Hal O'Brien

I was driving home on Friday and heard this piece on NPR, all about the "Kilkenomics" festival.

"Mr. DAVID McWILLIAMS (Economist): What we've done is we've taken together Ireland's finest standup comedians and some of the world's finest economists. And we've come together for the first of its kind, which is an economics festival where the comedians ask the questions of the economists."

Sounds good, doesn't it? Economics, the neverending recesssion, comedy... What's not to like?

Well... Why isn't Yoram Bauman involved? Ph.D from the University of Washington, author of The Cartoon Introduction to Economics, Volume 1: Microeconomics, and, oh yeah, a comedic translation of Mankiw's principles so sharp and pointed Mankiw himself linked to a video interview of Bauman?

Why, indeed? It's not like Bauman is obscure in this field. If you google "economics comedy", the results are full of references to Bauman.

So... What happened? You wuz robbed, Yoram!

{originally posted at my journal.}

Let me put in a lengthy quote by James Fallows, from his book, Looking At the Sun. This can be found on pages 178-179.

I had gone to Hitotsubashi to interview a professor who was, at the time, making waves. Starting in 1990, a number of Japanese businessmen and academics had begun saying publicly: Hmmmm, perhaps our business system really is different from what they have in Europe or the United States. The man Hitotsubashi, Professor Iwao Nakatani, was one of the most prominent and respected members of this group, and I'd spent the afternoon listening to his analysis while, through the window, I watched the petals drifting down.

On the way back to the station, I saw a sign that indicated, in Japanese, that there would be Western-language books inside. I walked to the back of the narrow bookstore and for the thousandth time felt both intrigued and embarrassed at the consequences of the worldwide spread of the English language. In row upon row sat an incongruous jumble of books that had nothing in common except that they were published in English. Self-help manuals by Zig Ziglar. Bodice-rippers from the Harlequin series. A Betty Crocker cookbook. The complete works of Sigmund Freud. And two books concerning Friedrich List.

Friedrich List!!! For at least five years, I'd been scanning used bookstores in Japan and America looking for just these books. I'd scoured the English-language stores in Taiwan, which until recently had specialized in pirated reprints of English-language books for about one-tenth the original cost. I'd called the legendary Strand Book Store, in Manhattan, from my home in Kuala Lumpur, begging them to send me a note about the success of their search (it failed) rather than making me wait on hold. I'd looked through English-language libraries without success. In all that time, these were the first books by or about List I'd actually laid my eyes on.

One was a biography, by a professor in the North of England. Another was a translation, by the same professor, of The Natural System of Political Economy, a short book List had originally written in German in the 1830s. Each was a slim volume, which to judge by the dust on its cover has been sitting on the shelf for years. I gasped when I opened the first book's cover and saw the price listed as 9,500 yen -- about $75. For the set? I asked hopefully. No, apiece, the young woman running the store told me. Books were always expensive in Japan, but even so, this seemed steep. No doubt the books had been priced in the era when $1 was worth many more yen than it was in 1992. I opened my wallet, pulled out a 10,000-yen note, took my change and the biography, and left the store. A few feet down the sidewalk, I turned around, walked back to the store, and used the rest of my money buying the other book. I would always have regretted passing it up.

I'm not (just) telling you all this because I think it's a lovely piece of bibliophilia.

No, I'm telling you all this because, unlike Jim, you can read Friedrich List right now. No five-year wait, no calls to justifiably legendary bookstores. The National System of Political Economy (which is indeed different from The Natural System...) is online, just a click away.

Some notes:

* The biographer, I'm guessing, was William Henderson. Friedrich List, Economist and Visionary 1789-1846. The interesting thing is, that book is about $10-$40 in German, but $130-$225 in English, even though Henderson wrote it in English.

* The Natural System... goes for $149-$175 on ABEBooks.

* 9,500 yen today is $109-ish. Also, $75 of 1992 money is about $113, or so says this inflation calculator. "Steep" though the prices may have been at the time, today they appear to be more so. List has appreciated more than inflation or currency exchange over the years.

* The National System... gets well over 200 hits on ABE, at a variety of prices. It's List's most famous work, so clearly accessibility to it (and him) in the West has improved markedly.

Regarding this column in the Sun-Times:

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To the Editor, and Ms Savage:

Regarding "There is no 'free' lemonade," July 5, 2010:

It seems Ms Savage is all in favor of the free market -- as long as the market agrees with her. She's all in favor of freedom -- as long as others do what she wants. And she writes as if she believes the Randian paradox of all actions of gratification are permitted -- except for those that may benefit others, no matter how self-gratifiying they may be.

One can't help feeling Ms Savage utterly lacks sincerity, and this was bait dangled out for the outcry that will surely follow. I suppose, in that respect, this very response is enabling her irresponsible behavior.

But consider: She says she's afraid of these children giving away something that wasn't rightfully theirs. Yet this over-the-top column will subject her future self to nothing but mockery, calumny, and disdain. She has completely given away the reputation that belonged to her future self, and to the future of the Sun-Times. Was it truly hers to give?

Sincerely,
etc.

David Brooks writes in The New York Times about the just-finished health care summit, "The Republicans believe that the answer is to create a genuine market with clear price signals, empowered consumers and an evolving process."

The problem? It simply won't work.

Free markets are great. Supply and demand is a great framework.

But it doesn't -- and won't -- work for health care. The reason is one that rarely occurs, so the usual laissez-faire advocates aren't seeing it: Demand for health care is infinite. There is no price sensitivity or price elasticity when it comes to health care. The only event that makes people stop spending is when they run out of funds. That's why the American Journal of Medcine reports medical expenses are the leading cause of bankruptcy in the US in a peer-reviewed study.

If demand for medical services is infinite, then there is never an equilibrium point for a price determined solely by supply and demand.

This is why the US, the only industrialized country that hasn't hasn't put health care under some form of social control, also has the largest share of its GDP given over to the heath care industry. Prices are out of control because there is no equilibrium point, so health care has become a black hole, drawing ever increasing dollars and GDP share in on itself.

Absent some governmental control of the sector, there's no rational reason to think market forces alone will succeed in containing costs.

Ilya Somin writes at that well-known hive of collectivism, The Volokh Conspiracy:

If you define “state-created entity” narrowly, then it won’t include most corporations. But if you define it broadly as any legally defined status that carries government-granted rights or privileges, then pretty much every important private organization is a state-created entity. Individual citizens may be “state-created entities” as well, and naturalized citizens certainly are. Going down this road would destroy constitutional rights for just about everyone.

As I just commented:

...and thus, you’ve demolished the distinction between “public sector” and “private sector,” and invalidated most strict laissez-faire arguments.

I guess we really are all socialists now. Well done.

Amazon review:

As an economic and political conservative, this book embarrasses me. Mostly because I might be tarred with guilt by association at the sloppy thinking Lewis demonstrates.

The central paradox of Lewis' book is this: He's all in favor of market outcomes -- just as long as the market agrees with him. Or, to put it another way: If Keynes is wrong, then Lewis is wrong, too, which would make Keynes right. The only way for Lewis to be right is if Keynes is right. That's paradoxical, and Lewis apparently hates paradoxes. That's a shame, because being a human being (and therefore paradoxical), he's written a paradoxical book.

Here's the problem: Lewis presents himself as a classical laissez-faire kind of guy. His main beef with Keynes is Keynes calls for too much government intervention in the marketplace. Lewis, like most laissez-faire believers, bases his assertion on the idea that markets constitute assemblies of rational actors, and thus arrive at the best pricing decisions possible under all circumstances. Keynes believes that economic actors are *usually* rational, but sometimes not. When they're not, government (which, in democracies, is just an alternate assembly of rational actors) needs to lend a nudge.

What no one disputes is that Keynesian ideas are now applied by the overwhelming majority of governments. The trouble for Lewis is, the near universal adoption of Keynesian ideas is itself an outcome of the market. It did not take place in a vacuum, and it did not happen in all countries at the same time. If Lewis is right, and minimally regulated markets outperform Keynesian ones, that should have been obvious over the decades Keynesian ideas took hold. *Some* country (or countries) should have stayed minimally regulated, and made a financial killing. That didn't happen, and it was results-based. Further, if Keynesian doctrines *don't* outperform minimally regulated markets, and the nations of the world individually adopted Keynesian doctrines *anyway*, then that would be an irrational decision -- which would toss the idea of "rational actors" into a cocked hat, and Lewis along the way as collateral damage. And, oh yes, it would validate Keynes' skepticism about the market *always* returning the best possible results.

There are other paradoxes in Lewis' thinking: Given the amount of government participation in today's economies, removing that participation can only be done through... massive government intervention. Or how about, if it's really Keynes that was the problem, why is so much of the data Lewis raises to refute him post-Keynes in time? Wouldn't it have been easier to just use pre-Keynes data? If Lewis believes in markets so strongly, why is his own firm, Cambridge Associates, privately held?

Nassim Nicholas Taleb, in his book "Fooled by Randomness," asks of stock traders, "Are you good, or are you lucky? How do you know?" We have no idea how successful or not Mr. Lewis has been, because he won't release that data. But if this book is representative of his rigor, there can be little doubt -- He's been lucky.

Mr. Bauman bills himself as "The world's first and only stand-up economist." He as an asterisk to that claim now, as others have been mentioned to him, and he graciously links to them. I would say all economists are stand-up comedians, but I'm impolite.

Here's Mr. Bauman's site as a stand-up economist. This is his more straightforward economics site.

The first video is Bauman taking on Mankiw's book, and translating Mr. Mankiw's 10 Principles into simpler language.

The second video is Bauman more recently at, "the first-ever American Economic Association humor session," explaining a bit about the financial crisis.

( cut to avoid friends list buggery )

There is a meme that's re-emerged from the Republicans lately:

"The New Deal didn't get us out of the Great Depression -- WWII did."

Here's the problem, from a Republican point-of-view: This is still a Keynesian statement. It says the New Deal wasn't big enough, and it was only with the spending generated by WWII that government investment in the economy finally did get big enough.

Here's what you don't hear:

"The New Deal didn't get us out of the Great Depression -- GM, GE, and the rest of the private sector did."

Oops.

Here's another article from the New York Times, again with some startling insights:

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"Many Americans know that there are characteristic policy differences between the two parties. But few are aware of two important facts about the post-World War II era, both of which are brilliantly delineated in a new book, “Unequal Democracy,” by Larry M. Bartels, a professor of political science at Princeton. Understanding them might help voters see what could be at stake, economically speaking, in November.

I call the first fact the Great Partisan Growth Divide. Simply put, the United States economy has grown faster, on average, under Democratic presidents than under Republicans.

...

The second big historical fact, which might be called the Great Partisan Inequality Divide, is the focus of Professor Bartels’s work.

It is well known that income inequality in the United States has been on the rise for about 30 years now — an unsettling development that has finally touched the public consciousness. But Professor Bartels unearths a stunning statistical regularity: Over the entire 60-year period, income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps over all."

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So, here's why that's so surprising, especially when connected with the Frum piece I wrote about earlier.

Republicans have the reputation of being the Party of Business. But Business actually does better when Democrats are in power. Republicans lose votes when income inequality increases, and Democrats gain. Yet, Democratic administrations have consistently reduced income inequality, and Republicans have consistently increased it.

As Frum says, "The trends we have dismissed are ending by devouring us."

The question isn't just, What's the Matter with Kansas? -- that is, why does Kansas vote Republican, when it's clearly against the voters' material interests to do so?

No, the larger question is, What's the matter with Business? For exactly the same reasons.

Back from our road trip around the state of Washington.

Reading a good issue of The New Yorker, I came across the claim from John Colapinto that US retail business lost about $40 billion in 2006 from theft. Which sounds impressive, until one learns from the US Census Bureau that retail sales, total (excl. motor vehicle and parts dealers) for 2006 (NB: Adobe .PDF file) was very close to $3 trillion. So theft accounts for an amount only 1.34% of US retail sales, which is probably within the margin of error of their accounting practices.

Bottom line: They have no idea how much theft is actually taking place. It's not enough to measure accurately.