Stigler on what economics isn’t

George Stigler in the lecture “Economics or Ethics?” (1980):

The proposition that economists are not addicted to taking frequent and disputatious policy positions will appear incredible to most non-economists, and implausible to many economists. The reason, I believe, for this opinion is that in talking to a non-economist, there is hardly anything in economics except policy for the economist to talk about. The layman is unequipped to discuss with an economist the problems that concern professional economics at any time: he would find that in their professional writing the well-known columnists of Newsweek are quite incomprehensible. The typical article in a professional journal is unrelated to public policy—and often apparently unrelated to this world. Whether the amount of policy-advising activity of economists is rising or falling I do not know, but it is not what professional economics is about.

The great economists, then, have not been preoccupied with preaching. Indeed, none has become great because of his preaching—but perhaps I should make an exception for Marx, whom some people rank as a great economist and I rank as an immensely influential one. The fact that the world at large thinks of us as ardent enthusiasts for a hundred policies is not pure error, but it tells more about what the world likes to talk about than what economics is about. The main task of economics has always been to explain real economic phenomena in general terms, and throughout the last two centuries we have adhered to this task with considerable faithfulness, if not always with considerable success.


Economics and the Shiny Hood Ornament Man Law

Cold Hard Football Facts is a great (American) football analysis website. I like their numbers-based approach, and they invariably have a no-nonsense take on whatever they write about. But I think they might have missed something lately. They tweeted:

“Stupid” isn’t really part of the economics vocabulary; we usually say “irrational” instead. But is it really? The fact that it’s a common practice throughout the league for so long doesn’t necessarily rule out irrationality, but it should make us stop and think first.

What is the goal of a team? As a collection of players, the goal is to win games. As a business entity including owners, managers, staff, and many other non-players, the goal is to make money. These two are related, but they aren’t the same (just ask Jerry Jones). And another thing: the owners’ own money is up in the air here, which should make us think even harder for a method to the madness. It’s easy to be irrational with somebody else’s money. It’s a lot harder to be irrational with your own, especially in the long term. Maybe it’s a principal-agent problem: the GM who selects the players acts on behalf of the owner, and he might not do a good job of it. But at some point, with so much money on the line, the incentive is to correct this.

I suspect that flashy wide receivers generate more money than offensive tackles, even though they rarely get the ball. There are many sources of revenue: ticket sales, memorabilia sales, television money, etc. Whatever the relative values different positions add to offenses and defenses, it’s quite clear that they contribute in different proportions to generating revenue.

CHFF certainly has me beat when it comes to football knowledge, but they focus on football as a sport. It is a sport, but it’s also a business—for the decision makers in particular. I’m not convinced that what I’ve said here is correct. Maybe the decision makers really are getting caught up in hype and acting “stupid”. But maybe not. It certainly would explain some things.

I tweeted to CHFF jefe Kerry J. Byrnes:

To which he responded:

Division of labor helps the poor

From Design of the 20th Century:

While Morris wished to bring good design to the masses, he refused to embrace mechanization, because he believed that the division of labour disconnected the worker from his work and, ultimately, from society. Paradoxically, this rejection of industrialized production meant that Morris’ designs were expensive and could only be afforded by the wealthy.

Graham Robb on French contraband

From Graham Robb’s delightful book The Discovery of France: A Historical Geography, I give you a sample of pp. 151-152:

With an entirely law-abiding population, much of France would have been cut off from the outside world. Smuggling, too, was a major industry that kept the tiny channels of communication open. In some parts, it was practically the only industry. The inhabitants of frontier towns such as Le Pont-de-Beauvoisin, which straddles the France-Savoy border, did little else. Some Provençal villages abandoned agriculture for contraband, and some monasteries had suspiciously large stores of alcohol and tobacco. Nice, which was a separate state until 1860, could export east into Italy and west across the river Var into France.

The frontier between France and Spain was like a sieve. In the west, the hills of the Basque Country were criss-crossed by the smugglers’ paths that were later used by guerrillas, Résistants and Basque terrorists. In the east, Catalans and Roussillonnais ran a thriving criminal economy. A report to the Ministry of Foreign Affairs in 1773 complained that ‘you can’t put one foot in front of the other without running into a band of armed smugglers’. These were not furtive figures creeping about in the undergrowth. They moved in platoons of fifty, with another platoon behind to provide backup. They were fed, paid a salary and divided into ranks like soldiers.

In Brittany, thousands of heavily laden women carrying cakes of salt and over-salted butter poured into Maine, pretending to be pregnant. More than twelve thousand children were tried for smuggling at the salt court in Laval in 1773. This figure included only children who were caught with contraband weighing fifteen pounds or more. When they grew up, some of them would join what was practically an Anglo-French common market. Breton sailors carried brandy to Plymouth while Cornishmen brought tobacco to Roscoff. The sea lanes used by Gallo-Roman traders and Norman invaders remained as busy as ever, especially when Napoleon imposed the Continental System (1806-1813). A smugglers’ slang is said to have been in use on both sides of the Channel. Smugglers from Saint-Malo and Granville could converse with Channel Islanders in Norman French. An American visitor to northern France in 1807 found suspicious signs that, despite Napoleon, Calais and Boulogne were still on excellent trading terms with Dover and Hastings:

Eggs, bacon, poultry, and vegetables, seemed in great plenty, and, as I understood, composed the dinners of the peasantry twice a week at least. I was surprised at this evident abundance in a class in which I should not have expected it. Something of it, I fear, must be imputed to the extraordinary profits of the smuggling which is carried on along the coast.

All this suggests that, while customs barriers stifled trade, they did not necessary increase isolation. The ‘fortress’ of France was remarkably porous. Any commemoration of European unity should remember the smugglers and pedlars who helped to keep the borders open.

Twelve thousand children being tried in any court in a year sounds a little high, but you get the gist.

It usually ends with Ayn Rand

One of the most common ways to dismiss libertarian ideas is to make a quasi-strawman reference to Ayn Rand. One problem is that, in my experience, the speaker usually doesn’t understand Ayn Rand’s ideas to begin with, although that’s not really what I’m concerned about here. (Also, she misunderstood and hated us.) A second problem is that even if he does, the libertarian case for something never rests exclusively on anything Ayn Rand said. You can take Rand’s philosophical ideas or leave them, and this has little necessary bearing on whether you’re a libertarian or not.

For my money, the best argument for a given libertarian idea usually rests on economics rather than on moral theory. By “best” I mean the one it’s most worth one’s time to defend, because there’s a lot more certainty about fundamental economic laws than about fundamental moral laws. If somebody rigorously defends a particular moral approach, there are other experts who find fault with it and prefer their own. Anybody who’s taken an intro ethics course can attest to this. On the other hand, if somebody defends an idea the implication of which is that demand curves slope upward, for example, you know that he just plain doesn’t know what he’s talking about.

Many of the dismissive Ayn Rand references I’ve heard are funny, and may be worth making for that reason. But it also (frequently) shows a refusal to engage the actual libertarian ideas in question. Nobody owes us their discussion time, but we don’t owe anybody the benefit of the doubt that they actually have ideas that are better than ours. I’m certainly free to tell the world I’m a better boxer than Floyd Mayweather and then refuse to fight him when he offers to put my claim to the test, but the world would rightly interpret that as my not really being a better boxer. Our ideas are very much in the minority, so I understand that a lot of people don’t feel it’s worth their time to challenge them. Fair’s fair. But fair’s also fair when we take your quasi-strawman dismissal as evidence that you’re not rejecting well-understood libertarian ideas for better non-libertarian ideas.

Bill Maher, I’m looking at you.

I’m sure there are ways in which libertarians are guilty of similar kinds of tricks. Feel free to call us out on it if it comes up.

Here is a collection of a bunch of pieces making fun of Ayn Rand’s ideas.

What I Study

This past weekend I attempted to explain to a non-economist what it is exactly that I study, more specifically than “economics” as a whole. I was not able to give a good description, and it occurred to me that I really should have an answer prepared for that. To most people, I simply study economics. They’re not particularly interested or engaged in the subject beyond that. This answer works most of the time. On the other end, the way I talk with economics colleagues is far more detailed, but I can’t take that explanation to the dabbler types. I need one for the person in between these two categories, who has more knowledge than the average man on the street but isn’t a specialist. Other academics and people who took some undergraduate economics largely fall into this category.

Basically, what I study are the perspectives in economics that emphasize individual decision making and the process of adaptation to circumstances. The textbook Keynesian-Samuelsonian economics that people learn as college undergraduates focuses on static equilibrium, aggregates, and the God’s eye view of society. These analytical tools have their uses, but they are not the be-all and end-all of economics. An economist who seeks to understand the world to the fullest extent possible will need to account for the discovery process that uses limited information and realistic incentives and works over time.

That is the reasonably short explanation of what it is exactly that I’m interested in. If anybody wants to know more, I’ll let the discussion develop from there.