Where I live, there are few gated communities. But, they seem to be quite popular with immigrants from Cali. The thing is, they don’t seem to see that there’s not much misery to get away from in deep red Utah.
The news this week is that President-Elect Donald Trump has convinced executives at Carrier to not move a production facility from Indiana to Mexico.
The backstory to this is that the business had bottom line reasons for wanting to move to Mexico, and government officials (with the explicit backing of the currently powerless Trump) bought them off with tax dollars.*
Democracy is the theory that the common people know what they want, and deserve to get it good and hard.
If that seems like a micro-offense, please recognize that those were different times.
P.S. A couple of days after posting this, Tim Worstall posted a similar quote:
Populism: the unpardonable sin of offering the populace what they appear to want rather than what they ought to.
Hat tip to Greg Mankiw for noting Summers’ turn of phrase, and to Don Boudreaux for repeating this Mencken quote many times through the years.
* On the negative side, in the short-run, we’re all investors in Carrier whether we want to be or not. In the long-run, this may solidify the dangerous precedent of corporate executives holding out for government handouts. On the positive side, it’s still early … perhaps Trump will just do this once to establish credibility that obviates it’s future need.
Cross-posted from SUU Macroblog, which is required reading for my macroeconomics classes.
… The press takes him literally, but not seriously; his supporters take him seriously, but not literally.
That helps me (although I’m still not sure if I can take him seriously or not).
I first saw this shortly before the election, but I’ve been too swamped to post it.
For my part, while I have disliked Trump for going on 35 years, I have been quietly saying for the last year or so that he must be doing something right to have stuck around for so long.
I’m not sure what that is, but as I get older, and I recognize how life wears you down, I’ve come to appreciate that staying power is underrated.
And this reminds me of doing research with JT on explaining the likelihood that batters will be voted into the baseball hall of fame. Every model we ran kept showing us that longevity was more important than the flashy stats put up over a long career. Here’s Maureen Dowd from the morning after the election:
Trump was like Rasputin, being declared dead time after time, but living on.
In the absence of clearly defined goals, we are forced to concentrate on activity and ultimately become enslaved by it.
I don’t have a source for this. I got the quote from my colleague Greg Powell, who used it in a brown bag about motivating student classroom engagement through questions.†
But I like the quote because it applies to another problem we have in understanding macroeconomics. Bryan Caplan dubbed this the “activist’s fallacy”:
Something must be done; this is something; therefore, this must be done.
I have lost the cite, but Lynne Kiesling paraphrased it as:
Don’t mistake activity for accomplishment.
When we think about macroeconomics — and certainly politicians talk an awful lot about it — what are their goals? No recessions on their watch? Low unemployment rate (how low)? Low inflation rate? Increased spending? Higher real GDP growth rate?
Consider the stimulus package of 2009. It was chock full of activity. But what was the goal? If it was stimulating the economy … it doesn’t seem like it did much (although I’m aware that we don’t have a control for this experiment).
On a different note, this brings me around to Hillary Clinton.
Does it seem like a lot of her supporters extol her activity without referencing many goals that were actually accomplished?
In 1979, James Fallows recounted why he had left his job as President Jimmy Carter’s chief speechwriter: “Carter believes fifty things, but no one thing. He holds explicit, thorough positions on every issue under the sun, but he has no large view of the relations between them.”
And, of course, coming from me, that observation should in no way be construed as support for Trump.
The first two sections of this are cross-posted from SUU Macroblog, which is required reading for my advanced macroeconomics class.
† Coonradt, Charles A. with Lee Nelson. The Game of Work, Shadow Mountain, 1991, p. 10.
Thanks to Marginal Revolution, a post from Cherokee Gothic is getting a lot of attention. I forwarded it yesterday to a bright student who’s conflicted about macroeconomics. Here’s Kevin’s entire post:
“Michael Gapen, chief U.S. economist at Barclays Plc in New York, said Fischer’s comments “reflect an ongoing divergence of opinion” at the central bank. Fischer “doesn’t see much room for running the economy hot” while Yellen’s views “seem to provide a wide-open door to do that. You have a chair and a vice chair who see policy differently right now,” he said.”
After the events of the great recession, it’s just amazing to me that people think the economy is a steak, the Fed is a precision sous-vide machine, and all we have to decide is medium-rare or well-done.
For the millionth or so time, the models implying the Fed can do this, completely and utterly failed during the great recession. There is also evidence that a large part of the good outcomes credited to the Fed during the great moderation were actually due to exogenous forces (i.e. good luck).
Neither the Fed nor the President “runs” the economy. There is no stable, exploitable Phillips Curve / sous vide machine that lets us cook at a certain temperature.
This Fed worship is more religious than scientific. The past 10 years should be enough to convince anyone with an open mind that the Fed’s power over the economy is quite limited and tenuous.
But I guess it’s comforting to think that the little old lady behind the curtain can fix things for us.
She can’t, Stan Fischer can’t, Bernanke couldn’t. Maybe the sous vide machine is unplugged?
In my principles class I have a bright guy (NC) in the front row. He doesn’t ask too many questions in class, but he asks some zingers after class … mostly because he’ catching on to the idea that what politicians say and do has little relation to what’s covered in the text. With permission, here’s his reply to my forward of Kevin’s post:
This was an interesting read, and definitely reflects where my frustrations with macroeconomics lie.
Out of all the classes I have taken in all the major fields of study here at SUU, no classes have been more eye-opening and more frustrating than macro and micro economics. I have no doubt that if anyone ever asked me what classes impacted my life the most it will be those two, primarily macro. The frustration stems from the fact that in my opinion economics is the only study where mankind is consistently hundreds of years behind its discoveries at all times. Medical discoveries, astronomical discoveries, chemical discoveries, engineering discoveries, all once more or less 'proved' are accepted with relative ease, and mankind benefits because of it. Sure, we burned a few people for saying the sun was at the center of the universe, but it didn't take thatlong for the heliocentric model to replace the geocentric model. Adam Smith shows in the late 1700's that trade benefits everyone, always, even if one gains more than the other, and its 2016 and half the nation is still calling for major restrictions on trade and fighting for jobs that do nothing but make the cost of living go up, like the steel industry in America. To me, that is unacceptable.
There are many economic issues that we are not 100% sure about, but there are plenty that for the most part economists are pretty damned sure about, such as the dangers of price ceilings/floors, restricted trade, planned economies, erosion of property rights, restriction of free trade, and discouragement of wealth. But despite this we are still having debates over whether or not to give a 206% [sic] minimum wage increase, whether or not to bring back jobs we suck at from other countries, whether we should force the redistribution of wealth, etc. To me this is equivalent to turning on your television and watching Trump try to convince the American people that the Sun orbits the Earth, and Hillary responds with 'No, the Earth goes around the Sun, which is the center of the universe.', better, but not by much.
Sometimes in your class I start to really consider a degree in economics. Then I remember that I'm still not comfortable with having an aneurysm at the age of 23.
Economists’ Normative Case for Government Intervention is a Very Poor Positive Theory of that Intervention
Boudreaux uses it as a title for the post, thus the capitals.
Let me unpack this as a way to figure it out for myself.
A normative case is an argument about how we think things ought to be. So the “normative case for government intervention” is a way of saying that government intervention is way to make things the way they ought to be.
A positive theory is one based on facts, about facts. So a “positive theory of that intervention” would be a theory of government intervention that incorporates and/or explains facts about the motivations and consequences of those actions.
Putting it all together, what I get out of this is that a position that the world would be a better place if only the government did something ignores the realities of what has happened when they have done some other things in the past.
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