Joan of Arc

28 November, 2015 at 12:31 | Posted in Varia | Leave a comment


Economists — can-opener-assuming flimflammers

28 November, 2015 at 12:15 | Posted in Economics | Leave a comment


Kids, somehow, seem to be more in touch with real science than can-opener-assuming economists …

A physicist, a chemist, and an economist are stranded on a desert island. One can only imagine what sort of play date went awry to land them there. Anyway, they’re hungry. Like, desert island hungry. And then a can of soup washes ashore. Progresso Reduced Sodium Chicken Noodle, let’s say. Which is perfect, because the physicist can’t have much salt, and the chemist doesn’t eat red meat.

Campbell's_Soup_with_Can_OpenerBut, famished as they are, our three professionals have no way to open the can. So they put their brains to the problem. The physicist says “We could drop it from the top of that tree over there until it breaks open.” And the chemist says “We could build a fire and sit the can in the flames until it bursts open.”

Those two squabble a bit, until the economist says “No, no, no. Come on, guys, you’d lose most of the soup. Let’s just assume a can opener.”


28 November, 2015 at 12:05 | Posted in Politics & Society | Leave a comment


Neoliberal privatization — what a great idea …

Panglossian macroeconomics

27 November, 2015 at 13:57 | Posted in Economics | 3 Comments

panglossEconomic science does an excellent job of displacing bad ideas with good ones. It’s happening every day. For every person who places obstacles in the way of good science to protect his or her turf, there are five more who are willing to publish innovative papers in good journals, and to promote revolutionary ideas that might be destructive for the powers-that-be. The state of macro is sound – not that we have solved all the problems in the world, or don’t need a good revolution.

Stephen Williamson

Sure, and soon it will be Christmas and Santa Claus makes everyone happy …

Human capital and ‘bad taste in mouth’ models

26 November, 2015 at 18:02 | Posted in Economics | 1 Comment

The ever-growing literature on human capital has long recognized that the scope of the theory extends well beyond the traditional analysis of schooling and on-the-job training … Yet economists have ignored the analysis of an important class of activities which can and should be brought within the purview of the theory. A prime example of this class is brushing teeth.

BeckerGaryCartoon2009_07_10The conventional analysis of toothbrushing has centered around two basic models. The “bad taste in mouth” model is based on the notion that each person has a “taste for brushing,” and the fact that brushing frequencies differ is “explained” by differences in tastes. Since any pattern of human behavior can be rationalized by such implicit theorizing, this model is devoid of empirically testable predictions, and hence uninteresting.

The “mother told me so” theory is based on differences in cultural upbringing. Here it is argued, for example, that thrice-a-day brushers brush three times daily because their mothers forced them to do so as children. Of course, this is hardly a complete explanation. Like most psychological theories, it leaves open the question of why mothers should want their children to brush after every meal …

In a survey of professors in a leading Eastern university it was found that assistant professors brushed 2.14 times daily on average, while associate professors brushed only 1.89 times and full professors only 1.47 times daily. The author, a sociologist, mistakenly attributed this finding to the fact that the higher-ranking professors were older and that hygiene standards in America had advanced steadily over time. To a human capital theorist, of course, this pattern is exactly what would be expected from the higher wages received in the higher professorial ranks, and from the fact that younger professors, looking for promotions, cannot afford to have bad breath.

Alan Blinder

Economic growth

25 November, 2015 at 17:55 | Posted in Economics | 10 Comments


I came to think about this dictum when reading Thomas Piketty’s Capital in the Twenty-First Century. 

Piketty refuses to use the term ‘human capital’ in his inequality analysis.

I think there are many good reasons not to include ‘human capital’ in economic analyses. Let me just give one — perhaps analytically the most important one — reason and elaborate a little on that.

In modern endogenous growth theory knowledge (ideas) is presented as the locomotive of growth. But as Allyn Young, Piero Sraffa and others had shown already in the 1920s, knowledge is also something that has to do with increasing returns to scale and therefore not really compatible with neoclassical economics with its emphasis on constant returns to scale.

Increasing returns generated by non-rivalry between ideas is simply not compatible with pure competition and the simplistic invisible hand dogma. That is probably also the reason why neoclassical economists have been so reluctant to embrace the theory wholeheartedly.

Neoclassical economics has tried to save itself by blurring the distinction between ‘human capital’ and knowledge/ideas. But knowledge or ideas should not be confused with ‘human capital.’ Chad Jones gives a succinct and accessible account of the difference:

Of the three statevariables that we endogenize, ideas have been the hardest to bring into the applied general equilibrium structure. The difficulty arises because of the defining characteristic of an idea, that it is a pure nonrival good. A given idea is not scarce in the same way that land or capital or other objects are scarce; instead, an idea can be used by any number of people simultaneously without congestion or depletion.

new-way-oct14Because they are nonrival goods, ideas force two distinct changes in our thinking about growth, changes that are sometimes conflated but are logically distinct. Ideas introduce scale effects. They also change the feasible and optimal economic institutions. The institutional implications have attracted more attention but the scale effects are more important for understanding the big sweep of human history.

The distinction between rival and nonrival goods is easy to blur at the aggregate level but inescapable in any microeconomic setting. Picture, for example, a house that is under construction. The land on which it sits, capital in the form of a measuring tape, and the human capital of the carpenter are all rival goods. They can be used to build this house but not simultaneously any other. Contrast this with the Pythagorean Theorem, which the carpenter uses implicitly by constructing a triangle with sides in the proportions of 3, 4 and 5. This idea is nonrival. Every carpenter in the world can use it at the same time to create a right angle …

Ideas and human capital are fundamentally distinct. At the micro level, human capital in our triangle example literally consists of new connections between neurons in a carpenter’s head, a rival good. The 3-4-5 triangle is the nonrival idea. At the macro level, one cannot state the assertion that skill-biased technical change is increasing the demand for education without distinguishing between ideas and human capital.

In one way one might say that increasing returns is the darkness of the mainstream economics heart. And this is something most mainstream economists don’t really want to talk about. They prefer to look the other way and pretend that increasing returns are possible to seamlessly incorporate into the received paradigm — and talking about ‘human capital’ rather than knowledge/ideas makes this more easily digested.

Famous blue raincoat

25 November, 2015 at 17:14 | Posted in Varia | 1 Comment


Intolerance against intolerance

25 November, 2015 at 11:19 | Posted in Politics & Society | 3 Comments

We teachers do our best to be Socratic, to get our job of re-education, secularization, and liberalization done by conversational exchange. That is true up to a point, but what about assigning books like Black Boy, The Diary of Anne Frank, and Becoming a Man? The racist or fundamentalist parents of our students say that in a truly democratic society the students should not be forced to read books by such people – black people, Jewish people, homosexual people. They will protest that these books are being jammed down their children’s throats. I cannot see how to reply to this charge without saying something like “There are credentials for admission to our democratic society, credentials which we liberals have been making more stringent by doing our best to excommunicate racists, male chauvinists, homo- phobes, and the like. tolerance-does-not-mean-tolerating-intoleranceYou have to be educated in order to be a citizen of our society, a participant in our conversation, someone with whom we can envisage merging our horizons. So we are going to go right on trying to discredit you in the eyes of your children, trying to strip your fundamentalist religious community of dignity, trying to make your views seem silly rather than discussable. We are not so inclusivist as to tolerate intolerance such as yours.”

I have no trouble offering this reply, since I do not claim to make the distinction between education and conversation on the basis of anything except my loyalty to a particular community, a community whose interests required re-educating the Hitler Youth in 1945 and required re-educating the bigoted students of Virginia in 1993. I don’t see anything herrschaftsfrei about my handling of my fundamentalist students. Rather, I think those students are lucky to find themselves under the benevolent Herrschaft of people like me, and to have escaped the grip of their frightening, vicious, dangerous parents.

Richard Rorty

Although Rorty’s view is pointing in the right direction re handling intolerance, his epistemization of the concept of truth makes the persuasive force of the argumentation weaker than necessary. Jürgen Habermas gives the reason why:

As soon as the concept of truth is eliminated in favor of a context-dependent epistemic validity-for-us, the normative reference point necessary to explain why a proponent should endeavor to seek agreement for ‘p’ beyond the boundaries of her own group is missing. The information that the agreement of an increasingly large audience gives us increasingly less reason to fear that we will be refuted presupposes the very interest that has to be explained: the desire for “as much intersubjective agreement as possible.” If something is ‘true’ if and only if it is recognized as justified “by us” because it is good “for us,” there is no rational motive for expanding the circle of members. No reason exists for the decentering expansion of the justification community especially since Rorty defines “my own ethnos” as the group in front of which I feel obliged to give an account of myself.

Offending offenders

25 November, 2015 at 09:49 | Posted in Varia | Leave a comment


Seems to be a universal trend. Even in Sweden we have lots of people who are offended by anything …

Free rider problem

24 November, 2015 at 20:26 | Posted in Politics & Society | 1 Comment


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