"John Yoo goes to Berkeley, Feith goes to George Washington.... There's a scandal for you."

Therein lies the banality of evil or what Thorstein Veblen called "The Higher Learning in America."

Posted at April 25, 2008 10:55 PM in response to The Banality of Evil: What Would Hannah Arendt Say About Doug Feith?

...much easier ways of showing that the marginal productivity theory of income distribution is bogus...

Perhaps. But there are also ways of showing that even with a marginal productivity theory of income outcomes are unlikely to be optimal for efficiency or welfare. These are orthodox, neoclassical ways that orthodox neoclassicals don't know about because they don't teach them.

Posted at June 4, 2007 8:29 AM in response to Challenging Orthodoxy, Part II: Rigor vs. Neo-classical Economics

The "lump-of-labor fallacy"... Is that an empirically confirmed hypothesis? ...our passion for data means our hypotheses not only can be falsified but are confronted with that possibility all the time...

In her book, Professor Coyle cited the debate about immigration as one place "where the economics toolkit comes in handy". Was she talking about mathematical models and sophisticated data analysis? Not really. Instead she offered an argument about a shift in the labor supply curve that could be taken straight from J-B. Say and a claim that opponents of unrestricted immigration commit a lump of labor fallacy in believing that "there is only a fixed amount of work to go around."

Of course if people really did believe there was only a fixed amount of work they would indeed be committing a fallacy. But what evidence did Coyle give for her assertion about their beliefs? What evidence has any economist ever given for such a claim. The claim about a lump of labor fallacy is not neoclassical economics. It is not based on a mathematical model nor is it tested empirically. It is simply a slander that economists have used with impunity over the years. It is a degradation ritual that certain economists use to rope off certain matters of potential dispute as taboo.

The story about the arrival of immigrants shifting the supply curve out is itself based on a number of unrealistic fixed assumptions. That doesn't mean it isn't a good story. Any economic analysis requires some variables to be assumed constant. Otherwise there are too many things changing all at once. That is what is meant by making a problem "tractable". But this business of both (implicitly) denying one's own hidden assumptions and at the same time attributing to one's opponent assumptions that can't be proven to be necessary to the opponent's argument reeks of sophistry.

Posted at June 3, 2007 9:59 PM in response to Empiricism Makes the Difference

Employment becomes a function of the aggregate effective demand for output as a whole.

Not exclusively, though.

In a letter to the poet, T.S. Eliot, dated April 5, 1945, Keynes identified shorter hours of work as one of three "ingredients of a cure" for unemployment (1980: 383-84). The other two ingredients were investment and expanded consumption. Keynes regarded investment as "first aid," while he described working less as the "ultimate solution." A more thorough and formal presentation of his view appeared in a note Keynes prepared in May 1943 on "The Long-Term Problem of Full Employment" (320-325). In that note, Keynes projected three phases of post-war economic performance. During the third and final phase, estimated to commence some ten to fifteen years after the end of the war, "It becomes necessary to encourage wise consumption and discourage saving, –and to absorb some part of the unwanted surplus by increased leisure, more holidays (which are a wonderfully good way of getting rid of money) and shorter hours" (323).

Keynes, J. M. (1980) The Collected Writings of John Maynard Keynes. Vol. 27, Activities 1940-1946: Employment and Commodities: Shaping the Post-War World, D. Moggridge (ed.). London: MacMillan; New York: Cambridge University Press.

Posted at June 2, 2007 6:42 AM in response to Rebutted but not Refuted

Just to prove that J. Bradford isn't the only one with access to the blockquote tag:

The prudent man always studies seriously and earnestly to understand whatever he professes to understand, and not merely to persuade other people that he understands it; and though his talents may not always be very brilliant, they are always perfectly genuine. He neither endeavours to impose upon you by the cunning devices of an artful impostor, nor by the arrogant airs of an assuming pedant, nor by the confident assertions of a superficial and imprudent pretender. He is not ostentatious even of the abilities which he really possesses. His conversation is simple and modest, and he is averse to all the quackish arts by which other people so frequently thrust themselves into public notice and reputation. For reputation in his profession he is naturally disposed to rely a good deal upon the solidity of his knowledge and abilities; and he does not always think of cultivating the favour of those little clubs and cabals, who, in the superior arts and sciences, so often erect themselves into the supreme judges of merit; and who make it their business to celebrate the talents and virtues of one another, and to decry whatever can come into competition with them. If he ever connects himself with any society of this kind, it is merely in self-defence, not with a view to impose upon the public, but to hinder the public from being imposed upon, to his disadvantage, by the clamours, the whispers, or the intrigues, either of that particular society, or of some other of the same kind. -- Adam Smith, Theory of Moral Sentiments

Posted at June 2, 2007 6:16 AM in response to I Rise, Like a Moth to a Flame...

Obviously, it's got to be Larry Summers. And look closely again at the key disclaimer:

That's not a judgment about how it should be, not a judgment about what they should expect. But it seems to me that it is very hard to look at the data and escape the conclusion that that expectation is meeting with the choices that people make and is contributing substantially to the outcomes that we observe...

This is a prime example of the 'instrument' affecting the observation. It is hypocritical to pretend that the instrument is neutral and thus that the observation is objective. What and where are the hidden assumptions that generate that dismal data? Some of it may be in the rational actor assumption that Julie Nelson singled out in her first post. But I would put my money on the flawed assumptions underlying the canonical labour-supply model.

I do hope Summers shed a symbolic tear while expressing his Walrusian sympathy for the tired oysters he was dining on.

Posted at June 1, 2007 9:19 PM in response to Disparate Impact

Julie,

I'd like to mention a third elephant that's closely related to climate change and the care crisis: working time. It also happens to have been referred to by Lionel Robbins as "one of the chief problems of the analysis of economic equilibrium."

The neoclassical economic theorist who, according to Robbins, effectively dealt with that problem was Sydney Chapman. Chapman's analysis was described by John Hicks as the "classical statement of the theory of 'hours' in a free market." By "classical" Hicks meant preeminent, not "pre-neoclassical" -- Chapman's analysis was scrupulously marginalist.

So, how does mainstream neoclassical analysis of equilibrium deal with this "chief problem" today? By ignoring it. By simply not knowing about the conundrum that it presents to analysis of equilibrium. Maybe it is incorrect to say that the Chapman elephant is even "in the room." It is buried under the foundation of the whole structure.

What does the unceremonious burial of Chapman's theory have to do with climate change and the care crisis? With regard to climate change, the Chapman-less analysis acts as an impediment to moving to a less consumption-oriented life. In the absence of a progressive reduction of the hours of work over the past half century, the only way to create jobs has been to promote economic growth, even if that growth is toxic. With regard to the care crisis, we have moved to more intensive workforce participation by women without getting rid of the "male bread-winner" model of working time that assumes the presence at home of a female caregiver -- a wife. This has meant the double-shift and the mommy-trap for women and the same-old-same-old for men.

I don't think it's any coincidence that the unaccounted for disappearance of a key piece of economic analysis in the past is intimately related to the most pressing problems we face today. I believe those problems are an outgrowth of a flaw that was engineered into the highly mathematical techniques. The flaw is manifest Hick's Value and Capital and in Abram Bergson's 1938 article, "A Reformulation of Certain Aspects of Welfare Economics", two of the cornerstones upon which the equilbrist structure is founded.

Posted at June 1, 2007 8:52 PM in response to Elephants in the Room

Thanks, NPE, but I wasn't confusing optimization of consumption with optimization of utility. I was simply calling attention to the slickness of the optimization/maximization slide. Even the verbs, "optimize" and "maximize", have misleading connotations in that they confuse the effect of an action with the action itself. Even assuming all the rational actors stuff, people don't optimize or maximize, they choose or they consume.

Posted at June 1, 2007 7:49 PM in response to How Stubborn Are We?

Mark,

You skate back and forth between "optimize" and "maximize" a little too indifferently for me to be confident that you won't at some point confuse the two.

If psychologists tell us that people have a preference for green, triangular shaped goods due to some brain quirk, that's fine, we take that as given and assume they maximize their utility...

People may have a preference for green, triangular-shaped goods up to a point, in which case maximizing their utility is not the same as maximizing the greenness and triangularity of their total consumption. Furthermore, this is only one of a myriad of conditions that, in total, make mincemeat out of the notion that "maximize" refers to something tractable.

What if someone's preference is for minimizing consumption? Then that person will maximize utility by minimizing the quantity of commodities consumed. Can someone have a preference for learning? Could that preference for learning be specifically with regard to the efficacy of one's "given" preferences? May I include in my given preferences the preference that all my preferences not be given? If not, they're not my preferences.

Posted at June 1, 2007 8:27 AM in response to How Stubborn Are We?

Summary:

Republicans believe that power corrupts until they come to power themselves and the power corrupts them. Absolutely.

Posted at February 28, 2006 10:27 PM in response to GOODBYE, HORATIO ALGER