Economists Do It With Models

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If Economists Are Going To Act Like This, There Had Better Be An Octagon Involved…

June 21st, 2010 · 36 Comments
Policy

Seriously- remember the episode of Friends where Monica’s rich boyfriend (played by Jon Favreau…the actor, not Obama’s cute speechwriter, in case that wasn’t clear) decides that he wants to be an Ultimate Fighting Champion? That show taught us that nerdy white guys are not so good at the fighting, but that their attempts are hi-larious. Therefore, I would like to propose that economists settle their differences in the octagon rather than by flaming each other on the Internet a la Hilary Duff and Lindsay Lohan when they were fighting over Aaron Carter.

Case in point: This article by Steve Landsburg, in which he mounts an impressively snide ad hominem attack on Paul Krugman. (In general, if one pulls a press photo of one’s adversary to put next to the quote that one proceeds to belittle, it’s a good sign that the argument is trending in the ad hominem direction. Just saying.) The whole article is worth reading, since there is some substance to the argument and counterargument, but it took me a while to realize that since I was distracted by the following:

But Krugman, as is his wont lately, appears committed to the following flat-out dishonest rhetorical agenda:

* Identify an adversary who is concerned about the cost of some program Krugman likes.
* Label that adversary a “deficit hawk”.
* Belittle (perhaps reasonably) excessive concern about the deficit while ignoring legitimate concerns about the costs of spending and taxation, which is not at all the same thing.
* Omit any attempt at an honest reckoning of costs and benefits.
* Pretend you’ve said something relevant.
* Sneer.

In short: Keep on pummelling that straw man.

It really isn’t surprising to me that the general public sees the economics profession as consisting of a bunch of old dudes arguing amongst themselves, and I feel like we (I mean we as in economists, not we as in old white dudes) can do better. So let me try:

First, consider the quote by Paul Krugman that sparked this, erm, spirited debate:

In America, many self-described deficit hawks are hypocrites, pure and simple. They’re eager to slash benefits for those in need but their concerns about red ink vanish when it comes to tax breaks for the wealthy. Thus, Senator Ben Nelson, who sanctimoniously declared that we can’t afford $77 billion in aid to the unemployed, was instrumental in passing the first Bush tax cut, which cost a cool $1.3 trillion.

Now, Krugman is a self-identified liberal, so it’s not shocking that he is more sympathetic to issues such as social insurance than people who identify themselves as conservatives. Liberal versus conservative is (or, rather, should be) a matter of values, which are inherently subjective and personal, and it’s quite possible for liberals and conservatives to take in and process identical information and yet come up with different policy prescriptions as a result of differences in values. These prescriptive differences don’t necessarily make anyone “wrong”, per se. Therefore, it is mainly relevant to consider whether Krugman made an actual analytical error, and Landsburg seems to think that that answer is yes:

Where to begin?

First, no economist—let me repeat that—NO economist, not even Paul Krugman on the days when he’s being an economist—would count a tax cut as a cost for purposes of policy analysis. A cost is something that consumes resources, not something that changes the ownership of resources. My Principles of Economics students all understand this; so, presumably, does the Nobel-prize winning author of a prominent Principles textbook.

Ugh. Can’t we just all get along here, or at the very least refrain from playing the Nobel card at every opportunity? I sound like a broken record here with my “you’re both wrong and not wrong, and kind of an ass in your discourse” stance. But here goes:

There is an important distinction between “cost to the government” and “cost to the economy.” Granted, Krugman doesn’t explicitly make this distinction, but in my view it is implied, since he is using “cost” in a general-interest publication in the way that most people would use the word. The tax cut does cost the government $1.3 trillion in this sense, since $1.3 trillion (minus the taxes on whatever marginal business activity the tax cuts create) flows out of the government’s coffers. What Landsburg seems to be arguing is that the $1.3 trillion is just a shift of resources from the government to the people, which is not wrong of course, but it’s also not at odds with what Krugman is saying. The $1.3 trillion tax cut could even be a net benefit to the economy overall, since it relieves some deadweight loss (i.e. economic black hole) created by the taxes in the first place.

By Landsburg’s definition, almost nothing that the general public thinks of as “costs” count as costs, since entities usually pay costs as payments to other parties, and this is in fact just a transfer of resources. From what I can tell, what he is referring to as a cost in a policy sense is what economic principles texts would call deadweight loss, since it is deadweight loss that accounts for shrinkage in economic activity (usually due to regulation such as taxes and subsidies) as opposed to transfers from one party to another.

It is in fact true that, under certain assumptions, unemployment benefits cause deadweight loss and tax cuts relieve it. On those grounds, it is potentially consistent that people would favor cutting both aid to the unemployed and taxes, since both policy changes are thought to lead to increased economic activity. However, this issue is to some extent separate from the budget-balancing issue, and Krugman is arguing that it is hypocritical to be for one form of deficit reduction (cutting benefits) and against another (increasing or maintaining the status quo on taxes). In order for his argument to be valid, he would have to be ignoring the differing effects of the policies on deadweight loss.

To summarize on an intellectual level: If all people claim to care about is size of the deficit, then they are being hypocritical in advocating one method of reducing the deficit and eschewing another. If all people care about is economic efficiency, then they are by definition internally consistent if they advocate both benefits and tax cuts. The reality of the situation is that most reasonable people put some weight on both deficit reduction and economic efficiency, so people are not automatically hypocritical or consistent just because they are simultaneously in favor of cuts in unemployment aid and taxes. But that conclusion doesn’t make for a very entertaining article…which brings me to my next summary…

To summarize on a philosophical level: If you want the world to better understand the points that you are trying to make, please focus on the issues at hand rather than on attacking the people involved. If you just want to argue amongst yourselves, I again suggest the following, at the risk of trending into ad hominem territory based on my earlier rubric:

(In case you aren’t familiar, Krugman is the one being kicked in the gut. I figured that that was appropriate for this particular scenario.) At least the UFC octagon setup would lend some credence to the whole “economists do it with models” thing:

Tags: Policy

36 responses so far ↓

  • 1 Cody // Jun 21, 2010 at 6:30 pm

    Landsburg seems to know what Krugman means by “cost” a couple of posts down:
    http://www.thebigquestions.com/2010/06/15/bad-logic-or-bad-arithmetic/

  • 2 David Welker // Jun 21, 2010 at 7:05 pm

    So, I sort of think this critique of yours is a little politically naive.

    Forget economists for a moment. What motivates ordinary people with limited economic knowledge: things that they can understand.

    People understand the concept of too much debt, and when the economy is doing poorly, concern about debt increases. Now, if you buy into Keynesian premises, this is backwards. When you should be taking the most action against debt is when the economy is doing well and you should be doing less when the economy is doing poorly. But ordinary people who haven’t thought about this deeply go more with gut instincts. And gut instincts say that you should cut back when things are bad; that this is safe. And they want to apply this to not only their own life, but to the government as well.

    Now, consider this fact. There are a lot of conservatives and libertarians out there, including economists, who prefer less government. Period. That is their value system. And in ordinary times, they do not really have much chance for severe cuts in social programs that they desire at all times.

    What is the strategy? Appeal to what the public understands. The public understands belt tightening in times of prolonged recession when the numbers look ugly. One can disguise what are essentially discretionary value judgments about how resources should be allocated and act like you are “forced” to cut by circumstances. This has a lot of emotional resonance with the public, especially when they are facing similar situations in their personal lives.

    Here is the thing that makes Krugman angry. No politician is going to present an argument that we are going to cut unemployment benefits and also cut taxes (which will probably go disproportionately to the wealthy, as tax cuts are usually designed to do) while still running large deficits in the name of efficiency. People aren’t quite that stupid. They know that what matters is not merely how much the economy produces, but also how much they get. So, to sell deep cuts to people, it usually has to be framed in we are doing this because it is the “responsible” thing to do in order to control the deficit. People can understand this this sort of rhetoric. The thing is, that this sort of rhetoric has a limited shelf-life. People are more inclined to accept deep cuts WHEN the economy is doing poorly, so politicians (and economists who care about politics – a lot of them) rush to sell cuts on fiscal austerity grounds.

    Then after that (and of course, they totally bash on Keynesian ideas whenever anyone resists their desire to cut unemployment and other social benefits) they will then turn around and use Keynesian ideas to justify tax cuts. We need these tax cuts to grow the economy in a big way, they will say. They aren’t going to say we need these tax cuts to eliminate a small amount of deadweight cost caused by taxes, and by the way, you will probably see very little benefit of eliminating those deadweight costs but it is sort of good for the economy in a small way. Instead, they are going to tend to say that tax cuts are a very big deal and suggest that the magnitude of the benefit is very high. That the magnitude of the benefit is so high, that maybe the tax cuts will even pay for themselves and not increase the deficit. Basically, they are going to make an argument about the efficacy of tax cuts that is unbelievable unless you adopt very optimistic assumptions about Keynesian multiplier effects. But, these same people were saying it was so important to cut unemployment benefits in order to get the deficit under control while acting like Keynesian economics is some sort of obviously wrong scam just a little while back.

    We have this opportunistic and cynical moralistic posturing about the deficit and debt on one hand when it comes to spending and total denial about the fact that increased tax cuts like increased unemployment benefits will also cause the deficit to increase, any small theorized changes in deadweight costs notwithstanding.

    The bottom-line is this. Krugman has been involved in politics a lot more than you have. He is therefore much more cynical than you are. You see arguments and try to put them in the best light possible. Krugman knows better. Or at least thinks he does. I am not saying that you should adopt Krugman’s point of view here, but you have to recognize that it is a cynicism that comes from experience. It certainly is a sort of bias, but your “neutral” view is also biased, just in a different way.

    I will also say that it is not uncommon for economists to be totally naive about politics. I remember in law school when I took a couple of classes from economists who were liberal democrats. They always insisted that we should evaluate policy only on the basis of efficiency and without regard to distributional concerns. Why? Because, even if you think redistribution is important, it is most efficiently undertaken via the tax system.

    This is not wrong in theory; but it is wrong in practice. It is very very hard to do redistribution through the tax system for those with lower incomes. Not impossible, but very hard. Doing redistribution that benefits powerful industries and lobbies is much easier; doing redistribution that benefits less powerful individuals and families is very hard. It doesn’t really matter if doing redistribution through the tax system is theoretically more efficient if it isn’t really politically possible to do so adequately in practice. For this reason, despite my professors advice, I think we have to consider the distributional impacts of all policies. And you know what, even if you choose to not think about those, you can guarantee that the powerful lobbying groups will be. To say that we should not consider distributional impacts for lower income individuals of policies in areas other than taxation is really nothing less than unilateral disarmament. It is naive in the extreme.

    Anyway, that is how I see it. Maybe we need more people who are really idealistic like yourself. But you should keep in mind that people like Paul Krugman and Brad DeLong have real political experience with how clever rhetoric can dominate rational discourse.

    Or let me put it another way. If you are going to apply economics to the real world in a serious way, you need to understand that politics is just as important or more important than economics to real world outcomes. When people see “windows of opportunity” to advance their subjective policy preferences, they will often do so using any means necessary, including emphasizing concerns (like the deficit) that they did not emphasize before. And I hate to say it, but this is probably also true of many economists. Often, people’s ideological views concerning the proper role of government are going to be more important than economic theory, even for economists. In other words, the economic arguments that are made are determined by ideology and not economic theory dispassionately considered. Now, this may not be as true when it comes to the very basics, but as soon as you get beyond that, it seems like it is often true to me.

  • 3 Benjamin // Jun 21, 2010 at 8:40 pm

    Jodi,

    With much gratitude, I have the sticker, and I have the T-Shirt, so please put me down for EDIWM shorts when they become available. Not all econdos are pale white and nerdy.

  • 4 Charles Dolci // Jun 21, 2010 at 10:27 pm

    Just one little point – I am just too tired right now to get too deeply involved in this discussion. Jodi claims that tax cuts are a cost to the government even if they are not a cost to the economy. I won’t debate the economics of that position but let me just point this out. By that logic, any income or wealth or property that the government chooses not to tax must then be a “cost” to the government. It also presumes that the government has some sort of prior and greater right to the fruits of the labor of its citizenry (or maybe I should say “subjects”) and that if it fails to confiscate everything you produce then it must be the resultof some oversight and therefore a “cost” to the government.
    For a nation that has a history (i.e. a past) of individual freedom and liberty that idea is a bit disconcerting.

  • 5 David Welker // Jun 21, 2010 at 10:37 pm

    Charles Dolci,

    You are being far too moralistic about this.

    It is a “cost” to the government as in, it raises the deficit. We are running a deficit, you know. The government is spending more than it raises in taxes. We also have long-term debt.

    Yes, in the same way, declining to raise revenue is also a “cost” to the government. Declining to raise revenue when the government otherwise could also increases the deficit.

    Note, that tax cuts and declining to raise taxes might both be justified on Keynesian grounds. That declining to raise revenue and cutting taxes are a “cost” in the sense that they decrease the deficit is an objectively true fact. That doesn’t mean that such costs are not worth it.

    A final point. You seem to be deeply confused in thinking that individual freedom and liberty are the natural result in the absence of government. Any examination of actual history should totally disabuse you of that notion. As Benjamin Franklin put it, “In this world nothing can be said to be certain, except death and taxes.”

    It has often been correctly observed that taxes are the price of civilization. And ultimately, it is civilization that protects individual freedom and anarchy. To put it another way, there is nothing “free” about preserving individual liberty and freedom nor working to create a happy and prosperous society.

  • 6 David Welker // Jun 21, 2010 at 10:39 pm

    Oops.

    “And ultimately, it is civilization that protects individual freedom and anarchy. ”

    should be:

    “And ultimately, it is civilization that protects individual freedom and liberty, not anarchy.”

    =)

  • 7 Charles Dolci // Jun 21, 2010 at 11:27 pm

    David:
    Holy cow! You certainly read an awful lot into my brief post.
    First, just what in my post suggested that I support anarchy??? That is a real leap.
    Second, I will go along with ” it is civilization that protects individual freedom and liberty” but I would be willing to debate the statement that ” it is government that protects individual freedom and liberty” I would clearly take the position that it is the “legitimate role of government to protect individual freedom and liberty” but too many governments have done a pretty poor job of that. In fact, as governments grow, individual freedoms shrink. May I be so bold as to presume that your position is that more government therefore means more individual freedom and liberty. I know you didn’t quite come out and say that, but allow me to take liberties with your post – just as you have done with mine. Of course one will have to scour history to find examples of large and invasive governments nurturing individual freedoms and liberties. Let’s see, there was the Soviet Union, Maoist China, Germany under the National Socialist German Workers’ Party, Cambodia under the Khmer Rouge, Cuba under Castro (oh wait – but they have “great medical care”), to name just a few champions of freedom. And, as long as we are quoting founding fathers how about Jefferson’s little epigram “Government which governs least, governs best.”
    Third, on deficits – how about they reduce spending, after all a deficit is an excess of spending over income. And as long as we are talking about “costs”, all those taxes are costing me quite a bit, and I am the one who produced the wealth. And bottom line – I really don’t care what it “costs” the government. Don’t you think fairness should put my costs above those of the government.
    Finally, if you are so concerned about reducing the governments costs, why don’t you just send them a check for all your income come April 15th. Why bother with filling out all those forms just send them everything you make and everyone will be happy.

    Sheeesh!

  • 8 Rachel // Jun 21, 2010 at 11:29 pm

    The tax-cut is a cost: an opportunity cost.

  • 9 David Welker // Jun 21, 2010 at 11:47 pm

    A couple of points Charles.

    My point is that you are reading your own normative preferences into this. You insist that calling a tax cut a “cost” is bad for normative reasons. But, the reason it is being called a cost is simply because, from the perspective of government, that is what it is. If we have a problem with too much debt and bond markets are getting upset, that cutting taxes is a cost would hopefully become more clear to you.

    Yes, the government can also cut the deficit by cutting spending. Whether to do that or cut taxes is definitely a judgment call.

    My first point was simply this. You are accusing Jodi of making the wrong normative claim in calling tax cuts a cost. My point is this; this isn’t a normative judgment at all. It is an objective statement concerning the effect on the government’s budget of cutting taxes (or declining to raise revenue). You were the one that was reading into what someone was saying.

    My second point is this. The purpose of government is ultimately to procure and secure the happiness of the people. Part of that is providing liberty and freedom. Part of that is providing security. Ultimately, the balance is not up to you or me as individuals, but to the people themselves. You are free to lament decisions you disagree with, but they are all within the purpose of government as conceived of by the founders of our Constitution.

    A final point. You haven’t produced any wealth on your own. The government all along has protected you from thugs, who have a right arising in nature to brutally club you to death and take whatever meager possessions you have managed to accumulate. Any wealth you have produced is a credit to not only yourself as an individual, but to civilization itself. It is only civilization that is protecting you from the natural brutality of both nature and your fellow man. Don’t ever forget that.

    It seems to me that you, like the rest of us, owe more to civilization than you could possibly ever repay.

  • 10 Michael L. // Jun 22, 2010 at 3:16 am

    As Milton Friedman once said “The government does not have money. The government only get money by putting it’s hand in your pocket.”

  • 11 David Welker // Jun 22, 2010 at 3:25 am

    And then Milton Friedman was clubbed to death and all his money stolen because he couldn’t fend for himself in a more savage world without government.

    But luckily, there was a time machine. Someone went back and told Milton Friedman about what was going to happen to him and he realized that no one would have any money without government. So, instead of being clubbed to death, Milton Friedman died a very rich man because the government protected him from the thugs who live by the motto that might makes right. And everyone lived happily ever after. The end. =)

  • 12 John F. Opie // Jun 23, 2010 at 9:10 am

    David, I think you’re being deliberately misleading and, to a certain extent, rude.

    You’ve turned the discussion at every point to your own ideological viewpoint and turned a query about whether a tax cut is a cost into life and death of civilization. Methinks thou doth protest too much. Or do you believe that there should never, ever be any tax cuts? That the government, duly elected by the people, may not chose to provide fewer services if the vox populi so decides? That tax cuts may be a more appropriate Keynesian pump-priming method than government spending?

    The original question was whether a reduction in tax rates can be properly called a cost. The problem is one of semantics (admittedly lawyers are occasionally skilled in the use of semantics). For a lawyer, costs are the pecuniary reimbursement to the winning party for the expenses of litigation; for an accountant, it is the value of money that has been used up to produce something, and hence is not available for use anymore; for an economist, a cost is an alternative that is given up as a result of a decision.

    In terms of government accounting, the only sense that a tax cut could be a cost is the economic sense, that the government cannot use the monies involved for alternative usage because someone decided that the monies were either not to be collected as taxes or that, once collected, they were to be refunded. It’s an *opportunity* cost.

    If that’s the case, then sure, tax cuts are a cost. Otherwise they are not.

    No business could say that an incentive program of price reduction qualifies as a cost (in the sense of cost of goods and services in calculating a balance sheet): it comes, instead, out of profits.

    And I find this remarkable:

    “The purpose of government is ultimately to procure and secure the happiness of the people.”

    Ye gods. No. The people of the United States have the *right* to pursue happiness. The government can’t procure happiness for them: they also cannot secure the *happiness* of the people, as happiness is both transitory and subjective. The government may provide security, but it cannot secure your happiness.

    Your final point in the response to Charles is effectively a call for the people to be in grateful servitude to the State: they should be damned well thankful that the State exists and has protected them from evil (and I’ve read my Hobbes).

    From the Declaration of Independence:

    “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.”

    Now that places the role of government quite clearly in its place: only with the consent of the government and subject to change according to the will of the people.

    And as an aside: I see that you are a member of the California bar, but live in Las Vegas? Could that be the result of … taxes?

  • 13 David Welker // Jun 23, 2010 at 9:25 am

    John F. Opie,

    First, I am glad that you have foolishly and wrongly asserted the function of government is not to procure and secure the happiness of the people. Because it provides me an opportunity to prove that you know nothing about our history nor what the founders thought the proper role of government should be.

    From Benjamin Franklin’s speech at the close of the Constitutional convention:

    Much of the strength & efficiency of any Government in procuring and securing happiness to the people, depends, on opinion, on the general opinion of the goodness of the Government, as well as of the wisdom and integrity of its Governors. I hope therefore that for our own sakes as a part of the people, and for the sake of posterity, we shall act heartily and unanimously in recommending this Constitution (if approved by Congress & confirmed by the Conventions) wherever our influence may extend, and turn our future thoughts & endeavors to the means of having it well administered.

    So, when you say that the function of government is not to secure and procure the happiness of the people, I say you are simply extremely ignorant of our history. Of course that is the purpose of government! What else would it be; to adopt policies that decrease our happiness?

    As for your whole, here are three definitions of costs point, you are actually supporting my assertions completely. If you recall, an earlier commenter was criticizing Jodi for calling such expenditures a cost on ideological grounds. But as you have shown, her use of that term need not be interpreted in such an ideologically charged manner.

    And as an aside: I see that you are a member of the California bar, but live in Las Vegas? Could that be the result of … taxes?

    That assumption would be incorrect. I am perfectly happy to have the privilege of paying both state and federal taxes.

  • 14 John F. Opie // Jun 23, 2010 at 9:38 am

    I see that my comment about being rude was correct.

    Franklin’s address is not the law of the land: it is the sentiment of Mr. Franklin.

    And I would argue that Mr. Franklin’s sentiments about the ability of government to provide for security and to allow the people to pursue happiness rests on the goodness of the government and the wisdom and integrity of its governors. Would you argue that this remains the case?

    That you pay Federal and State taxes in the State of Nevada was never a question: do you live in Nevada because the taxes there are lower than they are in California, where you are a member of the bar?

  • 15 David Welker // Jun 23, 2010 at 10:15 am

    Oh, of course what Benjamin Franklin said means nothing. I am sure the views of one of the most prestigious and important framers of our Constitution whose endorsement of the merits Constitution was no doubt a practical prerequisite for its adoptions should mean absolutely nothing. After all, his statement conflicts with your own preferred view, and we can’t have that. =)

    I think I already answered this, but tax considerations have played exactly zero role in determining my location. Like I said, I view paying taxes, both federal and state, as a privilege.

    I find it amusing that you have the audacity to call me rude when you ask intrusive personal questions that are clearly none of your business. (Which I have nonetheless answered.)

    Oh, I get it. Proving that you are simply wrong about how the framers of the Constitution viewed the overall purpose of government is rude. Because you don’t like being wrong.

    Well, if you don’t like being wrong, maybe you shouldn’t get into arguments about constitutional history with people who know more than you about that topic and assert they are wrong? Just a thought. I mean, I know some of you economists think that all knowledge can be derived from the laws of supply and demand, but that just isn’t the case. =)

    I briefly skimmed your blog and noted your senseless bashing of the humanities. Maybe if you had respect for the humanities (and history is among them) you would actually have some competence in them and would not embarrass yourself with incorrect statements. Just a thought. =)

    Besides saying that you were wrong about an issue that, your ego aside, really has nothing to do with you personally, how have I been rude? Who is the one that has asked inappropriate personal questions again?

    I think you need to distinguish between rudeness and disagreement. If I say that you are wrong about a substantive issue, that isn’t rude; that is part of free inquiry and debate without which knowledge would stagnate. In contrast, asking inappropriate personal questions with really no substantive relevance is rude.

    And guess what, being wrong is really not that bad. We have all been there, including myself. In fact, being wrong is often great; I learn more from being wrong than being right. It is only as big of a deal as you make it. Me saying you are wrong is not some sort of vicious personal attack, okay?

  • 16 John F. Opie // Jun 23, 2010 at 10:19 am

    Jodi, sorry for feeding the troll. Won’t happen again.

  • 17 Daniel // Jun 23, 2010 at 1:13 pm

    I think that it hilarious that the entire point of the post was disagreeing civilly, and not being “kind of an ass in your discourse”, and the comments immediately turned to ad hominum attacks, references to Nazis, and one of the most respected economists being bludgeoned to death.

  • 18 econgirl // Jun 23, 2010 at 3:44 pm

    You don’t say. :) Makes me wonder to some degree whether Krugman and Landsburg are in fact appealing to an audience. If this is the case, I would argue that there is still a larger audience that is not being adequately served. *throws hat in ring*

  • 19 econgirl // Jun 23, 2010 at 3:44 pm

    (or should I have said octagon?)

  • 20 David Welker // Jun 23, 2010 at 3:58 pm

    and one of the most respected economists being bludgeoned to death

    Hello!

    Time machine. Happily ever after. All that.

    I obviously wasn’t wishing Milton Friedman any harm or attacking him. Just making a point.

    I think this is a good example of confirmation bias. You are able to read the part of the story where he is bludgeoned to death, but not the part of the story where he is saved by the time machine! You just WANT to see viciousness.

    =)

  • 21 David Welker // Jun 23, 2010 at 4:21 pm

    Oh, Krugman has a new blog post up today that uses the the term “super-asanine” and predicts a “lost decade.” Check it out here.

    Okay, I admit it, I really liked the post. I also like UFC….

    Krugman is just responding to the forces of supply and demand. Don’t blame him! Blame me. =)

  • 22 Joshua // Jun 23, 2010 at 4:31 pm

    Wow, you really poked some people here. I was just going to comment on the pictures…

    The fact that both guys in the ring are looking at the camera and smiling is comic genius. Also, “Krugman” isn’t getting kicked in the gut, it’s a wheel kick to the ribcage, on his side.

    I couldn’t quite see the next picture, as my eyes got all watery from all the bleach in the air.

  • 23 Charles Dolci // Jun 23, 2010 at 7:58 pm

    Let me respond to David Welker’s June 21 post.
    However, let me preface this by saying many people need to develop a thicker skin. A spirited debate with people vigorously stating and defending their positions should not be condemned. I find nothing in David’s post to be offensive – wrong -yes, but offensive – No.

    Let me also quote Ben Franklin – in his closing remarks on the last day of the constitutional convention, which he had to allow fellow Pennsylvanian James Wilson to read, because Franklin’s gout prevented him from standing to give the speech and convention rules required all speakers to stand when speaking. In his peculiarly eloquent way Franklin urged his colleagues to adopt the admittedly imperfect but functional constitution. He said “In these sentiments, Sir, I agree to this Constitution with all its faults, if they are such; because I think a general Government necessary for us, and there is no form of Government but what may be a blessing to the people if well administered, and believe farther that this is likely to be well administered for a course of years, and can only end in Despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic Government, being incapable of any other.” I suspect we may have reached that point.

    I do not say that allowing people to keep the wealth they produce CAN NOT be called a “cost to government” I am merely saying that to do so distorts reality and gives to government power and authority that is highly destructive of personal freedoms and liberties.

    Now to the specifics of David’s June 21 post:
    “Yes, the government can also cut the deficit by cutting spending. Whether to do that or cut taxes is definitely a judgment call.” OK, but there are decisions that reflect good judgment and there are those that reflect bad judgment. Just because it happens to be a judgment call does not mean it is good or sensible. Lots of people and institutions make judgment calls that turn out to be disastrous.

    “The purpose of government is ultimately to procure and secure the happiness of the people. Part of that is providing liberty and freedom.” I think this is more than just a difference in semantics, I think it goes to the core of the issue. It is not the role of government to provide people with happiness. It is the function of government to provide an environment (including security and a recognition and protection of property rights) that will allow people to secure their own happiness. Otherwise the government is empowered to say “Here, this is your happiness, take it or leave it.” I think Jefferson had it right when he paraphrased John Locke in saying that people have the right to pursue happiness. The do not have a right to happiness, merely the right to pursue it. Moreover, if one fails to obtain happiness through one’s own efforts he has no right to demand that I then provide it to him through my labor. Moreover, David misapprehends the nature of the Constitution and the government it created. Go back and read it – it is quite brief and easily understood. The Constitution merely created a new form of government that derived its authority from the constituent states and their peoples. The first ten amendments were added (in fact, introduced by Madison at the first session of Congress) to counter the power of the government and to protect the rights of the people from this new government. The bill of rights recognized the fact that the people already enjoyed those and other rights (9th amendment) not enumerated. Those rights did not come from the government, the bill of rights was protecting those rights from infringemenet by the government.

    “The government all along has protected you from thugs, who have a right arising in nature to brutally club you to death …” Well, first of all, let us all admit that the government has not been doing a very good job in that regard. Secondly, what political or legal philosopher has ever said that a thug, or anyone else, has “the right” [David's words] to club someone over the head. Again, referring to Locke, such a person was a transgressor and did not have “a right” to go around clubbing people. In fact, Locke recognized the natural right of men to protect themselves against and punish transgressors. Another posting suggested that Milton Freidman might be mugged and killed. Not if he was armed with a 9mm Ruger, the right to which is protected by the Constitution.

    Finally, I don’t think anyone has argued that we do not owe something to civilization. That is not the issue. The issue as originally stated is about government and not civilization. Civilization can exist and function with minimal government – that government which exercises the limited powers granted to it by the people – in our case, via the cosntitution. Moreover, that does not settle the issue of just what and how much we owe “civilization”. By being law-abiding and productive I think I satisfy my obligations to “civilization”. In fact, I know that I have satisfied my obligations to civilization – civilization has so enjoyed my contributions that it has given me all kinds of things of value. I provide desired goods and services that enhances civilization and it gives me all kinds of goodies in return. And those people that provide little or nothing to civilization get little or nothing in return. Economist Walter Williams calls those things “certificates of performance”. I am not so creative – I just call it “money”. Although, I must make this one guilty admission – I do not think that Kobe Bryant’s contributions to civilization match the value of what civilzation has given to him. Playing a child’s game a few months out of the year does not warrant tens of millions of dollars in compensation. And if I were Queen for a Day, I would correct that gross injustice. (is there an emoticon that expresses “tongue in cheek”?)

    BTW, so David is a California lawyer – cool. So am I, but I am a recovering lawyer, now pursuing more honest pursuits – selling bootleg whiskey. :)

  • 24 David Welker // Jun 23, 2010 at 9:44 pm

    Charles,

    (1)

    With respect to happiness, Benjamin Franklin used the word “procure.” You obviously wish he had not used that word because it goes against your own personal preferences regarding the role of government. But that is the word he used. And there is no doubt that if Benjamin Franklin had declined to support the Constitution that it would never have been ratified.

    You cannot escape history, although I am sure you will try. =)

    (2)

    In a state of nature without civilization, you have a right to try to defend yourself. But others have a right to kill you and take what they want from you. Basically, the only rules that exist outside of civilization are the rules of survival. That is the brutal reality. Property is a social right to exclude others, even those who are physically capable of overcoming any resistance you might offer from taking that which is “yours” is a psychological construct that arises from civilization and which requires government to procure. Therefore, it is complete nonsense for those like Milton Friedman to say that all wealth is created outside of government. But for government, there would be no wealth.

    (3)

    It is POSSIBLE to have a government do nothing else but protect property. Or do nothing more than protect an aristocracy of elites whose well-being is already established.

    But that is not for you to decide. It is for the people to decide. The function of the government, once again is to both procure and secure happiness for the people. (And I will note, once again. in case you cannot read, that Benjamin Franklin used the word procure.) It is up to the people in their collective capacity (and not you in your individual capacity) to decide what the government should or should not do to help procure and secure their happiness.

  • 25 Rev. Pfloyd // Jun 27, 2010 at 10:01 am

    Where is the threshold where one’s “procurement of happiness” crosses over into “redistributing happiness” as is what occurs when you have too much “civilization” taking from one group of people and giving to another?

    I suppose theft by an individual is considered a violation of rights, but theft by an appointed group of officials makes it okay since that theft was mandated by “civilization”.

  • 26 Dave // Jul 6, 2010 at 1:39 pm

    To sum up: Because Benjamin Franklin said something about what he thought government should do, and Benjamin Franklin supported the Constitution, it must therefore be that the Constitution’s intent is what Franklin thought, not what the Constitution actually, in fact, says.

    As an economist, I am very glad that this kind of logic did not come from an economist; and hardly surprised it came from a lawyer.

    So because President Obama has said that the system he would prefer is a single-payer system, and because President Obama signed and pushed for the Health Care Reform Act, it must be that the HCRA suggests we should have a single-payer system. THAT is the logic being used here.

    My 8-year old niece could pick that argument apart.

  • 27 You Can’t Keep a Good Straw Man Down at Steven Landsburg | The Big Questions: Tackling the Problems of Philosophy with Ideas from Mathematics, Economics, and Physics // Jul 23, 2010 at 7:03 pm

    [...] Economists Do It With Models site, who graced us with a visit in yesterday’s comments and expanded on those comments on her own page. (That’s me kicking Paul Krugman in the [...]

  • 28 Jake S. // Mar 28, 2011 at 11:45 am

    Jeebus H. Crêpes here, people…

    I was just going to take [slight] issue with the following statement:

    “The tax cut does cost the government $1.3 trillion in this sense, since $1.3 trillion … flows out of the government’s coffers”

    But then I noticed the Comments section had become its own veritable octagon…

    No matter, I am going to be brave (on the Internet, lol) and tread headlong into the abyss… ;-)

    In this scenario, 1.3T doesn’t “flow out of the government’s coffers” because it was never in them to begin with.

    It simply never came in.

    It would be one thing if this were a rebate instead of a tax cut… then there would be a cost or expense (or whatever) in a ledger somewhere.

    I think commenter Rachel (Jun 21, 2010) hit the nail on the head when she identified it as an “opportunity cost.” (so profound in less-than-10-words!)

    [the following portion of my post is more in response to commenters than to EDIWM]

    What if the government keeps the tax rate the same but pulls in less revenue? Is that also a cost?

    What if it ups the tax rate but pulls in the same revenue (just less than it expected when it raised the rate)? Is that a cost?

    What if it ups the tax rate and pulls in the same revenue (which was consistent with the gov’s expectations when it raised the rate)? Is that a cost?

    I think the difference is important, because *real* costs show up on a ledger somewhere, but last I checked (and someone please correct me if I’m wrong, but) /opportunity/ costs don’t show up on ledgers or in budgets.

    If the DOD procures a Trident (II) missile and forgoes a Minuteman (III) — assuming for the sake of argument that they “cost” the same — is an identical figure entered in the ledger or budget for the “opportunity cost” of the one foregone?

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  • 35 Chuck Dolci // Dec 10, 2011 at 9:47 pm

    Hate to argue with our gracious host, but …

    She says Krugman is speaking about “costs to the government” in a “general-interest publication in the way that most people would use the word”. First I would not use the word “cost” in that way. To me a cost is a transfer of an asset/resource that I own to someone/something else. And the government not getting its hands on my money is not a cost to the government. How can the loss of a resource be a cost to you if you never had a claim to the resource in the first place? Second, Krugman’s “legitimacy” comes from the fact that he is an Economist, and a Nobel Laureate to boot, and a former Harvard Professor. If I want sloppy talk, I will talk to the general interest kind of guy on the street.

    If the tax cut costs the government, then so does the government not taking every last cent that every man woman and child makes. Moreover, it does not “flow out of the government’s coffers” since it was never there in the first place and the government had no legitimate claim to it (unless, of course, one believes that the government IS entitled to every last cent). Krugman would agree with the bank robber who is sitting in jail saying, “Being incarcerated is costing me money.”

  • 36 Jeff // Jun 7, 2013 at 3:22 am

    “On those grounds, it is potentially consistent that people would favor cutting both aid to the unemployed and taxes, since both policy changes are thought to lead to increased economic activity.”

    I guess I can’t argue with the idea that both policy changes are thought to lead to an increase in economic activity, but one could wish that the people with these views had more historical awareness. The idea that these policies will help the economy has been a stable feature of the Republican platform for at least 100 years.

    The result?

    Only two Republican presidents have left unemployment lower than they found it, Calvin Coolidge, who set up for the Great Depression, and Ronald Reagan, who started the National Debt explosion, the Great Trade Deficit explosion, the great incarceration, and decreased growth permanently by about a third in this country.

    Meanwhile, FDR, with the policies of the New Deal, grew the economy more in 12 years than all the Republicans following Wilson grew it in 48 years.

    It doesn’t really matter if our mathematical models suggest that economic growth should have actually increased and deficits should have decreased under the Reagan tax cuts if reality says that we saw the exact opposite.

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