I can't see how it is more pleasant to throw your cup carelessly on the ground than to walk to the trash can and throw it out -- that walking out of your way increases the amount of time you spend in the park with its beaucoup utility points.
there are a lot of analogues to this in ordinary life.
for instance, i get the greatest pleasure from reading comments threads with intelligent, well-reasoned comments.
however....
kid bitzer is banned (for the collective good).
Honestly, I'd be somewhat surprised if many academic economists saw a need for this book. Failures due to externalities such as the Tragedy of the Commons have been well known and openly spoken about during the (admittedly very short) time I've been around high-end economists.
It's good that these things are being more widely published if they were previously missing from the public discourse, but anyone who claimed some knowledge of economics yet was ignorant of these theoretical results should hang their head in shame. This is the entire basis for Pigovian taxes, which seek to limit tragedy of the commons by forcing someone to pay so much for any pollution that everyone else is equally happy to see them pay the money instead.
4: That is a good point, Clownae: who bans the banners?
3--
look, the right collective-action solution is simply to ban me from commenting, not from reading, right?
and that makes me happier, too.
It's not supposed to be original academic work, it's a good solid piece of popular economic writing that has strong policy implications. I hear enough complaints from the economically literate about popular ignorance that it seems odd to reject a book that popularizes some basic concepts as unnecessary.
Jill should have a kid and take him camping and let him become a "junior ranger." PK has taught me to be much better about not only carrying my trash until I find a garbage can, but also about picking up other people's trash and toting it until I find a garbage can.
Of course the whole camping and junior ranger things are totally about government intervention.
5: Isn't on of the underlying contention (correctly or no) behind a lot of these threads that academic econmists are largely failing to effectively engage in both the public discourse and the making of policy in precisely these ways?
This is the entire basis for Pigovian taxes, which seek to limit tragedy of the commons by forcing someone to pay so much for any pollution that everyone else is equally happy to see them pay the money instead.
Except that the Pigovian approach was -- as far as theory goes -- killed by the preferable interpretation of the Coase Theorem, or at least a specific reading of it: if transaction costs are minimized then the most efficient allocation of costs and benefits will obtain regardless of legal entitlements or rules. Coase himself emphasized that you could never really escape transaction costs, but many of his followers read his argument as saying that the less regulation there was, the better things would be.
8: Please don't take me wrong, I don't mean to condemn this book as popular writing. It's great if more people become aware of the ideas of externalities and a lot of the cooler results in policy economics. I was just trying to address this point:
It's interesting that the author isn't an academic economist -- one wonders if the social pressures we've been talking about within the discipline have something to do with that.
I don't think it's social pressures. In my opinion, it's more likely to be due to high-level academics simply being unaware of how poor the public discourse is. I was entirely unaware, and I don't even count as an academic.
9--
yeah, hard to say whether BSA and other jugend groups train 'em to be more happy with gov't intervention or to be more ruggedly individualistic and to value non-gov't associational groupings.
i mean, the pederasty goes well on either reading, so we can take that for granted.
12: Oh, and it's the sort of popularization that often is done by someone outside the field; while there are pop-science writers who are working scientists, there are certainly others who aren't. I'm not claiming that this is strong evidence that the Econ Mafia is keeping the truth from getting out, just wondering whether an econ professor who thought about writing a book like this would reject it as possibly damaging to his career.
The only trash I don't feel unpleasant about dropping on the ground, is a cigarette butt. Back in college a friend expressed a similar feeling to me and said that was one of his reasons for not smoking, that he didn't like to litter and un-self-conscious littering was part and parcel (in his experience and in mine) of smoking. Seriously, anything else, it just feels nasty not to carry it along to a trash can.
JAC is correct. These are not ideas that right-wing economists need to be reminded of. The point is that right-wing economists are subsidized by corporatist "think tanks" and monopolize the public discourse with their "Excuse me for believing that the law of supply and demand still apply, but I think I'll trust the magic of the invisible hand over the ham-fisted clumsiness of unelected congressmen and bureaucrats" that's intended to make people feel foolish for thinking the government can intervene in markets to make them serve people well. Economists who doubt the efficacy of Ayn Rand's policy prescriptions are underrepresented in the public discourse.
11: Yeah, but that's even addressed in the article I linked. Coase Theorem certainly doesn't apply in the case of public goods or commons, since it would be impossible to come to terms with all involved and most contracts and laws are poorly set up for accomodating indirect effects.
10: That's a good point. Most academics who have any hand in politics typically want a fairly indirect, advisory role. Some otherwise respectable economists certainly seem very unfortunately selective in which efficient policies they support while in official roles. Typically it looks like the conversation gets hijacked by the relatively ignorant who've read a couple interesting articles, and the economists I've known haven't been the types to jump into the fray of a non-academic argument.
15: The casual dropping of cigarette butts drives me nuts. What makes (some) smokers think the rest of us want their litter all over the place?
Well, they are on fire. Most small pieces of litter you can tuck in a pocket or something until you're near a trash can -- a butt is more difficult that way. So, annoying but not inexplicable.
Coase Theorem certainly doesn't apply in the case of public goods or commons, since it would be impossible to come to terms with all involved and most contracts and laws are poorly set up for accomodating indirect effects.
This is all true, but as a matter of public rhetoric you will typically not see economists talk like this in policy settings.
Cig butts, I think, read as biodegradable (though of course the butts themselves aren't). They're bad to drop, though, both b/c of the foam in the butts and b/c nicotine's bad for birds, etc.
The reasons people drop them are: there are far fewer ashtrays than trash cans (and you don't want to throw a lit butt into the trash); it's hard to put them out with your hand; they *are* kinda yukko to carry around looking for a trash can with.
But agreed, one should replace the extinguished butt in the pack for disposal later, or stick it in your pocket or something.
I've been meaning to pick this book up, actually, so good to hear that it's worthwhile.
Just one clarification on what I take to be the "libertarian moral argument." Libertarianism as I understand it is a political theory about the desirable level of state coercion. There are (at least) two libertarian arguments for minimizing coercion by the state 1) state coercion is immoral 2) state coercion has net bad effects. Most libertarians believe both. Both these claims can remain powerful even if we believe that people often will not act in their own interests, or get 'locked in' (via network externalities, prisoners' dilemmas, etc.) to behaviors that do not represent their 'true' preference.
I dunno... the example described seemed like a pretty orthodox bit economic reasoning to me, of the sort that lead to water management districts or homeowners associations or stuff of that nature. I agree that someone angling for a job at the AEI might not write it, but I don't see how it would hurt the chances of an academic career, per se.
agreed with #5. The existence of externalities isn't controversial, and environmental/tragedy of the commons situations aren't news.
I do have giant problems with economists' approach to certain issues related to environmental regulation:
(1) the idea that we have to do a cost benefit analysis for every regulation, and put a dollar value on things that really aren't quantifiable--e.g. the "value of a statistical life", in which economists debate various ways to measure the dollar value that people place on lives saved by a policy. I say that there is no objective way to put that into dollars; that economists who attempt to do so are making a value judgment that's outside their expertise; and that the measures that economists tend to choose are slanted away from situations where people CONSCIOUSLY are deciding how much $ to spend to save or preserve lives.
(2) economists tend to dismiss policy preferences about environmental or any other decisions that don't affect you personally--they are willing to concede the amount of litter in Central Park affects your utility & is a legitimate policy consideration, but far less willing to make the same concession about, say, the preservation of wilderness in Alaska that you have no intention of ever going to visit. There's some derisive term they use in the literature for strong policy preferences about issues that don't personally affect you: "fuzzy warmth", or "warm fuzzies", something like that....well:
(A) people actually DO care about those things, empirically. It does, in fact, increase my utility to know that wildernesses I am too much of a wuss to ever travel to exist. What happened to the city of New Orleans did, in fact, decrease my utility even though I hadn't ever been there, as will what happens to Bangladesh if we don't do anything about climate change. Who is Milton Friedman or Richard Posner to tell me that those preferences of mine don't matter whereas my preference for a certain brand of deodorant does?
(B) I can see an argument that "warm fuzzies" are outside of economics' competence to measure, but that just goes to show that economic cost benefit analyses can't accurately measure everything that matters, and shouldn't be the only thing driving policy decisions.
But anyway, I don't think this book (or at least the idea outlined here) is controversial. I think there's the same problem in economics as in a lot of fields: the liberals are actually moderates, and they want to be purely objective scientists/social scientists/journalists/etc.; they are not consciously trying to counter the ideologues on the right, and wouldn't bother trying to write a book like this.
That said, there is, in fact, a very respected economist who attacks President Bush from the left every three days on the NY Times op ed page, and is read by far more people than will read this book. What figure on the right is as influential as Krugman?
11: The other condition for the Coase Theorem to hold, besides zero transaction costs, is that property rights be well-defined.
In situations where property rights are not well-defined, you'll find even conservative economists advocating Pigovian taxes.
Fair enough, I shouldn't have called the argument rebutted the libertarian moral argument rather than a libertarian moral argument. But I've certainly seen the "Who are you to think you can make better choices for people than their own revealed preferences through individual decisions" argument made, and this book addresses that argument neatly.
What figure on the right is as influential as Krugman?
Friedman.
A rational utility maximizer will always throw the cup on the ground.
Probably not. Probably the rational utility maximizer would throw his/her cup on the ground 3 days out of every four (or so, depending on how you define the problem) and then pick them all up on the fourth and thrown them all away. This maximizes the average utility. Do it less frequently than that and the cup buildup kills the average; more frequently and the expensive (utility-wise) trip to the trash kills the average.
But then the problem gets more complicated if there are other maximizers in the picture.
Hey, good to see you here. I think the example as structured assumed daily street-sweepers; buildup of litter over time wasn't considered.
Examples like the one in the post never make sense to me. Why are we not factoring in Jill's awareness that throwing her cup on the ground makes others more likely to do so? Or the "utility" she gets from being superior to litterers? The various definitions of "rational" always seem pretty silly.
31: Because those other factors may or may not exist, depending on the individual circumstances. Does she live in a society where littering is frowned on, so she does feel superior? Does she believe that her littering decision affects other people's? She might, or she might not. The point is that you can set up a not-improbable situation where you need to coordinate your behavior with that of other people (which is what both of your questions suggest, just informally rather than formally) to get to a desired outcome -- individual utility maximizing won't get you there.
26: Right, that's a bad simplification. People's behaviors don't always indicate revealed preference (counter-example: PD). The better argument is that it is dangerous/immoral/inefficient to delegate the power of determining revealed preference to others, much less to institutions which have coercive power and are hard to exit. Such delegation -- at least in my view -- ends up being to a degree inescapable (the classic example being the family).
I believe the park example to be straight out of Mancur Olson, one of the godfathers of economics. Nonetheless, for some reason I've always gotten the impression that academic economists don't take collective action problems very seriously, on the whole (NB, I'm a social scientist but not an economist).
This might have to do with a certain preference for order on the mathematical/formal side. Efficient equilibria are usually unique, whereas in cases that exhibit collective action problems there are usually multiple equilibria in the same space, with no clear way of determining which one should hold in particular circumstances.
The latter has generated a literature on what's called equilibrium selection---how to determine which outcome holds given certain parameters. This work is usually based on stylized experiments with actual human beings, not closed form solutions to optimization problems. This probably generates some downward publication bias, in part because there's more investment involved in the equilibrium selection work (and a very different sort of effort), and in part because economics kind of fetishizes formal precision.
No, I think he meant P. Diddy, whose music is impossible to like and yet much purchased.
Okay, I'm slow, I just figured out he meant Prisoner's Dilemma.
I knew it was either Prisoner's Dilemma or Pansy Division but didn't want to embarrass myself by guessing.
Sean Combs is such a little punk. How he became a star is simply unfathomable to me.
A bunch of consumers got together, see...
What about the solution of moving the garbage can?
31 is what gets me about economics generally, and is why I say more and better popular economics books would be a good thing. I'm sure that economists factor in shit like guilt and the categorical imperative, but one never sees it actually addressed.
and then pick them all up on the fourth and thrown them all away
This is where "rational" loses all connection to reality.
moving the garbage can?
Or putting it on wheels. Maybe making it chase you?
There's a nice analogy in the book (sorry Ogged) which fits into our earlier discussion comparing economics and physics. Slee brings up the Ideal Gas Law (IIRC (Pressure X Volume) / Temperature = Constant ), which is derived from the assumption that each individual molecule of a gas interacts only with the walls of the container, not with the other gas molecules, as something like the assumption that people's individually rational decisions will lead to their preferred outcomes without consideration of how other people's actions affect the outcomes. And the Ideal Gas Law works really well in the real world -- it breaks down some at very high pressures and it's not perfectly exact, but it's good enough to use in a whole lot of practical situations.
The thing is, though, it works really well for gases. If the substance you're working with is a liquid or a solid, trying to analyze it using the Ideal Gas Law won't get you anyplace at all -- the interactions between the molecules, rather than being a minor factor that can be corrected for, turn into essentially the whole problem -- you don't keep working with the Ideal Gas Law and make corrections, you do an entirely different analyis.
Now, there are obviously 'thick' markets like commodity markets where market participants each individually maximizing their utility are going to arrive at an efficient result. But if a large portion of the real-world markets we're trying to explain aren't thick markets, and are different enough from thick markets that the analysis that works for thick markets breaks down completely, then we're going to run into problems trying to use the same tools on them.
(Note: I'm not certain how well the metaphor stands up, but I find the physics analogy pleasing.)
51: Do you think we can box up the stigma against moms and give it to the litterers and let them figure out how to get rid of it?
Here's the kind of utility calculation that shows rationality in action.
47 is better expressed by the metaphor of the Invisible Cock.
14
There is some academic prejudice against such works but I believe it is more against popular works in general than against popular works with disfavored points of view.
This prejudice has several sources. In part it reflects the fact that academics value original research over teaching or popularizations like this. So to the extent writing such a book took time from original research it could be career damaging.
There is also the common elite prejudice against anything with mass appeal like MacDonalds.
And there is the envy and jealously often felt towards peers who achieve fame and/or fortune.
Finally many academics are invested in the idea that what they do requires years of study and is far too complicated for even an intelligent layman to comprehend much less judge.
You see worries about this sort of thing in other contextes such as will blogging damage your tenure chances. I don't think it is particularly ideological except in that it enforces an ivory tower ideal of how academics should behave.
LizardBreath's litter in the park example is getting a certain amount of criticism, and yet it's also fairly self-evidently true, isn't it? I mean, people litter all the time; I don't think that anyone argues that that indicates people's revealed preference to live in filth. While the prisoner's dilemma may not hold for every single litter/not-litter decision, I think it's a perfectly reasonable simple example. And there are certainly many more.
One thing I would like to see more of in terms of liberal critiques of markets, though, is a two-sided analysis. This being an imperfect world, it's fairly easy to pick at most situations and find market inefficiencies or hypothetical future/possible market inefficiencies. It's usually less obvious to me that any other solution is going to be better.
I've always argued that the entirety of the libertarian argument consists of denying the relevance of Tragedy of the Commons.
Mostly, this is why libertarians seem so thick-headed to the rest of us. It's like they lost this simple chunk of their brains.
But as a civil libertarian myself, I deny that the speech commons (in most cases) benefits from regulation. Those who would regulate speech explicitly disagree with me - they see this as a world where free speech, however desirable for individuals, poisons the public sphere.
Come to think of it, the seemingly nonsensical right-wing argument about gay marriage also fits the mold of seeing a Tragedy of the Commons where there is none. If we let these gay people get married, it will degrade marriage for everyone !
60: First, it's not my example, unless I garbled it enough to make it mine -- it's Slee's and a chestnut before he got to it. But I think you're right that it's plausible; an analysis something like that makes more sense as an explanation of real world litter than the alternative assumption that there are a lot of people out there who like the way trash looks.
On your second point, I'm not the right person to address it, because I'm not an economist. But I have the impression that this sort of work (empirically driven critiques of markets, and discussion of alternative non-market solutions) is among the sort of heterodox economics that some economists are complaining has been marginalized.
I think that the doctrinaire libertarian answer to the park/trash scenario is that public property (such as parks) is inappropriate. If the park were privately owned, then the owner would have an incentive to enforce some standards. If you eliminate the commons, you eliminate the tragedy.
63: Which gets you to private property rights depending as much on gov't enforcement and coercion as anything e;se, which libertarians don't actually have an answer for.
The preferred solution is not regulation but privatization of the park. Then the profit-seeking owner will be incentivized to efficiently enforce a no-littering policy.
In other words, 11 gets it right. Also, A=A.
If you eliminate the commons, you eliminate the tragedy.
This is the argument I've usually seen the Tragedy of the Commons used to support, which drives me nuts because of course commons have worked fine in all sorts of social contexts without tragedy; they just need to be supported by regulation.
Fuck. 66 was written before all those preceding comments, back when it would have been funny. Technical difficulties delayed its posting.
>I've always argued that the entirety of the libertarian argument consists of denying the relevance of Tragedy of the Commons.
Libertarians believe that the Tragedy of the Commons is solved by selling the Commons. That was the historical solution in any event.
The actual Tragedy of the Commons article is kind of kooky:
62
"... an analysis something like that makes more sense as an explanation of real world litter than the alternative assumption that there are a lot of people out there who like the way trash looks."
I don't really agree, I expect real world litter is mostly due to a small minority who probably don't keep areas in their exclusive control very clean either. In part this is because the example is not describing the real world but a hypothetical world in which there are no legal or social sanctions against littering.
by selling the Commons. That was the historical solution in any event.
'selling' s/b 'enclosure' and it wasn't really a solution to any Tragedy of the Commons-like problem at all. More that wealthy landowners had the political power to take previously common land for themselves.
The other odd thing about the libertarian position is that civil liberties like the right to free speech DO NOT apply on private property (with certain exceptions for quasi-public spaces)--you do not have to allow an antiwar rally, or the free practice of any religion, on your front lawn; homeowner's associations can ban every flag under the sun, let alone flag burning. So if there are no public parks or streets, if everything is privatized, what does the absence of government regulation of speech, the press and religion actually get you? Not much.
There is some academic prejudice against such works but I believe it is more against popular works in general than against popular works with disfavored points of view.
Milton Friedman wrote lots of popular works of a near-Libertarian sort. There are a lot of other less famous libertarians and free-marketers writing for popular consumption. I don't think that the prejudice against popular works is ideology neutral.
The desire to work behind the scenes in administration and policy making, the disdain for popular writing, the mistrust of the electorate's ability to deal with the facts and the occasional suppression of evidence, all seem to display a strong anti-democratic bias.
Why are we supposed to think Dick-and-Jane level elaborations of elementary concepts from some "Game Theory for Dummies" primer have anything to offer serious policy debates? Nobody worth paying any attention to is operating anywhere near this level anyway.
Anyone who got their economic education in law school is, and there's a lot of lawyers who believe they understand economics involved in creating policy.
75 gets it exactly right. The average politician doesn't know anything about anything except whatever his job was before becoming a politician, and doesn't enjoy being told that whatever he's learned about a subject is superficial and misleading.
A rational economic actor will trash and plunder the Commons, and libertarians and the like will encourage him to. No one wants to be irrational do they, or to be elitist and tell tell other people how to live their lives?
Economists seem to want to design a system which works without public ethics. Adam Smith's famous example -- the butcher doesn't cut meat out of altruism -- has been generalized to a complete post-ethical system of selfish rational actors.
And when you combine #77 with the fact that our rulers are people whose entire careers have been spent saying "Sir/Gentlemen of the Board of Directors/Stockholders, I don't care if you committed lots of crimes, I just care about presenting your case in such a way that uninformed people will be convinced to punish you (or to not punish you), because to do otherwise would be to unilaterally disarm in our adversarial system of justice", you understand why it seems like everyone in power is from the 10% of the population who believes that ethics is a quaint, if not totally nonsensical, notion.
65
63: Which gets you to private property rights depending as much on gov't enforcement and coercion as anything e;se, which libertarians don't actually have an answer for.
It isn't coercion if you're stronger than the other guy.
Wait...
I'm coming at this a bit late, but I again feel the need to come to the defense of the economics profession. (Honestly, I'm usually pretty critical of it. But the problems aren't the ones that outsiders seem to see...)
I want to take issue with #24:
economists tend to dismiss policy preferences about environmental or any other decisions that don't affect you personally--they are willing to concede the amount of litter in Central Park affects your utility & is a legitimate policy consideration, but far less willing to make the same concession about, say, the preservation of wilderness in Alaska that you have no intention of ever going to visit.
This isn't true at all. There's a long literature about how to reliably estimate the amount of utility that people get from the existence of things like wilderness in Alaska. The problem is that it is hard: If you just ask someone "how much is it worth to you to know that Alaska is unspoiled," and you tell them that the decision about what to do will be based on the sum total of everyone's responses, there's a clear incentive for them to respond with the largest number they can think of. So I think it is fair to say that economists will tend to assume that such survey-based estimates are overstated, though there aren't really practically-implementable alternatives. (Google "contingent valuation" if you are interested.)
the "value of a statistical life", in which economists debate various ways to measure the dollar value that people place on lives saved by a policy. I say that there is no objective way to put that into dollars...
True, there isn't really an objective way to do this. But that doesn't avoid the need to do so. The need would be there whether or not the economics profession exists. The usual approach in the literature is to ask what values are consistent with other decisions that we make. For example, one recent paper computed the number of lives that would be saved from reducing the speed limit and the number of hours of travel time that this would cost; assuming that this policy makes sense assigns an upper limit to the value of a statistical life. The approach is imperfect--because existing policies aren't consistent with each other, you can get different values depending on the arena where you look. But again, how else are we to decide where to draw the line in safety regulation? And is this approach to the problem any worse than trolley hypotheticals?
(Finally, an apology for my continued presidential anonymity. It isn't so important here, but I thought I'd keep the same name that I used in the other thread for continuity's sake.)
74: George Bush is worth paying attention to, and he operates far *below* this level. U.S. policy would benefit if more of these goofs had read Game Theory for Dummies before responding to bin Laden by invading Iraq.
Deep thinkers make a big mistake to differentiate "serious" policy debates from the policy debates that actually take place - and then suggest that we only pay attention to the "serious" debates.
Plus, I learn stuff all the time at this level of conversation.
81 makes sense.
So I think it is fair to say that economists will tend to assume that such survey-based estimates are overstated, though there aren't really practically-implementable alternatives.
Why would this be simply "overstated" rather than "inaccurate in several ways at once"? After all, if you asked one of the editors of Reason to help you out with a survey on what utility the ANWR has to them, they would say "Hm, this survey may influence people's opinions on the importance of protecting these things in general...can I say negative infinity dollars?"
60, 61: these two posts capture the legitimate libertarian worry--the liberal worry, really--about the too-careless use of this sort of example. Your PD is my cartel, &c. More generally: some situations are n-person PDs; some are more like uneven coordination games, where the gains to some are losses to others. Note that in a genuine PD situation you would have unanimity about the desirability of sanctions to induce cooperation; if in fact there's widespread disagreement about the solution's superiority, perhaps the game structure has been misspecified. As someone who's been a TA in undergrad classes that are supposed to be teaching tragedy of the commons / public good / collective action problems, my experience has been that often professors are too quick to label things n-person PDs, rather than too reticent.
83: "Overstated" comes from the assumption that people are making the decision about how to respond based on their own valuation of the availability of unspoiled land, and that noone gets negative valuation from that availability or that you don't allow negative responses. Once you allow the sort of second-order strategizing that you mention (not just strategizing about how to achieve my preferred outcome on this survey, but about how to affect the environment in which the survey is carried out), I guess you are right that it need not be overstated.
Julian is basically 100% on point. One hopes that all intelligent libertarians grant that markets are imperfect, and that people sometimes choose things not in their interest. This is the level one counter to libertarians (and classic liberals), but is not at all decisive. Point one: even if markets fail, some deem coercion immoral. Point two, even if we grant that reducing government coercion has no independent value, it may still be generally sound policy. As Mike Munger puts it: "it is not enough to have a theory of market failure, you must also have a theory of government success."
A similar theoretical case for the likelihood of market failure can be made for the likelihood of government failure. Regulatory solutions to market failures themselves fail -- they are captured by special interests, they are poorly designed, they try to impose a single solution when in fact many smaller solutions would work better, etc.
81: there is no one answer to the question, "what is the dollar value we place on a life?" floating out in the ether. You get one answer when you look at emergency health care spending; another when you look at preventive health care spending; another when you look at life insurance payments or surivivor benefits; another when you look at speed limits; another when you look at the pay differential between more and less hazardous (and otherwise comparable) jobs; another when you look at damages in wrongful death tort cases; and on and on it goes. We also clearly value some lives more than others: a poor person's life gets a lower dollar value than a rich person's life. There is no "need" to artificially convert everything into the units of dollars if your method of unit conversion is ridiculously subjective and unreliable. You can tell a policy maker: this regulation will prevent this many deaths at a cost of this many dollars and these other factors. In comparison, this other regulation will prevent this many deaths at this cost...making dollars the universal unit of measurement is NOT necessary, and it's a distortion that's going to lead to undervaluation or biased valuation of things that are hard to quantify.
Right, but no one is arguing that market solutions are never useful; often, they are. The point of a book like this is to show that it is as easy to create an 'Econ 101' example of market failure as it is of market efficiency -- decisions about the necessity of regulation and the best structure of regulation have to be made on an empirical basis.
73
"Milton Friedman wrote lots of popular works of a near-Libertarian sort. There are a lot of other less famous libertarians and free-marketers writing for popular consumption. I don't think that the prejudice against popular works is ideology neutral."
And do you think this made it harder or easier for him to win an economics Nobel Prize? I would guess it made it harder.
74
Is this some sort of parody of elitist academic contempt for lay opinion?
In fact simple models should be preferred for public policy decisions as they are more robust and harder to manipulate.
Similarly: why does some contingent valuation survey get you a better answer than the real world question, do you want your Congressman to vote to protect ANWR or not? My contingent valuation survey answer is going to be pretty much made up, and not reflect a careful consideration of what I'd actually be willing to pay for the knowlege that the wilderness would be protected. But if I WERE asked what I'd actually pay, that would show as much about my disposable income as how much it affected my utility for ANWR to be protected. If you want to know whether people think it's worth it to protect ANWR from drilling at whatever economic cost, why don't you ask them whether the federal gov't should protect ANWR from drilling given whatever the costs are? At that point, of course, it's not an economics survey. But that's because there are policy questions that are simply outside economists' field of competence.
btw, the economics term of art I was thinking of wasn't "warm fuzzies" or "fuzzy warmth"; it was "warm glow."
decisions about the necessity of regulation and the best structure of regulation have to be made on an empirical basis.
This, I think, could be a bridge too far. Here's why:
1. If you believe that government coercion is an 'independent bad', your empirical calculus is different. To take a trivial example, even we stipulate that the current level of violence stems from market failure (we are "locked in" to a cultural environment no one chooses), principled civil libertarians might object to censorship. Likewise, principled economic libertarians might object to certain restrictions on consensual market transactions even if they represent market failure.
2. It will likely turn out to be impossible to do the empirical calculus in most cases. Or at least, to do it in a non-question-begging way that all people of good will consider decisive. In the event that we do not do cost-benefit case-by-case, we will rely on general rules. Here, it is helpful for us to think about under what conditions we should default to "fixing" market failures, and when we should let them lie.
Non-anarchist libertarians are fine with certain levels & kinds of violent gov't coercion: the police, the army, jails, etc. Can't have private property without this stuff. Once this apparatus is in place, then deciding what rules it enforces--relatively small differences in how much in taxes the government can collect, what levels of mercury and sulfur dioxide your power plant can emit, etc. does not actually have a noticeable impact on the overall level of government coercion. I think it's pretty obvious that forcing people to pay enough in taxes to pay for a decent indigent defense system INCREASES actual liberty and DECREASES gov't coercion on net.
Then there's the possibility of non-government coercion. I would argue that the 1964 civil rights act made this a freer society on net; so does the existence of public spaces where you can actually enforce your first amendment rights.
Friedman was a shoo-in for the Nobel Prize. He was about #12, and practically everyone up to then including him was of legendary status.
95
Obviously Friedman's popular writings didn't prevent him from winning the Nobel Prize but that doesn't mean they weren't a minus factor. This article notes the award to Friedman provoked protests. It seems unlikely an award to someone with the same professional publications without Friedman's popular writings would have generated the same degree of outrage.
Come on, James. The protests were because of his involvement with Pinochet. And the protests weren't by economists.
The protests were because of his involvement with Pinochet. And the protests weren't by economists.
He knows this. He's a troll.
31 yes,
Also - A rational utility maximizer will always throw the cup on the ground.
Wouldn't a truly rational human proceed as if all other rational humans were likely to act exactly as she does, and therefore rationally decide not to throw the cup on the ground?
How rational is it to act as if "I will do (x), but the others will do (y), because I am so not like those others?"
People do think this way, but that doesn't make it rational.
I've actually always been sympathetic to that line of reasoning, but it depends on an unsupported assumption, that everyone else is going to think like you. If you assume your actions don't affect anyone else's, throwing the cup on the ground stays rational.
97 98
Are you guys are claiming there would have been no protests absent Friedman's involvement with Chile?
Are you claiming to know that the protests were caused by his having done popular writing?
I'd note that the fact that the protests were explicitly related to his work for Pinochet suggests that his work for Pinochet had some causual connection to their occurence.
Are you guys are claiming there would have been no protests absent Friedman's involvement with Chile?
I would claim that, yes.
Similarly Henry Kissinger would be less disliked by the average liberal if he had confined his theorizing to articles in "Commentary" and "The New Criterion".
99
"Wouldn't a truly rational human proceed as if all other rational humans were likely to act exactly as she does, and therefore rationally decide not to throw the cup on the ground?"
No, although lots of people do irrationally think like this to justify things like taking the time to vote.
Do any of you genuinely believe Shearer to be this obtuse?
We prefer to deal with him as an author function. His true nature is irrelevant to the role he plays here.
103
For the guys waving signs at the award ceremony probably (although I wonder to what extent the Chile complaints were just a convenient way to justify an existing animus) however the attacks in TNR and the like were broader. Friedman was widely disliked on the left because of his popular writings which I believe also caused many on the left to discount the value of his professional work making the award an unwelcome surprise.
Wouldn't a rational human bring extra cups to throw, just for the sake of consuming more than his statistical share of the prestige good, and then go find someplace else pristine to ruin?
"Oh, I never go there anymore. It's been ruined. Alas, my new place is being ruined too, so I'm scouting an unspoiled place."
100:
I've actually always been sympathetic to that line of reasoning, but it depends on an unsupported assumption, that everyone else is going to think like you. If you assume your actions don't affect anyone else's, throwing the cup on the ground stays rational.
I realize that "rational" is a term of art in these discussions, but it frequently seems that "reasonable" is a more appropriate substitution, and there is an important difference.
Obviously I am not an economist, but I do resolve to, next time I see someone throw some trash on the ground, advance indignantly to protest rather than brood in silence.
Unless I think I might get beat up.
That's why you give them a good "Two Mississippi" with the stun gun before you berate them.
I haven't read the Slee book, but I just looked at Tabbarok's review. From that, it appears that the book is concerned as much or more with coordination games as it is with multi-person Prisoners' Dilemma/Tragedy of the Commons situations. This is a plus. In part this is because there already are popular books on the PD, so it's less clear what another book has to add. But also (and I'll confess to a professional bias here), coordination games are more interesting and arguably just as pervasive.
The simple PD has just one equilibrium: everyone throws their coffee cup on the ground. The defining feature of a coordination game is that it has *more than one* equilibrium. Imagine that people's preferences were such that people would feel bad about being the only litterer -- so if no-one else has thrown their coffee cup on the ground, each individual decides not to throw her cup down. But if other people have littered, then each individual chooses to litter as well. Then there is both a littering equilibrium and a no-littering equilibrium. A classic example of a coordination game is a bank run -- if everyone else leaves their money in the bank, then the bank is safe, and you should leave your money there as well. The bank ends up being safe. But if everyone else thinks the bank will fail, then they will try to take their money out, so you should do the same. The bank fails. Either outcome is possible.
60: I've always argued that the entirety of the libertarian argument consists of denying the relevance of Tragedy of the Commons.
I like to think of libertarianism as political Asperger's Syndrome.
113: The defining feature of a coordination game is that it has *more than one* equilibrium.
This is something that never gets enough play: equilibria are defined by stability, not optimality, and the identification of a (perhaps optimal) equilibrium doesn't in any way mean that that particular equilibrium will be attained. So, to pick an example of Obsidian Wings: self-regulation of the hygiene in food production might be an equilibrium in that market but so too might "everybody produces crappy food", and there's no reason to believe one equilibrium will be attained over the other.
And I just found out from a psych post-doc that apparently they've proven chimps know how to solve the (repeated) Prisoner's Dilemma. She was unfortunately fuzzy on the details -- how exactly you train the chimps to understand the payout system, how you get them to understand the coordination, etc. -- but this is apparently bang on what ev psych people have been predicting: sharing and cooperation were evolutionarily selected traits. Weird, but cool.
106: No, but it's fun to insult him and have him not respond because he's committed to the "I'm not a troll because I'm polite" position. At least, it's fun for a while, and then you get bored and stop reading his comments.
"I like to think of libertarianism as political Asperger's Syndrome."{
chuckle
God I love this blog. James Shearer, what utility do you get from commenting here? The activity seems, in terms of homo economicusness, to be a lot like voting. The chances that you will make the deciding argument in a debate here are about the same --and given who you are and who Unfogged is, that might be optimistic -- than the chance you'd cast the deciding vote in an election. Yet you comment. Odd, isn't it?
As for the general thread, Jan Elster comes to mind -- a rat choice approach to marxism -- but its been so long since I did this type of work that it all is covered in fog.
It's Jon Elster - though it's pronounced 'Jan' alright. The Cement of Society is a good place to start. Also great is Jack Knight's Institutions and Social Conflict (I should say that Jack is a friend and co-author of mine) which starts from mixed-motive coordination games to build a theory of power, social oppression etc.
Try his paper "Ideology & Methodology" from 1989.
"I believe that we are in a period of considerable
fluidity, if not crisis, in mainstream economics, and that a careful look at its development is particularly worthwhile for dissidents now."
After reading three papers, I am really starting to like this guy.
...
Emerson, if you get back to this thread, I noticed you at DeLongs "Confessions of an MIT-Keynesian" post. DeLong deletes all my comments now.
"Whilst workers will usually resist a reduction of money-wages, it is not their practice to withdraw their labour whenever there is a rise in the price of wage-goods. It is sometimes said that it would be illogical for labour to resist a reduction of money-wages but not to resist a reduction of real wages. For reasons given below (section III), this might not be so illogical as it appears at first; and, as we shall see later, fortunately so." ...Keynes, GT, as quoted pointedly by DeLong
"Fortunately so." And thirty years of declining real wages in America. I want a better understanding of that paragraph, and I think I have enough material to get working on it.
And looking for Foley at Amazon, especially balanced reviews of Adam's Fallacy, look what I found:
Making Sense of Marx (Studies in Marxism and Social Theory) by Jon Elster
paulsrb says: "Analytical Marxist classic, opposing functionalist & teleological thinking. Rejects Marx's historical & economic ideas, but upholds his views on alienation, exploitation, class, politics & ideology."
So that is how Karl got exiled to the crit-lit departments. Hi, Henry.
117
Actually I vote too but not because I think my vote is likely to be decisive or by some form of sympathetic magic determine the votes of lots of people like me.
As for why I post to this blog, I like to argue and who knows I might learn something.
You know, guys, as people who hang out at blogs where they disagree with most of what's said go, Shearer could be a lot worse. He's generally on topic, and isn't making it harder to have substantial conversations, just saying generally but not always weird and ill-supported things within those conversations. I'd like to reserve the 'Get lost because nobody likes you' tone for people who are more actively disruptive and abusive.