Daily Archives: December 22, 2017

Lorenzo and Horwitz debate Austrian economics

The Market Monetarist

Back in April our friend Lorenzo did a interesting post on Austrian theory. That has now triggered a response from Steve Horwitz who defends the Austrian position. It is excellent stuff. It is a debate between two clever debaters and I have very strong sympathies for both gentlemen. However, I don’t have time today to go through the entire debate, but I will strongly recommend to my readers to take a look at this very interesting debate.

See here:

Lorenzo: About Austrian Economics

Steve’s response: Thoughts on Lorenzo on Austrian Economics

Lorenzo’s feedback to Steve: Response to Dr. Horwitz’s thoughts

Again, this is excellent stuff. Read it! We can all become more clever by debates like this. Thanks guys.

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Steve, George and Bryan debate Austrian economics and empirics

The Market Monetarist

I am a huge fan of Cato-Unbound.org. Here you find good insightful and intellectual debates amount classical liberal, libertarian and conservative scholars on a number of topics. The quality of the pieces on Cato Unbound is always very high. That is also the case for the latest “debate”. As always there is a “Lead Essay” and a number of “Response Essays”. This time the topic is “Theory and Practice in the Austrian School”.

The lead essay is written by Steve Hortwiz and the response essays are by George Selgin and Bryan Caplan.

Fundamentally Steve’s claim is that Austrian method – praxeology – is not as strict anti-empirical as it is often said to be. In his essay “The Empirics of Austrian Economics” Steve makes an heroic attempt to argue that there is no real conflict between praxeology and empirical studies. Everybody who know me would know that I have…

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The Nuremberg Trials: Perceptions and Prejudice?

The View East

The end of World War II saw the establishment of the first International War Crimes Trial in the German city of Nuremberg, with the formation of an International Military Tribunal to oversee the trial and conviction of surviving members of the Nazi power structure. The Nuremberg Trials have had a lasting legacy; leading to the creation of the ‘Nuremberg Principles’ of 1950, heavily influencing the development of international criminal law (particularly in relation to Human Rights), and acting as a model for contemporary war crimes trials. The Nuremberg Trials have been the subject of extensive historical research in the intervening years and War Crimes Trials of former Nazi criminals remain a topical issue today, as demonstrated by the recent trial of 91 year old former concentration camp guard, John Demjanjuk. In May 2011 a German court convicted Demjanjuk of acting as an accessory to murder in relation to the 28,069 who died…

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#OTD USSR broke up

1. The literature on the effect of low-skilled immigration on native wages.  A strong consensus finds that large increases in low-skilled immigration have little effect on low-skilled native wages.  David Card himself is a major contributor here, most famously for his study of the Mariel boatlift.  These results imply a highly elastic demand curve for low-skilled labor, which in turn implies a large disemployment effect of the minimum wage.

This consensus among immigration researchers is so strong that George Borjas titled his dissenting paper “The Labor Demand Curve Is Downward Sloping.”  If this were a paper on the minimum wage, readers would assume Borjas was arguing that the labor demand curve is downward-sloping rather than vertical.  Since he’s writing about immigration, however, he’s actually claiming the labor demand curve is downward-sloping rather than horizontal!

2. The literature on the effect of European labor market regulation. Most economists who study European labor markets admit that strict labor market regulations are an important cause of high long-term unemployment.  When I ask random European economists, they tell me, “The economics is clear; the problem is politics,” meaning that European governments are afraid to embrace the deregulation they know they need to restore full employment.  To be fair, high minimum wages are only one facet of European labor market regulation.  But if you find that one kind of regulation that raises labor costs reduces employment, the reasonable inference to draw is that any regulation that raises labor costs has similar effects – including, of course, the minimum wage.

3. The literature on the effects of price controls in general.  There are vast empirical literatures studying the effects of price controls of housing (rent control), agriculture (price supports), energy (oil and gas price controls), banking (Regulation Q) etc.  Each of these literatures bolsters the textbook story about the effect of price controls – and therefore ipso facto bolsters the textbook story about the effect of price controls in the labor market. 

If you object, “Evidence on rent control is only relevant for housing markets, not labor markets,” I’ll retort, “In that case, evidence on the minimum wage in New Jersey and Pennsylvania in the 1990s is only relevant for those two states during that decade.”  My point: If you can’t generalize empirical results from one market to another, you can’t generalize empirical results from one state to another, or one era to another.  And if that’s what you think, empirical work is a waste of time.

4. The literature on Keynesian macroeconomics.  If you’re even mildly Keynesian, you know that downward nominal wage rigidity occasionally leads to lots of involuntary unemployment.  If, like most Keynesians, you think that your view is backed by overwhelming empirical evidence, I have a challenge for you: Explain why market-driven downward nominal wage rigidity leads to unemployment without implying that a government-imposed minimum wage leads to unemployment.  The challenge is tough because the whole point of the minimum wage is to intensify what Keynesians correctly see as the fundamental cause of unemployment: The failure of nominal wages to fall until the market clears.

From http://econlog.econlib.org/archives/2013/03/the_vice_of_sel.html

The Battle of Hastings and the Birth of the English Language (1066)

ROOTS OF EXCALIBUR

Adventus Saxonum: The Backdrop

When Rome abandoned ‘Britannia’ in 410 AD, the British Isles were open to invasion. Sure enough, Germanic tribes such as the Angles, the Saxons, and the Jutes (among many others) invaded and settled along the eastern coast of modern-day England. This mass migration of Germanic tribes became known as the Adventus Saxonum, which is Latin for ‘Arrival of the Saxons.’

The Saxons eventually rose to power as the most prominent of the other settlers and would become mostly united by the middle of the 900s. Think of it this way, do you remember how the American colonies were settled? The Dutch came over and founded New Amsterdam, and then the English who had already ruled all of New England took over Manhattan and renamed it New York after the Duke of York, then eventually claimed everything else. It’s pretty much the same kind of…

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Study shows wind turbines killed 600,000 bats last year

Watts Up With That?

Bats-graphic[1]

I wonder how many bats coal and nuclear power plants killed last year?

From the University of Colorado Denver

Bats pollinate crops, control insects

DENVER (Nov. 15, 2013) – More than 600,000 bats were killed by wind energy turbines in 2012, a serious blow to creatures who pollinate crops and help control flying insects, according to a new study from the University of Colorado Denver.

“The development and expansion of wind energy facilities is a key threat to bat populations in North America,” said study author Mark Hayes, PhD, research associate in integrated biology at CU Denver. “Dead bats are being found underneath wind turbines across North America. The estimate of bat fatalities is probably conservative.”

The study, which analyzed data on the number of dead bats found at wind turbine sites, will be published next week in the journal BioScience.

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Jon Haidt on intersectionality and identity politics

Why Evolution Is True

City Journal has published the text of a recent talk  (the Wriston lecture at the Manhattan Institute; video below) given by social psychologist Jonathan Haidt, “The age of outrage: what the current political climate is doing to our country and our universities”.

Here’s one except:

Let us contrast King’s identity politics with the version taught in universities today. There is a new variant that has swept through the academy in the last five years. It is called intersectionality. The term and concept were presented in a 1989 essay by Kimberlé Crenshaw, a law professor at UCLA, who made the very reasonable point that a black woman’s experience in America is not captured by the summation of the black experience and the female experience. She analyzed a legal case in which black women were victims of discrimination at General Motors, even when the company could show that it hired…

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A Question of Balance by William Nordhaus

Kvams

Before I went into summer mode, I finished William Nordhaus’s book A Question of Balance (read short excerpt). The book’s subtitle is Weighing the Options on Global Warming Policies. The book is somewhere inbetween a popular account of the economics of climate change and a technical report on Nordhaus’s (and his team of research assistants’s, one might add) analysis of different approaches to mitigate global warming. A lot of details are saved for the actual technical reports available online. (Note: Details have been updated since the book was published [2008]). Nordhaus still goes through and explains the main equations of the famous DICE model (Dynamic Integrated model of Climate and the Economy), such that most economists could use his online computer code to verify results and further play around with the model.

Before the technicalities, however, Nordhaus provides a ‘Summary for the Concerned Citizen’ (slightly pompous…

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Three Gorges Dam – Positive and Negative Externalities

econfix

Below is a very good documentary on the construction of the largest dam in the world – the Three Gorges Dam in China. However in its construction there are both costs and benefits including private and external. This is a topic in Unit 3 of the CIE A2 Economics syllabus and is found under – Externalities. Remember that we have both positive and negative externalities of production and consumption.

THE DIFFERENCE BETWEEN PRIVATE AND SOCIAL COSTS

 Externalities create a divergence between the private and social costs of production.

SOCIAL COST = PRIVATE COST + EXTERNAL COST (externality)
  • Private costs are the costs to a ‘firm of producing a good or service and to an individual of consuming a product.
  • External costs are the spill over effects on third parties.
  • Social costs are obtained by adding the private and external costs together. They reflect the total cost to society of…

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