Arnold Kling  

Morning Recommendations

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Inflation, Socialism, and Mora... Why the European Bailouts?...

1. A well-written review of From Poverty to Prosperity. I admit I was surprised when I got to the end of the post.

2. A new metaphor for the economy, from Don Boudreaux. He compares it to a gigantic jigsaw puzzle. This makes the idea of having one expert solve it, rather than many people work on it at once, seem clearly insane.


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COMMENTS (7 to date)
david writes:

The dispute hasn't been the complexity insight for decades; the critics won the economic calculation debate. Both the neoclassicals and socialists were wrong, etc. Go Hayek!

So the economy is complex. Great. Congratulations on the now seventy-year-old insight.

The problem is in the second part of Hayek's argument, where we have a "and then a miracle occurs" invocation which allows a more realistic limited-information economy to actually extract said information as prices. The neoclassicals and socialists eventually showed that the conditions under which this would occur were unrealistically restrictive, whereupon everyone shrugged their shoulders and moved on. The general equilibrium market failed and the socialist planner failed; we're stuck with market failures but partial equilibrium logic and K models would be good enough; we can't calculate optimal general equilibria but we won't try anyway.

Except for the existing generation of Austrians, who still appear to be fighting the last war. Do you know anyone still proposing to calculate complete general-equilibrium matrices and solve ten trillion simultaneous equations? No, what we have today is invocations of market-specific and simple workhorse models.

Of course a single expert can't solve the gigantic jigsaw; that's why nobody is proposing it. But a single expert can identify individual specific market failures, the same way a single observer might be able to point out that that ten-thousand-piece assembled portion definitely doesn't belong next to that other portion, even if said observer might not have been able to put either portion together alone.

Rich writes:

He compares it to a gigantic jigsaw puzzle

"Proof by analogy is fraud."
-Bjarne Stroustrup

Rebecca Burlingame writes:

I like the book cover. An example for Economics 2.0. Say someone is preparing for a career, and they are told that they cannot begin until they know everything about the system and every element in it, that is currently being used, before they can start work. The only problem is, the system that they are trying to learn about is growing at an astounding rate, and it encompasses far more than any one person can expect to know or tend to....health care.

ThomasL writes:

Dr. Kling,

If you haven't seen it, you may like to check out the video in the post a couple of down from that [very good] review called the Sin Police ('http://remnantculture.com/?p=1155').

I've never heard of the site or the pastor interviewed in the clip, but that post reminded me very much of the Church of Unlimited Government, framed in the context of the Rand Paul brouhaha.

The man takes an interesting view on _why_ that Church exists, that never occurred to me. The basic idea is that people often find their sense of justice offended by the actions of others and search for a remedy.

People that believe in God see Him as delivering ultimate justice, if not in this life than after -- but always.

Secularists have no comfort from the thought of ultimate justice, so some one has to punish every wrong. If it isn't punished by some person or authority (ie, the state), it means that the person has gotten by with it -- for all time.

It is a 7m video, and he states the position much better than I, but I found it fascinating food for thought, particularly when added to your views on the Church of Unlimited Government.

Back on topic of the review, I'd forgotten the laundry metaphor till I reread it in the review. Have you ever seen the Man in the White Suit (http://www.imdb.com/title/tt0044876/plotsummary)? It is worth seeing.

ThomasL writes:

I should also point out that the text of that post has some very legitimate criticisms of that view, eg, how does that explain religious people that also want to use the state to punish every ill, etc, etc.

Even still, interesting grounds for more thought.

Joseph Sunde writes:

Thanks for linking to my review. I hope I captured its contents accurately (even if I did surprise you in the end!). It was a thoroughly enriching read.

Jim Glass writes:

From the review...

"Several lesser known economists have been studying these areas for some time (e.g. Douglass North, Robert Fogel, Edmund Phelps)."

Wow, if those guys are lesser known compared to you, you're doing OK.

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