New EconStories Video--Deck the Halls with Macro Follies

Our friends at EconStories have produced another hit: "Deck the Halls with Macro Follies."  Enjoy!

Government's "Cold" Reality

Warning: You may be reading the words of a criminal.  The rate at which the government is eroding our liberties is striking and by the time you read this post, you may be breaking the law.  You have been warned...

There may be some of you who have noticed that my postings are done this semester.  (If you haven't, that's not a big deal.)  The reason why my postings have dropped off is because I have been ill for most of the semester.  I think that I may have been well for 2 -- 2.5 weeks  over the past 15 weeks.  I think that there are several factors, like the children going to a school for the first time.  (Last year, we home schooled.)  Nevertheless, when one in the family is starting to begin the path of recovery, another of one picks up something new and then I catch it.  

Today, I have a nasty cough.  My son also has a persistent cough.  This weekend my wife has come down with something new--a sore throat and a fever.  (I am looking forward to getting that one next!)

As the least sick driver in the house, it is my duty to go out and get the medicine.  And here we come to it.  My state, North Carolina, has decided that we are not to be trusted to buy pseudophedrine HCL.  First, we must show IDENTIFICATION to be registered in a statewide system.  We don't have to show ID in Presidential elections where we choose who will be the most powerful man on the planet, but we have to present ID for a stuffy nose!  Second, the amount we are allowed to buy is limited.  There were two boxes I was considering.  The first was just straight up pseudophedrine.  The other box was a mix of pseudophedrine and a sinus pain reliever.  My wife frequently has sinus troubles and I thought that she might like that.  So I, as a normal consumer, chose both.  

And then the machine chimed.

I would be breaking the law to buy two boxes!  Oh heavens!  How dare I want something that deals with multiple symptoms and something else that only deals with a stuffy nose.  I know!  How dare I think that I shouldn't over-medicate myself while providing multi-symptom relief for my wife!

The government can explain how they are just looking out for me.  They can explain how through this law they are cracking down on Meth makers and users.

All of these reasons are really irrelevant.  What it comes down to is the relation between the individual and the state.  Who owns my body?  Am I sovereign over myself?  The Classical Liberal/Modern Libertarian says that as long as I am not violating another's rights, then I should be free.  I should have control over what I put into my own body.

The political landscape is changing.   For the past several years, it was argued that the U.S. is a Center-Right country.  I think that most people live their lives conservatively.  I think that most people want the national government to be fiscally responsible and fiscally sound.  I also think the perception on individual rights is on the rise.  In the last election (Nov. 2012), marijuana for recreational use has passed in a few states.  The traditional American position was a fairly Libertarian one.  Historically, we don't see government interfering with personal choices until the Progressive Movement joined with the Prohibitionists. 

The lesson learned in the 1920s was that while alcoholism is bad, making alcohol illegal was worse.  Being addicted to drugs is bad, but drug war is worse.  It is time to stop the Nanny State.

It is time to have a serious discussion on the fundamental nature of the relationship between the individual and the State.  Does the state derive its powers from the people?  Or do people derive their rights from the State?  Are individuals sovereign to be masters of their own lives?  Or is the State the master of us all?

The cold reality is that the state is force.  Before a government can ever do, it must first take.  It is either force in action or it is the threat of force.  It cannot make us better people.  It cannot make us a more moral people.  It cannot make us thrifty, hard-working and generous.  

The choice that every generation must answer is how much government shall we have.  To sit on the sidelines is to make a choice.  To not think about it, is to make a choice.  To not read and engage is to make a choice.  To conclude, I turn to the words of the great Austrian economist, Ludwig von Mises:

Everyone carries a part of society on his shoulders no one is relieved of his share of responsibility by others.  And no one can find a safe way for himself if society is sweeping towards destruction.  Therefore everyone, in his own interest, must thrust himself vigorously into the intellectual battle.  No one can stand aside with unconcern: the interests of everyone hang on the result.  Whether he chooses or not, every man is drawn into the great historical struggle, the decisive battle into which our epoch has plunged us.

I, Pencil: The Movie

Our friends at the Competitive Entreprise Institute has just put "I, Pencil: The Movie" up on YouTube.  I invite everyone to take a look.

Teaching Austrian Economic Theory

This weekend I had the pleasure to speak before the 12th Annual Economics Teaching Workshop co-sponsored by UNC-Wilmington and Cengage Learning.  My topic was "Teaching Austrian Economic Theory."  The attendees were professors and instructors (with a few grad students thrown in for flavor).  I was happily surprised to see several hands go up when I asked how many have heard of Austrian Economics.  

When I was asked to give the talk, I was given a wide latitude about what I could say.  While having such discretion is a wonderful thing, I found that I had very little idea who my audience would be.  After thinking about it, I realized that I had to do the following:

1. Introduce and explain what Austrian Economics is.
2. Show how it differs with the mainstream.
3. Show how to teach it.
4. Show why it is better.
5. Do it for enough topics to be relevant.  (I chose to cover value theory, capital theory and business cycle theory.)
6. And do it all in under an hour!

To be certain I talked quickly.  I don't think that I went too fast, however I did promise to post the PowerPoint presentation of the talk so that they weren't scrambling to write down a bunch of stuff. To fulfill that promise here are the PowerPoint notes.

Once again, I would like to thank my hosts for the event.  In particular Rob Burrus and Pete Schuhmann of UNC-W and John Carey of Cengage.

Business Cycle Talk at Furman University by Cwik

Recently, I had the pleasure to give a talk at Furman University to the group, "Conservative Students for a Better Tomorrow."  The talk was, "It Didn't Have to Be This Way: From the Great Depression to Financial Meltdown."

There were about 70 students in attendance and several sat without chairs.  I commend the group for gathering so many students to listen to an economics lecture on the night that competed with the first Presidential Debate.

As you can see, they are a good looking group...

Additionally, the lecture was recorded.  It was split into two parts.  Here is Part 1...

Here is Part 2...

Again, I want to thank Furman University and the student group, Conservative Students for a Better Tomorrow, for their hospitality.

Austrian Economics Forum Fall 2012 #1--Caldwell on Hayek

Sadly, this year started off with me getting rather sick, and as a consequence, I have not been able to update the blog as I would like.  Fortunately I am on the mend and new posts will be forthcoming soon.

The first AEF event at NC State University had Hayekian expert Bruce Caldwell as the speaker.  Unfortunately I was unable to attend, however Alex Gill, graduate student and coordinator of the AEF, was able to write up his notes of the event.  Here are his words...

Talk on "How to do Archival Research" with Caldwell's work on Hayek as the motivating example...

Caldwell began by explaining how his interest in methodology led to an interest in the Austrian school, which led to the Hayek's challenge project.  He became interested in the Austrians because disputes with socialism and positivism shaped their arguments.

 

As part of the Hayek's Challenge project, he went to the Hayek archives at the Hoover Institute at Stanford and met then current general editor for Hayek, Bartley and his partner Stephen Kresge.  He quickly learned the importance of personal relationships, both between the researcher and those he encounters as well as the relationships between the subject of research and the people the researcher interviews or otherwise encounters in the course of research.  

 

When Bartley died, the editorship of Hayek's collected works moved to Kresge, who soon requested that Caldwell take it over.  Caldwell's position changes from having to ask for permission to quote unpublished material to being in charge of who has said permission (and for what). 

 

Dr. Douglas Pearce at this point asked Caldwell to clarify rules on quoting from unpublished letters.

 

Caldwell explained that one can paraphrase unpublished material without the editor's permission, but to quote directly or extensively one needs the general editor's permission.

 

Prof. Caldwell went on to explain that being general editor requirs fundraising (for instance, to hire volume editors), a skill he learned by doing.  He credits part of his career success to fundraising talent.

 

Caldwell then began discussing Hayek's divorce, both to reinforce the point about personal relationships and to make a point about following through to correspondents' archives (to get the other halves of conversations).  He learned that Hayek's father (a medical doctor and botanist) was highly nationalistic and embraced many of the opinions associated with Nazism, as did Hayek's brother.  His mother blamed his father for making F.A. a liberal, as she believed said liberalism was a reaction to the father's nationalism.  Without following through to correspondents' archives, Caldwell never would have found this fact out (and others), which would have changed the story he will end up telling in the forthcoming biography, especially with regard to Hayek's family relationships.

 

Hayek's archives include notecards he made while studying the literature (where he would list quotes from others and citations, etc.)  Through the painstaking process of reading many boxes of these notecards, Caldwell gained insight into Hayek's thinking about his Nobel prize and the person he shared it with (Gunnar Myrdal).  Caldwell was previously curious about Hayek's apparent change of tone beginning in this period (from relatively passive and softspoken to more aggressive and willing to attack others), and he realized that Hayek in this period was incensed that he had to share the prize with Myrdal, and that furthermore Myrdal disparaged him (Hayek) and later Nobel recipient Friedman publicly, which to Hayek displayed a complete lack of class and professionalism.  Hayek was furthermore upset that his Nobel address was refereed when submitted to Economica, a journal Hayek used to edit while he was at LSE.  He was offended that it was not accepted as is without an editing process.  So in this period (1970s) Hayek struck back, and began, for instance, attacking Mill (unfairly, according to Caldwell's interpretation) and Mill's interpreters (more fairly, perhaps).

 

Caldwell met with Hayek's children Larry and Christine, and obtained much of interest from them.

 

Dr. Lee Craig then asked, "Were Hayek's children or wives ever interested in his work/economics?"

Answer (paraphrased): No

Dr. Roy Cordato asked, "Where did Hayek place himself intellectually among other Austrians?"

Answer: He was a student of Weiser, but called Mises his "mentor."  He wasn't too close personally with Mises and Popper, though intellectually these two were the closest to Hayek.

 

Dr.Roy Cordato then asked, "Are Hayek's mentions of public goods, welfare economics and the like an artifact of his studying under Weiser?"

Answer: Not that I see.

 

Tim G. then asked, "Is there a connection between Hayek's economics and The Sensory Order?"

Answer: There is not a connection between Sensory Order and Misesian economics.  There is a similarity between Hayek's capital and cognitive theories, though (both self-organizing systems).  Current science is  largely in accord with Hayek's psychological theories.  Read the book and see what you think (the book is hard to understand).

 

Secondary Consequences--Blackmailing Batman

One of the most important concepts that we stress in economics is that of secondary consequences.  Too often, we simply focus on the immediate, on the short-term, on what happens to a particular group.  Economics teaches us that we need to go beyond a narrow focus.  In the movie "Batman: The Dark Knight," an employee discovers Batman's secret identity and thinks that he should be paid $10 million a year for the rest of his life to keep quiet.  Here is the scene:

The reason why this scene is funny is because the extortionist has not thought his proposition through.  He hasn't looked beyond the immediate.  What will Batman's reaction be to someone who wants to release his secret?  What will happen to him?  Will he ever be able to enjoy that money?

Earlier this week I attended my Town's Council Meeting.  There was a proposition to limit Electronic Gaming Businesses by saying that these businesses had to stay at least a quarter mile away from each other.  What they are failing to do is think about the secondary consequences.  Let's set aside the issue of whether such a rule will achieve its purpose--to frighten away such businesses from the Town of Garner.  (It won't.  It's like preventing Burger King from locating near a McDonald's because we fear that people are getting too fat.) 

The secondary consequences of creating these spacial regulations is that the town is carving out islands of monopoly.  Each business gets its own territory and all competitors are prevented from encroaching on your business.  The cost of enforcing this rule is picked up by the government.  It's a sweet deal for those already in business.  As an island of monopoly, the business doesn't have to compete as hard and so the product to the consumers is inferior and at a higher price.

So if the Town Council hates competition and wants to stick it to the consumers, then by all means let's pass this rule.  Or perhaps, we should think it through before we go up against Batman.