — and therefore we have a tendency to reach consensus, though it can take a while.

Anybody who blogs often enough (very much not excluding yours truly) is occasionally going to post something that, at least as written if not as intended, is objectively plain flat out wrong. Paul Krugman did that a couple of days ago, I responded, he’s responded to my response, and at least 4/5 of our disagreement is now resolved. That’s exactly as it should be.

Continue reading ‘Krugman Followup’

Share

Thursday Puzzle

quartersOur frequent and reliably insightful commenter Jonathan Kariv sends along this neat puzzle:

Your enemy chooses 10 points on an infinite tabletop and gives you 10 coins of the same size (let’s say U.S. quarters). Can you always place the coins on the tabletop in such a way that all 10 points are covered, but no two coins overlap?

Continue reading ‘Thursday Puzzle’

Share

Panglossian Economics

PanglossIn a radical departure from his previous expressions of dissillusionment, Paul Krugman has implicitly declared in his latest blog post that we are now living under the best of all policy regimes. I presume he will now be able to retire with satisfaction from his career as a gadfly.

The context is Eric Cantor’s demand that any federal disaster relief in the wake of Irene be offset by spending cuts elsewhere. Krugman thinks this is silly, and proves his point with an appeal to the standard Ricardian theory of public finance. According to that theory, which all economists understand and accept, if you’ve got to bear a cost, it’s best to spread that cost out over as many activities as possible. So ideally, you’d pay for disaster relief partly through spending cuts, partly through (current) tax increases, and partly through an increase in the deficit. Therefore says Krugman, “the bottom line is that basic, regular economics says that Cantor isn’t making sense.”

Since Krugman has carelessly neglected to spell out an important detail of his argument, let me fill in the gap for him: The Ricardian conclusion does not come from thin air; instead it follows logically from certain premises, key among which is that you’re starting from an ideal policy regime.

Continue reading ‘Panglossian Economics’

Share

How I Spent My Summer Vacation

ibookshelfA few years ago, I discovered that reading on my Kindle is about 1000 times better than reading a book. This year, I discovered that reading on my iPhone is about 100 times better than reading on my Kindle. As a result (and also as a result of a lot of time spent on airplanes), I’ve been on a mad fiction-reading spree the past few months. Some mini-reviews:

Continue reading ‘How I Spent My Summer Vacation’

Share

Terrifying Prospects

Paul Krugman wisely reminds us that:

The odds are that one of these years the world’s greatest nation will find itself ruled by a party that is aggressively anti-science, indeed anti-knowledge. And, in a time of severe challenges — environmental, economic, and more — that’s a terrifying prospect.

Yes, a terrifying prospect — and an excellent reason to limit the powers of ruling parties, though Paul never seems to notice this.

Click here to comment or read others’ comments.

Share

Travel Report

Thanks to Hurricane Irene, my trip to Brazil turned into a trip to Dulles Airport, from which I am now (after much scrambling) returned. I hope to make it to Brazil in the near future!

Click here to comment or read others’ comments.

Share

Public Service Announcement

For the next several days, I’ll be in at the Liberty and Democracy Forum in Brazil, and likely out of Internet range. I’ll
see you late next week.

Click here to comment or read others’ comments.

Share

A Consequential Study

By now you’ve probably encountered one of the various “do you push the fat man in front of the subway train to stop it from running over five innocent people trapped on the tracks?” puzzles that moral philosophers have been using lately to distinguish the consequentialists (who care only about ends) from the deontologists (who care also about means). (I invoked some of these puzzles, in a slightly non-conventional way, in Chapters 16 and 17 of The Big Questions.)

Now come psychologists Daniel Bartels and David Pizarro to report that choosing what they call the “utilitarian” solution (by which they mean the consequentialist solution, though one might have more faith in their scholarship if they’d used the accurate word) is correlated with higher scores on measures of psychopathy, machiavellianism, and “life meaninglessness”. Those who would push the fat man are more likely to agree with statements like “I like to see fistfights” or “The best way to handle people is to tell them what they want to hear” or “When you think about it, life is not worth the effort of getting up in the morning”. In other words, they are what we tend to think of as an unpleasant bunch.

But you see, here’s the thing: Bartels and Pizarro did the wrong test. Because in every one of the dozen or so moral dilemmas presented to the subjects, they asked: Would you shoot the crewmember? or would you execute one of the hostages? or would you flip off the switch to the ventilator? — which doesn’t get to the moral issues at all. The moral issue is this: In your opinion, should you shoot the crewmember or execute the hostge or flip the switch? The researchers never asked those questions, so we have no idea what the subjects’s opinions were.

Tell me a story about 20 children trapped in a burning building and ask me if I think I should rush in to save them. My answer is yes. Now ask me if I would. If I’m honest, I am very unsure I would do the right thing.

So what do we learn from this research? Here’s one interpretation: Maybe most people agree that you should push the fat man, and most people realize that they themselves would shrink from this moral duty out of squeamishness (just as most people agree that you should save the children from the fire, and most realize they might shirk this moral duty). Therefore they answer “No, I would not push the fat man.” But it’s only the psychopaths and Machiavellians who exaggerate their own moral virtues by claiming that they would rise to this particular occasion.

Continue reading ‘A Consequential Study’

Share

Mea Culpa

For the first time ever, I am deleting a post.

The numbers in this morning’s post (now missing) were completely wrong as were, therefore, the conclusions I drew from them.

For the record, all of the numbers concerned what happens if you save $1000 a month. I often show these numbers to my students, and when I do, I get the assumption right. But this time, I somehow a) convinced myself that the assumption was $100 a month, not $1000 a month and b) therefore concluded that saving is a whole lot easier than what I tell my students every year, and c) said a lot of nonsense that followed from this.

(I tell my students that for *them*, saving $1000 a month will soon probably be a plausible strategy, which is likely to be true. Having conflated $1000 with $100, I drew implausible conclusions in the blog post about what you could do on $25,000 a year.)

I could say things about the folly of posting at 2AM, but I think the wiser course is simply to apologize.

Share

Economics 102

One of Paul Krugman’s favorite tactics is to assert that all he’s doing is channeling the time-honored lessons of Economics 101 — pre-empting dissent with the implication that any dissenter must be either an ignoramus or a radical. (Journalistic honesty compels me to acknowledge that I might have employed this rhetorical tactic once or twice myself over the years.)

It’s interesting, then, to take note of how very far his central arguments actually deviate from Economics 101. Here’s what he said last week on his blog:

Mulligan and others keep emphasizing examples of individual groups that have managed to gain jobs by cutting wages or offering other attractions to would-be employers. They then assert that these examples tell us what would be needed to expand overall employment.

The point, of course, is that all such arguments amount to committing the fallacy of composition…The essence of macroeconomics is understanding why such things are a fallacy, why what happens if one group does something is not at all what happens when everyone does it.

But you see, here’s the thing: According to the standard Economics 101 version of the sticky-wage Keynesian model, this is a case where what happens if one group does something is exactly the same as what happens when everyone does it. According to that model, as long as wages continue to fall, firms will continue to move along their labor demand curves until we reach full employment.

Continue reading ‘Economics 102’

Share

Friday Solution

Re yesterday’s puzzle, you’ll find answers in the comments. (We are blessed with some very smart commenters here at The Big Questions!!)

Commenter Roger Schlafly pointed this Wikipedia article where I was surprised and delighted to see a reference to a paper co-written by my old friend Dave Rusin. I did not remember that Dave had anything to do with this problem, but in retrospect I bet I knew this at one time.

I managed to dig out some notes I jotted down on this subject many many years ago. I have not doublechecked these results, and I can’t completely vouch for the careful accuracy of my younger self, so take these for what they’re worth. But here’s what I once claimed to have proved:

The reason there is exactly one pair of nonstandard six-sided dice is that six is the product of two distinct primes. For the same reason, there is exactly one pair of nonstandard n-sided dice when n is 10, or 15, or 21, or …. For any product of three distinct primes, there are at most 40 nonstandard pairs.

I also found (in what appears to be my handwriting) this chart, which I reproduce with the same caveats:

Continue reading ‘Friday Solution’

Share

Thursday Puzzle

diceI love this problem, which I found on the Internet many years ago. I suppose you could find a solution by Googling, but that’s of course no fair.

A standard pair of six-sided dice induce a probability distribution on the outcomes 1 through 12: The probability of rolling a 1 is 0, of rolling a 2 is 1/36, of rolling a 3 is 1/18, etc. Is there any nonstandard pair of six-sided dice that induces exactly the same probability distribution? If so, how many such pairs are there?

(A non-standard pair of six-sided dice might have, say, the numbers 1,2,2,3,8,9 on one cube and the numbers 2,3,4,4,4,4 on the other.)

Continue reading ‘Thursday Puzzle’

Share

Looking Forward to Looking Backward

Each generation wishes it could go back fifty years and shake some sense into those people who were so bound by unnecessary customs, and so blind to the options they could have chosen and the changes that loomed on the horizon. As I said on Tuesday, this was Edith Wharton’s theme when she wrote in 1920 about the 1870’s, and it’s the theme of Mad Men, written in 2010 about the 1960s.

I invited you on Tuesday to speculate about which of our own quirks will trigger this sort of bittersweet nostalgic frustration among our descendants fifty years from now. There were some great responses in the comments.

Here are some predictions of my own that I think are least plausible — some moreso than others, but I’ll throw them out in no particular order.

Continue reading ‘Looking Forward to Looking Backward’

Share

Jesus Christ!

Kathleen Kennedy Townsend, writing in the Atlantic, has figured out that Jesus Christ wants you to be a Democrat. There are, you see, 2500 passages in the New Testament that call on us to care about other people. Rick Perry (and presumably others of his Republican ilk) ignores those passages, according to Ms. Townsend, when he voices “concerted opposition to government social programs”.

Now, of course Rick Perry is no more concertedly opposed to government social programs than is Kathleen Kennedy Townsend; instead, they disagree about how those programs should be structured and how extensive they should be. Not even Ms. Townsend (unless she is an even greater lunatic than she appears to be) believes that such programs should be unlimited, so her disagreement with Rick Perry is largely over where to draw the lines. Somewhere in those 2500 New Testament passages, she’s managed to discern an endorsement for her own preferred lines over Governor Perry’s. Quite a discerning reader she must be.

But it gets worse: According to Ms. Townsend’s reading of the Bible, we ought to “use all the tools we have at hand to help the poor, the sick and the hungry” — and I’m guessing that’s not someplace Kathleen Kennedy Townsend wants to go. That’s because using all the tools at hand to help the poor, the sick and the hungry means unleashing the power of capitalism. Regarding the poor and hungry, it means eliminating barriers to trade and immigration, reducing or eliminating capital taxation, and eliminating or drastically restructuring most federal regulations. Regarding the sick, it means curbing the power of the FDA, eliminating the tax deduction for employer-provided health insurance, and committing ourselves not to regulate the prices of prescription drugs. As a general rule, it means diminishing the power of the political class that Kathleen Kennedy Townsend has devoted her life to serving.

Continue reading ‘Jesus Christ!’

Share

Ages of Innocence

Reading Edith Wharton’s Age of Innocence, it strikes me that this must have been the Mad Men of 1920. That was the publication date, but the story is set 50 years earlier, in a world poised on the edge of cultural upheaval. The characters are blind to how dramatically the world is about to change, and to how much better their lives might be if only they could break out of the social strictures of their time. They manage to be both charmingly quaint and tragically foolish. We care about them, but we also want to take them by the shoulders and shake them into something more like ourselves.

As Edith Wharton viewed the 1870s, and as Mad Men views the 1960s, so the fiction of the mid-to-late 21st century will probably view us. Which of our quaint but tragically foolish ways do you think it will emphasize?

Click here to comment or read others’ comments.

Share

Last Night’s Debate

Putting aside all issues of who I did or did not agree with, and putting aside all issues of who I would or would not like to see in the White House, and ranking them solely on the criterion of “Demonstrated Ability to Think on Their Feet”, I score it this way:

1) Gingrich
2) Santorum
3) Bachmann
4) Cain
5) Paul
6) Romney
7) Pawlenty
8) Huntsman

You?

Click here to comment or read others’ comments.

Share

Tunnel Vision

The most fun you can have on the Internet is to find a beautiful, succinct argument with a conclusion so unexpected it seems like magic. For today’s fun, I am indebted to Michael Lugo, at God Plays Dice.

Lugo’s original post is so good it seems almost superflous to paraphrase it, but I can’t resist the temptation.

Drill a tunnel through the earth, from anywhere to anywhere — New York to Maine, or New York to Australia, or wherever else you like. Like so:

Now drop the object of your choice (Lugo suggests a burrito, but you might prefer a gravity-driven train) into the tunnel entrance and wait till it comes out the other side. It’s a standard calculus problem to calculate how long you’ll have to wait: The answer is 42 minutes, regardless of the length of the tunnel. I’m sure I once found it surprising that the tunnel length doesn’t matter, but I’ve known it long enough that I now take it in stride. So that’s not how Lugo surprised me.

The surprise is that if you change the size of the earth (while maintaining its density), the answer is still 42 minutes. Whether the earth is the size of a pea or the size of the solar system, it’s a 42 minute trip from one end of the tunnel to the other. (We’re — quite reasonably — ignoring the effects of relativity here. For an earth that was half the size of the universe, we’d have to make some corrections.)

Why so? You could, of course, discover this through a direct calculation. But Lugo provides a much slicker argument, namely:

Continue reading ‘Tunnel Vision’

Share

Turn Off Their Lights

The EPA announced yesterday that new regulations mandating fuel efficiency standards for heavy trucks will cost vehicle buyers $8 billion, but that will be paid for in fuel savings over a year or two.

Oh. Sounds like the mandate is quite unnecessary then, no? With numbers like that, consumers will demand high efficiency vehicles with or without the EPA. Unless, of course, the EPA is, umm….lying.

Continue reading ‘Turn Off Their Lights’

Share

There and Back Again

In a research paper with seemingly tragic consequences for science fiction fans, researchers in Hong Kong have confirmed that individual photons can’t move faster than light.

(Hopes had been raised a few years back, when a pair of German physicists claimed to have broken the light speed barrier by propagating waves that effectively arrived before they departed. I said at the time that I could do just as well without all the fancy lab equipment — all I need is a yardstick and an axe. If I chop off the last 12 inches, then the center of the yardstick moves from the 12″ mark to the 18″ mark — a six inch advance in exactly zero time. Of course a sane person might argue that this six inch “advance” involves no actual forward motion, but if I correctly understood the German paper, the same sort of objection would apply there as well.)

It’s being reported that the results from Hong Kong doom all hope for time travel. That’s true or false depending on how restrictively you interpret the phrase “time travel”. Back in 1938, Kurt Goedel (yes, the great logician Kurt Godel — though this particular work has nothing to do with his work in mathematical logic) constructed an example of a universe — that is, a structure that obeys all the laws of physics as laid down by Einstein — that is completely filled with closed timelike curves. If you lived in that universe, you’d be able to travel only forward in time, but still eventually come back to your starting point in both time and space — just as a bug can go in just one direction around a circle and still come back to its starting point. Just like Groundhog Day.

Continue reading ‘There and Back Again’

Share

Worst Puzzle Ever

From Air Canada’s inflight magazine:

aircanada

And since I’m sure someone will ask, here is, apparently, the only solution they could think of:

Continue reading ‘Worst Puzzle Ever’

Share

Friday Humor

Three logicians walk into a bar.

The bartender says: “Would any of you guys like a drink?”

The first logician says: “I don’t know.”

The second logician says: “I don’t know.”

The third logician says: “No.”

Hat tip to Adam Merberg, who isn’t sure of the source.

Click here to comment or read others’ comments.

Share