Category Archives: Articles

Articles, Op-eds, letters. Generally not made by us or for us but found on the web or something.

History

The Weakonomics blog talks about how history is taught in school.

In the grade school level, the content was always about events. It was “this thing happened on this date”. We never had to explain why it was important or even where that event fits in with its past and future. High schoolers can do that, but it was never presented that way.

And shares a video he finds entertaining. We agree, although a video of course does not allow for the conversation that he seems to imply would benefit education (here, too: we agree).  In any case, a subject we enjoy as we, too, believe in the importance of delving deeper in to historical knowledge.

Trickle Down

Theodore Dalrymple explains it, at Library of Law and Liberty:

 The trickle-down theory of wealth may or may not be correct, but those who hold it do not express, and never have expressed, ‘a crude and naïve trust in the goodness of those wielding economic power…’ On the contrary, according to the theory it is not the rich whose goodness benefits the poor, but the system that allowed them to become rich, even if the rich should turn out to be hard-hearted skinflints. A system of redistribution, by contrast, really does require the goodness of at least the superior echelons of the system, faith in which is genuinely rather crude and naïve.

Deirdre McCloskey: market-tested innovation

I cite a citation:

Think of the Bill Gates and Steve Jobs, big wealth accumulators in recent times. It wasn’t the magic of compound interest on capital that made them rich; it was intellectual property. They created billions of dollars of business from virtually nothing at all. If you measure the profits as a return on the small amount of initial capital invested, then it looks huge; but capital was no more important an ingredient of the original Apple or Microsoft than cookies or cucumbers.

Also:

Capitalism’s nature is not, contrary to Piketty’s claim, to forever protect and augment existing capital.  Central to capitalism’s nature is what McCloskey calls “market-tested innovation.”  And this innovation inevitably destroys the value of older, less-productive capital that is in competition with with it – in competition with the new capital, the new goods, the new production and consumption processes, and the new knowledge that innovative entrepreneurs create.

All at Cafe Hayek.

I’ll have a large slice of employment, please

Thomas Dalrymple responds to Paul Krugman Slice of Labour.

He concludes:

Mr Krugman’s argument is not the argument in favor of labor market rigidity as above, however. He is what one might call a slice-of-cake man, where an economy is a cake to be sliced rather than a dynamic organism to be nurtured, and where supply and demand can be managed without reference to price. There may be cruder economic ideas, but I don’t know what they are. He is also, of course, a proponent of ever-greater government stimuli to the economy. In this article, he quotes John Maynard Keynes on the dangerous influence of ideas. I wish he had quoted Keynes’ eloquent words on the effects, social, psychological and economic, on the debauchment of the currency.

Machines vs People

When I was little, and I would hear people bemoan the loss of human jobs to automation, my immediate question was always: but don’t we need people to make the machines?

I have had time to think it over, and my opinion has developed from there, but not, fundamentally, changed.

The point is: machines do things. People decide what gets done. If a machine can cannibalise your job then trust me: it will. So find what makes you more than a machine. (I’ll give you a hint: t’s your brain). Machines, technology, these are tools we employ to make better products, improve our services, etc. But a person – a human – has to decide how to use it, how to improve it, and how to develop its use over time.

And the Weakonomics blog now also raises this point:

Toyota is learning that when you automate too much you lose a couple of things.  First, you lose the people that know how to make the item.  You’ve replaced masters of their craft with people that push a button on a machine.  Second, machines don’t really have the ability to make an item better.  So if no human is making your item, no one is figuring out how to make it better.  By bringing workers back to replace robots, Toyota is finding their human workers are making certain materials for their vehicles more efficiently than the robot ever could. Sometimes this is a limitation of the robot.  Other times it’s simply the fact that a robot doesn’t know how to make something better until someone tells it what to do.

Yes, he concludes, “machines do take our jobs. However we can always be one step ahead of them”.

Pride in the dismal science

Tim Harford responds to question as to whether the study of economics attracts, or creates, sociopaths. Because apparently it is one or the other.

I would also posit that students’ responses to hypothetical situations while in an academic environment are not necessarily an accurate reflection of real world behaviour, but in any case Harford is a few steps ahead of me:

“If there is a single foundational principle in economics it is that when you give people the chance to trade with each other, both of them tend to become better off. Maybe that’s naive but it’s all about “abundance” and is the precise opposite of a zero-sum mentality.

. . .

Economists may appear ethically impoverished on the question of co-operating in the prisoner’s dilemma but they seem to have a far more favourable attitude to immigration from poorer countries. To an economist, foreigners are people too.”

And don’t miss the last paragraph, in which he explains the “dismal” epithet.

 

Big Macs vs. Salads

Interesting piece of governmental schizophrenia from the Physicians Committee for Responsible Medicine.

You may comment that their image shows the much outdated food pyramid, so here below we show you the much improved MyPlate. As you can see, the subsidies still don’t measure up:

Ok, so maybe you think all this ‘Free Market’ talk is bunk and that the government should be allowed to impose quotas, taxes, tariffs and subsidies because it knows what’s best for us, like our mothers. This mother, however, is telling us to eat our veggies while placing a Big Mac in front of us.

* You may also comment that the graphic shows Federal subsidies from 1995-2005 but, while the newest form of the Farm Bill is the Food, Conservation, and Energy Act of 2008, the amount of subsidies for these categories has not changed. Only subsidies for biofuels has increased.

How to Find a Job

We recently came across an article in Wired Magazine by Peter Thiel (of Paypal fame and early investor in Facebook) with some very interesting conclusions.

Briefly, he mentions how the best and brightest of our society tend to shoot for elite universities like Harvard, where they then proceed to interact with people more or less just like them and, as the years go by, they tend to reinforce their own principles and become more and more similar. This may seem both obvious and good. We agree that it is obvious. Most of us associate with people similar to ourselves, and studies have been performed to show that most people do the same around the world.

The second point, that it is good for the best and brightest to keep hanging out with the best and brightest, however, might not be so good. Thiel points to a study of entrepreneurs, which showed that those who associated with the most varied groups of people (in different clubs, associations and different activities) tended to be the most innovative. He then ties this back into Harvard, where he says the lack of interaction with diverse people (not necessarily diversity of race or gender, but of interests, goals, etc.) will limit the potential of these best and brightest. He ends with: “Perhaps Bill Gates knew what he was doing when he dropped out of Harvard.”
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The Best Example of Bad Graphs

Those of you in the UK (or elsewhere) who read the Telegraph may have noticed an article recently called “How the Fed triggered the Arab Spring uprisings in two easy graphs”. If you want the gist of it, here is the first graph:

Now, as most economists learn, correlation does not equal causation. But let’s assume for the author’s sake that he has a point. What should we think when we see commodity prices rising (starting June 2010) and the Fed’s Treasury purchases rising after the fact (around Aug-Sept 2010)? Yes, if we want to read causation, then we’d say that the rise in food prices caused the Fed Treasury purchases, and not vice versa (as the article claims).

The second graph, which we show below, displays the correlation between, well, we’re not sure. Continue reading