The Ambrosini Critique

… to maximize your profits, strip when you’re ovulating.

Now… I go back to writing.

I have the flu. That sucks. But this discussion of an interview between Bjorn Lomborg and Bill Maher doesn’t.

I agree with The Economist and Arnold Kling that the nation seems to be an arbitrary unit of measurement when considering economic outcomes.

To the extent economics is about efficiency, then we should talk about increasing efficiency for everyone. Trade is good, on balance, for everyone, foreign and domestic. Immigration is good, on balance, for everyone, natives and immigrants.

Yes, the “on balance” aspect of those statements is sticky. There will be some losers and some winners to trade and immigration, but “on balance” means that the gains of the winners outweighs the gains of the losers¹. Economists give themselves an out by just saying the winners can compensate the losers so we don’t have to worry about the distributional issues. For example, trade with Japan puts American car manufacturers out of business, but all of the tax payers who benefit from having higher quality and cheaper Toyotas compensate the auto workers by paying for their retraining.

Economics isn’t just about efficiency, though, its about distribution too. Distribution is much harder than efficiency to get your head around. With efficiency, you either increase it or you don’t. There’s only one way to go. With distribution, on the other hand, its not obvious what the goal should be. Should we care about equality of outcomes? of opportunities? Should we care about the poorest members of society more than others? The answers to these questions aren’t obvious.

It is obvious that we shouldn’t choose answers to those questions arbitrarily. When Borjas argues against immigration, he has to arbitrarily assume natives are more important in the calculations of welfare than the immigrants. When Rodrik argues against trade, he has to arbitrarily assume the current distribution of jobs, the number of American auto workers versus Japanese ones, is more important than total welfare.

Of course distributional issues matter. Of course it matters that some people gain and some other people lose. But pointing this out does not make for a good argument against immigration (or trade). What matters is identifying those winners and loser and quantifying the degree to which the winners win and the losers lose… whether or not the winners are “us” and the losers are “them”.

So, yeah, when deciding what is right and wrong, the nation seems to be an arbitrary unit of measurement. But I can come up with two reasons why the nation is a good way to study economic phenomenon:

• Nations have different institutions. If you want to test how institutions effect economic outcomes, nations are a pretty good starting point.
• Nations have statistics bureaus. Basically data is collected at the national level. There’s starting to be some good micro/international data sets, but for the most part if you want to look at data across countries, its aggregated at the national level.

1. Rodrik claims many economists get mixed up here — “A pervasive such false belief, for example, is that trade necessarily benefits more people than it hurts.” — but I don’t know any of those economists. [↩]

This first sentence is just here for all the bloggers who want to read the first sentence of the post and then go write an angry rebuttal of my claim that poor Americans should have to torture puppies in order to be eligible for Bandaids.

— Megan McArdle

And, no, I didn’t read the rest of the post… even though I’m sure its quite good.

UPDATE: It is good:

If you do believe that there is no right to a decent standard of living, then I won’t argue with you. That doesn’t mean I think you’re right; I disagree rather vehemently. But I’m pretty sure I’m not going to persuade you that you have moral obligations you don’t feel, and you’re not going to persuade me that the American taxpayer should let babies die because they made the mistake of having the wrong parents. How about wandering over to the music thread and making some suggestions? Some of my favourite bands have come via anarchocapitalists.

But what decent minimum standard of living? Liberals, it is safe to say, believe that this should be much more generous than do libertarians; I lean closer to the P.J. O’Rourke axiom that “the biblical injunction is to clothe the poor, not style them”.

and this makes me want to vote for her for President next time around:

The second is that I prefer a system which interferes as little in the lives of the poor as possible. I don’t think the government should be providing vouchers for food and housing; I think the government should be giving poor people money, and letting them decide what they want to spend it on. I support the elimination of almost all government benefit programs, except those targeted at children and the disabled, and a more comprehensive version of the earned income tax credit. In fact, I’d like to see a tax system which has positive and negative rates in a continuously increasing function, zeroing out somewhere around $28,000 a year.

Comparing the two archives, I’ve been blogging longer than the folks at MR.

Up until about 5 minutes ago I would have sworn on all the holy books that I was inspired to start blogging because of MR.

Here’s my early experiments with the medium.

Interesting job posting here.

Back before the good ‘ol days, even before there was an Old West, everyone was stuck in what’s called a Malthusian trap. The idea is that because technological innovations happened so rarely, people’s reproductive proclivities made sure that any technological advances would just translate into more people. If you invent a new plow that made land twice as productive, you’d produce more food and thus you could feed more people. People would go about making more of themselves in short order and in the end, you’d end up with just as much food per person as before the invention. The average person gets no richer.

The first part of Clark’s book is basically a long discussion of what are the implications of Malthusian trap. One of them, that many find perverse, is the idea that bad things like repeated droughts and persistent diseases are actually good things. Because they increase the death *rate*, they improve the average amount of food per living person.

Bryan Caplan thinks Prof. Clark is misinterpreting bad things. Instead of changing the relationship between the death rate and income per person, droughts and harvest failures reduce the productivity of workers. ¹

[T]he effect of harvest failures in the Malthusian model is to reduce income, which causes starvation, which reduces population, until you eventually get the old level of per-capita income with a new, lower population.

Ok. Fine. There’s two objections to Caplan’s interpretation of harvest failures. First, what does he mean by bad harvests “kill people by making a given number of people less productive”? Less productive at what? The economy was almost completely agrarian in these societies, so a bad harvest makes people less productive at making food. If you’re eating close to subsistence, less food means starving to death. This sounds like a change in the death schedule to me.

Second, and more substantive, Clark isn’t talking about supply shocks. He’s talking about persistent petulances and plagues. Introduce a new disease, and yes you get a one time decline in productivity which temporarily reduces incomes, but the long run effect is to increase the death *rate*.

For example, introduce malaria into a population and it makes everyone much less productive. This is bad in the short run as less food can be produced. Slowly, as people die from the disease, the total population decreases and the amount of food per person goes back to its original level. However, because malaria is still around, the rate at which people die goes up. By Clark’s reasoning, this has the effect of increasing the food per person. In the long run, then, the effect is an unmitigated good. Malaria increases the food per person.

Sick isn’t it.

UPDATE: Yeah, I passed my exam! Clark (on Caplan’s site): “What Caplan has done in redrawing the figure his way is to assume that extra disease has no effect on the death rate at a given material living standard. But this is just to assume away the possibility that the death schedule could change. Now that is a pretty strong assumption, and one demonstrably untrue.” That’s what I said! Except, well, he said it much better.

1. Go to Caplan’s post for pretty pictures, if such is your bag. [↩]

Tyler Cowan talks at Google about the Google X Lunar Prize and about when donors should create prizes or give grants.

This, and Cowan’s book, is a great example of economics thinking at work. He uses history and theory to show how people respond to incentives with the final end of providing advice to policy makers.

Answer, “balance”. Response, “re-balance”.

Neither Douthat’s answer or Wilkinson’s response address Haidt’s original point about conservative virtues: “surveys have long shown that religious believers in the United States are happier, healthier, longer-lived, and more generous to charity and to each other than are secular people. Most of these effects have been documented in Europe too. If you believe that morality is about happiness and suffering, then I think you are obligated to take a close look at the way religious people actually live and ask what they are doing right.”

What sort of balancing or re-balancing of the virtues in society gets the modern mix¹ right and still maintains what “religious people… are doing right” to make them happy?

1. I guess its obvious that modern, liberal virtues are better… [↩]

Or did I go wrong? Is it *still* too early to tell?