Libertarianism and it's limitations

I have long held that the weak underbelly of libertarian theory (in the modern form) is how to justify current wealth distributions (and thus hold current property rights inviolate). Brad DeLong does a good job of laying out the mental steps required:

Well, let me sketch out the logic of Robert Nozick's argument for his version of catallaxy as the only just order. It takes only fourteen steps:

1. Nobody is allowed to make utilitarian or consequentialist arguments. Nobody.
2. I mean it: utilitarian or consequentialist arguments--appeals to the greatest good of the greatest number or such--are out-of-order, completely. Don't even think of making one.
3. The only criterion for justice is: what's mine is mine, and nobody can rightly take or tax it from me.
4. Something becomes mine if I make it.
5. Something becomes mine if I trade for it with you if it is yours and if you are a responsible adult.
6. Something is mine if I take it from the common stock of nature as long as I leave enough for latecomers to also take what they want from the common stock of nature.
7. But now everything is owned: the latecomers can't take what they want.
8. It gets worse: everything that is mine is to some degree derived from previous acts of original appropriation--and those were all illegitimate, since they did not leave enough for the latecomers to take what they want from the common stock of nature.
9. So none of my property is legitimate, and nobody I trade with has legitimate title to anything.
10. Oops.
11. I know: I will say that the latecomers would be poorer under a system of propertyless anarchy in which nobody has a right to anything than they are under my system--even though others have gotten to appropriate from nature and they haven't.
12.Therefore they don't have a legitimate beef: they are advantaged rather than disadvantaged by my version of catallaxy, and have no standing to complain.
13. Therefore everything mine is mine, and everything yours is yours, and how dare anybody claim that taxing anything of mine is legitimate!
14. Consequentialist utilitarian argument? What consequentialist utilitarian argument?

To be able to successfully explain Nozickian political philosophy is to face the reality that it is self-parody, or perhaps CALVINBALL!

It is step 11 that seems to be the most interesting to me. Nobody really wants to argue for anarchy but that doesn't mean that pools of wealth are good, either. I suspect a false dichotomy is present as other options exist as well.

Furthermore, the system also ignores the influence of wealth on process. Differences in prestige, corruption and credibility can lead to issues with step 5, as well. So I think we need to be careful about making property rights primary. Obviously ownership has important effects in making a specific person responsible for an item (otherwise you can get the "Tragedy of the Commons" issues). But that effect works best on small pieces of property that are directly used by the person (a car, a house, a factory) and seem to become less helpful on larger scales (like in a corporation where you need to hire a management team who then bring in principal agent concerns).

Definitely something to consider.

Jonathan Chait: "I suppose I didn't express myself as well as I could have." -- repeatedly

Jonathan Chait today dismissed this objection (also discussed by Andrew Gelman) that being easily fired really isn't really part of the definition of a professional with the line:

I think Palko's point is pretty obviously just wordplay, but I suppose I didn't express myself as well as I could have.

Normally I'd let it rest there (it was one of the more trivial objections I've raised about Chait's position on education), but we really ought to note that this is not the first time we've seen this line:

But being "treated like professionals" has to mean both the opportunity to earn a good living if you do well and the potential to be fired if you fail.

You can find the full context of that line and my reaction to it here.

My disconnect with Jon Chait

Let me begin with Jon Chait being one of my favorite writers, a must-read, and a person with whom I agree > 90% of the time. I think that the one area we really differ is with teaching:

I think Palko's point is pretty obviously just wordplay, but I suppose I didn't express myself as well as I could have. Being a professional, to most people, means having the opportunity to gain higher pay and recognition with greater success. Such a system also, almost inevitably, entails the possibility of having some consequences for failure. Teaching is very different than most career paths open to college graduates in that it protects its members from firing even in the case of gross incompetence, and it largely denies them the possibility to rise quickly if they demonstrate superior performance.

Obviously the realistic possibility of being fired for gross incompetence would not in and of itself do much to attract more highly qualified teachers, but the opportunity to receive performance-differentiated pay would.

I think I can put my finger on the point of disconnection here. I would gladly take employment In which hard work and results were rewarded (and people who were bad fits were quietly eased out of the profession). These are my favorite work places, as I never want to be in a role where I am not contributing in a substantive way.

But what I think worries me about the attack on teacher tenure is that it seems to be coupled with a small government/austerity movement. I worry that the endgame is no tenure and less compensation (regardless of performance). That approach would open up higher education to worse incentives than it has now and increase the pressure for a parallel (and private) system. Looking at the cost of higher education, my concern is that the poor might be priced out of the education market.

I might be wrong about this pattern, but many countries have balanced job security with quality education (e.g. Canada, Sweden, Finland). I am not against a new pathway, I am just not sure how to increase compensation (to balance against the loss of job security) in the current environment. But I note that Jon Chait is coupling increased compensation opportunities with decreased job security. A reasonable trade, so long as it doesn't fall victim to the desperate need to shrink government that is in the very air these days.

If there is a path forward, I would actually be happy to revisit this question in a positive way. But why is this a burning question in the middle of a period of austerity budgets when it is unclear where the revenue for such reforms would come from?

Another This American Life episode you ought to listen to...

Unless you heard it the first time it ran. The title is "Million Dollar Idea" and it has two stories of interest to OE readers, one on MIT's elevator pitch contest and another memorable piece on the treacherous water of medical PR. On top of that you get an incredible story of a man who figured out a way to rig a game show without actually cheating and the origin of the phrase "the heroin's doing the heavy lifting."

The download is free for the next few days, but you should throw them a few bucks if you can spare it. They do good work.

The discussion continues

Andrew Gelman joins the debate about professionalism and job security. Gelman's posts pretty much always generate high quality comment threads so this will be one to watch.

Declining Salaries for Writers

This is a very sad blog post on the state of pay for role playing game writers. In particular:

Fifteen years ago, I wrote RPGs for 3 cents a word. In these more modern times, though, the pay rate is... wait, it's still 3 cents a word. Come to think of it, the pay hasn't changed much from the golden age of pulps and early sci-fi. The pay is the same as from the 1950s? What's wrong with this picture?
One argument is 'that is all the market will bear'. Okay, but in that same timeframe, other forms of writing (particularly journalism and non-fiction) moved on to dollar-a-word. Sure, we're in a dip for that sort of writing too, with rates often dropped to half that. But a pair o' quarters per word is still a damn site better than RPGing's 3-cents-per.

The part that makes this discussion so painful is that the quality of writing can really make or break what is fundamentally a book project. This is one place where markets really don't seem to be able to adapt as the low rates often lead to weak product. Maybe this is just a consequence of niche markets?

Paul Krugman should continue doing more productive things than watching TV

I think this anonymous commenter may be having a little fun here (The "I said good day" seems a bit over the top), but in case my fondness for obscure references really did go too far, let me close caption my earlier post.

Recently Paul Krugman wrote a smart piece decrying the proliferation of appeal to authority arguments which he closed with the following:

But in any case, this is never an appropriate way to argue — least of all at a time like this, when events have strongly suggested that a lot of work in economics these past few decades, very much including the work on which these guys’ reputations are based, was on the wrong track.

Do I do this myself? Probably on occasion, when I don’t catch myself. But I try not to. I would say that commenters who begin with “I can’t believe that a Nobel prize winner doesn’t understand that …” might want to think a bit harder; mostly, though not always, I have actually thought whatever you’re saying through, and the obvious fallacy you think you’ve found, isn’t. But “Me big famous economist, you nobody” is not a valid argument.

(See John Quiggin and Noah Smith for more on the incident that prompted this)

Having a weakness for snark, I immediately started looking for a silly criticism of Krugman that I could preface with the phrase “I can’t believe that a Nobel prize winner.." I got an opportunity today when Krugman referred to gibberish that sounds like Swedish. The theatrical term for this sort of thing is doubletalk and the acknowledged master of the form is Sid Caesar.

I'm also always on the lookout for excuses to bring in a favorite video clip, like this one from Whose Line Is It Anyway which provides a great example of the form and nicely shows the respect and affection the cast feel for Caesar.



Just to be absolutely clear, I was:

1. Looking for an excuse to use the "Nobel Prize winner" line in an obviously silly and trivial context;

2. Post the Caesar clip;

3. Link to yet another sharp and well-written Krugman post.

In other words, it was a joke.

(And for the record, if I make a disparaging comment about Felix Salmon followed a Kovacs clip, I'll be joking then too.)

Worth keeping in mind

Predictions are hard and sometimes the completely unexpected happens:

You Know, If You Had Told Me a Year Ago That on August 5, 2011 S&P Would Downgrade the U.S, and the 10-Yr Treasury Would Yield 2.5%... I would have laughed at you. I would have said that while there were possible futures in which each of those things happened, they were disjoint futures.

It is humbling to recall just how different events can be from our best possible projections.

A classic natural experiment

This post was requested by Mark.

One interesting natural experiment in diet and exercise was rationing in wartime Britain where the population ate less and exercised more (petrol was also rationed). The results were fairly impressive:

As a result of the balanced diet provided by rationing, children's health improved and on average they were taller and heavier than before the war.

The incidence of anaemia and tooth decay dropped - while the average age at which people died from natural causes increased, despite the stresses and strains of war.

The principles behind rationing sound surprisingly similar to today's health messages: reduced consumption of meat, fats and sugar and more of the sort of foods, such as vegetables, which provide essential vitamins and minerals.

this led to other health benefits:

A war-time regiment would also help reduce your risk of heart disease, Type 2 diabetes and high blood pressure, as well as cancers such as post-menopausal breast cancer, kidney and colon cancer.

The same outcome of rationing was seen in Australia:

The government feared that rationing would result in deterioration in health on the home front but, in fact, the outcome was positive. Rationing resulted in a decline in diet related problems like obesity, diabetes and heart disease.

So it is clear, that whether or not the wartime Commonwealth diet was optimal, there is a known population-level intervention that will result in better health outcomes: restriction of food.

Now, as a matter of public policy, I am clearly opposed to doing this in a coercive manner (but then I still see tobacco smoking as a personal choice). But it is clear that relatively simple diets can have surprisingly positive health benefits.

Paul Krugman needs to watch more TV

From today's Conscience of a Liberal:

Think of it this way: there was a time when you could say that the right had a model of how the economy worked. A silly model, yes, since it depended on implausibly large effects of marginal tax rates on incentives. Still, supply-side economics had a point of sorts.

But can you discern any model in what Malpass wrote, or for that matter in almost anything on the WSJ editorial page? I can’t. All I see is a bunch of prejudices, strung together with some vaguely economistic-sounding phrases, something like someone talking gibberish that sort of sounds like Swedish. In the world according to the WSJ, low taxes are good (unless the people involved are low income lucky duckies), regulation bad, low inflation good, low interest rates bad, strong dollar good — and don’t ask why.

I can't believe a Nobel Prize-winning economist would get this wrong. It's not gibberish; it's double-talk, and this is how it's done:



Co-posted at Mippyville TV.

See update here.

"No linear relationship" does not mean "no relationship"

There's a dangerous type of argument that I've noticed recently: pundits will argue that a certain relationship is non-linear and use this to justify any claim they want to make about that relationship.

The example of the hour is the Laffer curve. The basic concept is so simple we expect every high school algebra student to grasp it: you have a function with a global maxima somewhere between zero and one; if you're to the left of that maxima you want to move to the right; if you're to the right you want to the left. Let me draw a picture I could explain it to reasonably attentive elementary schoolers. (Dynamic laffer effects are a different story that I'll leave to Noah Smith.)

We can argue where the peak is (or where it was in 1960 or 1980), but once you've accepted the basic concept, you have to accept the move-toward-the-peak implication. Despite this, you will routinely see supposedly knowledgeable people on television, in print and online using the Laffer Curve to justify the blanket statement that cutting taxes raises revenue.

We see something analogous with health and fitness journalism. The relationship between calories and weight loss is not linear. Neither is the relationship between aerobic exercise and weight loss. In both cases, it's a strong relationship and you generally won't get in trouble assuming that it's strictly monotonic (within reasonable ranges, of course).

Unless you're an athlete in training or a model getting ready for a swimsuit shoot, you can probably assume that eating less and exercising more will cause you to lose weight, but we still get endless experts citing phenomena like metabolism responding to diet and then concluding that there's no point in going to the gym and passing up that pound o' fries.

p.s. Joseph has a great example of how calorie consumption tends to dominate factors like diet make-up. If he'll answer his damned phone I'll see if we can get a post out of him.

US Credit Rating

From Talking Points Memo:

From the S&P release ...

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.

I am skeptical, as I said to Mark, that this measure will influence other countries all that much. Japan switched to AA+ and that did not hurt the US, rather it helped. What it really does it mean about 55% of the AAA sovereign debt in the world just vanished. The UK, Canada, Sweden . . . all of these countries are about to pay a lot less for their debt. That actually makes them more creditworthy and not less so so.

By the way, what do all of these countries have in common? They are willing to raise taxes to pay for debt. I remember when Canada began paying down its debt via a national sales tax. Unpopular as the move was, it moved the country firmly into surplus and prevented a ratings cut.

It is quite possible for a country to pay down their debt via internal revenue generation. The survivors on the AAA list are the countries that have been willing to make hard decisions to raise revenue rather than appeal for help.

Question for economic modelers

Has anyone out there run a simulation of what the economy would look like today if two of the big three auto makers had gone under in 2009?

If America's not AAA, is anybody?

I don't mean that in a jingoistic way; I'm simply wondering where the safe harbors are in the aftermath of a US default. The people at Marketplace (which has been doing some great work lately) have been thinking along the same lines:

Heidi Moore: They downgraded the U.S. credit rating. It's like cutting our credit score. We went from a AAA to a AA+ -- which is more than people expected; people thought we'd just be a AA. The importance of this is largely psychological -- we've always been a AAA country. But now that we are a AA+, that's what everyone else will be too. I think everyone else will follow us.

Carney agreed that other countries would be downgraded as well:

John Carney: Remember, we're the country that supports people when they get in trouble. If our credit rating is lower, so is everybody else's.

Grade Inflation

An early stage professor posted this view on grade inflation:

I have to agree with the article that students do tend to expect A's. But mainly because they work hard, and the expectation is that if you work hard and learn the material, you should get an A. I don't really see this grade inflation as a problem. To me, an A grade means you learned the material and showed proficiency in it, not that you performed better than XX% of your classmates. Grades are not a ranking tool, but an indication of proficiency. I think that having a clear expectation of what you need to do to get an A makes it more likely that students will work harder to meet these requirements and learn the material better.

I think that this really is where the grade inflation is coming from. When I was a wee one, back in my home country, the decoding scheme for grades was:

A: Exceptional Work above and beyond expectations
B: Clear Mastery of material and met all expectations
C: Deficiency in one or more aspects of the course
D: Don't take any more courses in this area
F: Fail (with attendant consequences)

I think that the shift to A's being regarded as showing proficiency has been part of the general creep in academic culture. After all, an A average is starting to look like a requirement for entry to graduate school. I remember when a straight B average was solid evidence that a student was ready for graduate level work.

On the other hand, viewed in this light there isn't any real inflation. We have just changed the definitions of performance and introduced right truncation to make it impossible to pick out the really exceptional students by transcripts alone. I, of course, hate this approach but I can see why it might be popular if the focus is "did they get it or not" and reducing the arms race to demonstrate exceptional performance.