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Ask BadEconomics: Midweek Discussion Thread, 16 September 2015 (self.badeconomics)

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Welcome to the midweek discussion thread

Where you can ask any questions you have for the subscribers. Ever wonder if our team of pompous economists will mock you for an idea you've had about markets and the economy? Wondering if you are able to prax the answer?

"Is XXX bad economics?"

And also chat about any bad (or good) economic events. Remember to use the NP posts and whatnot.

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トップ新着論争中古い順Q&A

[–]CatFortuneにゃんぱす! 6ポイント7ポイント  (3子コメント)

Publishers put this in the corner of the pages for my Econ 101 textbook. This class will be legit.

[–]goodcleanchristianfu 2ポイント3ポイント  (1子コメント)

Your econ textbook is an Animorphs novel?

[–]CatFortuneにゃんぱす! 1ポイント2ポイント  (0子コメント)

Yeah my professor is literally Dr. K.A. Applegate so she's pimping her own textbook UGH.

[–]Polisskolan2 1ポイント2ポイント  (0子コメント)

I knew it!

[–]WearyTunes 4ポイント5ポイント  (6子コメント)

Any opinions on the recent WsJ article about the price of Sanders' program and the responses?

It seems like WsJ was being a bit unfair but I honestly can't tell if the people contradicting them are doing any better.

[–]irondeepbicycleI got 99 problems but technological unemployment ain't one 1ポイント2ポイント  (4子コメント)

I thought the WSJ made a handful of decent points and the WaPo made a handful of decent points. Most of the discussion revolves around Bernie's health care plan which hasn't been released so it's all speculation.

The larger points I took are 1) it is dishonest to discuss policy while only describing the benefits, without mentions of cost, and 2) The only way Bernie will be able to pay for what he wants is via middle class tax increases. If these facts are made clear I think he loses a bit of his support.

[–]besttrousers"Then again, I have pegged you for a Neoclassical/Austrian." 1ポイント2ポイント  (3子コメント)

I was shocked by the amount of pushback. The WSJ estimates is pretty consistent with the G/GDP you see in Scandinavian countries. Isn't that the goal? And hasn't that been fairly explicit?

[–]wumbotarianmodeled as if Noah Smith was a can opener 2ポイント3ポイント  (2子コメント)

Isn't that the goal? And hasn't that been fairly explicit?

It is the goal of Sanders but many Republicans and Democrats don't want that. Nor do they want the increased taxes. Sanders' Colonels of le reddit army might not even want that.

However, Bernie expects us to believe that we can fund all of it via punitive taxes on the rich and corporations. Also a financial transactions tax.

So Bernie either needs to fess up that we will have to raise taxes on middle income earners or borrow more money to fund these programs or back off on his programs.

[–]besttrousers"Then again, I have pegged you for a Neoclassical/Austrian." 2ポイント3ポイント  (1子コメント)

However, Bernie expects us to believe that we can fund all of it via punitive taxes on the rich and corporations. Also a financial transactions tax.

Ugh.

This is why the besttrousers/wumbotarian dialogues are so useful. The shitty reason on our respective "sides" are often transparent. I sort of implicity assumed that people knew there was a tax/spending tradeoff.

[–]wumbotarianmodeled as if Noah Smith was a can opener 1ポイント2ポイント  (0子コメント)

This is why the besttrousers/wumbotarian dialogues are so useful.

:D

[–]The_Doc29 1ポイント2ポイント  (0子コメント)

Here is my question to the users here. Healthcare in the United States costs approximately 3 Trillion a year and people are encouraged to sacrifice entrepreneur opportunities to work for companies with great healthcare plans to get coverage.

1) Can free market competition (eliminating state lines restricting competition) drastically reduce health insurance to match the estimated 1.5 trillion in single payer?

2) Should people be required to have health insurance like the rest of the world in which healthcare is cheaper per person?

[–]irwin08STAGFLATION IS COMING, BUY GOLD NOW!!1! 3ポイント4ポイント  (0子コメント)

Question 1: So I've been looking into the Great Depression lately and I keep seeing this sources say that "overproduction" was a major cause. That just doesn't seem right too me. Basically they say stuff was overproduced so prices fell and those industries that overproduces suffered, but wouldn't that be a relatively short adjustment as unprofitable firms left the market to other industries and prices rose until the market was in equilibrium again? If prices were declining everywhere wouldn't that be the fault of the Fed and not "overproduction"? So is overproduction a legitimate explanation for at least part of the Depression?

Question 2 I am picking up "The Great Contraction" - Friedman/Schwartz soon and am pretty excited. Is there anything I should pay particular attention to when reading it? Also is there any outdated info in it that I should be aware of. Oh and should I supplement it with any other papers or books?

[–]neshalchanderman 2ポイント3ポイント  (2子コメント)

Who's got the skinny on PQE?

[–]rafaellvandervaart 2ポイント3ポイント  (4子コメント)

What did Hayek get right? Where did Hayek went wrong?

[–]besttrousers"Then again, I have pegged you for a Neoclassical/Austrian." 2ポイント3ポイント  (0子コメント)

What did Hayek get right?

"Hayek’s ideas that the price system is a consolidator of information and a distributor of knowledge, as well as simply a way of assuring efficiency and exchange, is probably as penetrating and original an idea as microeconomics produced in the 20th century."

  • Larry Summers

Where did Hayek went wrong?

He had an incorrect model of the business cycle (though it had many important features that showed up in later 20th century models - it still made a contribution!).

[–]wumbotarianmodeled as if Noah Smith was a can opener 2ポイント3ポイント  (1子コメント)

Hayek did right on his prices as information thing (AER, Hayek 1945). I also think he did right as a social critic, but I'm a libertarian so I'm biased.

He done goofed on the ABCT.

[–]besttrousers"Then again, I have pegged you for a Neoclassical/Austrian." 2ポイント3ポイント  (0子コメント)

<high five>

[–]EsoteriCola"I have some serious economics training" 3ポイント4ポイント  (0子コメント)

I'd like to give a shoutout to /u/irwin08 who has pretty much single-handedly kept /r/memenomics (a highly underrated sub) afloat despite the massive competition from /r/PraxAcceptance.

[–]EveRommelDAY TUK UR JOBZ, didn't want it anyways, already replaced 1ポイント2ポイント  (2子コメント)

I tried to go to other subreddits to get more economic views and the lack of links to reputable sources makes me sad so I have to come back here.

Speaking of which can someone link HE3 excellent breakdown of Sanders bad econ that he made a few months ago, I've lost the link and I'm surrounded by people feeling the bern.

[–]Jericho_Hill#StickyLivesMatter #OverthrowTheMods 1ポイント2ポイント  (4子コメント)

I just finished a 9 month project to complete a beta build of a tool our folks in the field can use to do basic statistical analysis and hypothesis testing on the fly without needing to do anything but clicks and selections. In other words, I've brought statistical analysis to laypersons and in a manner that is consistent with research standards (its idiot proof).

When this rolls out to full deployment, it will likely save my agency millions per annum.

Holy hell, I am so pumped.

[–]EveRommelDAY TUK UR JOBZ, didn't want it anyways, already replaced 0ポイント1ポイント  (1子コメント)

5 bucks says some idiot some where will break it so bad you will have to tell them to just not use it ever again

[–]Jericho_Hill#StickyLivesMatter #OverthrowTheMods 2ポイント3ポイント  (0子コメント)

That's why we are in beta. There is a guy in one of our field offices who is my prime suspect for this. He is beta tester #1

[–]besttrousers"Then again, I have pegged you for a Neoclassical/Austrian." 0ポイント1ポイント  (0子コメント)

UGH I am so jealous.

I am not working on this project, but I am advising some people working on solving the same thing.

[–]wumbotarianmodeled as if Noah Smith was a can opener 0ポイント1ポイント  (0子コメント)

Apparently government workers aren't that unproductive after all!

[–]EveRommelDAY TUK UR JOBZ, didn't want it anyways, already replaced 0ポイント1ポイント  (0子コメント)

I think I've seen this talked about here before but I tried to articulate it in a conversation last night and realized I didn't grasp it completely.

Is Bernie Sanders 1 trillion dollar infastructure building plan good or bad economics?

[–]say_wot_againConfirmed for Google bigwig 0ポイント1ポイント  (0子コメント)

What are the actual problems with the Marxian labor theory of value?

Note: If you say marginalism, the subjective theory of value, or diamond-water, I will slap you. Those are counters to the Ricardian labor theory of value, not the Marxian version.

The Marxian labor theory of value states that since all value ultimately requires human labor, the amount of "socially necessary labor time" in the economy determines the productive capacity. Even capital ultimately requires labor to be stored in it over several periods to exist, and indeed this formulation of capital was used by both sides of the Cambridge Capital Controversy.

So what problems does this idea have? Sure, the whole problem of aggregation via stored labor in capital and "socially necessary" is a bit clunky, but so are the aggregation mechanics to get to K, L, or EL in Solow/MRW; indeed, as per CCC aggregating K is even MORE clunky than aggregating socially necessary labor time. This doesn't allow for analyzing income shares going to capital, labor, and skilled labor the way a Cobb-Douglas formulation might, but on the other hand it provides a lens to remember that ultimately capital requires labor to be stored over various periods first. So what are the main problems?

Tagging /u/The_Old_Gentleman in case I missed something.

[–]Melab -1ポイント0ポイント  (14子コメント)

I keep on hearing about the supposed greatness of the Case theorem from some people. They tell me that issues lije pollution or whatever can be negotiated "on the market". I'm at a loss by the apparent stupidity of this argument. Are these people forgetting the contention that one shouldn't have to negotiate with polluters to get them to stop? Seems like a terribly confused normative argument (not the theorem).

[–]Polisskolan2 4ポイント5ポイント  (13子コメント)

The Coase theorem is not a normative argument.

[–]Melab -1ポイント0ポイント  (12子コメント)

Of course. I am talking about the people who imply that negotiating with polluters is a solution.

[–]say_wot_againConfirmed for Google bigwig 4ポイント5ポイント  (2子コメント)

We do not negotiate with terrorists polluters.

Given that a LOT of things create pollution and you're unlikely to get pollution to stop altogether, what do you have against the idea of negotiating with polluters?

[–]Melab 0ポイント1ポイント  (0子コメント)

I'm critizing an argument. That is all.

[–]Polisskolan2 1ポイント2ポイント  (0子コメント)

I don't think that's a very appealing solution either. The only thing the theorem says is that the resulting allocation is efficient. In general, economic results are not enough to support a political position. You need to throw some political values/philosophy into the mix too. Which is why it always annoys me to see people talking about whether some policy is good or bad economics. It depends on what you want to achieve, and what you should achieve is outside the domain of economics.

[–]marpool 1ポイント2ポイント  (2子コメント)

Negotiation with polluters is a potential solution. If people affected pay the polluters to pollute less then the social equilibrium can be achieved. However at pointed out above negotiation is hard(the assumption of negligible transaction costs in coase's theorem unrepresentative of reality) so it wont be effective.

[–]Melab 0ポイント1ポイント  (1子コメント)

Yes, it is a potential solution. But why should people who are subjected to pollution have to pay to begin with?

[–]say_wot_againConfirmed for Google bigwig 0ポイント1ポイント  (0子コメント)

They...don't necessarily. If you assign property rights to clean air as opposed to the right to pollute, then polluters have to pay to pollute. Hell, that's the whole point of the Coase Theorem; with low enough transaction costs, it wouldn't matter except from a distributional perspective who you initially gave the property rights to.

[–]Oztafan 1ポイント2ポイント  (0子コメント)

Well, under the assumptions of the theorem it kinda is.

You assume that pollution is not something inherently "bad" but rather a by-product of whatever production activity you're looking at. In that case the polluter and the "pollutee" can come together and work things out.

(Assuming well-defined property rights, no transaction costs, ...)

[–]neshalchanderman 1ポイント2ポイント  (3子コメント)

My housemate used to plays music which annoyed me in our flat.

Apparently I shouldn't have negotiated with him to play something else because that adult course of action is totally immoral.

Thank you for your wisdom /u/melab.

[–]Melab 0ポイント1ポイント  (2子コメント)

Oh, come on. I made no claim about the morality of negotiating. I'm criticizing the suggestion that people who think polluters simply shouldn't pollute should negotiation over regulation. Why would someone who thinks that be persuaded that they should have to pay polluters not to pollute?

[–]neshalchanderman 0ポイント1ポイント  (1子コメント)

...

I'm at a loss by the apparent stupidity of this argument. Are these people forgetting the contention that one shouldn't have to negotiate with polluters to get them to stop?

How does the roommate situation resolve itself?

[–]Melab 0ポイント1ポイント  (0子コメント)

Should I have to negotiate with vandals?