Tuesday, February 21, 2012

From Perry Mason to Light in August


I too loved fiction as a child, and still love it to this day. My tastes in my younger years ran to Erle Stanley Gardner, Agatha Christie and John Jakes, while now they run to John le Carre and William Faulkner. I never considered a Humanities major since studying something I loved as recreation would have ruined the experience. Plus, I'm a literary idiot. Metaphor, analogy, symbolism is completely lost on me. I just like the stories. Currently i'm reading Light in August by Faulkner. I love Faulkner, and only discovered him in the past 5 years. I was so taken by The Sound and the Fury I immediately began reading it again after finishing it the first time. The seond time around was proably even more enjoyable. As I Lay Dying was fantastic and morbid. But it's a great story, told with passion.

I love stuff like this in Light in August, "Byron listened quietly, thinking to himself how people everywhere are about the same, but that it did seem that in a small town, where evil is harder to accomplish, where opportunities for privacy are scarcer, that people can invent more of it in other people's names. Because that was all it required: that idea, that single idle word blown from mind to mind. " and this "when anything gets to be a habit, it also manages to get a right good distance away from truth and fact " and this "a fellow is more afraid of the trouble he might have than he ever is of the trouble he's already got. He'll cling to trouble he's use to before he'll risk a change."

So how did I get to Economics? I loved the iconoclasm of it. I loved how it was a completely different filter on how to view the world. I loved how it often-times combined with politicial philosophy and history. It provided a framework to challenging conventional wisdom. And boy do I like challenging conventional wisdom. You tell me medicine is different than other consumer purchases, my natural reaction is to ask why? You say the FDA is a necessity my natural inclination is to say, "show me." I find a value in questioning our assumptions that something has to be a certain way.

No doubt, my starting point in a resource allocation problem, which is what medicine, education and drugs are, is to solve it with a market solution because the market works, a lot, even in cases where you might not think it works. It doesn't work always, it doesn't work everywhere, but it works more than we let it.

Where my philosophy, if we call it that, fails is it is totally impractical. It is easy to propose, what I'm sure would be labeled "extreme" positions, since they are in fact extreme. But I know they have little chance of ever being implemented and I know that if ever a consensus were to be reached that I was right, the transition to my nirvana would be messy and painful. So I can brush aside comments that my ideas are impractical, as I did to mtmtmd regarding the provision of school. I think you get frustrated with my apparent certainty (am I the "truly dangerous man... without doubt"?) also. I also think you sometimes read more into my questioning than is there.

So why do it? Well it's fun. I was at a cocktail party and said I wished we didn't have public education. My wife received updates during the evening, "Did you know your husband wants to get rid of public education?" "Did you know your husband things solar subsidies are a waste of money?" I'm not sure what they expected her to say. I also do it because even though it may be impractical as a goal, it might be useful to point ourselves in that direction.

Your criticism of economics is well taken and also somewhat silly. It would be simliar to me criticizing medicine as a profession because there are some bad doctors out there. Or as Michael Jackson said, "One bad apple don't spoil the whole bunch girl." But yes, a lot of it is claptrap and ideology driven. Krugman is not the worst, that distinction belongs to Robert Reich, then Brad DeLong, then Krugman. The Chicago economists can also get stuck in their ways and ideology driven as well. All of us can.

But at least the way I see it, this more often happens in macro economics, the study of the sytem, and less so in micro economics, the study of an individual's resource allocation decision. Macro is where the big fights of Keynes v Classical and Friedman takes place. I'm much more drawn to micro. My brain isn't expansive enough to handle macro.

I'm guessing if you look at most of the amateur opinions on economics the right disagrees with Keynes because they dislike government spending and the left likes Keynes becasue they like government spending. I doubt they have even the remotest idea what the theories are all about. Most politicians are Keynesians because it gives them the intellectual cover to spend our money. Most Wall Street and business economists are Keynesians because it gives private enterprise an opportunity to receive government largesse.

Some things I do firmly believe about macro. There are time lags between policy and result, and the time lags vary with circumstances. It is also very difficult to forecast what will be a catalyst to significant change. For instance, the idea of a housing bubble was very prevalent in the 2005/06 time frame. But there was very little thought it could be a catalyst to Bear Stearns and Lehman collapsing, leading to two different policy responses and a run on the banking system. There are way too many moving pieces to have that level of predictive accuracy. I suspect it's the same in medicine (and climate). If you try to argue medicine is much better you'll have to explain why we have as much death and disease as we do.

Which means what? That policy responses may work, or may hurt. They may have no impact, but a turn in the economy could be attributed to that policy response, simply because it happens around the same time. For instance, many fiscal policy responses take place right around the time the economy is bottoming, like our most recent example. But as you point out, correlation does not prove causation. So it means it is entirely possible our policy response makes things worse, or does nothing at all, in which case it was a waste.



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