Thursday, May 26, 2011

Texas Senate Passes Loser Pays Bill That Is Actually Plaintiff Pays

The Texas Senate has passed a lawsuit reform bill that is falsely labeled as moving Texas to a loser pays bill when it really moves to a plaintiff pays bill. In some ways it is a slight improvement over the previously passed Texas House bill, but not by much. Now, at least, a winning plaintiff will not be exposed to more costs and attorney fees than the amount they win at trial. This at least ensures that a winning plaintiff does not end up paying the other side more money than they won when they bring a meritorious lawsuit, just because they made the mistake of rejecting a settlement offer that was better than what they end up receiving after trial. While this is much better, because now plaintiffs with meritorious claims do not have to have nightmares about being forced to file bankruptcy from attorney fees and costs for daring to, heaven forbid, actually try to resolve their case in court before a jury of their peers, this still is a bad bill. The result is still way too harsh and definitely pushes nervous plaintiffs with meritorious claims to accept low ball settlement offers because of the "what if" factor. It would make much more sense to apply this sort of thing to plaintiffs who are somehow repeat players, but it does not really make sense to apply this harsh rule to an ordinary individual who has never filed a lawsuit before.

What Texas should do is move to a straight loser pays system period. If you lose, you pay attorney fees and costs. Period. Texas loser pays is more along the lines that if the defendant wins, plaintiff always pays. But if the plaintiff wins, then they not only have to win, but they have to win more than 120% the defendants last settlement offer before the defendant has to pay.

Overall, this is still an awful bill. And it is also mislabeled. It isn't a "loser pays" bill. It is a plaintiff pays bill. This seems awfully strange to favor the rights of defendants so much over plaintiffs. After all, if a plaintiff brings a meritorious lawsuit, then the defendant has done something wrong that violates the plaintiff's legal rights. So, in Texas, it apparently is much worse to actually bring a lawsuit to defend your legal rights than it is to violate those legal rights in the first place.

Why should a plaintiff who loses a lawsuit always have to pay but a defendant who loses a lawsuit often or even usually does not?

That isn't loser pays, that is plaintiff pays!

Wednesday, May 25, 2011

Appellate Jurisdiction in California: State versus Federal

The appellate system in California is different from the Federal system in a very important and surprising way. There are quite a few similarities, of course. In California, the decisions of the Supreme Court of California are binding on all lower state courts just as the decisions of the Supreme Court of the United States are binding on all lower federal courts. Below the Supreme Court level, California has six geographic districts, in a manner analogous to 12 geographic circuits. But there is a really important difference! In California, unless there is a conflict, a California Court of Appeal decision is binding on all Superior Courts in the state, regardless of whether they are in the same district or not! See Auto Equity Sales, Inc. v. Superior Court, 57 Cal. 2d 450 (1962). This is very different than the Federal system, where U.S. Court of Appeals decisions are only binding on U.S. District Courts in the same circuit.

This is definitely an important basic fact that any lawyer or citizen doing legal research on California should know and keep in mind.

Tuesday, May 24, 2011

OECD Better Life Index Versus GDP

So, the Organization for Economic Cooperation and Development ("OECD") has come up with a new "Better Life" index upon which to compare countries. Certainly, it is an improvement over GDP. However, I think we must judge this effort as a partial failure to the extent that what is trying to be produced is an alternative to GDP that will actually be reported by the media.

First, it simply is too complicated. When I go to the OECD Better Life Initiative web page, it asks me to rank 11 areas in terms of relative importance to me. I am simply not sure I am fully up to the task. As in, if I were to do a ranking, I am not fully confident in my own answers in terms of my own preferences. What sort of concrete tradeoffs are entailed by a given set of answers? How comfortable would I be with a given ranking if it actually had some sort of impact on my life?

Second, and worst of all, at the end of the day, this measure has no chance of replacing or supplementing GDP as an item that is reported by the media. You can see what the OECD has done here. They have bought into the idea that it is improper to make any sort of value judgments, and therefore have decided that it is up to each and every individual to make his or her own ratings so as to produce individualized country rankings. But this idea fails on two levels. For one, OECD already has made value judgments by deciding that there are 11 categories that matter and that these are the categories that must be weighted and implicitly traded off against each other. For another, GDP is at least a shared social measure, so it is likely to be reported in the media. So, the people behind this OECD category have decided to sacrifice the idea of a shared social measure of well-being to the god of false objectivity. Worse, they haven't really gotten anything in return. They have failed to really eliminate important value judgements, their total focus on individual rankings notwithstanding. The people behind this simply have failed to bite the bullet here and recognize that it is necessary to exercise some institutional judgment and actually produce a single number that rises and falls in a manner analogous to GDP.

It didn't have to be this way. The OECD could have come up with a single number that could be reported by the media and still provided the capability of people to make their own indexes. What they have produced instead is a complicated tool that is practically guaranteed to have minimum impact.

The problem with GDP is that it is at core a subjective measurement that is masquerading as an objective measurement. What is subjective about GDP? What is subjective is that someone decided that the component things that make up GDP were worth measuring and aggregating together into a single measure in the first place. What is subjective is the judgment that the resulting number itself has some sort of meaning. So, it is not as though GDP is objective. One might say that the data that goes into GDP is objective. But the idea that aggregating this objective data and reporting on results is something that is meaningful and important is subjective.

The OECD did not have to sacrifice this project at the altar of objectivity. The main competitor, GDP, is not itself objective.

You simply cannot avoid subjective measurement here. What is important is to acknowledge it and deal with it explicitly, not try to avoid it. So, what the OECD should have done is use their best judgment to come up with a single number that can expand and contract, just like GDP does. They should then allow individuals to alter the various weights of individual criteria to produce their own numbers if they like, but there should have been one number for each country that is released periodically and that can easily be reported by the media.

I appreciate this effort as a first stab at this very challenging problem. But it must ultimately be judged as a failure in terms of producing a viable alternative to GDP that will be reported by the media and thus have much of an impact in improving how we think. I do not imagine that any but the most curious individuals will come to use the Better Life Initiative tool to calculate their own individualized rankings.

Sunday, May 22, 2011

Diagrams in Economics: They Actually Aren't All That

Via Mark Thoma, Daniel Little has an interesting post on the history of diagrams in economics.

One thing that I find interesting is the extent to which mathematical diagrams have been such a dominant part of the toolbox of many economists, especially in modern times. That classical economists did not have access to these modern tools; in many ways, the classical economists had an advantage as a result.

It hardly needs to be said that mathematically precise diagrams are not scientific. They are not empirical, but merely describe a situation assuming very rigid premises are always true. They are most useful for engaging in thought experiments and, perhaps, helping to clarify thinking. (Although there is the risk of the opposite, since not everything that is important is necessarily represented in the model!)

It shouldn't need to be said that doing nuanced mathematical proofs about nuanced details contained in such diagrams are going to tend to be useless to the extent that the truth of such nuanced details depends on false assumptions. But economists waste a lot of time trying to prove such little details about diagrams... This time would probably be better spent contemplating and understanding the real world. In this way, modern economics can be somewhat inefficient; but you would think that a field that claims to obsess over optimality and efficiency, the way economics does, would be more efficient.

Milton Friedman defended models with untrue premises by suggesting that it does not matter how unrealistic the assumptions of a model are, as long as those models predict accurately. An analogy might be Newton's laws of motion which depend on false assumptions about how the world works compared to quantum mechanics. Nonetheless Newton's laws of motion are practically useful for some applications, especially since it is much easier to intuitively understand and use than quantum mechanics. What matters, or so argues Milton Friedman, is the truth of the predictions produced by the model more than whether the premises built into the model are true.

Well, there is some merit here in Milton Friedman's argument. But it is also excessively apologetic and sweeps far too many problems under the rug. First, this is no different than any other area of life. We ultimately have no choice but to reason from premises that are not perfectly true, because absolute truth is not available to us. For example, in law, we infer intent from actions, because we do not have direct access to someone's intent, which resides in their minds. That does not mean that false premises do not matter, however. When our inferences in law are wrong, we end up giving someone the death penalty when perhaps the appropriate punishment would have been merely some prison time or even probation. In economics, you have economists who risk giving policymakers policy advice that is wrong and therefore harmful.

Indeed, the absence of perfection regarding the truth of premises is not an excuse for ignoring false premises. Economists still should do the best they can to get their premises right. They should obsess at least as much over arriving at empirically correct premises as they obsess over rigid mathematical features of their models that do not really matter much in the real world anyway, to the extent that that house of cards is built on a foundation of false assumptions in any case. What is the point of being greatly detailed about a model when many of those details are based on premises that are not only false, but known to be false? If your goal is to make empirical predictions, the more nuanced mathematical details often are not going to matter anyway. A more efficient use of time would be to try to do better in terms of the truth of the premises that are used in the models in the first place.

Also, regarding Milton Friedman's argument, some economists can be awfully sloppy empiricists, as demonstrated by Noah Smith and Dean Baker here and here. While, it is really not true that one can fully make up for untrue premises by using empirical research to verify predictions, to the extent that economists are going to try to do just that, they must ensure that they enforce much higher standards of empirical rigor.

Finally, the entire Milton Friedman defense assumes that the same approach that is applicable to the much more narrow subject of physics is applicable to the much more complex subject of economics. The law of diminishing marginal returns should have convinced any rational knowledge maximizing economist to diversify their methodological approach long ago. The fact that they haven't just proves that economists, like everyone else, are far from rational. One need not go so far as to say that models are completely useless to make the obvious point that they are not all that or the be all and end all.

It is a large missed opportunity that economics has gone so long without working more on getting basic premises right. Economists ignore so many factors that are obviously important in economic transactions (like culture or social meaning) that they can be said to be rather ignorant of the actual functioning of the economy. Many economists don't study the actual economy; they study a fantasy world which consists of economic models built on demonstrably false premises.

Now, this is not true of all economists. You have the rise of behavioral economics which, finally, tries to work on getting premises about how humans actually behave right instead of proceeding based on known falsehoods concerning rationality. It is, however, still true of too many economists. While I am happy about the rise of behavioral economics, rather than be excessively gushy about this development, a more appropriate response is: "It is about time! How long were you economists going to waste playing in your sandbox before emerging to deal with the complexities of the real world anyway???"

What is most remarkable about economics is how little economists actually know, not how much they know. This is not said to bash on economists. The thing economists are trying to study is incredibly complex. But it is a reason to bash on arrogant economists who proclaim to know more than they actually do. So, I think that Greg Mankiw's advice to those listening to economists, both on the left and the right, is well taken: "If you find an economist who says he knows the answers, listen carefully, but be skeptical of everything you hear."

Buying Healthcare is Not Like Buying Milk

You would think this is obvious.

Buying healthcare is not like buying milk.

There is a lot of what is called "asymmetrical information" in the market for healthcare that makes it extremely unlikely that consumers armed with vouchers will be able to "discipline inefficient providers" of healthcare, despite the fanciful claims of certain politicians to the contrary. For one, it is very difficult and often impossible for a consumer to know, without the expertise of the very healthcare provider they are supposed to discipline, whether an outcome is the best one possible. It is very difficult and often impossible for a consumer to know whether the extra steps taken by one provider over another are necessary or useful, given the tendency of the appropriate steps to be taken to vary based on nuanced differences in diagnoses.

Or to put it another way, there is a reason that medical school takes four years in addition to college and many years after that in order to specialize. Add to all that education knowledge gained through experience, and it is quite clear that there is a major asymmetrical information issue regarding basic issues of what the "service" that is delivered should be.

It really is amazing that some politicians are proposing to end Medicare and replace the system with vouchers based on simplistic theories that do not address the plainly obvious point that buying healthcare is not exactly analogous to buying milk.

Jared Bernstein has more at his blog.

Saturday, May 21, 2011

Partisan Thinking, Tribalism, and Freedom

When people watch politics, it is very easy and very human to become attached to one side or the other. When this happens, there is a temptation and tendency to hold arguments and people on the "other side" to higher standards and conversely, a temptation and a tendency to hold arguments and people on "your side" to lower standards. This is a very tribal outlook, but it is also a fundamental human tendency. Indeed, the tribalism itself is evident in the tendency to look for "defectors" in one's tribe that need to be punished. Defectors are those who claim tribal affiliation, but hold one or more unorthodox beliefs. Unfortunately, this is not a very good way at arriving at the truth. Indeed, with tribal partisanship, it is not unusual for positions on what the "right policy" is to evolve for no other reason than tribal self-interest as opposed to more legitimate reasons such as the discovery of additional data or deeper thinking.

I am not saying that in modern politics that both sides are equally right. The solution to the very real problem of partisan tribalism isn't a superficial equivalency that all parties in all situations are equally right. Indeed, that sort of superficial thinking would be every bit as flawed intellectually and nearly as problematic practically as the problem of partisan tribalism itself.

There are no easy answers here. Tribal thinking, to some degree, is simply effective. Under both democracy and other forms of government, a group that can hold itself together will have a tendency to have some advantages over groups that cannot. But therein lies the problem. If tribalism is effective in this sense, the more important question and issue is, effective to what end? The problem with tribalism is that it so distorts the underlying thought process that the goals that one's tribe becomes "effective" at accomplishing are not necessarily good. Also, and most perniciously, tribalism limits an individual's ability to think independently and in a truly free manner.

We say we live in a free country. But the truth is, many of our minds are not free due to partisan tribalism. In our country, many of the people who talk about individual freedom are not truly free themselves.

Friday, May 20, 2011

A Deal to End Judicial Filibusters

Over at the Volokh Conspiracy, Jonathan Adler advocates for a deal to end judicial filibusters far enough into the future so that it would be difficult for either political party to determine which side would initially benefit when the rule was first put into place.

I think this is a good idea, but I share Adler's view that we are unlikely to get any deal of this sort in the immediate future. Our politics has degenerated into a partisan mess and it is rather natural that judicial nominations, like the rest of our political system, would tend towards being dysfunctional and with no end to the problem in sight.

I will say this. In the absence of such a deal, I believe that both sides should continue to use the filibuster vigorously rather than either side engaging in unilateral surrender.

Thursday, May 19, 2011

Do Senators Take Their Oath to Uphold the Constitution Seriously?

So, you have these politicians who claim that filibustering judicial nominees is not only bad idea, but that it is unconstitutional. That is right, not merely a bad idea or bad policy, but unconstitutional.

Well, Senators take an oath to uphold the Constitution, so if they say something like that, they can't later decided filibuster judicial nominations, right? After all, the Constitution, which they took an oath to uphold, takes precedence for any red-blooded American Senator over any political advantage from the unconstitutional filibuster of a judicial nominee, right?


Matt Yglesias has the dirt. Politicians who previously declared that filibustering judicial nominees was unconstitutional now engaged in the filibuster of judicial nominees.

Do these Senators take the Constitution seriously? Do they take their oath to uphold the Constitution seriously? Sadly, we are forced to conclude that the answer is no.

Should Non-Lawyers Own Law Firms?

Over at Above the Law, Elie Mystal argues that it makes sense for non-lawyers to be able to own law firms. I think he is absolutely right. Law firms would be much more efficient if they were run by actual business people. Therefore, the idea that they should only be run by lawyers is not quite right.

As far as the professional responsibility idea that lawyers could not possibly remain ethical if they worked in a firm run by non-lawyers, that just does not make sense. In-house counsel work for non-lawyers, and they usually remain ethical. Government lawyers might find that they can be fired by a non-lawyer, depending on the credentials of their boss, and they still usually remain ethical.

A junior associate working for a law firm, in contrast, might not be ethical despite working for a lawyer or set of lawyers who own the firm. Indeed, such a lawyer might even find that they are encouraged by their superiors to do unethical things, despite the fact that their superiors are also lawyers. It is ultimately the junior lawyer's responsibility to resist in such situations.

Ultimately, it is the responsibility of every lawyer, regardless of their position in the food chain, to maintain their own ethics. The idea that if a law firm were owned by a non-lawyer that this would be inherently corrupting is simply insulting. It is no different than when a very important client, another lawyer, or a company you work for and that you depend on economically demands that you do something unethical. As an individual, every lawyer must exercise his or her own professional judgment and refuse to do anything that is unethical. The idea that lawyers are so ethically weak that they would somehow succumb to unprofessional pressure if they, heaven forbid, worked in a law firm run by non-lawyers is actually an insult to the entire profession and the individual lawyers in it.

Ultimately, the people most hurt by the backwards restrictions on the ownership of law firms are consumers who end up being priced out of the market for legal services altogether due to the high prices that result due to inefficiencies that arise because lawyers are running law firms. It actually is a major injustice.

So I agree with Elie here. It is time for the profession to change its ways, move into the 21st century, and embrace maximally efficient business practices. That means that law firms owned by lawyers who chose to get a J.D. rather than an M.B.A. should have to face competition from law firms owned fully or in part by non-lawyers. And you know what, I really wouldn't be surprised if such law firms delivered the same or better quality for less.

Not So Fast: The Case for Slower Deficit Reduction

Over at Economist's View, Mark Thoma explains how, even if we assume a rather low multiplier of 1.0 for cuts to government spending, that cuts in the range of even $600 billion over two years are likely to have a severe negative effect on unemployment. For example, to do a rough "back of the envelope" calculation, a cut of $300 billion would result in an increase in unemployment of 1% or about 1.5 million workers per year for a total increase in unemployment of 2% or 3 million unemployed over two years.

While it is wise to address deficits over the long term, doing so now when the private sector is not in a position to make up for decreased government spending will seriously hurt the economy and cost a lot of innocent people their jobs.

When it comes to deficit reduction, timing is everything.

Tuesday, May 17, 2011

Are Supreme Court Justices Unelected?

A common criticism of judicial review is that it is undemocratic because federal judges in general and Supreme Court justices in particular are unelected. For example, in a 2006 law review article in the Yale Law Journal, Jeremy Waldron argues that judicial review disenfranchises ordinary citizens:
By privileging majority voting among a small number of unelected and unaccountable judges, it disenfranchises ordinary citizens and brushes aside cherished principles of representation and political equality in the final resolution of issues about rights.
But that isn't quite right. Supreme Court justices are elected! No, not directly of course. They are appointed by the President. But the President who appoints them is elected and the Senators who confirm them are elected. So, ultimately, what sort of judges we have on the Supreme Court and other federal courts is up to the people.

Saturday, May 14, 2011

Paul Krugman on Inflation in Perspective

Over at his blog, Paul Krugman has a brilliant post on inflation. It is interesting how there is this huge disconnect between some people's stated concerns and actual reality.

Of course, you have to empathize with people who are feeling pain at the gas pump right now. But maybe it is time to trade in your SUV (unless you really need it) for a more fuel efficient car. When gas prices fall again, people have a tendency to revert to their old behaviors as if the price of gas were not really volatile and subject to unpredictable increases. What people need to do is think longer term, like Mayor Wamaru did when he built a high seawall to protect the town of Fudai. Just because the waves are not very high today, doesn't mean that you should assume they won't be high tomorrow.

An Example of Visionary Leadership

The Scotsman has a great story about a 51-foot high seawall built in the 1970s by a visionary Mayor Kotaku Wamura which saved the coastal town of Fudai in Japan from the recent tsunami. At the time the project was commenced, the project and the mayor were criticized as being wasteful. But while the March 11th earthquake and tsunami which caused 25,000 deaths, did billions of dollars in damage, and even triggered a meltdown at a nuclear power plant in Fukushima province was devastating elsewhere, the town of Fudai was spared due to the visionary leadership of the late Mayor Wamaru, who unfortunately died in 1997.

While a culture of disdain for government along with a subsequent elevation of the private sector has arisen in the United States, this story clearly illustrates the great value that visionary leadership in the government sector can have. Good government and visionary leadership in the public sector are very important to our future prosperity.

Tuesday, May 10, 2011

Bill Gates is "Stunned" by How Hard it is to Get Funding for Energy Research and Development

Over at GigaOM, Ucilia Wang reports that Bill Gates is stunned at how difficult it is to get our dysfunctional political system to increase funding for energy research and development, which we absolutely must do if we are to thrive as a country. Indeed, although Bill Gates has had success in convincing the Obama administration of the need for increased funding, it is difficult for the administration to even maintain current levels of spending in the face of the Republican desire to cut back on investments in the future, much less increase the level of investment in a way that is likely to accelerate progress.

As I mentioned earlier, given our dysfunctional political system, it is increasingly difficult to make the kinds of critical innovation investments that we need to progress. I suspect that if we do not get our act together soon, we will eventually face national decline.

Monday, May 9, 2011

Loser Pays Isn't a Bad Idea, But Texas is Doing it Badly

So, over in Texas they have passed a new law for breach of contract cases which moves the system to loser pays.

I don't think that the concept of loser pays is a bad idea in general. Too often, in the system used by a majority of states in which each side bares the burden of its own legal costs regardless of outcome, plaintiffs are not made whole after they are wronged by a defendant because they have to pay the cost to bring suit to their lawyers, experts, and others. Under a loser pays system, in contrast, such a plaintiff has the opportunity to actually be made whole.

Still, it should be kept in mind that the legal system is inherently biased against wronged plaintiffs. It is not enough that a wrong in violation of law has been done. It is necessary to prove that violation in a court of law after getting one's evidence properly admitted through the technical and complicated mess that is evidence law. This is not always an easy thing to do by any means and there are many instances where a legal wrong occurs without any sort of remedy as a result. If you can't prove it formally in a court of law in compliance with intricate rules of procedure, it is as though it never happened.

While loser pays is not in general a bad idea, the Texas law, not surprisingly given who is currently in power, is a somewhat imbalanced implementation of the loser pays system. It tips the scales in favor of defendants by requiring even winning plaintiffs to pay the defendant's attorney fees if they fail to properly estimate the value of a settlement offer. So, if the result after trial is less than 80% of a settlement offer, the plaintiff may end up owing the defendant more in attorney fees than they are awarded by prevailing in the lawsuit. Of course, given the inherent uncertainty of legal proceedings, knowing when to accept or reject a settlement offer is often very difficult. Here, the legislature is trying to coerce plaintiffs to accept unfair low-ball settlement offers by harshly punishing them if they guess wrongly. So, what you have is an unbalanced system which systematically favors those who violate the rights of others under the civil law.

To Progress, We Must Risk: But Do We Dare?

Over at Economix, David Leonhardt interviews Tim Harford the author of an upcoming book called Adapt: Why Success Begins With Failure on the subject of risk-taking in both the public and private sector. It seems quite clear that both innovation and scientific breakthrough require risk-taking.

While I certainly agree with Harford that we need to take risks in order to progress, I wonder if our current political system is really able to deliver very well on that. It seems to me that it can sometimes be politically dangerous to experiment. After all, if you have to fight tooth-and-nail just to have the government fund things like high speed rail that are not as experimental, how much more difficult will it be to secure funding for projects that are much more experimental, where any particular project may not amount to anything, but nonetheless are the type of projects that will eventually be the source of great innovation, progress, and human flourishing?

China's Changing Investment Portfolio

Over at the Economix blog, David Barboza has a great post on shifting patterns of Chinese overseas investment. The takeaway: China is moving from a country that mainly attracts inward investment to one that is increasingly investing abroad.
On Friday, the English language newspaper, China Daily, quoted a senior Ministry of Commerce official saying that within three years China’s overseas direct investment would surpass its inbound foreign direct investment. The official said much of that investment would be directed toward the United States, Europe and Latin America.
That would be a major milestone, since China’s economic boom has been powered by decade by overseas companies investing in manufacturing and export-related industries here. Last year, China’s inbound foreign direct investment was about $100 billion, while outbound investments in the non-financial sector were about $59 billion.

Paul Krugman on David Hume

Over at his blog, Conscience of a Liberal, Paul Krugman talks about the liberating effects of reading David Hume. I must concur entirely. Then he applies the principles of one of Hume's quotes to the field of economics.

David Hume:
I have long entertained a suspicion, with regard to the decisions of philosophers upon all subjects, and found in myself a greater inclination to dispute, than assent to their conclusions. There is one mistake, to which they seem liable, almost without exception; they confine too much their principles, and make no account of that vast variety, which nature has so much affected in all her operations. When a philosopher has once laid hold of a favourite principle, which perhaps accounts for many natural effects, he extends the same principle over the whole creation, and reduces to it every phænomenon, though by the most violent and absurd reasoning.
Paul Krugman:
That applies to lots of things; to stay with my home field, the idea of maximizing behavior, which is a useful gadget for thinking about many economic issues, all too often becomes a sacred principle in the minds of economists, who refuse even to consider any story that doesn’t involve perfect rationality on the part of all players.
Definitely something to think about.

Sunday, May 8, 2011

The Solution to the Unemployment Problem: Cut Benefits

The New York Times reports that Florida has just passed a bill, which the governor is expected to sign, to cut the maximum number of weeks people can receive state unemployment benefits.

I guess this is sort of thing that some people go into "public service" to do. But my idea of public service at least does not include kicking people while they are already down, out of a job, and looking for work.

Apparently, in Florida, lawmakers are unaware of this concept called a "tough job market" in which this other thing called "unemployment" goes up and people have a hard time finding a job. This shows that even the most basic concepts are difficult to grasp for some "public servants."

Oh well.

The citizens of Florida have to live with the lawmakers they voted for and the concepts of "public service" that those lawmakers apparently have a passion for. While I think this is the exact opposite of good public policy, we do live in a democracy, so sometimes we have to live with bad public policy instead.

Saturday, May 7, 2011

The Case for Humility Among Economists

Greg Mankiw makes the case in a really great New York Times article. His takeaway:
If you find an economist who says he knows the answers, listen carefully, but be skeptical of everything you hear.
Sounds right to me!

Economists like Stephen Williamson who thinks he has nothing to learn from history and yet is shown to make important mistakes based on this ignorance should take notice.

Tuesday, May 3, 2011

The Incoherence of Friedrich Hayek

From Brad DeLong's blog:
 "Is it your view that if I went out tomorrow and bought a new overcoat, that would increase unemployment?"

"Yes," said Hayek, "but," pointing to his triangles on the board, "it would take a very long mathematical argument to explain why."
I suppose this just goes to show the dangers of relying on excessive mathematical models that defy common sense. Mathematics is not a substitute for other types thinking, but instead a very powerful and important supplement to them.