Mission The Center's mission is to promote the understanding and appreciation of the ideals of freedom and responsibility along four dimensions: published research, undergraduate education, graduate education, and community outreach.]]>Core Intellectual Values
These are core values that we will not compromise.1. Growth
We aim to stand up from our desks at the end of every day knowing something that we did not know when we sat down that morning. We do not teach from old lecture notes. With our students we will share what we know, along with our uncertainties & struggles. Our students will know the joy & trepidation of exploring the intellectual frontier.2. Seriousness
We are in the business of theorizing, but when we theorize, we draw maps whose worth stands or falls with their accuracy in representing reality. We draw distinctions not to obscure differences but to sort them out. When we make empirical claims, we back them up not by turning them into empty tautologies but by offering the kind of data that are relevant to the testing of scientific hypotheses. In short, if your definition makes it unnecessary to check the facts, then you need to check your definition.3. Independence
We realize that if you want to maintain your passion for work, & want people to be better off for having read your work, or for having been your student, you have to stand for something. But whatever you stand for, you have to stand for honest scholarship first. Truth comes first. If and when the truth turns out incompatible with our beliefs, we change our beliefs.4. Diplomacy
We will not demonize those who disagree with us. Our engagements will be constructive.
When I taught it this quarter, I was unable to convince one of the students that congestion is an externality. We had discussed earlier in the course the fact that when you have private property, there is not an externality because the owner takes into account the gains and losses to various people. But I pointed out that the airport is government-owned.
This was not his objection, though. His objection was as follows:
When I show up at the airport, that's a choice on my part. I know that if I show up at a busy time, I will have to wait longer, but I take that into account. So does everyone else who shows up.
My answer was, and is, that, yes, you take into account the amount of time by which you are slowed down, and everyone else takes into account the amount of time by which he or she is slowed down, but no one takes into account the amount of time by which he or she slows others.
That still didn't fly (pun not intended.)
So I gave a numerical example. Let's say there are two people: A and B who arrive at the airport. (It's hard to imagine that two people would create congestion, but if we complicated it with way more people, the essence wouldn't change.) A will lose $10 worth of time by arriving at the airport at a congested time but he values being there at that time, versus the uncongested time, at an additional $15. He also causes B to lose $10 worth of time. Vice versa for B. So A looks at the extra cost he will bear--$10 due to B slowing him down--versus the extra benefit--$15--and decides to arrive at the congested time. B likewise.
Now let's tote up the costs and benefits. The benefits to A and B add up to $30. The costs are $20 each, or $40 total. Why $20 each? Take A. A's cost that he bears is $10--it's imposed on him by B. A's cost that he imposes is $10--it's imposed on B and he doesn't take it into account. They total $20.
This is the first time I've written this down rather than just said it and now I'm feeling implausible. Am I double-counting the $10 that each imposes on the other? I'm getting the uncomfortable feeling that I am. It's funny how writing things down can expose flaws in thinking.
So here's the help I want. First, is my numerical example good or flawed, and why? Second, what's a good way of showing the student that there really is a congestion externality?
]]>Older adults commonly report growth in practical abilities over the years, even though their academic abilities decline. Williams, Denney, and Schadler (1983) interviewed men and women over the age of 65 about their perception of changes in their ability to think, reason,and solve problems as they aged. Although performance on traditional cognitive ability measures typically peaks at the end of formal schooling, 76% of the older adults in the Williams et al. (1983) study believed that their ability to think, reason, and solve problems had actually increased over the years, with 20% reporting no change and only 4% reporting that their abilities had declined with age. When confronted with the fact of decline in psychometric test performance upon completion of formal schooling, the older sample said that they were talking about solving different kinds of problems than those found on cognitive ability tests--problems they referred to as "everyday" and "financial" problems.And this perception is probably correct:
The idea that practical and academic abilities follow different courses in adult development finds support in a variety of studies. For example, Denney and Palmer (1981) gave 84 adults between the ages of 20 and 79 years two types of reasoning problems: a traditional cognitive measure, the Twenty Questions Task (Mosher & Hornsby, 1966); and a problem-solving task involving real-life situations such as, "If you were traveling by car and got stranded out on an interstate highway during a blizzard, what would you do?" or, "Now let's assume that you lived in an apartment that didn't have any windows on the same side as the front door. Let's say that at 2:00 a.m. you heard a loud knock on the door and someone yelled, 'Open up. It's the police.' What would you do?" The most interesting result of the Denney and Palmer study for the purposes of this article is a difference in the shape of the developmental function for performance on the two types of problems. Performance on the traditional problem-solving task or cognitive measure decreased linearly after age 20. Performance on the practical problem-solving task increased to a peak in the 40 and 50 year-old groups, then declined.This certainly fits my experience.
Not obviously. I can't dig up the cite at the moment, but I recall David Friedman being insistent about making sure the accounting is complete. It's probably rare that an activity produces only positive or only negative externalities. While walking from my car to my office, I noticed something else: the air smelled like bacon. The negative externality of the dumpster smell has to be balanced against the positive externality of the bacon smell. Perhaps that's the implicit Coasean bargain: put up with a slight stench if the wind's right and you're standing right behind your building in the afternoon, and you'll get the pleasant smell of tasty bacon in the morning.
The upshot for public policy is this: we can't make policy designed to fix externalities without taking all the relevant externalities into consideration. For more, here's John Nye's essay in Regulation on "The Pigou Problem." And, while Googling David Friedman and externalities, I was reminded that the Concise Encyclopedia of Economics article on externalities was written by none other than our very own Bryan Caplan.
]]>If the 12 month change of the CPI-U as reported by the BLS is greater than 5% for any sliding window between today and December 2015 in monthly increments, I pay Arthur $100. Otherwise, he pays me $3.
An excerpt:
Here are some sample calculations for a wage earner couple with two children living in a state that offers Medicaid to households with incomes at or below 133 percent of the federal poverty level (FPL). Because the law allows 5 percent of income to be "set aside," this is functionally equivalent to offering Medicaid to families with incomes under 138 percent of the federal poverty level. The federal poverty level for a family of four is currently $23,550. Allowing for the income set-asides and multiplying by 1.38, this family would be eligible for Medicaid as long as it doesn't earn more than $32,499.Now, suppose that the family earns an additional $501. It will now be ineligible for Medicaid. If the employer does not offer affordable coverage, the family will have to turn to a health insurance exchange.
According to the Kaiser Health Reform Subsidy Calculator, the premium cost for family coverage purchased through an exchange will be $1,143 per year (3.46 percent of annual income). Yet, after paying this premium and paying the additional federal income taxes it owes, this family is actually worse off as a result of its higher earnings. (See the table).
One correction, though. The last column in her table, which is the most important column in the piece, is mislabeled. It is not the "Percent Change in Marginal Tax." Rather, it's the marginal tax rate on the additional $501 of income. That's what's shocking. A family can get implicitly taxed 238% on that additional $501.
]]>1. Rolf Dobelli, The Art of Thinking Clearly. I finished it. It's very hard to put down, and it could've been subtitled "a pocket guide to making better decisions." The hardback is a little too big to fit in a pocket, so I also bought the Kindle edition. It has 99 very short chapters, each on a different cognitive mistake, and it will be great to have on my iPhone for those odd bits of five minutes here and ten minutes there that crop up between meetings and the like.
2. Charles Wheelan, Naked Statistics. The fact that it doesn't Google well with SafeSearch on notwithstanding, this is another entry in what looks like a growing array of books on statistical inference for educated lay readers (or is that just availability bias on my part?). I just flipped through the last few chapters (the exam was ending) and filed them away for someday in the future when I teach statistics or econometrics. Wheelan's writing is at least interesting, and he does something I'm surprised more scholars refuse to do (or can't do): take issues of life-or-death seriousness and make them interesting.
A Quick Preview of Coming Attractions: Some of my Future EconLog Posts
1. An answer to Bryan's question about how the government should spend a billion dollars. I'm going to take "give it back to the taxpayers" and "print a few hundred million US passports for prospective immigrants" off the table.
2. I teased a discussion of aggregate demand at Chuck E. Cheese's a couple of weeks ago. Now that exams are finished, I can write my answer!
3. An evangelical case for ending the drug war:
.@knowledgeprob @reason good question. Answer forthcoming @econlog.
— Art Carden (@artcarden) May 13, 2013
4. Why you're likely to be a much better pastor or youth minister if you change the composition of your reading list to include more books like The Signal and the Noise or Naked Statistics. I have a lot of experience in churches and parachurch environments where there are a lot of people who want to feed the hungry, clothe the naked, etc. These are environments in which people make a lot of confident-but-(let's be honest)-poorly-supported arguments about causal relationships. One of the classics: "if you live together before marriage, you're X% more likely to divorce." I think there are big epistemic bills on the sidewalk here, and while organizations like the Barna Group are making inroads, there is still a lot of work to be done. On a somewhat related note, some of my colleagues at Samford will be studying "Randomness and Divine Providence" over the next couple of years thanks to a grant from the Templeton Foundation.
]]>In the modern U.S., what is the most efficient way for the federal government to spend an extra billion dollars? What is the maximally utilitarian way for the federal government to spend this sum? (In both cases, assume that tax cuts are not an option). Use everything you've learned to craft a thoughtful answer, and be specific.Most responses fell into one of the following undesirable categories:
Ken' talk was on teaching economics and was very well prepared. I don't remember where exactly but there were a couple of points in the talk where I wanted to break into applause. Ken has shared his extensive notes from that lecture with me. Here are a few highlights.
From early in the talk:
I am going to talk about teaching economic by lecture today and I am fully aware that in some circles this marks me as pedagogically outdated. In the School of Education at my university, to lecture to students is to be a so-called "sage on the stage" and this is a pejorative description, as though there is something wrong with being a sage. Our Teaching Resource Center recently offered program called "The Tyranny of the Lecture" by Eric Mazur. I thought I might become depressed if I attended.As best I understand this criticism of teaching by the lecture method, it has to do with the fact that it is hierarchical; teaching by lecture is based on the assumption that the teacher knows more about the material than the students do. Frankly, I have never doubted that this applies in the teaching of economics.
I did not catch on until well into my teaching career that the best time to evaluate a lecture and decide what needs replacing often is right after the lecture is delivered, and not a year or two later, when one next teaches that topic area. It isn't enjoyable to revise a lecture right on the heels of giving it. But unless the lecture turned out to be brilliant, there is never a better time to identify that lecture's weak spots than just after giving it.
How does one know if a lecture was brilliant, requiring no future revision whatsoever? William Breit once proposed to me a tangible benchmark. A brilliant lecture, one you can file away unrevised, is one where students respond by carrying you out of the lecture hall on their shoulders and parade you around the campus. Most of us probably only have this happen one or two times per year.
If anyone wonders about the quality of his or her lecturing clarity, there is a reliable, albeit sobering test, that can be self-administered. Record three or four of your own lectures and then listen to them. Awkward speech patterns, such as slurred words and interspersed uhhhs between sentences, will be so embarrassingly revealed that a cure usually follows this examination.
More later. When I do the later excerpts, I'll also add one of my own thoughts. Ken didn't say it but I think it was implicit in his talk.
]]>It's easy (and perhaps intuitive) to say things like "tax-exempt groups shouldn't be allowed to engage in political activity" or "education produces positive externalities and should therefore be subsidized." But what is "political activity"? What is "education"? My definitions may be very different from yours. Paying the armies of lawyers necessary to work this out might actually cost more than the purported benefits of the restriction or the subsidy, and these aren't terms with objective definitions that lie waiting to be discovered. They are constantly in flux, with new types of political activity and education emerging as people come up with ever-more creative responses to the world around them. They are defined in the process of their emergence.
I've visited Buchanan a few times elsewhere, here and here. A question for the readers:
What are other examples of phenomena, products, organizations, or ideas that are defined in the process of their emergence?
]]>1. Nate Silver, The Signal and the Noise. I'm enjoying books in the loose "applied statistics for everyday life" genre. This is an educated layman's guide to the dark art of forecasting without getting into the Deep Magicks. Review forthcoming.
2. Christopher J. Coyne, Doing Bad By Doing Good: Why Humanitarian Action Fails. Most scholars would love to write just one important book in an entire career. Coyne has written two, and he isn't even 40 yet (the other is After War: The Political Economy of Exporting Democracy). Just as After War showed that we can't create liberal democracy at the point of a gun, Doing Bad by Doing Good shows that we can't sow the dry ground of global poverty with aid dollars, water it with our tears, and expect development. Review forthcoming.
3. Rolf Dobelli, The Art of Thinking Clearly. Dobelli counseled us to Avoid News. In this book, he offers 99 short chapters on different cognitive biases. I'm about 75 pages in, and it's great so far. I can't decide yet if it's a complement to or a substitute for denser and more scholarly books like Thinking, Fast and Slow.
4. James Buchanan and Richard Wagner, Democracy in Deficit: The Political Legacy of Lord Keynes (link to PDF). I refer to the Liberty Fund book rep at conferences as my "dealer;" fortunately, they have also taken many titles and put them online. Like this one, for example, which I assigned in my intermediate macro class. This is an under-appreciated volume in the current climate. If I could summarize in a sentence, it would be this: the effectiveness of fiscal policy will be limited by the constraints imposed by the rent-seeking society.
]]>1. A decentralized order is possible. Indeed, it is natural for human societies to achieve such an order, rather than degenerate into the Hobbesian war of all against all.2. The natural decentralized order is, however, highly illiberal. It requires a set of social norms that bind the individual to the clan. Under the rule of the clan, peace is broken by feuds, commerce is crippled by the inability to put trade with strangers on a contractual basis, and individual autonomy is sacrificed for group solidarity.
3. In the absence of a strong central state, the rule of the clan is the inevitable result. In order to graduate from the society of Status to the society of Contract, you must have a strong central state.
Like Kling, I'm willing to believe 1 and 2, but I find 3 unpersuasive (again, I haven't read Weiner's book yet). I'm reminded of the following from chapter 3 of Douglass C. North's Structure and Change in Economic History, titled "A Neoclassical Theory of the State":
"The existence of a state is essential for economic growth; the state, however, is the source of man-made economic decline." (p. 20)."For the economic historian, the key problems are to explain the kind of property rights that come to be specified and enforced by the state and to explain the effectiveness of enforcement; the most interesting challenge is to account for changes in the structure and enforcement of property rights over time." (p. 21)
"The essence of property rights is the right to exclude, and an organization which has a comparative advantage in violence is in the position to specify and enforce property rights." (p. 21)
North offered a powerful explanatory theory of the state, but even in spite of the fact that chapter 5 of Structure and Change in Economic History is titled "Ideology and the Free Rider Problem" and in spite of North's later work (especially his 2009 book with John Wallis and Barry Weingast, Violence and Social Orders), we don't have a complete understanding of what Daniel Klein called "The People's Romance." Co-blogger Bryan Caplan is right that people exhibit anti-foreign bias and that these biases are rooted in our tribal past, but I look forward to a more complete explanation of how these rules and norms have translated into not just a willingness to obey but an outright love for one's government.
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