Friday, April 30, 2010
How significant is the Central Government Fallacy for today's public discourse? Very significant. If you're one of those people that thinks the United States is engaging in Keynesian macroeconomic policy, then you haven't been paying attention.
There's been a lot of talk about Keynesianism lately - and that's good. And there are a lot of policymakers that have been taking Keynes seriously lately - and that's also good. But if you think we've been practicing Keynesianism, you're quite simply wrong. How would I characterize our policy response to the economic crisis? Tepid monetarism. That works tolerably well in most circumstances, but not when nominal interest rates are at record lows, inflation is low, and demand is weak.
The section title was:
"The Integration of Catallactic Functions"
...or perhaps I missed the point of the comic :)
Ultimately, though, Stiglitz and Roberts come to wholly opposite conclusions from roughly the same initial critique of our current regulatory apparatus. The common ground only goes so far, but I think it's interesting that they're working from the same basic typology. The choice between Roberts and Stiglitz ultimately boils down to a question of the volatility of the market vs. the heavy handedness of government. Both are quite real concerns, and we do ourselves a disservice by ignoring either one of them. While I personally fall in Joe Stiglitz's lower-right hand quadrant of the typology I've presented, I definitely have my differences with him, as I certainly do with Roberts as well. Generally speaking, I worry that Roberts doesn't pay adequate attention to the market failures that I described, and Stiglitz doesn't pay adequate attention to the potential government failures.
Before closing, I'd like to provide a link and a disclaimer. First, I want to refer people back to my post on Hyman Minsky (which now has some very insightful comments from F&OST guest, Sebastian). My basic critique of Roberts is that he misses the Minsky insight of financial fragility. Indeed, to the extent he recognizes this sort of fragility, he lauds it as a virtue. In many cases it is a virtue. There is absolutely no doubt that failure is functional - that destruction is creative. The market is successful precisely because firms and individuals fail. That's not where Roberts disagrees with economists like Stiglitz (although Roberts would probably like you to think that's where the disagreement lies!). The point of disagreement isn't the necessity of letting people fail. The point of the disagreement is that Stiglitz sees both functional and unfunctional kinds of failure, whereas Roberts rarely mentions the type of destruction and failure that isn't functional or creative.
My disclaimer is that I haven't read Roberts's new essay yet. However, he's been working on it for a while, and I've read and extensively commented on numerous blog posts from Roberts on the issue and even on this essay while it was in its formative stages. I also did listen to his entire December testimony. So take this more as general thoughts on Russ Roberts's position, rather than on this essay in particular.
Thursday, April 29, 2010
Anyway, through all of these really great thoughts, I think the meaning of the initial "epistemic closure" concern has been lost. I count at least three versions of "epistemic closure" available to us - two of which are being addressed in this ongoing debate, and a third that I think is especially interesting to think about.
Version 1 (Wrong and Uninteresting): "Epistemic Closure" as shorthand for various and sundry bitching about conservatism
One of my biggest concerns, however, has been that this whole debate has degenerated into complaining about conservatism, rather than providing a clear critique of conservatism. For Bruce Bartlett, conservatism's alleged epistemic closure amounts to: "They don’t think there are any new ideas of particular interest to them. Their philosophy is fully formed. The only question is how best to implement conservative ideas in the political debate". His concern seems to be the increasing activism of conservatism, and the rigidity of their value system. Others have talked about the "conservative cocoon" phenomenon, where conservatives (allegedly) have restricted interactions with those who don't share their views (in a similar vein, a friend from college shared this this interesting research with me on the closedness of the conservative blogosphere). Douthat focuses on the point of whether there are internal debates in conservatism, a question that is especially salient in light of the Frum Affair. But none of these address the more fundamental point of epistemic closure that was originally raised.
Bartlett's concern about activism and values is beside the initial point. Marxists, for example (at least the early Marxists) were unalloyed activists with a completely closed value system, but they were very thorough in thinking through epistemological questions. As for the "cocoon", the phrase "the ivory tower" is definitive of the cocooning of a group of thinkers - and yet no one accuses the academy of having an underdeveloped approach to epistemology. Douthat's concern with internal debate also has nothing to do with epistemic closure. There is no debate to speak of that 2+2=4 or that the Earth revolves around the Sun. Does that mean it is supported by a suspect epistemology? As I say, I haven't read all of this in great detail, but a lot of the debate seems to simply be a random assortment of complaints about conservatism, with the fancy phrase "epistemic closure" thrown in as a catch-all.
Version 2 (Wrong and Interesting): "Epistemic Closure" and the way that conservatives know what they "know"
Beneath the surface of these random complaints, there is real concern with and discussion of what Julian Sanchez initially meant by "epistemic closure" - namely, how conservatives derive knowledge about the issues that they pontificate on. Sanchez argues that accuracy of the knowledge inputs for the conservative movement are increasingly unimportant. Conspiracy theories, birth certificate skepticism, and crazy Beckesque guilt-by-association chalkboard flow charts have (so the argument goes) become sufficient factual fodder on which conservatives build their arguments.
The Manzi-Levin debate on the National Review is worth looking at as an example (well, at least Manzi's initial post is an example) of a genuine discussion of epistemological questions. Climate change is one issue where I think conservatives are pretty clearly ignoring the evidence to defend what is essentially an ideological position. Other issues, such as financial regulation, health reform, and fiscal stimulus are more dubious issues. I think it's hard to make a blanket statement that conservatives "ignore the evidence" more than liberals. Often they're taking the same evidence and simply applying a different set of values to it. Regardless, it's a fruitful question to ask - and there are a lot of conservatives, particularly in Washington, that do seem to be assuming their own conclusions rather than carefully reviewing the evidence.
Version 3 (Right and Very Interesting): The "Epistemic Closure" of Julian Sanchez's undergraduate subconscious
The New York Times reports Sanchez's confession that "he probably fished “epistemic closure” out of his subconscious from an undergraduate course in philosophy". Indeed he did. Sanchez used "epistemic closure" to describe the problem of "epistemological closed-mindedness", but "epistemic closure" is also a technical term in philosophy, which I only stumbled across recently while preparing for this blog post. The short definition of "epistemic closure" is:
"The principle that, where P and Q are propositions, if we know that P, and know that P logically entails Q, we know that Q"
In other words, "closure" refers to a closed system of knowledge, not closed-mindedness. I think it's fine that Sanchez didn't use "epistemic closure" in this technical sense, but it's interesting to think about the implications of this definition. The idea of "epistemic closure" is often closely associated with skepticism, because of the very real possibility that your knowledge of your initial statement (P), somehow (implicitly) presupposes the later statement (Q). The example given in this longer treatment of epistemic closure is:
"the proposition I have a driver’s license issued by the state of North Carolina entails that North Carolina is not a mere figment of my imagination"
The skeptical position would point out that your ability to make the initial statement presupposes the truth of the second statement. It's not exactly what Sanchez had in mind (and I should point out that I think what he did have in mind, while not exactly "epistemic closure", was also very interesting), but this does relate to a problem that I'm personally concerned about: the problem of deductively extended logical systems of thought. Theoretically, deductive logic is a fantastic source of knowledge. But it relies on two fundamental pillars: the accuracy of its axioms and presuppositions, and the validity of its deductions. The skeptical objection to arguments based on "epistemic closure" are very similar to my (perhaps less formalized) reservations about deductive logic and a disproportionate emphasis on rationality and reason in general.
Logical formality can amplify the errors of bad initial assumptions, while providing the veneer of incontrovertibility. As logical systems get increasingly extended, making broader and broader claims, the initial errors (which may have been negligible) can easily multiply into substantial errors. As Nikola Tesla once said: "Today's scientists have substituted mathematics for experiments, and they wander off through equation after equation, and eventually build a structure which has no relation to reality". In economics, I think the Austrian School and Real Business Cycle School are both excellent examples of Tesla's scientists who have "wandered off", confident in their deductive systems that bear no relation to reality. At least Real Business Cycle theorists will do empirical work to check up on things. The Austrian School explicitly refuses to do this check up.
I suppose I've wandered quite far from the point of conservative "epistemic closure" over the course of this etymological exercise. Are conservatives more likely to "wander off" with deductive arguments built from fallacious assumptions? Quite possibly. I think that's an open question.
Tuesday, April 27, 2010
Nick Rowe is contemplating the withered shell of the Eurozone that may be left after all this is over.
Paul Krugman is bracing for "the mother of all bank runs"
and Ken Rogoff, the former IMF chief economist, said that it is unlikely that the sovereign bailouts would end with Greece.
And all these pronouncements of course feed into expectations, which makes the bad news even worse. We aren't out of the woods yet.
"To the extent to which the machine becomes itself a system of mechanical tools and relations and thus extends far beyond the individual work process, it asserts its larger domination by reducing the "professional autonomy" of the laborer and integrating him with other professions which suffer and direct the technical ensemble."
"The people recognize themselves in their commodities; they find their soul in their automobile, hi-fi set, split-level home, kitchen equipment."
Although we should be careful not to get too worked up about this sort of thing. Remember, Marcuse also said: "Not every problem someone has with his girlfriend is necessarily due to the capitalist mode of production."
Monday, April 26, 2010
- The private space industry took a step forward this month when Dulles-based Orbital Sciences bought General Dynamics' spacecraft development and manufacturing division. I think this is good for two reasons. First, we've known since Smith's Wealth of Nations that "the division of labor is limited by the extent of the market". The emergence of dedicated spacecraft manufacturing companies is a sign that the extent of the spacecraft manufacturing market is expected to broaden. It's also a good sign that space will not necessarily be utilized, explored, and eventually settled by defense contractors like General Dynamics.
- How many NABE firm surveys is it going to take to realize that hiring has been primarily limited by aggregate demand expectations, and not by taxes or regulatory uncertainty or the alleged generosity of the safety net? I really don't see what's so hard about this.
- The financial reform bill is moving through Congress, and I'm wondering how many people actually know what's in it. I haven't had the opportunity to follow this debate as closely as the health reform debate - and I felt like a lot of Americans had misconceptions about what was in the health reform bill (which was relatively easier to understand). How many know what is in this one? And yet how many people think we should just do nothing with this bill? This is a pretty good argument for representative government - but it simultaneously highlights the problems of any government solution.
- Paul Krugman talks about epistemic closure in macroeconomics. I don't know how to take this, really. It certainly sounds plausible - I'm not sure whether it's true or not. It reminds me of some awkward conversations I've had with my supervisor at work. We were talking about my plans for PhD programs, and she suggested I shoot high and that one of the places I apply should be Chicago (she went to Chicago for her masters' in public policy). Not only is that a ridiculously long shot, I had trouble explaining to her that while I'm sure I'd get a great education there I'm just not sure how balanced it would be. I think my brother Evan (a current PhD student in Chicago's Divinity School) is savvy enough to get the point without being offended, but I'm not sure this is on other people's radar. At a place like Harvard, you know you'll get a balanced position. You've got Greg Mankiw on the one hand and Robert Barro on the other. You're going to hear both sides of the issue. Maybe you would at Chicago too, I just couldn't say with as much certainty.
- I've had a decent opportunity to study this weekend because Kate has been watching Sex and the City, which doesn't always hold my attention. However, it did remind me of something I stumbled across this week that would have fit in perfectly with the show: a detailed review of John Maynard Keynes's sex diaries. I knew that Keynes had a promiscuous streak of homosexual encounters in his early years at Cambridge, but I had always thought these were more anecdotal. It turns out, he actually kept meticulous records on it. The earlier diary names names, including many men from the Bloomsbury Group. The later diary is a coded time series of encounters.
- My paper on the 1920-21 depression on SSRN. As soon as my PDE class is over next week I'm going to revisit this with gusto and then submit. Any thoughts are appreciated.
- Barro and Lee have an updated version of their global education dataset available now at NBER. It's a fairly interesting endeavor - I first came into contact with it in econometrics a couple years ago.
- Inside Higher Ed reviews the AEA's new sub-journal proceedure. I'm curious what other people think of this. My impression has been that the four sub-journals aren't as prestiguous as other journals in the field. In other words - they're not really a runner up to the AER. But then again, I haven't published in any journals yet, so I'm not necessarily the best person to ask.
Sunday, April 25, 2010
Friday, April 23, 2010
To add insult to injury, Comedy Central censored the episode that Trey Parker and Matt Stone submitted. This isn't a first amendment issue, of course. Comedy Central had every right to do what it did. But in my opinion, they tarnished themselves by abandoning Trey and Matt, who have worked tirelessly to deconstruct shibboleths and taboos. You may not enjoy the show, but to a certain extent you have to respect the satirical mission.
Militant fundamentalist Islam is more than a security threat. It is a step backwards in human evolution - a regress to a time before modernism and humanism - as is every militant fundamentalism. Perhaps the only difference between Islamic militant fundamentalism and other varieties is that its toxic combination of revealed truth, liberal textual appeals to violence, and an explicitly global sense of its own jurisdiction imbues the movement with a unique animation and activism. Nationally based militant fundamentalisms (such as national fascist movements), or militant fundamentalisms based on other epistemologies than revealed truth (such as international Communism) are certainly disturbing, but in many ways they are less disconcerting. More reasonable epistemologies can be reasoned with or disproven. More limited jurisdictional claims can be isolated or even simply appeased. Militant fundamentalist Islam is a different beast that is only further complicated by the fact that there most definitely is (and we can never forget this) a considerably more widespread non-militant, non-fundamentalist Islam.
I can only speak for myself, not Evan - but I want to offer this post in solidarity with South Park and all the other artists, film makers, and writers that have faced or even suffered death at the hands of these people.
A.) The Insane Clown Posse
B.) Christopher Hitchens
Here's a tougher quiz. Who is more entertaining and offensive to the tender, mild-mannered mainstream:
A.) The Insane Clown Posse
B.) Christopher Hitchens
"Finally, it is of course true that I cannot control how my ideas are used, either by those who advocate similar but more intrusive policies, nor by those like Whitman who criticize them by mischaracterizing them. When we say that we only want to help people make better choices as judged by themselves, we mean it. Really. And it is frustrating to constantly have to respond to those who criticize something we do not say or believe."
Thursday, April 22, 2010
"By 2050—earlier, probably—all real knowledge of Oldspeak will have disappeared. The whole literature of the past will have been destroyed. Chaucer, Shakespeare, Milton, Byron—they'll exist only in Newspeak versions, not merely changed into something different, but actually contradictory of what they used to be. Even the literature of the Party will change. Even the slogans will change. How could you have a slogan like "freedom is slavery" when the concept of freedom has been abolished? The whole climate of thought will be different. In fact there will be no thought, as we understand it now. Orthodoxy means not thinking—not needing to think. Orthodoxy is unconsciousness."
That was the real terror of Newspeak; not that it was a tool of deception, but that it was a tool of destruction and devaluation. It didn't simply hide truth - it destroyed truths.
That is Orwell's Newspeak, and commentators are always on the look out for it. Branding your opponent as a "Big Brother" or "Orwellian", or identifying something they say as "Newspeak" is always a winning rhetorical strategy (well... at least a winning punditry strategy). But something interesting I saw today on the BBC website highlighted actual political manipulation of language and made me think that perhaps instead of Newspeak, Orwell should have offered us "Mustspeak". Newspeak's ability to frame contradictory ideas as consistent, and its blighting of the English language certainly makes for good fiction, but Mustspeak - a form of political language that compels people to action - is probably more pervasive in real life than Newspeak will ever end up being.
BBC created a "word cloud" of British political party platforms from 1945 to the present. The regularity of the appearance of the word "must" really struck me. Politicians certainly try to hide the truth, don't get me wrong. But in a free society that can be a challenging task. Sometimes what's more effective is for politicians to try compel people to action, before they have time to reflect on the truth. In a society with a free press, a strong education system, and a literate populace there's only so much truth you can hide. But what you can do is manufacture a sense of urgency or duty that blunts or retards critical thought.
So by all means, keep looking for Newspeak ("new" came up in the word clouds a lot as well). But be on the look out for the less publicized examples of Mustspeak. And if you ever read about Mustspeak in a dystopian novel, just remember: you heard it here first.
Wednesday, April 21, 2010
However, as I click through Evan's links, I get the impression that Goldstein herself offers a far more institutional and historical perspective on the post-revolutionary concept of selfhood, which honestly interests me more. Goldstein argues that the post-revolutionary quasi-resurrection of Descartes served as a sort of prop for the new regime. This is the blurb for the book:
"In the wake of the French Revolution, as attempts to restore political stability to France repeatedly failed, a group of concerned intellectuals identified a likely culprit: the prevalent sensationalist psychology, and especially the flimsy and fragmented self it produced. They proposed a vast, state-run pedagogical project to replace sensationalism with a new psychology that showcased an indivisible and actively willing self, or moi. As conceived and executed by Victor Cousin, a derivative philosopher but an academic entrepreneur of genius, this long-lived project singled out the male bourgeoisie for training in selfhood. Granting everyone a self in principle, Cousin and his disciples deemed workers and women incapable of the introspective finesse necessary to appropriate that self in practice.
Beginning with a fresh consideration of the place of sensationalism in the Old Regime and the French Revolution, Jan Goldstein traces a post-Revolutionary politics of selfhood that reserved the Cousinian moi for the educated elite, outraged Catholics and consigned socially marginal groups to the ministrations of phrenology. Situating the Cousinian moi between the fragmented selves of eighteenth-century sensationalism and twentieth-century Freudianism, Goldstein suggests that the resolutely unitary self of the nineteenth century was only an interlude tailored to the needs of the post-Revolutionary bourgeois order."
My guess is that like me many readers will find this description of Goldstein's work as a historical project more interesting. But please click through and read Evan's post - it's a good read that focuses more on the substance of the understandings of the self, rather than the function that they served.
Tuesday, April 20, 2010
In the meantime, since we've gotten a lot more readers lately, I wanted to highlight two past posts on fallacies on this blog that I thought were both pretty fun.
The first is a post by Evan on a fallacy that he enjoyed coining: the fallacy of gravity as a mechanism of consciousness. As Evan suggests, it probably already has a name, but it's more fun to give it a new name that enables you to reference Wile E. Coyote. The post is very good.
I also have one on the fallacy of teleological thinking when we talk about evolution and the environment.
On April 17th, the chair of Obama's Council of Economic Advisors chairwoman (and W&M alum) Christina Romer set off a firestorm in the economics blogosphere with a relatively benign rendering of mainstream economics through the medium of a shout out to 1990s political culture. Namely, that: "it's the aggregate demand, stupid". Romer's case is that aggregate demand is driving unemployment as opposed to unemployment insurance. The Economist provides a general overview of the question, while a paper prepared for a Brookings panel and a San Francisco Fed paper provide some empirical structure to the debate.
Bloggers have lined up on either side. Menzie Chinn, Michael Derby (WSJ), Mark Thoma (here and here), and Brad DeLong take Romer's side. Arnold Kling and Megan McArdle are opposed to her position. Tyler Cowen and Bryan Caplan are also opposed, but their posts go down this strange rabbit hole of nominal wage rigidities, which is very unusual because (1.) Romer never mentions nominal wage rigidities, and (2.) nominal wage rigidities have exactly zero to do with aggregate demand deficiencies, although some economists are fond of referencing them.
Some of the more interesting posts on the issue get into alleged fallacies committed by the pro-Romer aggregate demand crowd. I'm going to call these "fallacious fallacies", because they miss the mark by a fair margin, they threaten clear thinking, but you hear them a lot because human beings (particularly bloggers) love to play "gotcha". So I'm gonna call "gotcha" on the "gotcha" guys. The fallacious fallacy in question is the "aggregation fallacy". While most economists content themselves with the fact that aggregate demand is real and job search intensity (which is lowered by generous UI benefits) is real, and we have to arbitrate between their relative importance, some economists flatly reject the validity of aggregating anything. Robert Higgs recently listed the "aggregation fallacy" first in his list of six alleged fallacies. The argument is that by aggregating a variable like income into a variable like GDP, or an individual price into an aggregate like the CPI, complex processes at a lower level of aggregation are glossed over. This critique can come in several varieties, but it's disconcerting for me that it is ever expressed in the all-encompassing way that Higgs presents it. Peter Boettke recently brought this aggregation debate into Romer's aggregate demand debate. In his comment section, after some debate on the question, Peter writes that he is "unpersuaded that aggregate concepts do much of anything to improve our understanding of an economic system".
Monday, April 19, 2010
Ralph Waldo Emerson
By the rude bridge that arched the flood,
Their flag to April’s breeze unfurled,
Here once the embattled farmers stood,
And fired the shot heard round the world.
The foe long since in silence slept;
Alike the conqueror silent sleeps;
And Time the ruined bridge has swept
Down the dark stream which seaward creeps.
On this green bank, by this soft stream,
We set to-day a votive stone;
That memory may their deed redeem,
When, like our sires, our sons are gone.
Spirit, that made those heroes dare,
To die, and leave their children free,
Bid Time and Nature gently spare
The shaft we raise to them and thee.
Saturday, April 17, 2010
Jefferson and the Social Contract
One of the ideas I struggle with a lot is the social contract. In a lot of obvious ways, it's a very poorly thought out idea. Put simply, a social contract is a contract that in all likelihood many of the parties never consent to. Hence, it's not really a "contract" at all. It's not a new critique, but it's a nagging one, and it's a critique that inevitably leads to the conclusion that state authority itself is illegitimate. Nevertheless, all of us tacitly accept the social contract in practice, even if it's very common to reject it in theory. Even some of the most vocal critics of the idea do this. Libertarians most readily furnish the criticism I outlined, and yet it's rare to find a libertarian that doesn't think that a minimalist role for government is appropriate: enforcing contracts, providing national defense, etc. I'm not personally clear on why the social contract "works" in these situations, but not in other situations. Why is it legitimate to cite Rousseau's fallacies and the problems with the social contract when we're talking about health reform but not when we're talking about the recognition of contracts? The only position consistent with this (valid) critique of the social contract is anarchism. The rest of us are simply getting by on various versions of inconsistency.
I was recently reading Jefferson's 1813 letter to John Wayles Eppes (here's the Charlottesville connection), originally for the purposes of revisiting Jefferson's thoughts on banking. However, what I was struck by was his opening thoughts on the legitimacy of public debt. This is where he makes his famous suggestion for 19 year limits on constitutions and debt contracts. He acknowledges and attempts to circumvent the problems with the idea of the social contract in an interesting way:
"...But what limits, it will be asked, does this prescribe to their powers? What is to hinder them from creating a perpetual debt? The laws of nature, I answer. The earth belongs to the living, not to the dead. The will and the power of man expire with his life, by nature's law. Some societies give it an artificial continuance, for the encouragement of industry; some refuse it, as our aboriginal neighbors, whom we call barbarians. The generations of men may be considered as bodies or corporations. Each generation has the usufruct of the earth during the period of its continuance. When it ceases to exist, the usufruct passes on to the succeeding generation, free and unincumbered, and so on, successively, from one generation to another forever. We may consider each generation as a distinct nation, with a right, by the will of its majority, to bind themselves, but none to bind the succeeding generation, more than the inhabitants of another country."
One thing that leaps out at you is that Jefferson finds nothing wrong with the fundamental logic of the social contract, which isn't necessarily surprising. Groups of men are considered "as bodies or corporations" and "a distinct nation". What Jefferson has a problem with isn't the homogenization of the citizens into the state, but the perpetuation of that institution over time. In other words, the most disconcerting tyranny is the tyranny of the past over the future, and not of the present majority against the present minority. This is especially notable because he is writing it in 1813, very late in his life. In the heyday of the American Revolution and (for Jefferson) the French Revolution, the radicals were not particularly nervous about democracy. Many anti-federalists and Republicans were quite comfortable with the idea of a popular unicameral legislature (ie, the House of Representatives without the Senate). It was only after the excesses of the French Revolution and the waxing power of the Federalists that suspicion of democracy thoroughly took hold. And yet as late as 1813, long after these developments and long before the inauguration of Jacksonian democracy, Jefferson is not concerned at all with the traditional objection to the social contract - he is concerned with the question of time.