9-5 Economists

A very long time, I had a colleague and friend who I concluded was only an economist in working hours. Having come across another example more recently, I thought it would be worth explaining the concept.

Suppose there is some issue on which economics implies a straightforward conclusion, but an implication short of a proof. Minimum wage laws provide a simple example. The conclusion that raising the minimum wage will reduce the employment of those currently receiving a minimum wage is a straightforward implication of the assumption that demand curves, in this case for a particular sort of labor, slope down. It is however possible, with sufficient ingenuity, to construct a model of the labor market (every employer of such labor is a monopsonist holding down employment in his tiny niche in order to hold down the wage he must pay) or the market for goods and services produced by low paid labor (customers for those goods and services much prefer to buy if they know the workers are all being paid at least $15/hour and there is no easy way for producers who pay that much to prove it to customers) which yields the opposite conclusion. 

The response of a real economist will either be "raising the minimum wage almost certainly reduces employment for low skilled workers" or (less likely but not impossible–I am thinking of a real example) "one of those odd models might possibly be right, I will look for a natural experiment by which I can test it."

The response of someone who is only an economist in working hours is to believe whatever he would believe if he was not an economist. If that requires him to believe that raising the minimum wage will not reduce employment for low skilled workers and someone points out the inconsistency with economics, he will justify himself on the grounds that the economic argument is not actually a proof, so its conclusion could be false.

For an example on the other side of the political fence, consider a conservative economist who wants to support trade restrictions.

In either of these cases, there may still be a way for a real economist to support the  conclusion he wants. In the case of the minimum wage, his argument  might be that the loss of employment to some is more than balanced by higher wages to others, so that the total earnings of low skilled workers go up instead of down. If that is his argument he will want to look for evidence on the relevant elasticities, may support his point by observing that losing a ten dollar an hour job increases leisure by an hour for every ten dollars lost, and will be bothered by the possibility that losing a ten dollar an hour job removes the first step leading to a fifteen or twenty dollar an hour job.

In the trade case, the argument might be that although free trade produces net benefits for Americans the gains go to richer people than the losses, so a gain in value measured in dollars leads to a loss in value measured in utility. If he is a real economist he will want to make some effort to find out if the claim is true, to estimate the income distribution of gains and losses and their relative size. Alternatively, if he is both a real economist and a cynic, he may agree in private that the economic effects of trade restrictions are negative but support them as a way of getting the rust belt votes needed to elect politicians who will do other things whose effects are positive and larger.

In either case, the simple test is whether an economist's views tend to diverge from those of his ideological allies when the ideology clashes with the economics.  If they do he is a real economist. If they do not, he is only an economist in working hours.

P.S. (added later) John Cochrane points at an example of something worse than a 9-5 economist, an economist who engages in public demagoguery that relies on the economic ignorance of his listeners and has the gall to do it while citing his professional qualifications as an economist.

Stable Cryptocurrencies

There are two problems with using Bitcoin as a substitute for conventional currencies. One is that transaction costs are high; I gather there are some proposals to solve that. The other is that its value is very unstable. So far that has been a plus, since the value has mostly gone up. But in general it is a minus, since it means that if you are holding a substantial amount of currency for transactions you are also speculating in its value, whether or not you want to. 

That raises the interesting question of whether it is possible to construct a cryptocurrency with a stable value. Basecoin is a recent attempt to do so. I have not examined how it works carefully enough to offer any opinion on it, but I think in principle the project is doable.

Suppose you want a currency which exchanges at one for one with the U.S. dollar. There is a real world example of a solution to that problem, although it was for paper currency not cryptocurrency–the Hong Kong dollar issued by the Bank of Hong Kong and Kowloon (I think also by a second bank–all this is from memory, so details may be off). It maintained a constant exchange rate with the dollar (not one for one) by a simple mechanism. Any time the $HK went above the target rate the bank printed more, any time it went below they bought some and took them off the market.

Basecoin works on the same principle. In theory it eventually shifts from pegged to the dollar to pegged to a market basket of goods.

Pre-bitcoin, Chaumian digital cash was supposed to provide a currency that could be exchanged by sending messages, with neither party having to trust or know the identify of the other. The problem was that it required an issuer, a trusted bank. A digital currency makes enforcing money laundering rules hard, an anonymous digital currency, which the Chaumian version would have been, makes it impossible, so governments very much don’t want it to exist, which makes it hard to establish a trusted issuer. 

The beauty of Bitcoin is that there is no issuer, so the problem goes away.

How do you maintain a stable digital currency without an issuer, a private central bank? I do not know the details of how Basecoin proposes to do it, but here is my version:

You start with ten issuers, each a respected private firm, probably in different countries, each with a private key/public key pair that it can use to prove its identity. You have some way that the software can measure the exchange rate between your currency and the dollar–the Ethereum people I have talked with refer to a mechanism for reporting real world facts to the software as an oracle and have some ingenious ideas for making one work. The software then establishes the following rules:

1. Any time the exchange rate is above the target, one of the issuers can create one more coin. Which issuer gets to do it depends on which ones created the last nine coins–they go in sequence. 

2. Any time the exchange rate is below the target, one of the issuers, again in sequence, is supposed to buy a coin and take it out of circulation.

3. An issuer that fails to obey rule 2 is no longer in the sequence for rule 1. Each time it fails to obey it, its debt to the system goes up by one. Only when it has repaid that debt by taking the corresponding number of coins out of circulation does it rejoin the sequence of issuers.

4. If the exchange rate is above the target and the issuer whose turn it is to issue a dollar doesn’t, after an hour it loses its turn to the next issuer in sequence.

Assume an expanding demand for the currency, first from its initial spread, in the long term from economic growth. Issuers profit because they are getting an interest free loan in the form of the the coins they print to hold the value down to a dollar. That gives each issuer an incentive to obey rule 2, so as to maintain its ability to issue.

Rule 4 exists mostly to cover the possibility of an issuer going out of business or being shut down by its government. There should be a mechanism making it possible, if that happens, to transfer its status to a new issuer. In the simplest case, that is done by selling the private key that proves its identity to another firm that wants to replace it. 

What is wrong with this proposal?

I was pointed at this problem, and at Basecoin, by my son Patri. I gather it has been discussed at some length recently, so I may well be reinventing the wheel, but I find it more interesting to think such things out for myself than to start by reading what other people have written.

That reminds me of an anecdote about my friend and ex-colleague the late Gordon Tullock. Someone prominent wrote an article. Tullock wrote a rebuttal. The original author wrote a response, claiming that Tullock had entirely misunderstood the original article. It included the line (by memory so not verbatim):

We have all been long impressed by how much Professor Tullock has written. It is even more impressive to realize that he has written so much without being able to read.

Did the Death of Copyright Hurt Anyone?

Intellectual property in digital form is easy to copy and easy to share, which makes enforcing copyright law against it difficult, often in practice impossible. Thus the shift of Intellectual Property—music, books, movies—to digital makes it much more difficult for copyright law to serve its traditional purpose of providing an incentive to create by rewarding the creators. The obvious conclusion is that creators of intellectual property should now be much worse off than before and much less, or lower quality, work should be being created.

The question, to which I do not know the answer, is whether it actually happened. My casual impression is that books are as good as they were ten or twenty years ago. I consume almost no music and almost no video, so cannot judge their quality–do others think it has declined? 

The other half of the question is the effect on producers. Have musicians gotten poorer? Do movie companies make less money than they used to? Are there fewer professional authors supporting themselves by their writing? 

If the answer to all of these questions is "no," that casts serious doubt on the conventional interpretation of the function and importance of copyright law.

For any graduate student in economics who is looking for a thesis topic, I suggest that trying to find an answer to that question and then an explanation for that answer would be a project worth pursuing.

How to Make Cherry Coke Zero

I consume a lot of soda, mostly Coke Zero or Diet Coke–enough so that I buy it in two liter bottles. I enjoy sometimes switching to the cherry version of the drink for variety. Unfortunately, Cherry Coke Zero is not available in two liter bottles in this part of the country. 

I have found a solution to this problem and am posting it here for the benefit of anyone else in a similar situation. 

Iranian restaurants offer a sour cherry drink as one of the options on the menu. I like it and my daughter likes it, so on a recent visit to our local Iranian grocery store I bought a bottle of the syrup that it is made with. 

Add a dash of that to a glass of Coke Zero and you have a do-it-yourself Cherry Coke Zero.

Friending on Facebook

I get quite a lot of friend requests on Facebook, most of which I decline. I thought it would be worth explaining why here, in the hope that some of the people who want to friend me also read my blog.

All of my FB posts are public, open to everyone. So the only effect of friending someone is that I get to see his posts--some at random, if I correctly understand how FB works, some because they mention me or have some other content that makes FB flag them for my attention.

When I get a friend request, I look at the requester's page to see if there is a particular reason why I would want to see his posts and the comments on them. If they are in a language other than English I almost always decline, since I am not fluent in any other language and so would rarely make the effort to read them. Google translate is getting better, but still not good enough for routine use. If the posts and comments are in English, I look at them to see if there is anything that makes them more interesting than the average of what I am already seeing on FB. If not I usually decline. 

I'm not entirely comfortable with this policy since I worry that people will interpret my declining their request as an unfriendly response, but I don't see much point to accumulating hundreds or thousands of "friends" whose posts I don't actually read.

Is a Complete Sex Change Operation Possible?

In one of Lois Bujold's books, a character is changed from female to male via a high tech medical procedure. In Karl Gallagher's Torchship series, sex change operations are treated as routine options–one minor character has changed f to m in order to be physically qualified for a preferred military role and plans to change back later.

That raises an interesting question. Altering the physical structure of the body looks like something that should be practical with the medical technology we can expect to have sometime in the next century. But a complete change should include a change at the genetic level, from XX to XY or the reverse, and Bujold makes that explicit in her story.

This raises two questions. One is whether the change could be made. I think the answer is pretty clearly yes, given a sufficiently advanced technology. One could, after all, have nanotech cell repair machines, very small robot submarines, that go through the body altering every cell.

The more interesting question is to what degree the result would still be the same person. The Y chromosome contains lots of genes in addition to the gene SRY that determines testes development. So replacing an X with a Y or a Y with an X would change a lot of the individual's genetic code. 

Could the problem be avoided by copying all of the genes not relevant to sex determination from the existing Y to the new X? Possibly. But it will not work the other way because the X is much larger than the Y; there is not room on the Y for all the genes from the X. 

Alternatively, is it an issue that doesn't matter because all the relevant determination of the organism by the genes has already happened in the adult? I don't know the answer.

Comments welcome, ideally by people who know more about this stuff than I do.

Incidentally, Gallagher's Torchship series is very good--I have now reread it twice. In addition to being a good action story, it raises issues that I have seen discussed at length in non-fiction contexts, including hostile artificial intelligence and problems with a society where everyone gets a basic income. Particularly impressive for a new author, which I believe Gallagher is.

P.S. My wife, who remembers books much better than I do, points out that in Bujold's A Civil Campaign the sex change operation only results in the male genitals being XY, leaving all other cells XX. The text implies that a complete conversion was possible but would take longer than was available and "the complications can be strange."

My Visit to Brazil

I got home very early this morning from a two week speaking trip in Brazil. I recorded four of the talks and they are now webbed, along with powerpoints and a video of one talk that someone else recorded. My talk in Rio was live streamed but I have not yet figured out where on the web it is.

A few observations:

The libertarian movement in Brazil–they prefer "liberal"–is very active and quite young. Most of the people at my talks appeared to be college age and at least one was a high school student. I believe my largest talk had an audience of about six hundred; several others were around two hundred. 

Part of the reason it is so active may be that the present state of Brazil is very far from libertarian and a lot of Brazilians are unhappy with it. As one striking example of just how bad things are, I was told that getting a drivers license  requires two hundred hours of lessons–eighty hours before taking the written exam, an additional hundred and twenty hours before taking the driving exam. That is an enormous deadweight loss, presumably existing to provide employment to the people authorized to teach the classes.

Brazilians don't sleep. At least, they see nothing add about expecting a visiting speaker to be at dinner until near midnight then up by six or so to catch a plane to the location of his next talk. In at least one case most of the Brazilians, after dinner, were off to further socializing, a nightclub or equivalent. To their credit, once made aware of their visitor's odd requirements they were willing to accommodate them.

I have often noticed that hotel people seem to believe I am unable to carry my own suitcase, despite the fact that I managed to get it to the hotel. In the past I interpreted this as a tactic designed to extract a tip. But tipping does not seem to be expected in Brazil, and I (and my daughter, traveling with me) still had to make a considerable effort to be allowed to bring our own things up to our hotel room. My current conjecture is that carrying a guest's bags serves as a way in which a hotel signals the high status of the guest.

In countries notably poorer than the U.S. I expect locally produced goods, such as restaurant food, to be inexpensive. That was not the case in Brazil. Part of the explanation seems to be a high level of tax on consumption. I was told that about half the price of what you buy is tax.

It was an enjoyable trip, with lots of friendly and helpful people and only a tolerable level of chaos.

North Korea and Munich

The solution to the present problem of North Korea seems obvious–we should have invaded them a little more than a decade ago, just before they developed nuclear weapons. It looks like the modern version of the lesson of Munich: Britain and France should have opposed Hitler early, when he was still weak, instead of going along with the annexation of the Sudetenland. More generally, it is the argument for a foreign policy of figuring out early who are going to be your enemies and opposing them before they get strong enough to be dangerous.

That argument assumes that your nation not only will have an interventionist foreign policy, it will do it right. The U.S. has an interventionist foreign policy, as demonstrated in, among other places, Vietnam, Iraq and Afghanistan. It had one in 2006. It did not do anything serious to prevent North Korea from obtaining the ability to drop a nuclear weapon on the U.S. because the cost of invading North Korea would have been large and immediate, the cost of not doing it more than two elections away. The benefits of an interventionist foreign policy conducted by a government no more competent at it than ours is are much less than the Munich argument implies. 

The costs are much greater. Modern U.S. history provides several striking examples, but I prefer a less familiar one.

A while back, rereading the first volume of Churchill's history of the Second World War, I discovered something interesting. The first time that Hitler attempted to annex Austria he was stopped not by France or Britain but by Italy. Mussolini announced that Italy would not tolerate a German annexation of Austria and made his point by moving Italian divisions into the Brenner pass. Hitler backed down.

What changed? When Italy invaded Abyssinia, England and France announced that that was a very wicked thing to do and took token actions against Italy for doing it. Mussolini concluded that Italy's World War One allies were not his friends and were not very dangerous enemies. The next time Hitler wanted to annex Austria, Mussolini raised no objection.

In Churchill's view, the correct response of the Allies to the Abyssinian invasion was either to forcibly prevent it or to ignore it. The first would have brought down Mussolini's government, the second would have retained him as an ally. Either a non-interventionist policy or a competent interventionist policy would have worked. The incompetent interventionist policy they actually followed gave Hitler his one significant ally.

What, in the absence of a time machine, can now be done about North Korea? The U.S. could, the President hints that it might, launch a full scale attack, probably nuclear as well as conventional. At this point that might not cost very many American civilian lives, since North Korea probably does not yet have the ability to deliver a nuclear weapon to the U.S. mainland, although it soon will. It would result in a very large number of civilian deaths in South Korea and possibly Japan. And in North Korea. It might happen, but I do not think it is likely to. Or should.

The alternative is to recognize that we are back in the world of mutually assured destruction, this time, fortunately, with a weaker opponent. Technological progress has made it possible for a relatively poor country to build intercontinental ballistic missiles with nuclear, perhaps thermonuclear, warheads. We are, however, enormously richer than North Korea--our GDP is more than six hundred times theirs--and considerably more advanced. The strategy that suggests is the one Reagan adopted for dealing with the Soviet Union, a competition in defensive weapons that they could not afford to win. I do not know enough about the current status of anti-missile technology to judge how workable that is, but I do not see any better alternatives.

Keynes on Newton--and some ideas for fantasy.

I have just come across a fascinating piece, a lecture on Newton by Keynes, delivered posthumously by Keynes' brother and largely based on Newton's unpublished papers, apparently totaling about a million words. The central thesis is that Newton's "unscientific" work was just as careful and logical as his scientific work, that he approached alchemy and theology in the same way he approached physics and mathematics. In each case he was trying to make sense of the world by the power of his mind.

Which suggests an interesting idea for a fantasy–I don't know if it has been done. Suppose Newton was right in his exotic work as in his invention of modern physics. In one possible version he is still around, having discovered the alchemical secret of eternal life and faked his own death. In another, a modern scholar reads through the whole body of unpublished work, correctly works out the magical secrets that it contains and that he concealed, and makes use of them.

And in a third, alternate history, version, Newton's friends fail to pull him away from Cambridge into the conventional world of parliament, civil service, and society. He spends the second half of his life as he spent the first, produces breakthroughs in the Hermetic sciences as great as in the natural sciences, and history forks.

Asking the Wrong Question

A few days ago I spent some seven hours attending a meeting of the San Jose City Council. I was there to speak against a proposed gun control law, but there were other interesting things in the meeting. One of them was a discussion of the Evergreen Senior Homes Initiative, a ballot measure proposed by  developers who want to build 910 units of housing on land currently zoned for industrial use, an idea to which the Mayor is opposed.

His argument is that, despite the references to affordable housing, seniors, and veterans, what the plan actually proposes is a gated community for wealthy residents. He may, for all I know, be correct. It does not follow that building it will not make more affordable housing available for the non-wealthy.

When someone moves into one house he moves out of another, which is then available for someone else to move into. If the development is built and the units are bought by people currently living in San Jose, the net result will be to increase the city's housing stock by almost a thousand units. Doing that will make more housing available in the city and lower its cost. The question the Mayor should be asking, assuming that what he is really interested in is the welfare of the citizens of the city and not merely his ability to control things, is whether the development will draw mostly from current residents or mostly from people who would not otherwise live in the city. Pretty clearly, that question never occurred to him.

The assumption of the Mayor–I think of city planners more generally–is that the way to get affordable housing is to build affordable housing. That is not the only way of getting it. The alternative, very common in the history of U.S. cities in the past, was for poor people to move into housing that had been occupied by, possibly built for, less poor people, vacated when the less poor people moved into newer and better houses. 

The same way poor people get cars.

Embedded Economics: Help Needed from Conrad Readers

As I have mentioned here before, one of my current writing projects is a collection of short works of literature that have interesting economic insights. In a conversation yesterday at an SSC meetup, someone mentioned a Conrad story that sounded as though it would fit in very nicely. Unfortunately he didn't remember the title. I am not sure if he was misremembering something in "Typhoon," which has a scene similar but less interesting, or if there is another story I have not been able to find.

The story as he remembered it involved a ship in a storm, as does "Typhoon." In his version, the money belonging to the crew was in a strong box that got so shaken that there was no way of distinguishing what belonged to whom. The solution was for the captain to instruct the crew members to each write down how much of their money was in the box. He would then add up the amounts and, if they came to more than was actually in the box, dump the box overboard. It's an ingenious solution, although I can see some practical problems, and would fit neatly into my discussion of mechanisms for making it in the interest of individuals to reveal information. The only thing I now have for that is the story of Solomon and the baby which is much weaker, since it depends on the woman who is pretending the baby is hers not guessing what Solomon is up to. 

In "Typhoon," the money that gets mixed up belongs to the Chinese passengers and the much less interesting solution is an even division.

Does anyone here know of the story in question? Does anyone have another work of literature that illustrates another solution to the general problem? Another example of a short work of literature with an interesting economic insight?

My discussion of the Solomon story and the general issue it illustrates

The current draft of the book, webbed for comments

Gun Control and Homicide Rates

Some recent comment threads on Slate Star Codex, my favorite blog, have dealt with the always lively issue of gun control. One standard argument is "we know gun control laws work because the U.S., which has relatively few restrictions, has a much higher homicide rate than countries such as Canada or the U.K., which have much more restrictions."

One response sometimes offered is that there are other countries, such as Mexico and Brazil, with both restrictive laws and homicide rates much higher than in the U.S. That then gets into the question of what comparisons are more relevant, in what respects the U.K. is more like the U.S. than Brazil is.

An alternative approach, which I think more useful, is to ask whether the difference in homicide rates existed prior to the difference in regulation. The web makes that question much easier to answer than it would have been twenty years ago. 

In the case of the U.K., the answer is pretty clear. According to the Wiki page on Firearms Policy in the U.K., the first restrictive legislation was the pistol act of 1903, but it had little effect:

The Act was more or less ineffective, as anyone wishing to buy a pistol commercially merely had to purchase a licence on demand over the counter from a Post Office before doing so. In addition, it did not regulate private sales of such firearms.

The first  significant restriction was the Firearms Act of 1920. There were additional acts in 1937, 1968, 1988, 1997 and 2006.

The data on Homicide rates per 100,000:

Year	U.S.	England&Wales	Ratio
1900	1.2	0.96	1.3
1910	4.6	0.81	5.7
1920	6.8	0.83	8.2
1930	8.8	0.75	11.7
*1946	6.4	0.81	7.9
1950	4.6	0.79	5.8
1960	5.1	0.62	8.2
1970	7.9	0.69	11.4
1980	10.2	1.11	9.2
1990	9.4	1.09	8.6
2000	5.5	**1.71	3.2
2010	4.8	1.14	4.2

*No data for the U.K. 1940-1945
**The figure is for the U.K. rather than England and Wales

Looking at those data, it is hard to believe that the reason the U.K. has a lower homicide rate than the U.S. is restrictive legislation.

My point here is not that gun control doesn't (or does) work. I wouldn't be surprised if some restrictions on firearm ownership reduced the homicide rate, but if so, the effect on the U.S./U.K. ratio is lost in the noise. My point is rather that the sort of factoids that show up in this sort of argument, even when they are true, are rarely as solid evidence as those who offer them claim.

This would be a better post if I had a good example on the other side of the same debate. I don't, but perhaps someone reading this can offer one.

European Speaking Trip in April

I have made tentative arrangements for another European trip. At the moment it looks like four or five talks in two weeks, so I could squeeze in a few more, hence this post. Current schedule:

April 14th, Belgrade

April 21st, Sofia

April 28th, Norway

Sometime between those dates possibly Poland, possibly Milan. For additional talks I prefer places reasonably close to places already on my schedule, so as not to spend too much time traveling.

My usual terms are expenses plus whatever honorarium the host thinks appropriate. Defining expenses gets complicated for a multi-talk trip. If one host has offered to fly me to Europe and back, I expect others to provide accommodations and any additional travel expenses, otherwise it's accommodations plus an even division of travel expenses among the hosts.

Did Anyone Record my Debate with Austin Petersen?

I debated him at the Young Americans for Liberty national convention on anarchism vs minarchism. I unfortunately did not record the debate, and YAL didn't either. 

It occurred to me that, since nowadays practically everyone has a smartphone which doubles as, among many other things, a recorder, someone in the audience probably recorded the debate. If so, I would be interested in getting, and webbing, a copy.

A commenter has now pointed me at a recording of the debate that someone has webbed.

I live in a world where almost everyone in my audience has a video camera disguised as a phone in his pocket and where I can put a question to the world at large, as I did in this post, and get an answer in three days.

For those unhappy with how rarely I post here nowadays, the main reason is that I am active as a commenter on my favorite blog, Slate Star Codex, which I highly recommend. I will continue to post here from time to time when I have something I feel like writing about.

On another subject, Eric Raymond has an interesting post up today, arguing against the destruction of Confederate Statues on the grounds that they, the treatment of Lee in the North as well as the South as a hero rather than a traitor, and a bunch of other things were part of a successful attempt on both sides to heal the wounds of the Civil War.

Reading it, it occurred to me that it parallels what is happening at the end of my second novel, Salamander. There has been a rising attempting to reverse the result of an earlier succession struggle, it has failed, and the victorious incumbents are deliberately offering very generous terms to the losers for essentially the same reason Eric describes.

The issue comes up in the sequel, which I am currently working on. The following is the relevant passage, spoken several years later by a secondary character who was involved in the rising and is now arguing against another attempt:

“Don’t know if you remember, but a bit before the mountain blew up, all Earl Eirick’s food stores went up in flames. Figure the Prince and his mages did it somehow. With no food and no Forstish army, we were in pretty poor shape. Prince could have offered terms a fair bit worse than he did, asked for the Earls’ heads, maybe some others, maybe mine. Sent all of us he didn’t trust north, put his people in the holds. From where he sat, we were traitors tried to bring in a Forstish army, take his capital, mebbe kill him and his brother. Not a lot we could have done to stop him once the rest of the royal forces showed up–can’t keep an army in the field without food.

“I was the one brought the Prince’s terms back to the Earl, good terms considering. Duke Morgen gave ‘em to me–didn’t even know the Prince was in the keep till he stood up to guarantee ‘em.

“One part you don’t know, cause I never told anyone but the Earl. Morgen’s daughter that’s Princess Mariel now, Prince’s wife. Maybe widow. At the College with me. Knew her pretty well. After I got the terms from her father, Prince endorsed them, still wasn’t sure we could trust ‘em, considering what rode on it. Asked Mari. Prince had proposed to her during the siege. Figured she should know.

“She said they would keep the terms. And why. Prince and Duke wanted to tie the kingdom back together, had worried about it a long time. Reason to give us generous terms. Reason to keep them. Told Earl Eirick. He accepted the Prince’s terms. They kept them.

“Try to break up the kingdom, steal the throne from the Prince’s heir, I’ll do what I can to stop you. Asgeir too.”

Reviving the Living Paper Project

A very long time ago, I wrote some computer programs to go with my price theory textbook. The idea, in each case, was to do something on the computer that could not be done on paper. My favorite was a program I called curvedraw, which let you draw a total cost curve freehand on the computer. As you did so, the computer drew the corresponding marginal cost and/or average cost curves. At any point you could switch from drawing total cost to drawing one of the other two, at which point the computer would take over drawing the total cost curve. You could click on any part of the total cost curve and have the program draw a tangent with horizontal length one, hence vertical length equal to the slope, i.e. the marginal cost, thus seeing visually why the marginal cost curve was what it was. The idea was to teach the student to intuit the relation between total, marginal and average, between a function, its derivative, and its average.

My plan was to produce more programs and offer to customize them to other textbooks, and I sketched out ideas for some of them. I also had a design for a computer game in which the player was  building a trade league, an "empire" based not on conquest but on mutual advantage. An early version was written  by a programmer friend of mine but the living paper project eventually died, since neither I nor my friend was willing to put enough time and effort into it.

I put up a description of the project a few years ago, in the hope of bringing it back to life as open source. That may now be happening.  Ricardo Cruz has been looking at doing my programs in javascript so that anyone could try them using the browser. He has asked me to announce the mailing list [1] and the github page [2]:

[1] https://groups.google.com/forum/#!forum/price-theory

[2] https://github.com/rpmcruz/price-theory

 

Shanghai and Batumi

Two cities I have enjoyed visiting and hope to visit again. They are quite a long distance apart and in many ways very different, but they have one thing in common. In both cities, all the architects are crazy.

Not, however, in the same way. Shanghai architects are science fiction crazy:

 A spherical building of glass

A skyscraper with a stylized Saturn on top. 

Or a space station.

 

A very large transformer, about to transform.

Batumi architects are fantasy crazy. 

Build a tower. Take a bite out of one side. Insert a magic spinning array of capsules.

Each, presumably, containing someone. Or something.

A three pointed tower, complete with clock and gilded dome.

A steampunk palace.

The Poor Man's Air Conditioning

It has been very hot in San Jose the last few days. One solution is air conditioning, which we have and sometimes use. The other is to open the windows in the evening, when it cools off, close them in the morning. Sometimes–last night, for instance–that cools the house faster than air conditioning. And it doesn't show up on our electric bill.

I have long wondered why there isn't an automated version available, or if there is and I haven't come across it. It would be easy enough to have an insert for a window that was controlled by a simple thermostat. If the inside temperature is both above your optimal and higher than the outside temperature, open to let air in, if not close. A few such inserts should do, automatically and more reliably, what we do by hand. For an improved version, provide the insert with a fan--that uses some power, but much less than an air conditioner.

Does anyone know of a commercially available version of such a system for home use? Alternatively, am I missing some reason why it isn't as good an idea as I think?

Embedded Economics: v. 0.1

I have just webbed the first draft of the project I have been discussing here, a collection of short works of literature that contain economics with some brief comments by me. Most of the works are available online, so I could do it as a collection of links without first getting copyright permission for the pieces I included. There are, however, a few pieces missing as a result.

The draft is here. Comments and suggestions for additional things to include are welcome. For a more detailed description of what sort of things I want, see my recent posts.

Suggestions for a better title are also welcome.

Legal Systems Very Different From Ours

I have just webbed the latest draft of the book I have been writing. To give you a quick idea of what's there, here is the table of contents:

Introduction

1.      Imperial Chinese Law
2.      Romani Law
3.      The Amish
4.      Jewish Law
5.      Islamic Law
6.      When God is the Legislator.
7.      Pirate Law
8.      Prisoners’ Law
9.      Student Law [Not yet in]
10.    Embedded and Polylegal Systems
11.    Saga-Period Iceland
12.    Somali Law
13.    Early Irish Law
14.    Comanche, Kiowa and Cheyenne: The Plains Indians
15.    Feud Law
16.    England in the Eighteenth Century
17.    Athenian Law: The Work of a Mad Economist
18.    Enforcing Rules
19.    The Problem of Error
20.    Making Law
21.    Guarding the Guardians
22.    Ideas We Can Use

       Bibliography


Comments welcome.

My European Speaking Trip

For people interested in attending, here is the list of the open talks:

Gothenburg, Sweden, May 24, 18:00 CEST

"A World of Strong Privacy: Anarcho-Capitalism Online"

Allégården, Södra Allégatan 4, Gothenburg

Facebook link 

 

Stockholm, Sweden, May 25, 17:00

"The Confederation of Liberal and Conservative Students - Speakers evening with David Friedman"
"Market Failure: An Argument Both for and Against Government"

Blasieholmsgatan 4a

Batumi, Georgia, European Students for Liberty Batumi Conference, May 27

Shota Rustaveli University   11:30 – 12:30 "Market Failure, an Argument Both For and Against Government"

14:45 – 15:30 "Feud Law: The Logic of Private, Decentralized Law Enforcement" 

17:30 –18:00 – "Future Imperfect: Many Ways the World Might Change in Your Lifetime"

Moscow: May 29, 7:30 P.M.
"Zombie-Visionary: Can We Control the Future?"
Osobnyak na Volkhonke, Bolshoy Znamensky 2 Building 3, 2 floor
People need to apply at http://www.inliberty.ru/events/207-Zombiprovidec
A recording of the talk is now webbed. You have to figure out what to click on to turn on the sound, however. And what you will hear is in Russian--the simultaneous translation (I don't speak Russian), not the English.

May 30, 7:30
"Legal Systems Very Different From Ours"
Higher School of Economics, Staraya Basmannaya, 21/4 Building 1, 4 floor
People need to apply at https://www.facebook.com/events/294694010975746/ and have their ID with them, since it is on a university campus.  

Graz, Austria, June 6

University of Graz, Resowi Building, 2nd floor

"The Case for Anarchy," 11:30am, room SZ15.22

"Climate Change, Population, and the Problem with Externality Arguments, 6pm, room SZ15.21

Link to organizer with some additional information (partly in German): https://economics-club.uni-graz.at 

Budapest, Hungary, June 7, 6 P.M.

"The past and future of law without the state"

Kossuth Klub, Múzeum u. 7, Budapest 1088, Hungary

Facebook event
Facebook page for details and discussion

The Most Exciting Maybe of the Year

A  link in a recent post on my favorite blog took me to a piece on a recent article from the Netherlands Cancer Institute in Amsterdam. It describes a procedure which appears to reverse aging in mice. These are early results, they might be wrong, there might be currently unknown problems, and we are not mice. 

But it at least suggests the possibility of not merely slowing aging, which is what most anti-aging research is about, but reversing it.

Something Different. Or Maybe Not.

My younger son writes, among other things, fiction set in the world of super heroes and super villains. This morning he pointed me at someone else's work in that genre, a novella: Interviewing Leather. I read it.

The narrator is a reporter working for a Rolling Stone equivalent in a world with super heroes and super villains. His assignment is to interview a mid-level super villain, more precisely super villainess, who goes by the name of Leather.

It is an enjoyable story with interesting characters, plot, and moral issues. But what most impressed me was that the author took a pattern of behavior that came into existence for literary reasons, to make good stories, and constructed a persuasive explanation of why real people would act that way. Not easy to do when "act that way" involves a lot of dramatic posturing and dialog by both sides, most of it well suited for the dialog bubble of a comic book but entirely unnecessary for either committing crimes or stopping them.

To see how he managed to pull it off, read the story.

Discussing it after I finished, my wife raised the question of whether the story would work for the book I plan of stories that teach economics. It might. Part of the background is a description of the economics of the super villain business. Much of the point of it is people taking the actions that achieve their objectives, which is what economics is about, although neither the objectives nor the actions are exactly what we are used to.

If you read the story, or have read it, let me know if you think it belongs in my book.

Thoughts on Literature, Economics and Education

My recent posts here have dealt with my current project of putting together a book of short works of literature that have interesting economic ideas embedded in them. I've gotten suggestions both here and in response to emails that I sent to people who I thought might help. Some of the suggestions I expect to use. But my reaction to most of them was that they were not what I was looking for. The purpose of this post is to explain why. Part of doing so is looking at the difference between the project I am planning and the somewhat similar, but I think fundamentally different, project that Michael Watts produced in The Literary Book of Economics.

What is Economics?

Probably the most common definition is "the science of allocating scarce resources to diverse ends." Watts offers Marshall's definition: "The study of mankind in the ordinary business of life." Neither of those is what I think of as economics. Still less is it the study of the economy, which I suspect would come closest to what most people think the word means.

To me, economics is that approach to understanding behavior that starts from the assumption that individuals have objectives and tend to take the acts that best achieve them. That is what economists mean by "rationality," and it is the assumption of rationality that is, in my view, the distinguishing characteristic of economics. What I am looking for are works that tell us something interesting about the implications of that assumption.

Someone at some point suggested Orwell's Down and Out in Paris and London. It is an interesting book, although much too long for my purposes. But what makes it interesting, economically speaking, is not the vivid picture of poverty in the period between the wars but particular details relevant to implications of rational behavior.

I can give, by memory, an example. Orwell observed waiters in a fancy Paris restaurant, out of sight of the diners, spitting in the dishes they were going to serve. In an idealized market context, the waiter would never spit in the dish unless the value to him of doing so was more than the disvalue to the patron he was serving, which is unlikely. But throw in the inability of either the patrons or the waiter's employers to monitor the waiter's behavior and any benefit to the waiter of expressing his hostility is a sufficient incentive to make him do it. That suggests the further point that, when you cannot monitor someone's behavior, his preferences matter--you want the job he is doing for you to be done by someone whose preferences are close enough to yours so that he will want to do what you would want him to do–even if nobody is watching.

Economics is not the study of the economy. A picture of poverty, or unemployment, or wealth, or economic growth, however accurate and vivid, does not in itself teach you any economics. A story such as Poul Anderson's "Margin of Profit," which deals with a wholly fictional future, does, because it demonstrates in that world an important implication of rationality that holds in our world as well–that in order to prevent someone from doing something you do not want him to do it is not necessary to make it impossible, merely unprofitable.

How to Learn

One difference between my project and Watts' is that he includes things that are not, by my definition, part of economics, along with others that are. The other difference is that most of what he includes are not complete works but excerpts from much  longer pieces. 

I can imagine an economics professor reading through The Literary Book of Economics in search of things he can use in his teaching. But I find it hard to imagine anyone else doing so on his own initiative, merely because he enjoyed reading it. There is a reason why a book is the length it is; a novel is not, with rare exceptions, a series of short stories. I conclude that most of the people reading Watts' book, most of the people it was written for, will be students reading it because their professor told them to. And, judging by my experience of students over the years, many of the students told to read it won't. 

That fits the pattern of most modern schooling at all levels. Someone else decides what you should learn, tells you what you must do to learn it, and makes some attempt to make sure you follow his instructions. It is not a model I think highly of. A much superior model in my view, if you can pull it off, is to get someone to learn something primarily because he finds it interesting. The best way of doing that is to provide students with things to read that are  worth reading on their own, not things they read only because they are ordered to. Not even things they read only because they think the labor of reading them will pay off in future benefit. 

That view of education is why both children of my present marriage were unschooled. It is also why all of my nonfiction books, with the partial exception of Price Theory, were targeted at the proverbial intelligent layman. They can be, and sometimes are, used as textbooks, but they were written with the assumption that if the reader did not find a chapter worth finishing he was likely not to finish it.

It is also why I am not looking for literary excerpts that can be used to demonstrate economic points, unless the excerpt can stand on its own as a work of literature.

Ideas That Teach Economics: Who Should I Ask?

At least since I successfully used this blog to get a design for the cover of the third edition of my first book, I have been intrigued with the idea of using the internet as a way of collecting ideas and information. My current project, described in my previous post, is an obvious candidate. I have accordingly been using this blog, Facebook and G+ to ask for suggestions on what I ought to include in a book of short works of literature that contain economic ideas. I have also been emailing everyone I can think of who might contribute additional suggestions, ranging from my undergraduate debate partner, a fellow Kipling enthusiast and currently a federal judge, to two science fiction authors, also friends. Also lots of economists. It just occurred to me that I ought to try the second order approach--using the Internet to get suggestions about who I should use the Internet to get suggestions from. Hence this post.

Who should I contact by email who would be likely to know of short works of literature that included interesting economic ideas? What sites online might it be worth putting posts or comments on? 

So far the only one I have tried, aside from here, FB and G+, is Baen's Bar.

Ideas That Teach Economics: A Progress Report

In two previous posts I described my current project to put together a collection of works of literature that teach economics. Inspired in part by comments to those posts, I now have almost half a book's worth and am looking for more. Here is the current list, not necessarily in what will be the final order:

"Business as Usual DuringAlterations" by Ralph Williams

Horodotus on the marriage customs of the Babylonians

From Imitations of Horace by Alexander Pope

"Margin of Profit" by Poul Anderson

"The Peace of Dives" by Rudyard Kipling

"The Cambist and Lord Iron" by Daniel Abraham

"The Jigsaw Man" by Larry Niven

“The Verger” by Somerset Maugham

A Petition by Frédéric Bastiat

George Orwell, A Review of The Road to Serfdom and The Mirror of the Past

I am considering adding, at Peter Leeson's suggestion,  
"The Judgement of Solomon." 
It is a well known story but provides a simple illustration of a preference revealing mechanism, although arguably a flawed one.

With a little commentary by me, this would come to about 40,000 words. I am aiming at at least twice that, preferably a little more.

A few comments on what I want:

1. The idea is to teach economic ideas. Economics, to me, isn't the study of the economy, it is the approach to understanding behavior that starts from the assumption that individuals have objectives and tend to take the actions that best achieve them. So the fact that a story describes events in the economy, such as inflation or unemployment, is neither a necessary nor a sufficient condition. 

2. I am looking for works that teach economics, not works that support my (libertarian, pro-free market) political views. 

3. I am looking for works that are good enough literature to be read as such. A story written by an economist to teach economics, such as Hazlitt's Time Will Run Backwards or Murder at the Margin by Marshall Jevons, does not qualify unless it is a good enough story to have survived on its literary merit alone. Ideally, this would be a collection that could be read for pleasure by someone uninterested in economics as well as being used as supplementary reading for discussion in an economics course.

4. I don't want excerpts that read as excerpts. The piece by Alexander Pope is part of a longer work but reads on its own as a complete poem.

As I mentioned in an earlier post, there is a somewhat similar project published in 2003, The Literary Book of Economics by Michael Watt. It is where I discovered the Pope poem, but so far that is the only thing I have found in it that I would want to use. It is not a book that I can easily imagine anyone reading all of for fun, although there are some interesting bits in it.

Suggestions can either be put as comments here or emailed to me.

Again Fictional Economics

A while back, I put up a post about an idea for a book, a collection of works of literature that taught economic ideas. Thanks to comments on that post, my list has expanded from two works to four, with a few other possibles. The purpose of this post is to make what I am looking for clearer and ask for more suggestions.

The plan is for a book consisting of works of literature, probably stories and poems, that are good enough to be worth reading for entertainment but that in addition embody interesting economic insights. Since it is to be a collection, the individual pieces have to be reasonably short—a novel would not fit. In my experience, good fiction writers usually write better fiction than even good economists, so I am not looking for something written by an economist to teach in fictional form, such as Looking Backwards by Hazlitt or Murder at the Margin and its sequels by Breit and Elzinga writing as Marshall Jevons–and in any case, all of those are too long for my purposes.

My present list:

"Margin of Profit" by Poul Anderson

A science fiction story whose point is that, in order to stop someone from doing something, you don't have to make it impossible, just unprofitable.

"The Peace of Dives" by Rudyard Kipling

An allegory in verse arguing that economic interdependence brings peace.

"So I make a jest of Wonder, and a mock of Time and Space,
"The roofless Seas an hostel, and the Earth a market-place,
  "Where the anxious traders know
  "Each is surety for his foe,
"And none may thrive without his fellows' grace."

--> "The Cambist and Lord Iron" by Daniel Abraham

A short story about prices--of an obscure currency, two men's lives, and a soul. 

--> "Business as Usual DuringAlterations" by Ralph Williams

A short story about why matter duplicators would not crash a market economy. 

Other suggestions? An excerpt from a longer work isn't impossible, but it has to stand on its own, be worth reading as a story. 

---
P.S. I think I have one more. "The Jigsaw Man" by Larry Niven. The central point is the same that I later and independently published in the  JPE as "Why Not Hang Them All: The Virtues of Inefficient Punishment."

A commenter pointed me at The Literary Book of Economics by Michael W Watts, which seems to be a project along the same lines as mine; I've ordered a copy. From descriptions I could find, it's a lot of relatively short excerpts from works of literature, each  making some economic point. I'm thinking in terms of many fewer pieces, probably each complete.