Chronicle of the Conspiracy
Friday, May 19, 2006LET'S NOT BITE THE HAND THAT FEEDS OUR PRODUCTIVITY Economist Ken Rogoff on the American productivity miracle:
Together with a few sister “big box” stores (Target, Best Buy, and Home Depot), Wal-Mart accounts for roughly 50% of America’s much vaunted productivity growth edge over Europe during the last decade. Fifty percent! Similar advances in wholesaling supply chains account for another 25%! The notion that Americans have gotten better at everything while other rich countries have stood still is thus wildly misleading. The US productivity miracle and the emergence of Wal-Mart-style retailing are virtually synonymous.Via Greg Mankiw.
Posted by Donald L. Luskin at 8:31 AM | link
IT'S BEEN A LONG SIX MONTHS The fundamental fatuity of Thomas Friedman (from The Corner, via Econopundit).
Posted by Donald L. Luskin at 8:29 AM | link
Thursday, May 18, 2006THE WORD IS SPREADING I'm cited today in Investors Business Daily:
The economy took off after the 2003 tax cuts, creating more revenues than even the spendthrifts in Congress imagined.
Posted by Donald L. Luskin at 8:55 PM | link
VERY COOL TOOL From Congressional Quarterly -- an interactive map of House, Senate and governor races across the country, complete with summary scorecards. I have to say, from this, things don't look all that horrible for the governor .
Posted by Donald L. Luskin at 11:50 AM | link
Wednesday, May 17, 2006NEW YORK TIMES BACKS PERSONAL ACCOUNTS FOR SOCIAL SECURITY Well, not exactly. But in a piece yesterday by the Times' crusader for higher taxes, David Cay Johnston, this graphic is presented to show the awesome earnings potential over time in personal Roth IRA accounts -- which amounts to the same thing.
Of course the point, for Johnston, is not that this tax-free account is a way for ordinary Americans to accumulate great retirement wealth over time (which is true). It's that the government is being deprived of tons of tax revenues in the future (which is also true -- and equally wonderful). Thanks to reader Steve Ambos for the link.
Posted by Donald L. Luskin at 7:59 AM | link
SCIENCE? I THINK NOT My friend Greg Mankiw writes on his blog about economics as "science," in distinction to the mere "engineering" of macroeconomics. A useful distinction to be sure -- but I think Greg is being naive about the reality of the scientific nature of even the most basic economics:
Economists like to strike the pose of a scientist. I know, because I often do it myself. When I teach undergraduates, I very consciously describe the field of economics as a science, so no student would start the course thinking he was embarking on some squishy academic endeavor. Our colleagues in the physics department across campus may find it amusing that we view them as close cousins, but we are quick to remind anyone who will listen that economists formulate theories with mathematical precision, collect huge data sets on individual and aggregate behavior, and exploit the most sophisticated statistical techniques to reach empirical judgments that are free of bias and ideology (or so we like to think).Sorry, but none of that qualifies for "science." Where is the utterly essential ingredient of repeatable experimental verification of falsifiable hypotheses? Without that -- and economics surely doesn't have it -- there can be no claim to science or the scientific method. The best that can be said for economics as a science is that it strives to be scientific -- but in the complex real world of human behavior (which is, after all, the domain of economics), there can never be science in any hard sense. A scientific attitude toward inquiry, yes -- but let's not pretend it's hard science.
Update... Reader David Hemmer says,
This got me to thinking, do you consider mathematics to be a science? We really don't have this ingredient -- repeatable experimental verification of falsifiable hypotheses -- either!I would say math is not a science -- it is a language. It happens to be a language particularly useful to science. One of the fallacies that is often used to support the status of economics as a science is the application of math to it (indeed, Greg makes that very case). But math can be applied to astrology, too -- and that doesn't make astrology a science.
Update 2... A hedge fund manager (who has asked for anonymity) writes,
I use a helluva lotta math in my financial industry job... but I’m no scientist.Update 3... Economist John Seater writes,
I recommend that you post your definition of science. It seems clear that some of the difference between you and Mankiw over whether economics is a science arises from differing definitions of the term science. You suggest in your comments on Mankiw that science requires experimental evidence. The definition I use (memorized long ago from Funk and Wagnall's dictionary) makes no mention of experiments:I would reply to John that I can live with the Funk and Wagnall's definition. The word "experiment" may not appear in it, but to require it to do so in order to satisfy my point is fallacious. The notion of "experiment" is clearly implied in the phrase "subject to verification." Economics is simply not "subject to verification" in the same way that, say, physics is. I guess if I had to come up with a definition of science on my own it would be something like this: Science is knowledge that results from the application of the scientific method -- i.e., the experimental testing of falsifiable hypotheses.Science: Any department of knowledge in which the results of investigation are logically arranged and systematized according to general laws and hypotheses subject to verification.Note that the nature of "verification" is not specified here. Would you consider astronomy or geology sciences? They can't reconstruct what they study. They can't creat a slightly different Milky Way or Earth. Astronomers can't even touch what they study (well, almost can't, anyway; they do send rockets to planets and comets). Your implied definition, which qualifies "verification" with "experimental," is just as valid as mine. Definitions are totally arbitrary. They are never right or wrong, only useful or useless. I don't argue with your definition. I just would like to see it. I suspect that some and maybe even most of the disagreement between you on the one hand and people like me and Mankiw on the other is semantic rather than substantive. All I really care about is whether economics helps us understand the world. Whether it is called "science" doesn't much interest me.
Update 4... Reader Gerald Hanner writes,
Reminds me of an online discussion between some economists I was once monitoring (lurking). At one point an engineering prof pipped up and made this statement: We engineers take our cues from the basic research done by physicists. If you followed the same pattern, you would be taking your cues on human behavior from the psychologists, but you don't. How can you claim to be scientific?Update 5... Greg Mankiw has responded on his blog. Greg makes the point that not even all the hard sciences strictly use "experimental" evidence -- such as astronomy, which uses observational evidence. I accept that critique, and indeed I considered addressing it before I wrote my earlier remarks. I decided it was unnecessary, though, as I regard such observational evidence -- provided that competing observers are free to make the same observations, or refute that such can be made -- as a form or subset of experimentation. Second, Mankiw notes that there is some work in so-called "experimental economics." I accept that, too. Fine. All to the good. But Greg's abilty to find one or two white sheep in the flock doesn't mean all the sheep are white. "Experimental economics" is an avant garde rarity within the field, and hardly justifies the characterization of the entire field as experimentally validated.
Update 6 [5/19/06]... Reader Greg Ransom, who describes himself as a Hayek scholar, says:
I take Hayek's view that economics is a non-experimental science that succesfully explains undesigned order -- just as Darwinian theory is a non-experiemental science that sucessfully explains undesigned order. The key thing is that Hayek's scientifically sound explanatory strategy is largely unused by the "idiot savants" who populate the econ. departments.
Posted by Donald L. Luskin at 7:44 AM | link
Tuesday, May 16, 2006IRONIC JUXTAPOSITION (OR IS IT MORONIC?) California reader Marty Holloway notes,
The Sacramento's Bee's two main editorials this morning are an amazing misunderstanding of cause and effect.
Posted by Donald L. Luskin at 2:25 PM | link
THE RELIGIOUS LEFT CELEBRATES ITS PARADISE From the American Spectator:
...one of the little boobies they let write editorials for the Times now that Abe Rosenthal is gone decided to celebrate the world of the Nukak tribe last Saturday: "Perhaps you read yesterday's article about members of the Nukak tribe...who walked out of the Colombian jungle and renounced their ancestral ways....According to witnesses, they say they are happy about it....None of which explain the bittersweet feel this story leaves in the reader's [the editorial writer's] mind....We have no clearer idea what it would mean to live a subsistence life in the Colombian jungle than the Nukak have of living even on the fringes of the modern world. [Only, little booby, if you have no intelligent imagination or sense enough to get some anthropological information, so readily available on the Internet. See, presumably the difference between you, and them is that you are supposed to be educated]....it's hard to escape the feeling that their SELF-SUSTAINING EXISTENCE...WAS HOLDING SOMETHING OPEN FOR US, SOMETHING THAT HAS NOW BEEN LOST."It goes on and on and gets better and better. Thanks to reader Jameson Campaigne for the link.
Posted by Donald L. Luskin at 7:15 AM | link
Monday, May 15, 2006SHAKE DJIBOUTI? Tasteful, and probably very effective as a preventative:
ABIDJAN (Reuters) - Days after bird flu was detected in Ivory Coast, hundreds of people were trembling, flapping their arms and clucking like hens.
Posted by Donald L. Luskin at 10:41 AM | link