Whenever I read these economics posts of yours, the following thought always occurs. If only professional economists could manage to get across to a lay public that economics is essentially a study of human behaviour (rather than dollars-and-cents abstractions and policy positions on resource allocation) then it might attract wider interest - and, at least partially, redeem its notoriety as 'the dismal science'.
Good point. When my wife, who has been married to an economist for over 40 years, tells someone her husband is an economist, she often gets back something like the following: "Oh, he studies money." She replies, "No, he studies human behavior."
I’m half way through Invisible Wealth. As a non-economist, I appreciate your clearly worded posts on the subject. Perhaps I’d have taken a greater interest in it in college. The teacher makes such a difference in any subject - it was how I ended up in history. I didn’t expect a 7:30 AM summer session class on medieval European history to captivate me, but the professor was fantastic. (It also didn’t hurt to sit next to a cute blonde).
"Experiments are evaluated rigorously" Do you see it as a problem that this gives more weight to values that are easily measured? For example, short term benefit may be easier to measure than long term costs.
"So it is pretentious for an economist to claim to know the cost and to be able to do cost-benefit analysis."
And very often we know the cost in dollars but maybe the benefit is more difficult to estimate.
And sometimes we avoid making coat-benefit comparisons even when they are useful. I worked in dam safety for a bit and there was an aversion to stating a benefit by estimating lives saved if a repair or improvement is completed. By doing this, accuracy of comparisons was being purposely reduced.
Of course some benefits are more difficult to estimate and the estimates may be inaccurate but not doing so ensures inaccuracy.
That Disneyland paper is a lot of fun, even if too math-y for the (utterly) uniniated. A real vintage gem. Thanks for linking it. But one thing I am not sure about is the contention that mere entry to the park gets you nothing - if that's at all important to the argument. Apologies if this is a stupid question, but your economics does seem to invite nuance ...
Maybe that was so in the 60s.
I only have one rather glancing visit to Disneyworld 20-odd years ago to go by.
The thing that struck me as genuinely un-mockable was how clean it was - so clean that chancing upon a piece of litter or a weed, I was embarrassed and quickly corrected it. And how not-ugly the surroundings. Unlike an amusement park in, say, any American city - it was pleasantly set in a pretty big acreage of timber (not sure if that holds, now, if they've developed most of it). And how nice were the places to stay - we stayed in some resort that was not considered a core Disneyworld resort and yet was owned by Disney as well as I can recall: this was I believe a good deal cheaper than, say, staying in the Polynesian resort, which is why I chose it, but it was easily the nicest place we had ever stayed in our very young parenthood days. And yet you would never go there if you hadn't planned to pay that tariff - in our case, one day in the Magic Kingdom, which we didn't even handle very well in terms of picking what to ride.
Mises's a priorism comes from Immanuel Kant. To appreciate why Mises devoted so many pages to it, one must have some understanding of Kant. Few people have read Kant, and few among them are economists, who are generally allergic to explicit philosophical reasoning. There are other approaches to the philosophy of knowledge, so being an Austrian does not require one to adopt Mises's a priorism. It retains a hold among present-day Austrians, though, because it was part of Mises's effort to unify economic thinking and place economics within an overall system of human understanding, a hugely ambitious task that has rarely been attempted.
All this makes a lot of sense in a sort of Friedman critique of profit non-maximization way. Let's stipulate that Chicago-style economics does not include dynamic efficiency, institutional factors, fixed costs etc. But that does not show that their policy recommendations do not come out AS IF they had taken all those things into account. Or, between an Austrian and a Chicago Boy who can say the most about the accumulation of CO2 in the atmosphere?
Of course, there were no cost-benefit analyses done BEFORE the restrictions and the recommendations/requirements of non-pharmaceutical interventions (staying home, masks, social distancing).
That is bullshit, Thomas. They all tried to justify their actions with cost benefit analysis, the only problem is that their analysis was either laughably wrong or they flat out lied about it.
At the beginning of the pandemic, Arnold had a series of posts saying, "In order to make intelligent decisions, we need to know X, Y, Z ... We should be researching them as quickly as possible. BUT WE'RE NOT!"
It was a terrible failure of the medical/public health complex.
I don't remember seeing anything remotely like a cost benefit analysis. The big shortcoming of the Covid escapades was focusing almost exclusively on the Covid deaths (and hospitalizations) and ignoring all the other societal costs.
Two weeks to flatten the curve, masking to slow the spread, social distancing, closing the schools was all sold as a way to prevent overwhelming the healthcare system, Mike- that is explicit cost-benefit analysis.
Coud you refresh my memory about the cost benefit analysis carried out to suggest closing schools? Eschewing first dose first and fractional dosing? Delaying approval of screening tests? I do not even recall the part showing the benefits, much less consideration of the costs?
Prof. Mulligan found that closures were unreasonable. He was countering policy-makers who pushed the idea that the health benefits of school closures outweighed the harms to education.
I see, Thomas, you are going to play the "No True Scotsman" routine. If you want to claim that a lousy and lying cost/benefit analysis isn't really a cost/benefit analysis, just say so explicitly by writing the following:
"They all got it wrong in early 2020- the shutdowns, the masking, the social distancing, the school closures. All of that was wrong and shouldn't have been done."
The efforts to justify non-pharmaceutical interventions (lockdowns, masks, etc) by cost-benefit analysis gathered steam with Thomas Pueyo's essay, "Coronavirus: The Hammer and the Dance" (19 March 2020):
To be clear, some top economists questioned whether the benefits of non-pharmaceutical interventions were greater than the costs. See, for example, Andrew G. Atkeson's real-time analyses of Covid and policies:
There was certainly some effort to argue the utility of certain NPI, but to my recollection none were quantified and compared to the costs of said NPIs.
We are talking about whether policy makers use cost-benefit analysis justify decisions reached by other other means. I say, I know of none of it.
If you are referring to my justification of mandatory vaccinations, it's right there in the comment. I assumed there was a positive externality from vaccination. That was wrong.
Cost benefit analysis reaches the wrong conclusions if the data it is based on is wrong. The same is probably true of alternative decision criteria.
Alex Tabarrok was influential on policy. (Separately, he served on the Operation Warp Speed working group for vaccine development.)
Was Prof. Tabarrok "a policy maker"? I dunno. The term is ambiguous. Maybe "influential policy voice" is apter here.
You're correct that lawmakers and governors didn't spell out cost-benefit analysis. I would add: Non-pharmaceutical interventions were driven partly by demand, and also partly by HR (fear of squeeky wheels and litigation). And mainstream media amplfied fear-driven demand. But influential policy voices (e.g., Prof. Tabarrok) did matter, by shaping policy and/or by rationalizing policy after the fact (as Guest User suggests in his comment in this overall thread).
BTW, I wasn't referring to your views about vaccines. I simply meant to note that you, too, were following the 2020 efforts by Profs. Tabarrok and Caplan to do real-time CBA. I agree that it's hard to get the facts straight in the moment in novel situations.
For example, what is the cost of "keep 6 feet of distance" -- now even without such a rule people generally keep around that distance from strangers. Or inability to see dying relatives in hospice care (can you even put a price on it)
At the same time can a cost benefit analysis be undertaken for, say, entering WW2? What is the value of defeating axis powers and of preserving a free world?
a) I'd consider the advantages of issuing a 6 ft. recommendation based on modeled effect of virus spread at 6 ft c.f. "normal" distancing, ideally taking account of the fact that firms would buy floor stickers telling people to keep their distance.
b) Same, I'd want to model the benefits of decreased spread of the virus to/from people in hospitals whihc would probably have resulted in very different kind of recommendation based on the screening test status of the person visiting etc.
c) SFAIK, politicians and the public DID weigh the costs and benefits of entering WWII. Can you think of a better way to think about it?
I'm not disputing that some analysis can be done. The numbers that would go it would be so subjective that you can make the result come out the way you want to. Price of a life = value of statistical life year? 10 million dollars?
Price of inconvenience of standing six feet apart = 50c each time you have to do it? $1 each time you have to do it?
More that it shows up limits of what we can measure.
Whenever I read these economics posts of yours, the following thought always occurs. If only professional economists could manage to get across to a lay public that economics is essentially a study of human behaviour (rather than dollars-and-cents abstractions and policy positions on resource allocation) then it might attract wider interest - and, at least partially, redeem its notoriety as 'the dismal science'.
Good point. When my wife, who has been married to an economist for over 40 years, tells someone her husband is an economist, she often gets back something like the following: "Oh, he studies money." She replies, "No, he studies human behavior."
I’m half way through Invisible Wealth. As a non-economist, I appreciate your clearly worded posts on the subject. Perhaps I’d have taken a greater interest in it in college. The teacher makes such a difference in any subject - it was how I ended up in history. I didn’t expect a 7:30 AM summer session class on medieval European history to captivate me, but the professor was fantastic. (It also didn’t hurt to sit next to a cute blonde).
Arnold
The question of ‘initial assumptions’ of Mises is profound.
In this connection, Chantal del Sol (French professor) make the point that-
‘Ontology is epistemology’
Natural law (rothbard) posits humans are special, unique and important.
In fact, that only works if humans are the ‘image of God’. (Moses).
If humans are just chemical robots (Descartes), smarter animals (Darwin), the initial assumption, most basic premise is different.
Maybe . . . even the modern justification for political control is the outworking of belief humans are driven by irrational, animalistic motives.
Therefore, more outside correction required.
Personal responsibility replaced by group control, political power.
See ‘Story of Russia’ by Orlando Figes.
Explains difference of judeo/christian/ catholic/ Protestant culture with Byzantine/mongol/orthodox/pagan culture.
Ideas matter.
I think a wide variety of decisions can be subsumed under Mises’ premises.
Ontology is what is. Not what we want.
Thanks
Clay
You know, I've never been able to figure out just what people mean by "ontology". What do you mean?
Roger
Ontology is study of what exist.
God?
Soul?
Freewill?
Truth?
Mind?
Humans as ‘image of God’?
Humans as superior (inferior) animals?
Planet earth alive Gaia?
Gravity (Newton)?
Spacetime (Einstein)?
Quantum physics- Einstein says no. Bohr says yes.
Mathematics exists as a complete provable system - (Hilbert)
Mathematics is incomplete and never totally provable - (Gödel)
Is physical matter reducible to quarks?
Does dark matter exist?
Does dark energy exist?
Ontology forms basis of all other conclusions, beliefs or theories.
Thanks
Clay
Thanks.
"Experiments are evaluated rigorously" Do you see it as a problem that this gives more weight to values that are easily measured? For example, short term benefit may be easier to measure than long term costs.
"So it is pretentious for an economist to claim to know the cost and to be able to do cost-benefit analysis."
And very often we know the cost in dollars but maybe the benefit is more difficult to estimate.
And sometimes we avoid making coat-benefit comparisons even when they are useful. I worked in dam safety for a bit and there was an aversion to stating a benefit by estimating lives saved if a repair or improvement is completed. By doing this, accuracy of comparisons was being purposely reduced.
Of course some benefits are more difficult to estimate and the estimates may be inaccurate but not doing so ensures inaccuracy.
That Disneyland paper is a lot of fun, even if too math-y for the (utterly) uniniated. A real vintage gem. Thanks for linking it. But one thing I am not sure about is the contention that mere entry to the park gets you nothing - if that's at all important to the argument. Apologies if this is a stupid question, but your economics does seem to invite nuance ...
Maybe that was so in the 60s.
I only have one rather glancing visit to Disneyworld 20-odd years ago to go by.
The thing that struck me as genuinely un-mockable was how clean it was - so clean that chancing upon a piece of litter or a weed, I was embarrassed and quickly corrected it. And how not-ugly the surroundings. Unlike an amusement park in, say, any American city - it was pleasantly set in a pretty big acreage of timber (not sure if that holds, now, if they've developed most of it). And how nice were the places to stay - we stayed in some resort that was not considered a core Disneyworld resort and yet was owned by Disney as well as I can recall: this was I believe a good deal cheaper than, say, staying in the Polynesian resort, which is why I chose it, but it was easily the nicest place we had ever stayed in our very young parenthood days. And yet you would never go there if you hadn't planned to pay that tariff - in our case, one day in the Magic Kingdom, which we didn't even handle very well in terms of picking what to ride.
Mises's a priorism comes from Immanuel Kant. To appreciate why Mises devoted so many pages to it, one must have some understanding of Kant. Few people have read Kant, and few among them are economists, who are generally allergic to explicit philosophical reasoning. There are other approaches to the philosophy of knowledge, so being an Austrian does not require one to adopt Mises's a priorism. It retains a hold among present-day Austrians, though, because it was part of Mises's effort to unify economic thinking and place economics within an overall system of human understanding, a hugely ambitious task that has rarely been attempted.
All this makes a lot of sense in a sort of Friedman critique of profit non-maximization way. Let's stipulate that Chicago-style economics does not include dynamic efficiency, institutional factors, fixed costs etc. But that does not show that their policy recommendations do not come out AS IF they had taken all those things into account. Or, between an Austrian and a Chicago Boy who can say the most about the accumulation of CO2 in the atmosphere?
Of course, there were no cost-benefit analyses done BEFORE the restrictions and the recommendations/requirements of non-pharmaceutical interventions (staying home, masks, social distancing).
Me too. But, perfect example, policy makers did NOT try to justify their actions with cost benefit analysis.
That is bullshit, Thomas. They all tried to justify their actions with cost benefit analysis, the only problem is that their analysis was either laughably wrong or they flat out lied about it.
At the beginning of the pandemic, Arnold had a series of posts saying, "In order to make intelligent decisions, we need to know X, Y, Z ... We should be researching them as quickly as possible. BUT WE'RE NOT!"
It was a terrible failure of the medical/public health complex.
I don't remember seeing anything remotely like a cost benefit analysis. The big shortcoming of the Covid escapades was focusing almost exclusively on the Covid deaths (and hospitalizations) and ignoring all the other societal costs.
Two weeks to flatten the curve, masking to slow the spread, social distancing, closing the schools was all sold as a way to prevent overwhelming the healthcare system, Mike- that is explicit cost-benefit analysis.
That's not a cost-benefit analysis. It only looked at one of the costs and ignored the huge economic and educational costs (among others).
I should say, only looked at one of the benefits and ignored the huge costs.
Just because it was all wrong or a pack of lies doesn't mean it wasn't cost-benefit analysis.
Coud you refresh my memory about the cost benefit analysis carried out to suggest closing schools? Eschewing first dose first and fractional dosing? Delaying approval of screening tests? I do not even recall the part showing the benefits, much less consideration of the costs?
See Casey Mulligan's remarkable real-time cost-benefit analysis of school closures:
https://link.springer.com/article/10.1007/s11127-021-00917-7
Prof. Mulligan found that closures were unreasonable. He was countering policy-makers who pushed the idea that the health benefits of school closures outweighed the harms to education.
Too bad Mulligan was not the Chief Economist of the CDC.
You have a point -- up to a point.
I see, Thomas, you are going to play the "No True Scotsman" routine. If you want to claim that a lousy and lying cost/benefit analysis isn't really a cost/benefit analysis, just say so explicitly by writing the following:
"They all got it wrong in early 2020- the shutdowns, the masking, the social distancing, the school closures. All of that was wrong and shouldn't have been done."
It seem to me you are claiming whatever was done was done and justified as cost benefit analysis. So I no longer know what we are disagreeing about.
A more expansive version of my vies about COID policy is at
https://thomaslhutcheson.substack.com/p/covid-policy-errors
I disagreed with this sentence that you wrote and seem to have forgotten that you wrote or are now disavowing:
"But, perfect example, policy makers did NOT try to justify their actions with cost benefit analysis."
The efforts to justify non-pharmaceutical interventions (lockdowns, masks, etc) by cost-benefit analysis gathered steam with Thomas Pueyo's essay, "Coronavirus: The Hammer and the Dance" (19 March 2020):
https://tomaspueyo.medium.com/coronavirus-the-hammer-and-the-dance-be9337092b56
To be clear, some top economists questioned whether the benefits of non-pharmaceutical interventions were greater than the costs. See, for example, Andrew G. Atkeson's real-time analyses of Covid and policies:
https://sites.google.com/site/andyatkeson/home/covid-work
There was certainly some effort to argue the utility of certain NPI, but to my recollection none were quantified and compared to the costs of said NPIs.
Thomas, see, for example, Alex Tabarrok, "Save Grandma, Save the Economy" (7 May 2020):
https://marginalrevolution.com/marginalrevolution/2020/05/save-grandma-save-the-economy.html
Note also Bryan Caplan's refutation (and your comment thereto) (1 June 2020):
https://www.econlib.org/what-im-thinking/
We are talking about whether policy makers use cost-benefit analysis justify decisions reached by other other means. I say, I know of none of it.
If you are referring to my justification of mandatory vaccinations, it's right there in the comment. I assumed there was a positive externality from vaccination. That was wrong.
Cost benefit analysis reaches the wrong conclusions if the data it is based on is wrong. The same is probably true of alternative decision criteria.
Alex Tabarrok was influential on policy. (Separately, he served on the Operation Warp Speed working group for vaccine development.)
Was Prof. Tabarrok "a policy maker"? I dunno. The term is ambiguous. Maybe "influential policy voice" is apter here.
You're correct that lawmakers and governors didn't spell out cost-benefit analysis. I would add: Non-pharmaceutical interventions were driven partly by demand, and also partly by HR (fear of squeeky wheels and litigation). And mainstream media amplfied fear-driven demand. But influential policy voices (e.g., Prof. Tabarrok) did matter, by shaping policy and/or by rationalizing policy after the fact (as Guest User suggests in his comment in this overall thread).
BTW, I wasn't referring to your views about vaccines. I simply meant to note that you, too, were following the 2020 efforts by Profs. Tabarrok and Caplan to do real-time CBA. I agree that it's hard to get the facts straight in the moment in novel situations.
What would such an analysis look like?
For example, what is the cost of "keep 6 feet of distance" -- now even without such a rule people generally keep around that distance from strangers. Or inability to see dying relatives in hospice care (can you even put a price on it)
At the same time can a cost benefit analysis be undertaken for, say, entering WW2? What is the value of defeating axis powers and of preserving a free world?
a) I'd consider the advantages of issuing a 6 ft. recommendation based on modeled effect of virus spread at 6 ft c.f. "normal" distancing, ideally taking account of the fact that firms would buy floor stickers telling people to keep their distance.
b) Same, I'd want to model the benefits of decreased spread of the virus to/from people in hospitals whihc would probably have resulted in very different kind of recommendation based on the screening test status of the person visiting etc.
c) SFAIK, politicians and the public DID weigh the costs and benefits of entering WWII. Can you think of a better way to think about it?
I'm not disputing that some analysis can be done. The numbers that would go it would be so subjective that you can make the result come out the way you want to. Price of a life = value of statistical life year? 10 million dollars?
Price of inconvenience of standing six feet apart = 50c each time you have to do it? $1 each time you have to do it?
More that it shows up limits of what we can measure.