Monthly Archives: December 2009

Peter Boettke On Paul Samuelson

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Peter Boettke writes a sobering obituary for Paul Samuelson:

“John Hicks once wrote that the story of economics in the 1930s was the battle between Hayek and Keynes. I think Hicks is right, and that this battle continues to this day as witnessed in our current policy debates.  But I think there is a deeper debate that goes at the very project of economics as a scientific discipline. And that battle is the one between Samuelson and Mises, and the fateful choice was the late 1940s.  Rather than following Mises’s Human Action, the economics profession went the path of Samuelson’s Foundations.  Formalism was interepreted as synonymous with logical rigor, and in the subsequent decade positivistic testing was interpreting as synonymous with empirical analysis.  By the 1960s, formalism and positivism transformed the science of economics so that the Misesian understanding of “theory” and “history” was actually completely dismissed as a relic of a pre-scientific age.

Since then a large part of the great efforts by economists have been directed at recapturing insights that Mises-Hayek possessed already by mid-century — whether we are talking about cognitive limits of man, the role of property rights (and legal and political institutions in general and behavior related to them), and the microfoundations of all macroeconomic phenomena. New institutional Economics, New Classical Economics, New Economic History, Experimental and Behavioral Economics, etc. all deviate in significant ways from the scientific and policy project that Samuelson initiated in the late 1940s and which dominated economic thinking from that time until the 1980s.  The Samuelsonian project had to be pecked away at for progress in economic understanding to take place. Yet the ‘scientific’ allure of the project still remains — unfortunately even among many of those who pecked away at the Samuelsonian project.  The pretense of knowledge (see Hayek’s Nobel) and the claim to the mantle of science (see Rothbard’s paper of that title) have a much stronger grip on the minds of economists and intellectuals than what might be reasonably expected in the wake of repeated failures.

Samuelson argued that like all great scientists he was only concerned with the applause of his peers. And he received great praise in his lifetime and will be celebrated in the short-run in his death.  But I have stated on more than one occasion that I believe Samuelson will be remembered in the same way as Sir William Petty is remembered, not as Adam Smith is remembered.  His substantive contributions (as oppopsed to the form in which he stated arguments) are not immediately obvious to pinpoint.  We must always remember that Samuelson was the great anti-Misesian of 20th century economics, and in my book that translates into a force for anti-economics despite all the scientific accolades, awards, honorary degrees, and reverence by his peers he was granted in his lifetime.”

Speculation Tax and In-House Informants In The Works

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“We can also be a bit clever about cracking down on evaders. Suppose that we gave a reward of 10 percent of the tax collected to workers who turn in their bosses. There are few Wall Street billionaires that physically do the trading themselves. They have assistants for this task. And many of these assistants would be happy to make themselves rich by turning in their bosses.

In reality, the idea that a tax on speculation is unenforceable is laughable on its face. Compare the difficulties of enforcing a speculation tax with enforcing copyrights. In the case of a speculation tax, the issue is a relatively small number of very large transactions. No one cares if trades involving a few thousand dollars go untaxed. The real issue is a relatively small number of trades involving millions, or even billions, of dollars.

By contrast, copyright enforcement is all about billions of small transactions involving movies with a copyright-protected price of $15 or $20 or songs with a copyright-protected price of less than a dollar. The problem of enforcing copyrights is several orders of magnitudes greater than the problem of enforcing a financial transaction tax. Yet, none of those insisting on the impossibility of enforcing financial transactions taxes have said that copyrights are unenforceable. The issue is clearly what they want to enforce, not a question of what is enforceable.

The country does need to let itself be ripped off by the Wall Street crew indefinitely. We can make them pay a price for the damage they have caused. We just have to stop listening to the Wall Street apologists and get serious.”

My Comment

Two questions and a wince:

Question: Are we to assume from this that after the taxes you already pay on capital gains from trading, you are going to be further taxed, because, thanks to inventors and businessmen, costs in trading have come down?

Question: And are we to believe that this will affect only million dollar trades, but not the few thousands that many more investors are concerned with?

Wince: Did I hear that people are going to be given incentives to report their bosses?

Whoa!

We already have the SEC and FBI bribing people to inform on other people. Personally, I think an informant who receives money for his information should be disregarded.

What happened to doing your civic duty as a virtue?

Do citizens have to be bribed to perform duties (assuming you think, which I don´t, that turning in tax evaders is part of your moral duty)?

(Of course, we already bribe them to fight, bribe them to make babies, bribe them to vote, bribe them to run businesses…socialism being the society built on bribery rather than on demand).

And that´s only one part of the problem with this….

SEC To Look At High-Frequency Trading and Naked Access

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From Reuters, a report shows sharp rise in “naked access” to markets after 2005:

“NEW YORK (Reuters) – A report says that 38 percent of all U.S. stock trading is now done by firms that have “naked sponsored access” to markets, the controversial trading practice said to imperil the marketplace, and which faces a regulatory crackdown.

Naked access gives trading firms, using brokers’ licenses, unfetted access to stock markets. The firms, usually high-frequency traders, are then able to shave microseconds from the time it takes to trade.

Aite Group, a Boston consultancy, found that naked access accounted for just 9 percent in 2005.

The U.S. Securities and Exchange Commission is set to make changes to naked access and less risky forms of so-called sponsored access, when it releases a document expected next month.

The document is also expected to look more generally at high-frequency trading — where proprietary trading firms, brokers, and others use algorithms to make markets and profit from narrow market inefficiency.”

Are We All Keynesians Now?

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Peter Robinson in Forbes, writing about Professor Samuelson´s death, on why we aren´t all Keynesians now:

“Question: “Everyone,” you claim, “understands … that there can be no solution without government.” Are you aware that Harvard economist Robert Barro called the Obama stimulus package “garbage?” “This is probably the worst bill,” Barro insisted, “since the 1930s.”

Had you noticed that Stanford economist John Taylor has warned against responding to the crisis with a government intervention? “[P]olicy makers,” Taylor wrote recently, “should rethink the idea that frequent and large government actions and interventions are the only answer to our current economic problems.”

Are you aware that nearly 300 economists signed a petition opposing a federal stimulus? “Notwithstanding reports that all economists are now Keynesians,” the petition declares, “we do not believe that more government spending is a way to improve economic performance.”

And have you happened to glance at any recent polls? According to the Rasmussen organization, more than half of Americans believe the Obama stimulus bill will either hurt the economy or have no impact.

If dozens of economists and more than half the American people are against you, then who is this “everyone” of whom you spoke?”

Why Am I Not Surprised?

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Ritholtz:

(Sept 26, 2009)

(strong critic of the Fed, on speaking to Congress about reform and about oversight by Congress of the Fed)

“I was invited to testify this week to the House Financial Services Committee about reform and regulation.

I politely demurred.

Quite bluntly, I didn’t see how speaking to Congress would matter one tiny bit. Its not like they seem to be paying much attention to witnesses, or have very much interest in figuring out what was the cause of the crisis. Besides, they seem to be beholden to those whose interests are to not fix the problems at hand.

While I have been critical of the Federal Reserve (especially the Greenspan years), my beef with them has been their judgment and decision-making process. Congress, on the other hand, is a whole different matter. Its not their judgment, but rather, the fact they are owned not by the American people, but by lobbyists, and corporate interests. They have become structurally deformed.

(Lila: So who owns the bankers and the Fed? The American people?)

How weird is it for me, who spent so many pages blaming the Fed for much of the recent crisis, to find myself in a position of defending them from outside political pressure?”

My Comment

Oh, not weird at all. Perfectly transparent.

Here´s why.

It´s OK for establishment critics to criticize Obama. It´s OK to criticize Congress, and the Regulatory Agencies. And to call them all bought and paid for by corporate interests. It´s OK to criticize the oil industry, and the defense industry, and fundamentalist Christians, Bush, Cheney, Phil Gramm, and abstractions like “the power structure”. It´s OK to criticize speculators (in the abstract) and the Fed (in theory). It´s OK to lecture African leaders. Or the Indian caste system. Or socialism or capitalism..or greed…or the Catholic church.

But it´s never OK to actually do anything that really limits the power of the bankers and financiers at the heart of the problem.

No audit of the fed.

No investigation of the actual, provable corruption of the financial media, the academic peer review process, prize committees,  etc. etc.

No lawsuits against bankers, without retaliation from the SEC.

The Creation Of Professional Consensus

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An article that illustrates how professional consensus is created in the sciences today:

“To experts such as McIntyre and Pielke, perhaps the most baffling thing has been the near-unanimity over global warming in the world’s mainstream media – a unanimity much greater than that found among scientists.

“For example, last year the BBC environment reporter Roger Harrabin made substantial changes to an article on the corporation website that asked why global warming seemed to have stalled since 1998 – caving in to direct pressure from a climate change activist, Jo Abbess.

“‘Personally, I think it is highly irresponsible to play into the hands of the sceptics who continually promote the idea that “global warming finished in 1998” when that is so patently not true,’ she told him in an email.

“After a brief exchange, he complied and sent a final note: ‘Have a look in ten minutes and tell me you are happier. We have changed headline and more.’

“Afterwards, Abbess boasted on her website: ‘Climate Changers, Remember to challenge any piece of media that seems like it’s been subject to spin or scepticism. Here’s my go for today. The BBC actually changed an article I requested a correction for.’

“Last week, Michael Schlesinger, Professor of Atmospheric Studies at the University of Illinois, sent a still cruder threat to Andrew Revkin of the New York Times, accusing him of ‘gutter reportage’, and warning: ‘The vibe that I am getting from here, there and everywhere is that your reportage is very worrisome to most climate scientists … I sense that you are about to experience the “Big Cutoff” from those of us who believe we can no longer trust you, me included.’

“But in the wake of Warmergate, such threats – and the readiness to bow to them – may become rarer.

“A year ago, if a reporter called me, all I got was questions about why I’m trying to deny climate change and am threatening the future of the planet,’ said Professor Ross McKitrick of Guelph University near Toronto, a long-time collaborator with McIntyre.

“‘Now, I’m getting questions about how they did the hockey stick and the problems with the data.

‘Maybe the emails have started to open people’s eyes.’

What´s especially interesting in this report is that the Russian government has confirmed that the emails were uploaded from a Siberian server, but has “strenuously denied” that they were generated by the Russians.
That possibility was one of the reasons why I didn´t initially rush to defend the hackers, as many skeptics did.
But since then, several sources have claimed that the information was illegitimately denied to the public and was probably released by a whistleblower or someone  acting on behalf of the public interest in the matter.

Bush Redux: The Obama Doctrine

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Glenn Greenwald on the Obama Doctrine:

“Indeed, Obama insisted upon what he called the “right” to wage wars “unilaterally”; articulated a wide array of circumstances in which war is supposedly “just” far beyond being attacked or facing imminent attack by another country; explicitly rejected the non-violence espoused by King and Gandhi as too narrow and insufficiently pragmatic for a Commander-in-Chief like Obama to embrace; endowed us with the mission to use war as a means of combating “evil”; and hailed the U.S. for underwriting global security for the last six decades (without mentioning how our heroic efforts affected, say, the people of Vietnam, or Iraq, or Central America, or Gaza, and so many other places where “security” is not exactly what our wars “underwrote”).  So it’s not difficult to see why Rovian conservatives are embracing his speech; so much of it was devoted to an affirmation of their core beliefs.

The more difficult question to answer is why – given what Drum described – so many liberals found the speech so inspiring and agreeable?  Is that what liberals were hoping for when they elected Obama:  someone who would march right into Oslo and proudly announce to the world that we have a unilateral right to wage war when we want and to sing the virtues of war as a key instrument for peace?  As Tom Friedman put it on CNN yesterday: “He got into their faces . . . I’m for getting into the Europeans’ face.”  Is that what we needed more of?”

From Anti-War to Anti-Warm

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An insightful blog post by Richard Cummings on Lew Rockwell, on where the antiwar movement went:

“Your piece on global warming and the left is spot on. As they used to say in the Soviet Union (if you will forgive my invocation of them), it is “no accident” that Gore has diverted the left  from its anti-war position. This has been the tactic of Establishment liberalism for ages.   Earth Day itself was an attempt to divert the anti-war movement away from the Vietnam War.  As a person, Gore is dishonest.  I know this from personal experience.

Naive liberals have never understood the insidious nature of the liberal Establishment, which shares none of their goals.  It is totally cynical. The inner circle is hugely rich and lives incredibly well.  They buy stocks in defense companies and look down on blacks. They fear the downtrodden will rise up and take away their wealth and privilege, so they toss them crumbs from the state to keep them docile and pretend to identify with them.  The epicenter of these phonies is Goldman Sachs, a parasitic firm that got  bailed out by the government.  It plays both major parties for its own ends.”

Facebook´s Misleading Privacy Tools

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Update: I deactivated my facebook account, following the fracas over the facebook friends page.  I´m still on Twitter. I will also – probably in a few months – change the format of this blog to make some part of it private,  partly to avoid plagiarism and partly for security.

According to this report, privacy advocates are outraged by Facebook´s new settings (that went into effect on Wednesday):

“The Facebook privacy transition tool is clearly designed to push users to share much more of their Facebook info with everyone, a worrisome development that will likely cause a major shift in privacy level for most of Facebook’s users, whether intentionally or inadvertently.”

Prior to the change, Facebook users could keep everything but their names and networks private.

Maybe that throws light on this.

On inquiring, Deep Capture says the inclusion of some of the names initially was an accident and has removed them. It also point out here that the characterization of the list as hacked is libelous…

Other users might want to double-check their settings.