Monthly Archives: August 2016

Rights and Consequences

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I read the latest (final? I hope not, because I have some critical comments) draft of Tyler Cowen’s Stubborn Attachments, which he describes as follows:

I outline a true and objectively valid case for a free and prosperous society, and consider the importance of economic growth for political philosophy, how and why the political spectrum should be reconfigured, how we should think about existential risk, what is right and wrong in Parfit and Nozick and Singer and effective altruism, how to get around the Arrow Impossibility Theorem, to what extent individual rights can be absolute, how much to discount the future, when redistribution is justified, whether we must be agnostic about the distant future, and most of all why we need to “think big.”

One of the issues that Tyler raises that I think ought to be resolved somewhat differently is that of the role of rights in consequentialism. In a sense, basic rights, like property rights, dangle awkwardly in a consequentialist philosophy. If I can create more happiness by giving your corn to someone else, why should you have the right to keep it?

I am inclined to give a Hayekian account of why you should have the right to choose whether to eat, plant, trade, or donate your corn. That is, you are likely to know the best of use of your corn, including the best moral use of it, thanks to your local knowledge. Thus, the consequences are likely to best if you make the decision rather than I make the decision.

In fact, in cases where we think that you are not competent to make the decision (a child, or someone with severe mental deficiencies), we do not treat property rights as absolute. Thus, our intuition about rights is tied up with the issue of how much we respect the person’s local knowledge.

One view of moral philosophy is that our intuitions are basically right, and it is the philosopher’s job to come up with a system of thought that accounts for and perhaps codifies our intuitions. While I would not go to this extreme, it is always something to consider in moral philosophy.

On the other hand, if you told me that economists’ intuitions about what constitute high-quality research are basically right, and the job of economic epistemology is to come up with a system of thought that accounts for and perhaps codifies our intuitions, I would be inclined to object. But perhaps I am willing to say that it something to consider in economic epistemology.

Does War Improve Cooperation?

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I review Peter Turchin’s book from 2005. My final paragraph:

For libertarians, these are crucial questions. In order for markets to function well, they must be embedded in cultures that promote pro-social behavior and are conducive to trust. If the absence of external conflict weakens the bonds that prevent internal conflict, then the libertarian goal of peaceful cooperation in all domains will prove elusive.

Coincidentally, the Journal of Economic Perspectives that just came out has an article on this topic by Michal Bauer, Christopher Blattman, Julie Chytilová, Joseph Henrich, Edward Miguel, and Tamar Mitts. They conclude,

Most of the papers in this emerging literature agree on one central matter: that the data strongly reject the common view that communities and people exposed to war violence will inevitably be deprived of social capital, collective action, and trust. Across the 16 studies from economics, anthropology, political science, and psychology, the average effect on a summary index of cooperation is positive and statistically significant, if moderate in magnitude.

A More Timely Measure of Rent Inflation

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Adam Ozimek writes,

As I proposed in my work, CoreLogic utilizes an approach that mirrors the S&P/Case-Shiller house price index. This approach measures current market prices by using only new leases, and controls for housing quality by tracking the same units over time.

Pointer from Tyler Cowen.

The standard BLS measure is more like a smoothed lagging indicator. Relative to the BLS path for rental inflation since 2008, Ozimek’s revised path shows inflation dipping by more early in the recession and then climbing by more during the recovery (should I say “recovery”?).

Unlike Ozimek, I see this as having zero impact for the macroeconomic theory of the Phillips Curve. That theory deals with the rate of wage change, and changing how you measure rent inflation does not change the history of wage inflation. To show a meaningful trade-off between wage growth and unemployment in recent years, you are going to have to find another data-massaging trick.

Of course, I admit that I used consumer prices in my recapitulation of Phillips Curve history. If I were extending that essay today, I would say that the Phillips Curve died again in 2008-2016, which is another period in which conventional macro does poorly. The Kling/FischerBlack view of inflation, which is not confounded by recent data, is presented in my latest book.

Zoning After 100 Years

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Justin Fox writes,

Fischel has a long list of explanations for this intensification of zoning that I won’t go into here, other than to mention the one that drives me the craziest — the dressing-up of self-interested economic arguments in the language of environmentalism and morality.

Pointer from Mark Thoma.

My thoughts:

1. In urban areas, there are important spillover effects from development. Your new building might block my view, create noise or congestion, and so on. In theory, this would be resolved in a Coasian manner–either you compensate me for the harm that you do or I compensate you for not allowing you to build. But in practice the mechanisms for Coasian bargaining do not exist. Hence, these spillovers are dealt with by the political process.

2. Land-use regulation is a major source of political power. If the teachers’ unions ultimately determine who can and cannot be elected in Montgomery County, Maryland, then the ability to fund a campaign comes from developers. The developers are effectively bribing the county council to get their projects approved.

3. I am not sure what the free-market equilibrium looks like for major cities. Perhaps there would be a bit more high-rise apartments built and somewhat less upward pressure on prices and rents. But do not be so sure that the effect would be large.

4. Economists and pundits look at the higher incomes in San Francisco and New York relative to small-town Ohio and see missed opportunities caused by zoning restrictions. I think that these observers under-estimate the differences in lifestyle preferences.

The WikiLeaks Story You May Have Missed

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In its coverage of the story of the leaks about the Democratic National Committee and Bernie Sanders, the Washington Post has covered many angles, including the possible preference of Russia for Mr. Trump being a factor in the leaks. However, the WaPo has had no coverage of one interesting fact to emerge, which is the cozy relationship between two of its prominent staffers and the DNC. Even if you think that no journalistic ethical boundaries were crossed, just the tone of the relationship is smarmy. It makes me want to say to the journalists and the Democratic staffers, “Get a room.”

As for the DNC itself, I am reminded of Richard Nixon’s Committee to RE-Elect the President, which went by the appropriate acronym, CREEP. Given the dirty tricks that the DNC contemplated against Mr. Sanders, imagine what they have been doing to Republicans.

UPDATE: It appears to me that the Post is (a) really going out of the way to stress the Russia angle and (b) that this is probably in coordination with the DNC. But I never thought that linking in the public’s mind the words “Russia,” “email,” and “Clinton” was a good plan for the Democrats. Mr. Trump seems to agree.