Economics

"The Psychology of Prediction"

A nice statement on why, like establishing causality, prediction is difficult. Sample:

3. History is the study of surprising events. Prediction is using historical data to forecast what events will happen next.

Do you see the irony?

Historical data is a good guide to the future. But the most important events in historical data are the big outliers, the record-breaking events. They are what move the needle. We use those outliers to guide our views of things like worst-case scenarios. But those record-setting events, when they occurred, had no precedent. So the forecaster who assumes the worst (and best) events of the past will match the worst (and best) events of the future is not following history; they’re accidentally assuming the history of unprecedented events happening doesn’t apply to the future.


"An Interview with Deirdre McCloskey, Distinguished Professor Emerita of Economics and of History, UIC"

As usual, a lot of good stuff from Prof. McCloskey. She's asked how much of our GDP should be devoted to government and she replies, "Put me down for 10 percent slavery to government. Not the 30 to 55 percent at present that rich countries enslave."

I like it.

Also this:

Much of the research on the economics of inequality stumbles on this simple ethical point, focusing on measures of relative inequality such as the Gini coefficient or the share of the top 1 percent rather than on measures of the absolute welfare of the poor.  It focuses fashionably on an inequality that’s very hard to measure properly or to alter rather than on a poverty that is very easy to measure properly and alter. They elide the two. Speaking of the legal philosopher Ronald Dworkin’s egalitarianism, the philosopher Harry Frankfurt observed that Dworkin in fact, and ethically, “cares principally about the [absolute] value of people’s lives, but he mistakenly represents himself as caring principally about the relative magnitudes of their economic assets.”  We should care about lifting up the poor, not how many diamond-incrusted Rolex or Cartier watches the rich have.


"The crippling cost of doing business in California"

An Orange County Register editorial:

CNBC’s annual state-by-state “business climate” study is out. No surprise, we’re dead last — No. 50 — among the states for “cost of doing business.” Here’s an area where you don’t want to say, “As California goes, so goes the nation.”

Almost all of California’s business-climate problems are self-inflicted, as lawmakers try to balance conflicting interests.


"Why Libertarians Distrust Political Power"

Steve Horwitz has posted a wonderfully concise, beautifully exposited argument for why reasonable people should be suspicious of big government. It also serves as a very necessary rebuttal to the assertion that I'm, sadly, hearing more frequently from conservatives: big government is fine as long as it is guided by "conservative" principles.

(And Professor Horwitz's argument is nicely consistent with the case made numerous times on this blog that government has problems relative to the market in two areas: information and incentives.)


"What Noah Smith Gets Wrong about Poverty"

Kevin Williamson destroys some sloppy thinking about poverty. Ends with this powerful statement:

There are people who are poor because they have terrible disabilities and no family support; there are people who are poor because they drink two liters of bourbon a day; there are people who are poor because they simply will not work; there are people who are poor who are willing to work but cannot or will not relocate to places where there are opportunities; there are people who are poor because the education system has failed them; there are people who are poor for all sorts of other reasons. We have to sort those out, not because we want to elevate the “deserving” and abandon the “undeserving” but because those are fundamentally different problems that demand fundamentally different solutions.

We could try to do that. Or we could blame “the capitalist system.”