Thursday, February 17, 2011


This post on Stumbling and Mumbling bugs me.  For a number of reasons.  First I never see why people feel the need to qualify any positive statement about religious (usually Christian) people such as "There’s some evidence that religious believers are more prosocial and more likely to give to charities" with things "" like "This doesn’t necessarily mean they are nicer than non-believers".  Why?  Why can't it just be accepted that religious people may be more social and more giving?  Dillow then compounds this with his next statement: "It might just be that the fear of eternal damnation gives them different incentives than non-believers". Again, why? Why is it casual commentators always have to peddle the picture of Christians (usually) as only acting out of fear?  We all go along to church in some masochistic manner, just waiting for that fear to be drilled into us, poor irrational buggers that we are.

Why is the true motivation for Christians doing good never put forward?  That Christians respond to the grace shown to them by God through Jesus, and hence feel obliged to respond in kind to others?




Libertarian, Hayekian Economists on the Stimulus

There's a Hayekian blog called Taking Hayek Seriously, and my usual flippant response to whatever is on there is: I might take it more seriously if you stopped writing all your headlines in CAPITALS.  Better to get my attention by being interesting and coherent rather than trying to shout louder to be heard.  I imagine he's one of the less prominent GMU bloggers out there...

There's been a Stimulus "hearing" taking place in the US which has given libertarians their latest attempt to fire off their generally cynical views about all things public sector.  Their talk about how only the free market without government can possibly provide liberty I just cannot ever bring myself to agree with.  I believe in the value of free markets, but I am also painfully aware (often from personal experience) that they fall short in places.  Economists have talked and theorised about how imperfect and asymmetric information can adversely impact market outcomes, and externalities while difficult to measure provide a reason to expect markets to under- or over-provide goods.  But because we can't measure these things perfectly, libertarians simply dismiss them out of hand, and instead allow firms to exploit market positions entirely outside the sphere of government influence because evil people are evil people regardless of whether they are in the public or private sector. Libertarians seem to think that once somebody steps inside a public institution they become corrupt and evil, whilst inside a private institution the wonderful profit motive makes them shining beacons of integrity. Get real.

I always dislike their railings, particularly when they drag up Hayek and talk about scientism, usually applied in completely the wrong place, as per usual.  They tend not to understand statistics, and that econometric models have these things called errors, or residuals once we estimate them.  There's no false pretension of accuracy going on if econometrics and hence economics is applied appropriately.  We have our standard errors and our variances.

Yet these guys seemingly would just abandon all this just because it's a bit hard.  They criticise any attempt to understand more about the economy using data with an air of saying "well we already knew it all anyway", and stick to supposedly self-evident axioms that some Austrian wrote down six or seven decades ago.  Then they additionally claim any good idea that's ever been in economics as one of Hayek's.  I guess one day I'll substantial most of these claims, just not now.  I have some econometrics to do, to try and help fill some more of those gaps in the knowledge we currently have about the economy.  As any self-respecting economist would do.

Wednesday, February 16, 2011

Always Libertarians

I'm not totally sure why, but anyway I often read the writings of libertarians.  Partly I like to think it's because I'm always keen to challenge the way I think about things, and so reading those who believe very different things to yourself can be challenging.

I guess possibly annoying for those that post long libertarian blog posts (and apparently libertarians are particularly inclined to blogs), I usually pick up on one tiny point.  I think it's because I don't devote as much of my time to blogging as they do.

Anyhow, there's been a little discussion about just how much libertarians, and GMU faculty in particular, blog.  The linked post ends by commenting on just how great life is because the blogger can post while on a flight, at the trifling cost of $12.50.  The Christianity part of this blog title rails at this, but that's another blog post entirely.

I think though my being a Christian drives why I don't like what libertarians argue. I'm going to caricature them grossly here, but essentially their point is "free market good, government bad".  Or maybe, "free market always better".  

Now why do I rail against this?  Well because of the underlying assumption.  It is that without the profit motive, none of us get out of bed in the morning, basically.  It's that because of this absence of the profit motive in government activity, it is all therefore wasteful and corrupt, with a seeming obsession with the latter.  The way they talk, you would imagine that only evil people congregate to work in governments, and only virtuous people work in the private sector.  I've had libertarians tell me exactly why I'm motivated to teach my students, and it isn't because I want to teach them and do a good job.

I'm sorry, but it's not quite as simple as this.  Free markets will not always produce the best outcomes, and they won't even liberate the most people.  You don't have to dig too far into a microeconomics to find reasons why, and they range from lack of information symmetry for all market participants to missing markets and externalities.  Now this isn't a free ticket for government intervention, but it does suggest something can be done to improve matters for many people deprived of choices in market situations, and hence deprived of their liberty.  However, at this point the trite libertarian usually chips in with some quote by Hayek about economist thinking they can design things.  A pretty luddite stance if you ask me, it says "it's the way it is, deal with it".  Of course, usually the way it is benefits libertarians, who funnily enough often seem to be wealthier and own businesses.  Not that I'm a conspiracy theorist at all...

Monday, February 14, 2011

Precise Forecasting - Who Actually Engages In It?

I'm constantly pricked to read the writings of those who would not agree with what I think or do.  Austrians, or Hayekians, or whatever you wish to call them, are one such category of people.  I think it's got to be a good thing to read what people who disagree with you have to say.

This is an interesting article on the 10 Hayekian Insights for Trying Economic Times by Bruce Caldwell, not least because it mostly talks common sense.  I often find this about economists who devote their allegiance to Hayek - I find it hard to believe he is really the only proponent of so many of these ideas.  But I haven't got any decent grounding in economic history to really make this case.

The case I will make relates to point 5 about precise forecasts being ruled out because the economy is complicated.  Duh.  This is the entire basis upon which econometrics functions: Economic variables are modelled as random variables, and hence we attach probabilities, not certainties, to possible outcomes.  That's why at the basic level we have 95% confidence intervals, why we attach confidence bands to our forecasts and are always looking to estimate standard error bounds for anything we plot.

If some foolish economist decides to make a precise forecast, then he is just that.  But I strongly suspect Caldwell means any economist who says that their forecast for growth is 0.5%.  This, to all too many Austrian-type libertarian economists, is too much.  Yet if 0.5% is the most likely figure for growth that the economst thinks, well sound bites are going to come out saying it's 0.5% that is the forecast.  But every forecast has a confidence bound, if only you bother to read the paper or article it comes from...