Your article on macroeconomic models was excellent. Thanks for the link.
As a hard nosed STEM person with some interest in complex feedback control system ( like supply demand systems where changes in demand drive the supply system response ), I wondered how economist handle the time delay functions relating to the response time. It sounds like they aren't handling them well. In dynamic system, these response times can create real instabilities and oscillations.
Perhaps we just know more in STEM about how the components interact dynamically in real time and have the ability to model these interaction based upon a theory and then demonstrate the predictions by observation and thus validate the theory (the super gold of science - accurate prediction everywhere in the known universe over all time). For example, demonstrating general relativity by the orbits of planet mercury or the gravity waves or the fact the i-phones work.
I think of how some rockets blew up in the '50s at the start of the space race by growing oscillations. In a control theory class, it was time delays in the transfer functions that causes the instability. California had stable real estate prices until the '70 when we pass regulations that created 7-10 year delays in real-estate projects for EIRs and legal nonsense and then the unstable oscillations began (existence of the delays not the cause is what is relevant). The same mathematical dynamics explain both the real estate oscillation and the rocket oscillations.
Perhaps economics needs to look at how engineers and a few ecologist handle complex dynamic problems. Control system engineers handle some very complex dynamic system ( think of a refinery where changing one valve can change almost everything else in a very dynamic fashion ).
"California had stable real estate prices until the '70s."
If only there had been good jobs or commercial opportunities to boost residential property rates. Instead of money-pits like Desulu Studios, the Jet Propulsion laboratory, and pornography.
From 1940 to 1970 the population of LA increased at record rates. I was young then and watch the changes. With aerospace and Hollywood we had lot of jobs. The development of new housing was simple. Just buy up a big hunk of land and build a new city like Lakewood in just a couple of years. Every-time the housing market ticked up just a % or so, the developers were building very rapidly and expanding the supply.
The city I live in now was "tin can beach" where some developer created a lot of housing for the growing population, which became Huntington Beach, Ca. Yes, we didn't have all the controls that causes delays and building inspectors took bribes to look the other way, but all that competition resulted in housing over-supplies at times like when I went to UCLA and they had overbuilt the area just over the hill from UCLA and you could get 2 months free rent just to move in.
Great historical essay. As Yancey notes, the Big Gov't statists won by funding academia, and following the real golden rule. The one with the gold makes the rules.
Markets are based on entrepreneurs trying new things, offering new products or services, to customers. Most of these offers turn out to cost more than they're worth to most customers. This is called a "failure", and our rich societies are becoming adverse against any "failure". That's bad, and sad.
(Maybe if it was renamed "low value trial", it would be more acceptable...]
Won't change until some years after academia has far more market-friendly professors.
Government supporters, statists, Socialists and Marxists, won by funding the academic pursuit itself. People like Kling are dying off one by one, and not being replaced, at least not within the profession.
Re: "economists no longer are actively debating market vs. government. The giants no longer roam the earth."
The debate remains active, but tends to focus on (a) the nature and scope of the regulatory state and (b) "inequality". For example, Edward Glaeser's and Casey Mulligan's critiques of regulation aren't merely technocratic. See also macro by Alberto Alesina (RIP).
A distinct issue is whether "giants" -- i.e., economists who are at once academic stars and major public intellectuals -- still exist. Liberals might point to Paul Krugman. Classical liberals used to point to Milton Friedman and then Gary Becker and Thomas Sowell; but have they any giants now?
I would venture a partial answer by pointing to a new dimension that has emerged in the past forty years in debates among economists about markets vs government: "behavioral economics." The thought is that special regulations might be necessary and justified in order to protect individuals from their own micro irrationalities.
Experimental cognitive psychologists Amos Twersky, Daniel Kahneman, and Paul Slovic inspired Richard Thaler/Cass Sunstein and a generation of behavioral economists/legal scholars, who came to shape policy with a new paternalism of regulations as "nudges."
Robert Sugden, a student of James Buchanan, and a pioneer in experimental economics, has offered a classical liberal rejoinder to the new paternalism at every step. See his book (a summation of his work), "The Community of Advantage: A Behavioural Economist's Defence of the Market" (Oxford U. Press, 2018):
In my judgment -- but I'm neither a psychologist, nor an economist! -- Kahneman and Sugden are giants walking the earth in the enduring debate about markets vs government.
Also must recommend Sugden's book "The Economics of Rights, Cooperation, and Welfare." IMO one of the underrated economists around.
It really troubles me how few classical liberal 'giants' among economists are around, after losing ones like Alesina and Lazear so recently. I think people on the right (including libertarians here) underestimate the importance of maintaining a foothold in academia. For better or worse, academia really does select for, aggregate, and ultimately shape disproportionately naturally intelligent people. Conservative dreams of academia becoming irrelevant in the near future are fantasies. And while smart conservative economists may find good work in business, Chase or Goldman Sachs aren't going to pay them to do what Friedman and Hayek did. One can't just expect 'truth to win' regardless of whether it comes from academia or substack. In a world where everyone with an IQ over 120 is trained and educated to be a creationist, I'm not sure the Darwinists still end up winning the public debate. I think we may be headed to a world a bit like that with respect to the question of the market economy.
Very nice, but one is presently left in the dark ages as to what the cost/benefit analysis of government intervention is. No calculations are ever made on subjects like the value of adding 87000 IRS agents to the Federal workforce.
With the system we have one shall never know the answers to such questions. Perhaps one should concentrate upon implementing a system that does such calculations, that forces government to estimate the costs and benefits of public expenditures.
And it is not so much a cost undertaking that is needed, but an estimation of benefits. We know there is an immense cost to the varied welfare programs offered at all levels of government, but what is the benefit to the recipients and to those compelled to pay for it?
The 'Giants' have no answers, nor do you! I have given one, but you and your kind have closed their minds to it because its doesn't accord with certain of your cherished and erroneous beliefs.
The cost/benefit analysis of government intervention or use of scarce resources is best made by those closest to the action, that is by the local residents, not by distant public managers devoid of local knowledge. Under a system of Taxation, that shall never be the case.
Hi Arnold - if you're still open to Boston meet-ups, I'd love to meet with you! Maybe I could give you the lowdown on commodities if you're interested. I am at alexfak at gmail dot com.
Glad to see you acknowledge the Austrian direction of your thought.
The real world is dynamic. Academic economics is not. Meanwhile, the internet is full of dynamic thinkers who are analyzing the rapidly changing trends out there. I see academic economics, insofar as it remains technocratic, as becoming increasingly irrelevant to the big changes in society.
I'm more interested in what Saifedean Ammous and Balaji Srnivasan (along with Arnold Kling) are saying about economic change in the next decade or two than I am in the writings of any mainstream academic economist. The combination of fiscal crises, crypto, startup cities and other new jurisdictions, the collapse of government managed education and the rise of innovative private alternatives, all make technocratic economics appear as a profession that is fiddling while Rome burns.
Your article on macroeconomic models was excellent. Thanks for the link.
As a hard nosed STEM person with some interest in complex feedback control system ( like supply demand systems where changes in demand drive the supply system response ), I wondered how economist handle the time delay functions relating to the response time. It sounds like they aren't handling them well. In dynamic system, these response times can create real instabilities and oscillations.
Perhaps we just know more in STEM about how the components interact dynamically in real time and have the ability to model these interaction based upon a theory and then demonstrate the predictions by observation and thus validate the theory (the super gold of science - accurate prediction everywhere in the known universe over all time). For example, demonstrating general relativity by the orbits of planet mercury or the gravity waves or the fact the i-phones work.
When I see a new economic observation like real estate price oscillations in California https://www.dropbox.com/s/7go8mum7wmgljsg/Realestate%20oscillation%20Ca.pdf?dl=0
I think of how some rockets blew up in the '50s at the start of the space race by growing oscillations. In a control theory class, it was time delays in the transfer functions that causes the instability. California had stable real estate prices until the '70 when we pass regulations that created 7-10 year delays in real-estate projects for EIRs and legal nonsense and then the unstable oscillations began (existence of the delays not the cause is what is relevant). The same mathematical dynamics explain both the real estate oscillation and the rocket oscillations.
Perhaps economics needs to look at how engineers and a few ecologist handle complex dynamic problems. Control system engineers handle some very complex dynamic system ( think of a refinery where changing one valve can change almost everything else in a very dynamic fashion ).
"California had stable real estate prices until the '70s."
If only there had been good jobs or commercial opportunities to boost residential property rates. Instead of money-pits like Desulu Studios, the Jet Propulsion laboratory, and pornography.
From 1940 to 1970 the population of LA increased at record rates. I was young then and watch the changes. With aerospace and Hollywood we had lot of jobs. The development of new housing was simple. Just buy up a big hunk of land and build a new city like Lakewood in just a couple of years. Every-time the housing market ticked up just a % or so, the developers were building very rapidly and expanding the supply.
The city I live in now was "tin can beach" where some developer created a lot of housing for the growing population, which became Huntington Beach, Ca. Yes, we didn't have all the controls that causes delays and building inspectors took bribes to look the other way, but all that competition resulted in housing over-supplies at times like when I went to UCLA and they had overbuilt the area just over the hill from UCLA and you could get 2 months free rent just to move in.
Great historical essay. As Yancey notes, the Big Gov't statists won by funding academia, and following the real golden rule. The one with the gold makes the rules.
Markets are based on entrepreneurs trying new things, offering new products or services, to customers. Most of these offers turn out to cost more than they're worth to most customers. This is called a "failure", and our rich societies are becoming adverse against any "failure". That's bad, and sad.
(Maybe if it was renamed "low value trial", it would be more acceptable...]
Won't change until some years after academia has far more market-friendly professors.
Government supporters, statists, Socialists and Marxists, won by funding the academic pursuit itself. People like Kling are dying off one by one, and not being replaced, at least not within the profession.
Re: "economists no longer are actively debating market vs. government. The giants no longer roam the earth."
The debate remains active, but tends to focus on (a) the nature and scope of the regulatory state and (b) "inequality". For example, Edward Glaeser's and Casey Mulligan's critiques of regulation aren't merely technocratic. See also macro by Alberto Alesina (RIP).
A distinct issue is whether "giants" -- i.e., economists who are at once academic stars and major public intellectuals -- still exist. Liberals might point to Paul Krugman. Classical liberals used to point to Milton Friedman and then Gary Becker and Thomas Sowell; but have they any giants now?
I would venture a partial answer by pointing to a new dimension that has emerged in the past forty years in debates among economists about markets vs government: "behavioral economics." The thought is that special regulations might be necessary and justified in order to protect individuals from their own micro irrationalities.
Experimental cognitive psychologists Amos Twersky, Daniel Kahneman, and Paul Slovic inspired Richard Thaler/Cass Sunstein and a generation of behavioral economists/legal scholars, who came to shape policy with a new paternalism of regulations as "nudges."
Robert Sugden, a student of James Buchanan, and a pioneer in experimental economics, has offered a classical liberal rejoinder to the new paternalism at every step. See his book (a summation of his work), "The Community of Advantage: A Behavioural Economist's Defence of the Market" (Oxford U. Press, 2018):
https://www.amazon.com/Community-Advantage-Behavioural-Economists-Defence/dp/0198825145
And see the (open access) review of Sugden's book in JEL:
https://www.aeaweb.org/articles?id=10.1257/jel.20201621
In my judgment -- but I'm neither a psychologist, nor an economist! -- Kahneman and Sugden are giants walking the earth in the enduring debate about markets vs government.
Also must recommend Sugden's book "The Economics of Rights, Cooperation, and Welfare." IMO one of the underrated economists around.
It really troubles me how few classical liberal 'giants' among economists are around, after losing ones like Alesina and Lazear so recently. I think people on the right (including libertarians here) underestimate the importance of maintaining a foothold in academia. For better or worse, academia really does select for, aggregate, and ultimately shape disproportionately naturally intelligent people. Conservative dreams of academia becoming irrelevant in the near future are fantasies. And while smart conservative economists may find good work in business, Chase or Goldman Sachs aren't going to pay them to do what Friedman and Hayek did. One can't just expect 'truth to win' regardless of whether it comes from academia or substack. In a world where everyone with an IQ over 120 is trained and educated to be a creationist, I'm not sure the Darwinists still end up winning the public debate. I think we may be headed to a world a bit like that with respect to the question of the market economy.
Very nice, but one is presently left in the dark ages as to what the cost/benefit analysis of government intervention is. No calculations are ever made on subjects like the value of adding 87000 IRS agents to the Federal workforce.
With the system we have one shall never know the answers to such questions. Perhaps one should concentrate upon implementing a system that does such calculations, that forces government to estimate the costs and benefits of public expenditures.
And it is not so much a cost undertaking that is needed, but an estimation of benefits. We know there is an immense cost to the varied welfare programs offered at all levels of government, but what is the benefit to the recipients and to those compelled to pay for it?
The 'Giants' have no answers, nor do you! I have given one, but you and your kind have closed their minds to it because its doesn't accord with certain of your cherished and erroneous beliefs.
Here it is again:
https://www.zerohedge.com/markets/case-government-borrower-limit-tyranny
The cost/benefit analysis of government intervention or use of scarce resources is best made by those closest to the action, that is by the local residents, not by distant public managers devoid of local knowledge. Under a system of Taxation, that shall never be the case.
Hi Arnold - if you're still open to Boston meet-ups, I'd love to meet with you! Maybe I could give you the lowdown on commodities if you're interested. I am at alexfak at gmail dot com.
Thanks!
Glad to see you acknowledge the Austrian direction of your thought.
The real world is dynamic. Academic economics is not. Meanwhile, the internet is full of dynamic thinkers who are analyzing the rapidly changing trends out there. I see academic economics, insofar as it remains technocratic, as becoming increasingly irrelevant to the big changes in society.
I'm more interested in what Saifedean Ammous and Balaji Srnivasan (along with Arnold Kling) are saying about economic change in the next decade or two than I am in the writings of any mainstream academic economist. The combination of fiscal crises, crypto, startup cities and other new jurisdictions, the collapse of government managed education and the rise of innovative private alternatives, all make technocratic economics appear as a profession that is fiddling while Rome burns.
I predict that 30 years from now, no one will remember Buchanan or Arrow, or their critiques.
Leveveller Movement. Misleading name indeed.