Arnold Kling  

Paul Seabright, GYOB

Visualize Growth... Bartlett's Final Chapter...

Internally at Econlog, GYOB means "get your own blog." It is a term of disparagement used to describe commenters who frequently post comments that are longer than the original post.

In the case of Paul Seabright, I am thinking that the blogosphere could benefit from his having a blog. On my Recalculation Story, he comments,

The story is that everyone has to specialize in some way, and we are never sure whether we have got it right: the signals the markets sends us are inherently ambiguous. A demand shock could be a signal about people's preferences for my particular skills or a signal about a temporary shift in demand for a broad class of services, or a combination of both. .. when demand is weak; I prefer to hang in there in the (usually justified) expectation that conditions will improve. But in normal times, if demand stays weak I will soon conclude that this isn't the line of work for me. The process is painful, maybe even tragic for me and my family, but it leaves few ripples on the national pond. In abnormal times I can't conclude any such thing: demand may be temporarily down and I might be foolish to abandon this line of work. Indeed, my response is non-monotonic in the demand shock: up to a certain point the larger the fall in demand the more likely I am to quit, but after that point a really large shock convinces me that the market is not, after all, telling me personally that I made the wrong specialization choice.

Read the whole thing. He makes a lot of points, one of which is that trying to cut your wage to the market-clearing level may send an adverse signal. It could be that starting salaries at large law firms should be $25,000 lower than the salary at which new graduates are currently being hired. But any law firm or law school graduate who proposes a lower starting salary would be sending an adverse signal of some sort. So the salary stays fixed. I think that this particular story implies that monetary inflation would work, because real starting salaries would fall.

I think I prefer the Garett Jones story, in which the typical worker is treated by the firm as overhead. In good times, you tolerate high overhead, because you are building capabilities for the future. In bad times, you cut down on overhead. You only increase your overhead when you have a comfortable level of profits and a positive medium-term outlook.

Because workers are overhead, there is no "marginal product" as such. Thus, there is no market-clearing wage. In bad times (meaning that firms are unprofitable and/or have a pessimistic outlook), the value of additional overhead workers is close to zero, but the reservation wage of the unemployed remains much greater than zero.

Comments and Sharing

COMMENTS (18 to date)
Doug writes:

Everyone I seem to read on the business cycle, Kenyesian, New Classical, Austrian, Recalculationist seems to be united in the view that the business cycle is a bug not a feature.

Recalculation comes closest to a view that I've lately been entertaining in the back of my head. The commonality is seeing the market as a giant algorithm for solving the problem of the efficient allocation of economic resources. Recalculation looks at recessions and thinks something's wrong because they tend to be marked by resources flowing out of previously heavy invested in businesses and sectors suddenly.

However in my view I think the business cycle perhaps is a manifestation of Simulated Anealing. Basically new technology enters the market at a rate that is somewhat exogenous to economic growth. Say the economy is optimized at point A, and some amount of new technology becomes available at point B. The economy could stay super-optimized tweaking a little bit to accommodate the tech as it becomes available.

However this raises the possibility that the equilibrium the economy (or resource allocation algorithm) ends up at is a sub-optimal local maximum. Even if a point is the global maximum before, once new tech becomes available it's possible, probably even likely, that the new global maximum won't be in the same neighborhood.

Therefore in the phrasing of metaheuristics we make a tradeoff to make our algorithm less exploitive and more explorative. Periods of easy money/easy credit/booms are useful because it makes it easier to try radically new economic activity made possible by tech created since the last boom. After we've sufficiently explored the global search space though we want to now optimize around the new optimal equilibrium. Compared to the boom this involves a period of tightening, restructuring, consolidation and bankruptcy.

Just a thought I've been entertaining...

Phil writes:

Re: GYOB: it takes a lot more words to properly rebut or disagree with something than to state it in the first place. "Get your own blog" can be a proxy for "if you disagree with me, do it somewhere else." (Not to imply that's what the intent is here.)

If someone says, "hurricanes are good for the economy because they create jobs," that's a 10-word fallacy. Can anyone properly explain why it's wrong in a 10 word comment, or 20, or even 50?

John Jenkins writes:

Hurricanes destroy value and force people to reallocate resources to repair and maintenance rather than encouraging growth. Therefore, irrespective of any jobs temporarily required for reconstruction, hurricanes are a net loss for the economy as a whole.


Mike writes:

I have, for the last year and one-half, been living the situation so well describe by Seabright.

It is amazing how low the market clearing wage has become for my unique set of skills and experience.

The difficult part of recalculation for the individuals involved is that while the market clearing wage might be determined rather quickly, the costs, both business and personal, that support that wage do not adjust at anywhere near the same speed. Current law school graduates will not see any retroactive reduction in the cost of their education.

Justin Dailey writes:


As the perpetrator of a GYOB sized comment yesterday, maybe it isn't in my interest to say that short rebuttals can often be made, but I'll bite anyway:

Why are hurricanes not good for the economy?

"Hurricanes destroy wealth and people must rebuild lost wealth, rather than create new wealth."

That's 14 words - you can elaborate and make the case more convincing, but with that sentence you have already put the pro-hurricane guy on the defensive. He'd have to make an objection about how those people might have been out of work without the hurriance, and then you reply with a paragraph long summary of seen vs. unseen effects.

Alternatively, you could respond to the fallacy with a bit of sarcasm, although that type of response often turns people off. As an example:

"Really? Katrina was good for New Orleans? Maybe you'll get lucky and a disaster will hit your city too."

That all said, I do agree that in some situations it would be better to fully elaborate rather than periodically checking in on the post and responding to anticipated objections as they materialize. Anyway, going forward I'll keep my comment size limited, to avoid the 'frequently' criterion Arnold mentions.

Rebecca Burlingame writes:

Ultimately in Recalculation, it may be that people start to look at the degree either private enterprise or government seems to be tending to their needs and proceed accordingly. This could be where it gets interesting as people begin to produce in ways that were once illuminated by for profit and non profit activity.

Phil writes:

John and Justin,

Three more arguments:

1. I would agree, of course, that your 37 and 14 word rebuttals are accurate. But, would they actually be understood by the original poster?

Almost everyone would understand the concept embodied in the original 10 words. Say "hurricanes are good for the economy because they create jobs" to anyone on the street, and they'll instantly grasp what you're talking about, whether they agree with it or not.

On the other hand, if you were to immediately read them your proposed rebuttal, they won't get it right away. Or, they'll think "yeah, but..."

But give them five minutes of *actual explanation*, and they'll understand at least on par with the original premise, whether they agree with it or not.

Most bad arguments don't take a lot of words because they're superficially plausible. Opposing arguments, which aren't as plausible, take more effort.

2. It takes more words to debunk an argument than to make one, because readers internalize the first argument they find plausible, and it takes more "force" to dislodge it than to put it there in the first place.

3. My short example notwithstanding, most blog posts use a lot of words to make their argument in the first place. Shouldn't you give your opponents at least as much space to state their case as you did to state yours? I know newspapers don't do this -- letters to the editor are shorter than op-ed columns -- but space is more limited in newspapers than in blogs.

OK, I'll shut up now or GMOB. :)

Chris Koresko writes:


Your post above is really, really good. I was going to write a post making the analogy with a forest needing periodic fires to keep it healthy, but your "simulated annealing" picture strikes me as much closer to the truth.

If anybody doesn't follow the thrust of Doug's post, I think it's worth reading the contained links and perhaps spending an hour or two going over it with someone in the local math dept. Seriously.

If we are chucking out the whole concept of marginal wages, then 'sticky wages' arguments and wage-cut solutions are a waste of time. infact, aren't minimum wage arguments also a waste of time? I'm not comfortable chucking this concept

fundamentalist writes:
the signals the markets sends us are inherently ambiguous.

Only when the guv intervenes and distorts prices. I think Seabright is confusing state intervention in the market with the market. Many economists have that problem.

Doug, your analogy is interesting and very similar to the cycle theory of Schumpeter. There is a lot of truth in it, but it doesn't explain a whole host of issues. The Austrian theory is much more comprehensive and has much greater explanatory power.

gabriel rossman writes:

Olav Velthuis has a similar argument as to why artists charge above market clearing for their artwork.

lawyer writes:

As a partner in a big firm, I think the overhead interpretation is only accurate on the margin (ironically), and the marginal product analysis is much more useful. That is, the highest quality law firm employees are in no way overhead but are hugely productive. The absolutely lowest quality is going to be terminated, not on an economic overhead analogy, but just because they are not tup to the job to begin with and there are of course liability risks and just plain headaches from employing someone not up to the task. The next lowest quality, in boom times, are mostly accretive, but in weak times, they do turn into overhead. So the overhead interpretation only describes a subset of the employee population and only describes that group in certain circumstances.

Pete writes:


I think your example may be true in your instance (and other professional service / sales jobs), but the for the majority of companies, employees are very much overhead.

Smaller businesses in particular, where the owner is often the rainmaker and everyone else is support. Its certainly true in manufacturing as well, where entire lines of production can be eliminated at once.

In summary, most Americans fall into that subset you mentioned.

Doc Merlin writes:


'If someone says, "hurricanes are good for the economy because they create jobs," that's a 10-word fallacy. Can anyone properly explain why it's wrong in a 10 word comment, or 20, or even 50?'

"Hurricanes destroy wealth, the created jobs don't counterbalance that, just mitigate it."

Darn, 12 not 10.
Anyway here is another thing about jobs that people often fail to understand. Jobs are not a flow or a stock, but streams of flow.
The flows are work and compensation (in opposite directions).

William Newman writes:

Regarding the question of whether refutations can be naturally longer than claims, consider, as a rich source of examples, the literary genre of claims that free markets are to blame for mixed-market outcomes. Free markets caused the current bank-related problems, free markets caused the Great Depression, the California power deregulation fiasco illustrates the problems of free markets, (Barbara Ehrenreich argues in _Nickel and Dimed_ that) "it's the market, stupid" that prevents economical housing being available near work...

Megan McArdle seems pretty good at effective blogging, and spent some 80 words rebutting the brief claim implicit in

A conservative reader emailed this item to me with the following comment: "I've heard people say a conservative is just a liberal who's been mugged. Then maybe a liberal is just a conservative who suddenly got this in the mail."

Regarding "GYOB" as a complaint about posting responses long enough to justify a full blog post, is it considered good manners to post a short answer and/or an abstract along with a hyperlink to a longer argument posted on one's own blog? I've done that (very) occasionally. So far I haven't noticed any complaints. But I have noticed that it is pretty uncommon for people to do this, and it worries me that doing this looks very much like an obvious cynical tactic for bloggers chasing page views directly or through search engine prominence. Thus, I feel uncomfortable about doing it unless there's a clear norm or policy that approves of it.

(The process of posting this reminds me of the optional URL field in EconLog's POST A COMMENT form. I suppose perhaps I should be reading that as EconLog's implied approval of hyperlinks to one's own blog.)

William Newman writes:

(And hmm... After submitting that last comment, I hit the "YOUR COMMENT HAS BEEN RECEIVED BUT IS BEING HELD FOR APPROVAL" page. Quite likely this is because there is a hyperlink in that post. I fully appreciate the need for human filtering of potentially spammy hyperlinks. But this is a reminder that even if I tried to post a comment containing a short summary and link to details on my blog, the hyperlink might tend to cause an arbitrarily long delay in the appearance of the comment.)

[@William: Get over it! Waiting five minutes for your comment to get posted isn't the world's worst disaster. One hyperlink is no problem. The particular hyperlink your comment included set off our spam filters. Nothing about your blog link or your comment was otherwise a problem. If you can't wait so much as five or ten minutes before griping and screaming and yelling, you are pretty hair-trigger, eh? After you validate your email address, which you have not yet done, your comments will be approved more quickly. Please email us to validate your email address, since our email to you has bounced.--Econlib Ed.]

Doc Merlin writes:

The RBC theorists say that the business cycle is a feature, not a bug.

William Newman posed two background questions about EconLog comment policies: first, about what occasions a GYOB [Get Your Own Blog, excessive comment-length] designation and second, about whether it's polite to link to one's own blog from a comment.

With regard to excessive comment length: Arnold's GYOB definition was simplified. His goal was to compliment, not denigrate, Seabright. Historical problems on EconLog only involve commenters who repeatedly monopolize threads with unwieldily long comments, which discourages others from reading or participating. A comment that is substantially longer than the original post--or much longer than the comment to which the person is responding--is a possible indicator, but not definitive. In practice, we've only warned or banned commenters to GYOB who routinely post dissertation-length comments. For example, repeat offenders in the past have submitted comments that grow to 5,000-20,000 words in length. Comments of 500 words or even an occasional 1000-word comment are not usually a problem.

One could reasonably argue that a commenter might on average take more words than the original blogger to formulate a cogent response. Not everyone is as pithily succinct as Arnold! In any blog, the original blogger has typically spent a lot of time in advance thinking about and crafting his post. The commenter is often working out an argument on the spot.

With regard to linking to one's own blog: We consider that a perk of commenting. Linking to your URL around your name is almost always okay. (If your email address is validated, it may even garner you extra positive points in our spam filter.) If you write a great extended response to an EconLog post on your own blog and post a brief summary in our comment section linking to your blog post, that's excellent!

Our goal is for the comment section to return positive net value to readers. Readers enjoy interaction and communication. Readers are not generally enticed by the prospect of having to scroll through screen after screen of a single comment they've chosen to skip after scanning a few words. Responses that launch off like dissertations are not as interactive as responses that sincerely listen and invite further discussion. Readers also generally like knowing that if they click a link that looks interesting, it has a positive probability of being worth that few seconds of their time. Comments that bring positive net value are always welcome on EconLog.

[For comparison, the above was 398 words. Read more about EconLog comment policies here.]

Comments for this entry have been closed
Return to top