Saturday, April 16, 2011

25 Things I Learned in the 25 Years After My First 21 Years

I have long wondered what they put in the drinking water at George Mason University. This recent post by Dr Bryan Caplan attracted much attention in the blogosphere. Whatever is in the water seems to be causing conjecture to morph into the realm of the categorically immutable. But perhaps this assuredness is merely part of his philosophical territory. It is so effective, it inspired me to reflect upon 25 things I learned in the 25 years after my first 21 years. This doesn't include the several years I spent unlearning many of the things I learned in my first 21 years (and note these are in no particular order).

Economics:

1. Supply and demand in itself fails to solve countless mysteries, particularly where externalities are rife, corruption abounds (both large and small), and markets rather less-than-perfect (which are many).

2. Almost anyone can understand supply and demand if explained calmly enough (and with stick-figure or cute warm-and-fuzzy "Hello Kitty"-like animation), except perhaps Art Laffer and Maria Bartiromo.

3. Poverty is terrible, but poverty amidst gluttonous plenty is worse such that income redistribution complementing economic "growth" (where "growth" results in increasing and unprecedented skewness of income distribution) is better than growth alone.

4. The causes of unemployment are varied and complex and include (amongst other things) high executive wages, oligopoly, corporate rent-seeking, and capital's excessive short-termism

5. Free competition that results in unchecked collusive oligopolies and de facto monopolies often results in the diffused abuse of consumers for the parochial benefit of managers and shareholders.

6. Free beer is always far superior to perfect beer.

7. Bad governments combined with a poorly informed electorate - with or without fiat money - have little control over real GDP or employment.

8. Hazardous morals,  particularly in insurance and reinsurance markets, result directly from the pull of greed and its tendency to adversely select unduly self-interested agents.

9. Optimism about the economy and the future, however true it may prove to be, is a poor substitute for critical thinking and trying to do better.

10. Communism was a disaster primarily because of poor fashion sense.

Philosophy:

11.  The greatest philosophical mistake is to ignore a Blinding Glimpse of the Obvious.

12.  The second greatest philosophical mistake is to believe that the prior statement is either philosophical or a mistake.

13. Betting on whether or not a debate will resolve "what's obvious" is easier than betting on the stock market.

14. There are no such things as an anti-empirical dualistic unicorns, and even if there were, they wouldn't resemble moral facts.

15.  If you look too hard for something, you end up looking up your own arse. (thanks to Iain Owings)

Politics:

16. Believers voting is, in itself, irrational, since whatever prevailed would have been divine will.

17  Libertarian (and farther right) beliefs that "The public interest is best served by no public interest" is total bollocks.

18. Government may not provide the best solutions to externalities problems, nonetheless, government's attempts to address such problems are better than waiting for "the market" to miraculously conceive solutions inimical to their parochial financial interests.

19. All government, existing policy and expenditure requires reflection and critical introspection to insure  its continued relevancy and appropriateness for the prevailing times that it serves: this applies to the structure, and institutions, as well as the programs and initiatives, despite its heresy to strict interpreters of the constitution.

20. Paternalism should not be viewed in the pejorative. A Parents responsibility is (quite rightly) to set fair boundaries, and subsequently [justly] encourage adherence as well as enforce them with consequences if violated. In addition to being fair and just, they indeed change over time and epoch. However, the Parent who neglects these responsibilities, as well as the children who rebel and/or subvert for fun or parochial interest,  very often conjure problems to majority of others.  

22. Archetypical Conservatives and archetypical Progressives are actually more different than cynics believe, traits distributed in roughly similar proportions across all societies of the world. By nature they are fundamentally predisposed towards different values, particularly with respect to preserving tradition and accepting change, respectively.

24. However, like Yin and Yang, both traits are useful and required to govern more optimally, via constructive embracing of change, but throttling its speed in order to avoid the upset that change typically brings.  Understanding this reality should encourage everyone to compromise rather than polarize.

25. It is quite obvious that America has a Government Revenue Shortfall problem, rather than a Government Expenditure Problem (since spending is bottom quartile, and revenue bottom quintile compared to peers), AND that the revenue shortfall is caused by historically low tax receipts collected from the wealthy, demonstrated by comparatively low marginal rates vs. last 8 decades of economic history. Far from stimulating growth (ahhhem....errrr Dr. Laffer...??!?!), these comparatively low marginal rates over the past decades have enriched a very few quite dramatically, while impoverishing the next generation of the many in terms of per capital debt.

(errrr... umm.... that's quite enough "things I've learned" hurled upon you)

8 comments:

Anonymous said...

10. Communism was a disaster primarily because of poor fashion sense.

You're kidding right? Or you're not serious? The whole list is one big parody, right?

Anonymous said...

In discussing levels of taxation and government expenditure (quite apart from the irksome absence of a link to the data), you are employing the same rationale that is employed by the executives you bemoan are overpaid: considering levels relative to other players'. This results in a ratchet effect, as all players do the same.

Surely government spending should be assessed in the same manner as we assess other forms of our spending? On this basis, since we can identify billions and billions of wasted public spending, the rational response is to redirect or even cut government spending, not to increase its level further.

"Cassandra" said...

Anonymous#1: Admittedly some of these are tongue-in-cheek (you should worry if you need to ask which ones). Others like:

25. It is quite obvious that America has a Government Revenue Shortfall problem, rather than a Government Expenditure Problem (since spending is bottom quartile, and revenue bottom quintile compared to peers), AND that the revenue shortfall is caused by historically low tax receipts collected from the wealthy, demonstrated by comparatively low marginal rates vs. last 8 decades of economic history. Far from stimulating growth (ahhhem....errrr Dr. Laffer...??!?!), these comparatively low marginal rates over the past decades have enriched a very few quite dramatically, while impoverishing the next generation of the many in terms of per capital debt.

cannot be repeated often enough in order to dispel misconceptions about the USAs ability to collectively afford the current level of government expenditure. Future liabilities are a separate issues. That doesn't mean we *should* spend what spend, nor does it mean we *should* spend it upon what we do, but it does mean those who philosophically believe in low absolute govt spending should cut the horse-shit in painting the picture of what we can and cannot afford.

Anonymous #2 - there are undoubtedly billions of waste. and we should make every effort to eliminate these billions of waste, stupidity, misallocation, fraud, [insert favorite critical insult here].

While the self- justifications of outsized executive comp do employ relative arguments, my criticism is that they negatively impact present (and future employment) whereas in analyzing where the USA sits in the govt revenue/expendture %GDP pecking order for a reality check, before asserting that throttling skewness of income distribution, and forcing a semblance of redistribution via funded Govt spending has net positive effects. It is worth noting that most of northern europe (ex perhaps Belgium) sees a Govt take 25 to 35% higher (~10% of GDP) not only without ill effect (except to the top decile of taxpayers), but one could easily argue that it results in with mostly positive macro economic impact (even before attempting to measure positive social externalities. This is the argument of Shiller and others who've suggested mechanically setting the top marginal rates in relation to the GINI precisely because extreme maldistribution is economically caustic, and sub-optimal in comparison to better distributions.

I'm not suggesting here what the US should do (though I have my opinions), just that the rubbish one hears on say FOX with Neil Cavuto harassing some inarticulate Texas woman Rep.with a repeated dismissive mocking of mantra "We can't afford! We're broke! How are we gonna PAY for it...." yada yada is crap because others can and do afford it and pay for it via higher energy taxes, higher regressive VATs and higher progressive income taxes (reasonably equitable across income levels provided one can enforce collection from the top decile AND they are visibly better off. I have been open-minded with theories and arguments that speculate upon higher growth and tax receipts with lower tax rates (top decile tax rates in particular). However, that has NOT been borne out in the laboratory of American fiscal life where windfalls have been consumed or saved resulting in net loss to Govt coffers, with no visible offsetting national macro or micro benefits. Perhaps, the QB should call a different play

Highgamma said...

People who seek government power often start with the best intentions (though some don't), but they ultimately wind up serving their own or someone else's self-interest.

Anonymous said...

Thank you for putting into words what I have been trying in vain to communicate to some around me (the perils of living in a red state); especially #3 and #18, they are true gems.

jpau

"Cassandra" said...

jpau

it seems like a simple innocuous concession (that growth with some measure of equality is measurably better than growth alone). Indeed, many (prominent non-partisan economists, e.g. Shiller et. al.) feel strongly that inequality is quite harmful to the macro economy for obvious reasons of maintaining balanced general levels of consumption. But the refusal of many libertarian adherents to concede that policy is not Hegelian, and therefore perhaps middle ground in the continuum may provide better outcomes than the purity of the ideal is problemmatical for the political process in general and day-to-day governance.

this process of denial which threatens the primacy of cherished beliefs is eerily similar to the difficulty some people have in admitting their own personal faults and culpability. Often this (and related pefectionist complexes) relates to their fear of loss of control, and results in great difficulty achieving rapproachment where conflicting views exist. I have often wondered if these phenomena are in some way related.

As for #18, the record is not inspiring of either self-regulation or self-correction or the market dealing effectively with resulting externalities. This doesn't imply the extreme regulatory solution is best (though it may be). I think "nudge" is superior to "the stick", provided the nudge is sufficient to tilt the balance towards the lower-externality solution. It is worth considering that miraculuous conception of self-restraint is perhaps more difficult where capital and management are the only constituents served and that with worker-rep on the board (German-style) there is at least the chance of greater balance and transparency. The reasons are obvious (and are the same as rent-seeking): benefits are typically concentrated both in time, and to whom they accumulate to (as well as in relation to penalties and downside), whilst negative consequences are diffuse across both axes.

zephyrum said...

Cassandra, enjoyed your list; thanks.

Your blog shows a sold grasp of reality. Fortunately embracing truth is its own reward, because few people are going to offer much for it.

"Cassandra" said...

Z- This point is well understood, though I do believe progress is made tackling one demagogic falsehood at a time