what "motivated reasoning" looks like–& why dissensus about "scentific consensus" #climate http://t.co/7UenGmLk5l pic.twitter.com/LfZVggTaN6
— Cultural Cognition (@cult_cognition) February 8, 2015
When divorce lawyers can advertise
07 Feb 2015 Leave a comment
in economics of information, economics of love and marriage, entrepreneurship, law and economics Tags: advertising, entrepreneurial alertness, family law
Name recognition and your chances of winning the presidential nomination
06 Feb 2015 Leave a comment
in economics of information, economics of media and culture, politics - USA Tags: 2016 presidential election, name recognition
Why popularist politics work: People Are Terrible at Estimating Income Inequality
05 Feb 2015 Leave a comment
in economics of information, politics - Australia, politics - New Zealand, politics - USA, Public Choice Tags: expressive voting, poverty and inequality, rational ignorance, rational irrationality, the top 1%, urban myths
Does global warming denial and the anti-vaccination movement march to the same anti-science step?
03 Feb 2015 Leave a comment
in climate change, economics of information, economics of media and culture, environmental economics, global warming, health economics, politics - Australia, politics - New Zealand, politics - USA, Public Choice Tags: anti-vaccination movement, climate alarmists, expressive politics, expressive voting, psychology of persuasion
In the last post, I presented evidence, collected as part of the CCP Vaccine Risk Perception study, that showed that the trope has no meaningful connection to fact.
Those who accept and reject human evolution, those who believe in and those who are skeptical about climate change, all overwhelmingly agree that vaccine risks are low and vaccine benefits high.
The idea that either climate change skepticism or disbelief in evolution denotes hostility to science or lack of comprehension of science is false, too. That’s something that a large number of social science studies show. The CCP Vaccine Risk study doesn’t add anything to that body of evidence.
Vaccination rates are a serious issue. Do those that are trying to lift vaccination rates think they going to get anywhere by calling people stupid, corrupt and in the pay of a multinational.
Of course not. This matter is serious. It’s a real public health risk.
People are persuaded to vaccinate through gentle messages providing facts in a way they can understand that also respects their knowledge, their intellect, and their concerns for the safety of the children. You don’t win people over by insulting them.
The climate alarmists are so insulting because they have no interest in persuading the people that are actually talking to. They are reaching out to members on the audience were are on the margin, and appealing to their political base, including the fundraising base by showing how staunch they are in slaying the Dragon.
Why do economic consulting firms exist?
02 Feb 2015 1 Comment
in applied price theory, economics of bureaucracy, economics of information, financial economics, law and economics, managerial economics, organisational economics, survivor principle Tags: advice giving industries, corporate law, Deirdre McCloskey, directors duties, economic consultants
Directors’ duties are the reason why the companies hire economic consultants. What consultants say isn’t important; the fact that simply the directors of a company sought advice is what matters. Same goes for the public sector: you must know what you’re doing, you took advice from outside experts.
Central to avoiding being sued if the company goes broke, or otherwise gets into a spot of bother, is the directors show that they acted responsibly.
Central to this is they can show they took advice from esteemed advisers: an accountant, a lawyer and an economist. If they did so, they must be responsible prudent directors because they took advice.
Deirdre McCloskey argued that the advising industry lives off 19th century case law on directors’ and trustees’ duties.
If you take advice – from an accountant, a lawyer or an economist – and the business or investment still fails, it can’t be your fault that you lost the widow’s and orphans’s inheritance.
You took advice. That is what that 19th-century court held with regard to what directors do and do not have to do given the fact that are not involved in the business on a day to day basis.
James Burk, a sociologist and former stockbroker… found that the advice giving industry sprang from legal decisions in the early 19th century.
The courts began to decide that the trustee of the pension fund or a child’s inheritance could be held liable for bad investing if they did not take advice. The effect would have been the same had the court decided that prudent man should consult a Ouija boards or the flight of birds…
America decided through its courts than an industry giving advice on the stock market should come into existence, whether or not it was worthless.
Therefore, it doesn’t matter what you say as a consultant economist to a company, the fact you’ve said something to them is more important to them than what you are saying. Seeking and receiving your advice excused them from being sued for breach of their directors duties for a couple of days.
Profits Are So High, Why Don’t More Farmers Switch To Organic?
02 Feb 2015 Leave a comment
in economics of information, economics of religion, health economics, occupational regulation Tags: compensating differentials, consumer fraud, entrepreneurial alertness, expressive voting, food snobs, organic farming, reputational capital, social norms
HT: Yet Again, Organic Ag Proves Just as Productive as Chemical Ag | Mother Jones.
The increase is partly because more farmers are taking advantage of the healthier profit margins and partly because organic marketing groups sell a health food mythology where cost is not a factor, so costs can rise along with more product. It is a miracle of capitalism.
But given a consumer-base that is wealthy and that is educated by advertising so completely, why don’t all farmers switch?It just takes paying for a sticker and promising to use an organic toxic chemical rather than a synthetic one, there is no testing of organic food, so it would be easy to just make more money.
The reason more don’t move to organic, according to a paper in the Journal of Marketing, is because conventional farmers know in their hearts and minds they are deceiving the public if they switch – making that change is like switching belief systems.
via “Chemical Farmers”: Profits Are So High, Why Don’t More Farmers Switch To Organic?.
Adam Smith wrote about religion in the Wealth of Nations in part because how it infused moral fibre into market dealings. Smith offered a theory explaining the participation of individuals in religion based on his theory of human capital.
In particular, businessmen want to signal to customers that they were moral upstanding people who will not cheat them because that would be against their own moral code and sense of self-respect.
For this reason, Adam Smith suggested that religious sects proliferating in cities because people wanted to join them as a way of signalling they were morally upstanding people. These sects were demanding and rigourously policed the morals of their membership and expelled those who fell in any way short.
A reputation for honesty is both an entrepreneurial investment as well as a way of living a decent life.
People value their reputations and self-respect for being a good and decent man or woman, but some do so more than others. This is why the wage premium under the theory of compensating differentials is large enough only for the trailing edge of the business community. What is that premium?
In 2011, [the] organic premium for a bushel of wheat was 52.2% after factoring in reduced yield per acre of organic production versus total [chemical] average yield per acre. In other terms, [chemical] wheat would have had to have yielded over 53 bushels [a two-thirds increase] per acre to match organic return per acre. (Ted Craig, Wyoming Department of Agriculture, personal communication)
Being an organic farmer is somewhat trendy these days and raises you in the eyes of many but not all. As such, self-respect rather than reputation would be the bigger driver of how large the compensating differential must be before more move to organic farming.
The success of monetarism and the death of the correlation between monetary growth and inflation
30 Jan 2015 1 Comment
in business cycles, econometerics, economics of bureaucracy, economics of information, inflation targeting, macroeconomics, Milton Friedman, monetarism, monetary economics, politics - Australia, politics - New Zealand, politics - USA Tags: lags on monetary policy, Levis Kochin, monetary policy
Monetarists blame fluctuations in inflation on excessively volatile growth in monetary aggregates. In 1982, Friedman defined monetarism in an essay on defining monetarism as follows:
Like many other monetarists, I have concluded that the most important thing is to keep monetary policy from doing harm.
We believe that a steady rate of monetary growth would promote economic stability and that a moderate rate of monetary growth would prevent inflation
The U.S. data supported this hypothesis about the volatility of monetary growth and inflationuntil 1982, but since 1983 monetary aggregates have been essentially uncorrelated with subsequent inflation in the U.S.
Levis Kochin pointed out in 1979 that a well designed monetary policy would lead to zero correlation between any measure of monetary policy and subsequent inflation. The reason for this is the correlation between any variable and a constant is zero.
If monetary growth is stable, say, a constant growth rate of 4% per year, as advocated by Milton Friedman, monetary growth will have no correlations with any variable:
Poole (1993, 1994) and Tanner (1993) also argue that one predictable consequence of optimal monetary policy is that the correlation between monetary policy instruments and policy goals will be driven to zero.
Poole further contends that it is obvious to any careful reader of Theil (1964) that optimally variable policy will give rise to a zero correlation between policy and goal variable…
In 1966 Alan Walters, a U.K. monetarist, observed:
If the [monetary] authority was perfectly successful then we should observe variations in the rate of change of the stock of money but not variations in the rate of change of income… [a]ssuming that the authority’s objective is to stabilize the growth of income.
Milton Friedman in 2003, wrote about how the Fed acquired a good thermostat:
The contrast between the periods before and after the middle of the 1980s is remarkable.
Before, it is like a chart of the temperature in a room without a thermostat in a location with very variable climate; after, it is like the temperature in the same room but with a reasonably good though not perfect thermostat, and one that is set to a gradually declining temperature.
Sometime around 1985, the Fed appears to have acquired the thermostat that it had been seeking the whole of its life…
Prior to the 1980s, the Fed got into trouble because it generated wide fluctuations in monetary growth per unit of output. Far from promoting price stability, it was itself a major source of instability as Chart 1 illustrates.
Yet since the mid ’80s, it has managed to control the money supply in such a way as to offset changes not only in output but also in velocity.
Nick Rowe explained the difficulty of causation and correlation under different policy regimes and Milton Friedman’s thermostat superbly as an econometric problem Nick Rowe:
If a house has a good thermostat, we should observe a strong negative correlation between the amount of oil burned in the furnace (M), and the outside temperature (V).
But we should observe no correlation between the amount of oil burned in the furnace (M) and the inside temperature (P). And we should observe no correlation between the outside temperature (V) and the inside temperature (P).
An econometrician, observing the data, concludes that the amount of oil burned had no effect on the inside temperature. Neither did the outside temperature. The only effect of burning oil seemed to be that it reduced the outside temperature. An increase in M will cause a decline in V, and have no effect on P.
A second econometrician, observing the same data, concludes that causality runs in the opposite direction. The only effect of an increase in outside temperature is to reduce the amount of oil burned. An increase in V will cause a decline in M, and have no effect on P.
But both agree that M and V are irrelevant for P. They switch off the furnace, and stop wasting their money on oil.
Subsequent work of Levis Kochin showed that if the effects of fluctuations in monetary aggregates were not precisely known then the optimal policy would produce negative correlations between monetary aggregates and inflation:
The negative correlation results from coefficient uncertainty because the less certain we are about the size of a multiplier, the more cautious we should be in the application of the associated policy instrument.
Therefore, although optimal policy leads to lack of correlation between the goal and control variables if the coefficient is known, it will lead to a negative relationship if there is coefficient uncertainty. The higher the uncertainty, the more cautious will be the optimal policy response. Also, if the control variable can’t be controlled perfectly then the correlation between the goal and the control variable becomes positive i.e., the control errors are random…
Uncertainty about the impact of a policy will stay the hand of any bureaucrat , much less a central banker, as Kochin and his co-author explain:
Uncertainty should lead to less policy action by the policymakers. The less policymakers are informed about the relevant parameters, the less activist the policy should be. With poor information about the effects of policy, very active policy runs a higher danger of introducing unnecessary fluctuations in the economy.
The competing visions of stabilisation policy have been defined by Franco Modigliani and Milton Friedman
26 Jan 2015 Leave a comment
in business cycles, economics of information, history of economic thought, macroeconomics, Milton Friedman, monetarism, monetary economics Tags: Franco Modigliani, Keynes in macroeconomics, monetary policy, stabilisation policy, The fatal conceit, The pretence to knowledge
Homeopathy First Aid Kits – only $54.99!!
22 Jan 2015 Leave a comment
in economics of information, health economics Tags: fraying of civilisation, homoeopathy, modern medicine, modernity, Quacks, The Age of Enlightenment
On homeopathy websites you can buy special first aid kits for the car, for hiking and camping, for horses, for pets, for pregnancy, for childbirth, and for travel.
One website sells a first aid kit that “contains all the major homeopathic first aid remedies which work so amazingly well particularly when given immediately after an accident or injury.” Only $99.95, but you’re also advised to buy a book to explain its use, for an additional $18.95. It contains 15 remedies in a 30C potency:
- Aconite (the “queen of poisons): for colds, flu, sore throats, effects of fear, fright, chicken pox and croup
- Apis mellifera (honey bee): for burning and stinging pains, insect stings, swelling of the lower eyelids, edema, swollen joints
- Arnica: after injury, mental and physical shock, before and after operations or visits to the dentist. Stops bleeding, aids in the healing of wounds and reduces bruising and swelling. Good for general healing and shock, exhaustion, muscular pain, sprains from overexertion.
- Arsen alb (arsenic): stomach upsets from food poisoning, diarrhea, vomiting and acute hayfever. Good for some dry skin conditions.
- Belladonna (deadly nightshade): hot flushed face, sore throat, facial neuralgia, throbbing headache, earache, boils, chickenpox, measles and mumps
- Bryonia (a toxic weed): dry chesty coughs, muscular pains, which is better for resting [sic]
- Cantharis (a beetle, Spanish fly): burns and scalds before the blisters form, sunburn, constant urge to pass urine, urine passed drop by drop (cystitis)
…For certain illnesses, it said “Depending on severity, seek medical care.” These included anaphylaxis, animal bites, bone injuries, third degree burns, carbon monoxide poisoning, cuts, drug overdose, electrocution, eye injuries, food poisoning, paint poisoning, pesticide poisoning, puncture wounds, and shock. It’s appalling to think that patients are left to their own assessment and might think these conditions were not severe enough to merit medical care.
It has always been my intention to keep this blog safe for work. In consequence, I can make no further comment on homoeopathic first aid kits.
Utopia, you are standing in it! 
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