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. 

Free Distance Learning

Both of the courses I am teaching this year are being video recorded and webbed. It occurred to me that some of my readers might find one or both interesting.

Economic Analysis of Law
Class Page
Book: Late Draft in HTML  Page Images with Virtual Footnotes
Videos
Powerpoints

Legal Systems Very Different From Ours
Class Page
Book
Videos
Powerpoints

Propaganda Masquerading as News: The Incredible Shrinking Horse

I recently came across a news story which struck me as a good example of how to mislead people, probably for political purposes, without saying anything that was not actually true. The title was "Watch out: Mammals shrink when Earth heats up, study says." The story reported evidence that, at a period when global temperatures were high, a number of ancient mammals became smaller—by fourteen percent in one case, by four percent in another.

There were two things wrong with the story. The first was the repeated use of the term "shrinking." What it was actually describing was evolutionary change, probably over a period of several million years, but the story never said that. It made it sound as though  animals were actually shrinking, and that is how I would expect a casual reader without much scientific background to read it. How else would you interpret "At least twice before in Earth's history, when carbon dioxide levels soared and temperatures spiked, mammals shriveled a bit in size."

At least twice before in Earth's history, when carbon dioxide levels soared and temperatures spiked, mammals shriveled in a bit in size

Read more at: https://phys.org/news/2017-03-mammals-earth.html#jCp

At least twice before in Earth's history, when carbon dioxide levels soared and temperatures spiked, mammals shriveled in a bit in size

Read more at: https://phys.org/news/2017-03-mammals-earth.html#jCp

At least twice before in Earth's history, when carbon dioxide levels soared and temperatures spiked, mammals shriveled in a bit in size

Read more at: https://phys.org/news/2017-03-mammals-earth.html#jCp

The second was the picture that accompanied the story. It shows a modern horse, a Morgan, contrasted with Sifrhippus sandrae. The visual impression is of enormous shrinkage, the modern horse being nearly a hundred times the weight of the ancestral horse. But that is totally irrelevant to the facts being reported, since all of this was happening many millions of years before there were any modern horses.

My conjecture, on which the title of this blog is based, is that the article was designed to mislead, to scare casual readers about the effects of global warming, to make them imagine that it would shrink them by a similar amount. It is possible that I am mistaken, that the author did not care about politics and was merely trying to write a story people would read. Shrinking from the size of a horse to the size of a cat is a much more dramatic story than evolutionary change from the size of a large cat to the size of a medium cat, which is what the story was actually describing.

On either interpretation, I see no plausible way of interpreting the story, in particular the picture, that does not make it a case of deliberately dishonest journalism.

A Proposal to Triple Tax Robots

Certainly there will be taxes that relate to automation. Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.

(Bill Gates, from a Quartz interview) 

A robot that does a job earns income for its owner. If the owner is an individual, that income gets taxed—income tax, social security tax, all those things. If the owner is a corporation, the income pays corporate income tax then is paid to the stockholders as dividends and taxed again, although at a lower rate than ordinary income.

Gates is proposing that we replace the double tax with a triple tax.

I expect one could construct arguments for special taxes on capital that replaces labor that were not absurd, although there is no particular reason to focus on robots—capital has been substituting for labor at least since the invention of the plow, probably longer. 

But this one is either stupidity, unlikely in the case of Gates, or blatant demagoguery.

A Scrap of Libertarian History

I just came across a letter I wrote to Edith Efron in 1978 on the anarchist/minarchist controversy. It occurred to me that others might find it interesting. I don't remember if she ever answered it. 

But then, I also don't remember writing it.

Crazy Like a Fox

One possible interpretation of Trump's actions is that he is ignorant, stupid, impulsive and thin skinned. During the campaign the obvious implication, which many drew, was that he had done and would continue doing stupid things that would lose him the nomination or, if he somehow got the nomination, the election.

That did not happen. When your theory confidently predicts something that does not happen, it is worth considering that the theory may be wrong. 

Additional evidence against that theory comes from Trump's earlier history. His finances are not public knowledge and some have argued, for all I know correctly, that he would have done at least as well if he had invested his inherited wealth in a collection of low risk interest bearing assets. But he didn't. He engaged in a long and risky series of entrepreneurial projects. If he was as incompetent as many seem to believe, he would by now have lost all or most of his money. 

That suggests an alternative interpretation, that while Trump may indeed be impulsive and thin skinned he is not stupid, that the apparently stupid things he did were for the most part tactics that were intended to win and did win, that it was not Trump who did not understand what he was doing but his critics. 

Hence the title of this post.

How well does that fit what has happened since the election? 

The initial travel ban made very little sense as a way of preventing Islamic terrorism  but quite a lot as a way of giving Trump the image of doing everything he could to defend America from Islamic terrorism. Seen from that standpoint, even its poor design made sense as a way of provoking noisy and passionate opposition, making his opponents in the Democratic party and the mass media seem to be soft on terrorism. It isn't as if the average voter can be expected to pay attention to the details.

The oddest thing about the response of Trump's critics to his moves is the implicit assumption which they would surely disavow if were made explicit—that Trump's motives are benign. On the assumption that his objective was to make America better, his actions look stupid. But not if his purpose was to promote his own power and status. 

The theory I am offering also explains the accusation that Obama tapped Trump's phone. As best I can tell, there is no evidence that it is literally true. But there is evidence, reported in the New York Times more than a month ago, that federal agents acted under a FISA warrant to tap the communications of some members of Trump's team in the Trump Tower. There is probably no evidence that they did so at Obama's urging or in order to provide information to him, but there probably would be no evidence of that even if it were true.

Obama, the New York Times and the rest of the opposition could have responded to Trump's charge by denying that Obama had tapped Trump while conceding that some around him had been tapped as part of a legal investigation, a fact reported a month or more before Trump made his charge. They could even have suggested that confusing the two claims was evidence of Trump's weak hold on reality. Perhaps some did. But the overall impression of their response as I saw it and, I suspect, as most others saw it, was that it amounted to "That's absurd, Trump must be crazy, nothing of the sort happened."

At which point Trump's supporters could respond that something of the sort, even if not exactly the same thing, had not only happened, it had been reported in the New York Times. That might not convince someone paying close attention to the two claims and the differences between them, but not many voters would be. Making people less willing to trust the mass media, especially when they are criticizing Trump, is a win for Trump.

When I offered arguments along these lines in a Facebook comment thread, the response I got, at least implicitly, was that by denying Trump's incompetence I was defending Trump and that Trump defenders were not worth listening to. My response, that assuming your opponents are stupid when they are not is a very dangerous mistake, fell on deaf ears.

---

An earlier version of this argument.

Division Rules and Assortative Mating

 [Warning: This post assumes the reader understands the Principle of Comparative Advantage. Those who don't will find an explanation here.]

Assortative mating is the pattern of like partnering with like. A standard example is the tendency of men with college degrees to marry women with college degrees. It came up in a talk I recently heard in the rather different context of the tendency of elite law firms to have partners at similar levels of ability. To an economist familiar with the principle of comparative advantage that looks like the opposite of what we would expect, which started me thinking about why, in different contexts, assortative mating would or would not happen.

Consider a greatly simplified model of the marriage market in a world with the traditional division of labor between household and market production but without the traditional sexual division of labor. The world contains four people, two men and two women. One of the men and one of the women are high income earners—think of them as the college graduates. The other two command lower incomes on the market but are equally good at running a household. The two high income earners can each make $100,000/year, the two low income earners can each make $40,000/year. Any of them can produce household services, cooking, laundry, rearing children, whose cost if purchased on the market would be $60,000/year.

With assortative mating, the two high income earners marry each other. Both work, they purchase household services and are left with $140,000/year. The other pair also marry,  one works and one stays home, and they have an income of $40,000/year. The combined income for the two couples, net of the cost of buying or producing household services, is $180,000/year.

Suppose, instead, that each high income earner marries a low income earner. The high income earner works, the low income earner stays home. Combined income of the two couples, again net of cost, is $200,000/year.

The pattern is a familiar one in the context of trade. One partner has a comparative advantage in earning income, the other in household production. Dividing who does what accordingly can make both better off. The implication of that simple model is that men with college degrees should marry women without them and women with college degrees should marry men without them. That is not what actually happens. Why?

In the case of marriage, there are a number of possible explanations. Many couples meet in college. Educated men and women may get along better with educated partners. Educated men and women may prefer that their children be reared by an educated housewife or househusband.

I want to offer another explanation which is not limited to marriage, one that suggests why pairing would be assortative in some contexts, possibly including law firms, and not in others.

Add one more assumption to my model—that the income of each couple is split evenly between them. With assortative mating, the high earning couple get $70,000 each, the low income couple get $20,000 each. With mixed mating, each individual gets $50,000. As long as income has to be split evenly, the situation is stable, since neither of the high earning individuals would want to switch. Without that assumption it is unstable, since a switch to the mixed mating pattern with a 75/25 division of income in each couple makes everyone better off.

Generalizing from the simple model, we would expect to see assortative mating in contexts where differences among potential partners are large and pairs, or larger groups, are constrained to a roughly equal division, because the loss to the high value partner of having to share equally with the low value partner(s) outweighs the benefit of a more efficient division of labor. We would expect the opposite pattern where potential partners are free to vary the division between them.

Consider again the case of marriage. Husband and wife live in the same house, share the same meals and vacations. That limits, although it does not entirely prevent, an unequal division of consumption. Further, once they have been married long enough to have children they are locked into a bilateral monopoly bargaining situation in which any contract over the division of consumption is largely unenforceable.

Consider next the law firm. A law partnership is a worker run firm, although one where control is limited to a subset of workers. That fact limits the degree to which an unequal division can be maintained among the voting partners. So the prediction is that voting partners will be unwilling to recruit others who are substantially less productive than they are and unable to recruit others who are substantially more productive than they are. They will take advantage of comparative advantage by hiring non-voting members of the firm, whether non-partner attorneys or secretaries, who will receive a different, usually lower, share of the firm's income.  

Finally, consider the issue of immigration. It is in the interest of the population of a high income, high skill country such as the U.S. to admit low skill, low income immigrants due to the usual principle of gains from trade. For people who understand the relevant economics, the chief argument against doing so is that poor people will come not to work but to collect welfare. The solution offered by supporters of free immigration, the solution I offered more than forty years ago in my first book (Chapter 14), is that welfare should not be available to new immigrants. The response to that solution is that immigrants will eventually become citizens, at which point they will vote for income redistribution in their own favor. Hence, it is argued, we should admit skilled immigrants from India and China to work in Silicon Valley but not unskilled Mexicans to pick crops.

How accurate the final step in the argument is in the real world of 21st century America is not clear, but its logic is the logic I have offered for when assortative mating will or will not happen.