Monthly Archives: December 2014

The Greater FOOL Theory

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Peter Wood writes,

The passivity of this cohort when faced with a hard core challenge by those intent on replacing liberal education with illiberal social control is, in that sense, a troubling mystery. One way to resolve it is to conclude that the “libertarian moment” in higher education is mostly an illusion. Is it possible that the small “l” libertarians are themselves not really libertarian at all? Could they be simply the crowd that follows where the progressives lead?

Read the whole essay to get the context.

One of my still-gestating essays concerns what I call FOOL, the Fear of Others’ Liberty. My theory is that the desire for government, or more generally for “illiberal social control,” comes from the tendency of people to fear what others will do with their liberty. You are willing to see liberty stifled, especially when you think it will be others’ liberty that will be stifled much more than your own. I am inclined to think that FOOL explains a lot.

Technological Obsolescence of Labor

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Timothy Taylor writes,

when I run into people who are concerned that technology is about to decimate U.S. jobs, I sometimes bring up the 1964 report. The usual response is to dismiss the 1964 experience very quickly, on the grounds that the current combination of information and communications technology, along with advanced in robotics, represent a totally different situation than in 1964. It’s of course true that modern technologies differ from those of a half-century ago, but that isn’t the issue. The issue is how an economy and a workforce makes a transition when new technologies arrive. It is a fact that technological shocks have been happening for decades, and that the U.S. economy has been adapting to them. The adaptations have not involved a steadily rising upward trend of unemployment over the decades, but they have involved the dislocations of industries falling and rising in different locations, and a continual pressure for workers to have higher skill levels.

Suppose we make some simple assumptions:

1. Leisure is a normal good.
2. Skills are heterogeneous and adapt slowly to changes in technology.

The prediction I would make is that we would see a lot more leisure. For those whose skill adaptation is adequate, that leisure will take the form of earlier retirement, later entry into the work force, or shorter hours. For those whose skill adaptation is inadequate, that leisure will show up as unemployment or reluctant withdrawal from the labor force.

I think that if you look only at males in isolation, you will see this in the data. That is, men are working much less than they used to. For some men, this leisure is very welcome, but for others it is not. In that sense, I think that we should look at the fears of the early 1960s not as quaint errors but instead as fairly well borne out.

For women, the story since the 1960s is different. In the economy as a whole, the share of labor devoted to preparing food, washing clothes, and cleaning house has gone down. Also, a higher share of the remaining work in these areas is coming from the market, via restaurants and cleaning services, rather than from unpaid female labor. The upshot is that, from the 1960s to about 2000, we saw a continuation of the trend for women to increase their share of market work and reduce their non-market labor. So, while men were increasing their leisure, women were increasing their market work. Combining men and women, you would not see a decline in market work.

It seems that around 2000, the trend for more market work by women reached its peak, making the trend toward technological unemployment more visible. From now on, what was happening to men before will be what happens to the total labor force. That is, leisure will go up, and some of it will be less than voluntary.

I might suggest also that the distribution of leisure is becoming increasingly distorted by the welfare state. Some people have too much leisure, in part because implicit tax rates for low-skilled workers are high, and in part because we over-subsidize leisure among healthy seniors. Some people have less leisure than they might otherwise enjoy, in part because they are working to support those with too much leisure.

The Sociology of Economists

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Marion Fourcade, Etienne Ollion, and Yann Algan write,

we document the pronounced hierarchy that exists within the discipline, especially in comparison with other social sciences. The authority exerted by the field’s most powerful players, which fosters both intellectual cohesiveness and the active management of the discipline’s internal affairs, has few equivalents elsewhere.

Pointer from Tyler Cowen. As I describe in my macro memoir, Stanley Fischer, now vice-chairman of the Fed, controls a remarkable proportion of the sub-discipline of macroeconomics. For better or worse–and I strongly believe it is for worse–he has decided who is a macroeconomist and who isn’t.

Paul Krugman’s take:

It has been all too obvious that there are people with big reputations who can push equations around but don’t seem to have any sense of what the equations mean.

My only quarrel with that statement is that I believe it applies to equation-pushers from saltwater institutions as well as those from freshwater institutions.

Macroeconomics is Infinitely Confirmable

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John Cochrane writes,

Keynsesians, and Krugman especially, said the sequester would cause a new recession and even air traffic control snafus. Instead, the sequester, though sharply reducing government spending, along with the end of 99 week unemployment insurance, coincided with increased growth and a big surprise decline in unemployment.

Sometimes, I think that there are macroeconomists (Krugman is not the only one) for whom there is no path of economic variables that could ever contradict their point of view. They remind me of the climate scientists who tell us that Buffalo’s Snowvember came from global warming.

Macroeconomics is infinitely confirmable because of its high causal density and lack of controlled experiments. The macroeconomist has enough interpretative degrees of freedom to twist any pattern of economic activity to fit his or her priors.

In theory, you could ask macroeconomists to place bets on their predictions. However, that, too, would run afoul of causal density. If you make unconditional predictions, then an oil shock or other event could make you right or wrong more or less by accident. And the conditional forecasting space gets very complicated very quickly.