A mixed bag of economics

I took this test Are You an Austrian? The actual number of ticks for each economic tradition I got are as follows:

• Keynesian/Neoclassical: 10
• Chicago: 8
• Austrian: 5
• Socialism: 1
• Keynesian: 1

My score was 47/100. So I am nearly half Austrian. Who knew?

Ranting about nothing very much

This Are You an Austrian? [1] quiz has some fail in it. Take question 4:

What is the economic impact of saving?

The first two of four multiple choice answers to this question are:

In normal times, saving is not economically harmful but in a recessionary environment it can cause the economy to spiral downward.

Saving reduces consumer spending and may not be translated into investment spending because of investor pessimism. This will reduce total demand in the economy and lead to unemployment.

One way of correcting this is to expand the money supply to keep interest rates low. This will support private investment and stimulate total spending in the economy.

Fiscal and monetary managers need to implement policies that discourage hoarding and encourage current expenditure. As for saving over the life cycle of individuals, we need a social safety net that will provide for people in their older years.

and

The vast accumulation of wealth within select classes and families creates an economic oligarchy that shuts out those who cannot gain a foothold within the economic system.

Inheritance taxes, and taxes on dividends, are essential to a society that values equality. After all, the yield from vast bank accounts really amounts to unearned income. No society can tolerate some people living off interest while others live paycheck-to-paycheck off the meager sums offered by minimum wages.

The first answer is basically right, but the second seems like a non sequitur straw man version of a raging Marxist. What does inheritance tax have to do with the question of whether saving is good or not?

[1]: Economist, that is.

What people are actually interested in

In lieu of actual content I've decided to post this image of the most read articles on The Daily Telegraph webwotzit, seen whilst reading about some sort of Westminster argy bargy by Boris:



Dunno why, but it tickled me.

Links here, here, here, here, and here because I don't want posterity to bother me about this.

LMFAO!

From these guys.

Ideology and the state vs. markets paradigm

Charlotte Gore, libertarian liberal democrat, has been responding at length to a comment I made on this post on her blog.

Chris Dillow has commented on the G20 protests, and of course manages to be far more coherent than I've been, what with my constantly changing opinion on the matter:

Most of the Left is more interested in smug self-righteousness than in economics.

The debate about what to do now is conventionally framed in terms of the state versus (actually existing) markets - that is, as one set of bosses versus another. The possibility that people can organize themselves - through either genuinely free markets and/or through democratic co-operation - doesn’t arise. But it’s this spontaneous free organization that is the Marxist ideal.

This is what I find most interesting about Dillow: he highlights the absurdity of exhorting people to support one set of rulers (state bosses) against another set of rulers (corporate bosses). All left/right distinctions kind of fall away when you frame the political debate in these terms.

T'be honest when it comes to political ideology I don't give a flying fig: they're interesting things to study in their own right, just as science, technology, business, political economy, and the history of all of these things are interesting.

But do I care to ascribe to any particular ideology? No. Not really. I am somewhat peeved that despite the fact that humanity possesses the technological and economic capacity to make the world a decent place to live for everyone we still haven't done so.

I am mildly annoyed that not every one of my fellow human beings is living the Good Life they deserve to.

But as to means to achieve these ends? I don't know. I strongly suspect we haven't even started to properly explore the phase space of all possible ways of running our civilization, and there may well be ways that are qualitatively better than the current statist/capitalist model of global political economy, but I am strongly sceptical that any particular Vanguard know What Needs to Be Done and have the ability to do it.

As long as our Leaders avoid doing anything really stupid then things will probably turn out OK.

Progress will happen, as progress always does, with many incremental steps and the occasional jarring revolution.

Civilization will continue to evolve.

Put people first

Yeah. So I've changed my mind about the G20 protesters. It is a shame that one was killed, but really they were just protesting for the sake of smashing things up and generally making a nuisance of themselves.

Edit 07/04/2009:

Nope. I've changed my mind again. I don't know exactly where I stand vis a vis the Put People First agenda, and the conduct of the police was depraved and disgusting.

Harnessing the body politic

Reading Hopi Sen's excellent analysis of Peter Oborne's less than excellent analysis on Charlie Brooker's excellent program Newswipe I was struck by an important point, from Oborne:

"You go back a generation or two, the people who came into the commons, whether from the left of the right, the primary objective was to serve the country or serve their voters, not to make money for themselves.

What is new is that the majority of people now coming into Parliament have sought politics as a career since coming out of university… so what we see is the use of politics as a way of making huge sums of money".

The first assertion is bogus: what people, and politicians especially, really want is power. But there's nothing wrong with this, it's just how we're evolutionary wired.

The trick is to create a system of government that harnesses the inherent desire for power and competitive instincts of homo sapiens sapiens to constructive ends.

Democracy works because when it works properly it enables politicians to achieve power by giving the public what they think the public wants.

That this is an absurd impossibility is without doubt: but at least they're trying and at least they're accountable and at least they're so keen to stab each other in the back that they can very effectively police themselves.

G20: what was that about?

Since I read The End of Politics by the august Chris Dillow I have become even more sceptical of the capacity of politicians to identify and accomplish worthwhile goals.

So news that the 20 most powerful politicians on this fair globe of ours have got together and have decided that something must be done is not especially comforting, especially as much of what they suggest seems tangential to the main problem of anthropogenic climate change.

This is unsurprising given the other great lesson of The End of Politics is that there is no such thing as a clearly defined national interest or even (within fairly wide parameters) such a thing as a single global interest. Any government policy will result in winners and losers. There will always be tradeoffs between different interests. TANSTAAFL.

And yet rather than focus on the big problem of a powerful, complex, open, and unpredictable system that we also all happen to live inside these 20 individuals chose to focus on a powerful, complex, open, and unpredictable system that we all happen to rely on for ongoing wealth and economic development (I betcha can't tell which one is which!).

Mmm. Tradeoffs at work.

I have not opinion on the credit crunch. I imagine things will be back up and running soon enough. As to the climate it is best to try to tread as lightly as possible and stop pushing the button. We've got a good thing going on here: it would be a damn shame if we continue pissing it up the wall.

And it is not managerialist to desire that governments do something about climate change. Given the potentially huge negative consequences of continuing to vent gas this can be thought of as a case of stopping a crime: one of the few things that it is generally agreed states are pretty good not bad at.

But I repeat: there are always going to be winners and losers.

Which is why it is important that everyone is consulted, everyone's point of view is heard, and the losers are given respect and sympathy for their plight.

That is why the death of one of the protestors at the summit was particularly sad.

The Put People First campaign achieved a couple of it's goals: tougher action on tax havens, and closer regulation of all financial instruments. But there didn't seem to be any particular emphasis on the environment or climate change, undoubtedy the areas where most medium and long-term good can be accomplished.

I'm sure I'm not the only one who can read and has access to a history book. Financial panics and recessions happen every few years.

But if there is one good thing politicians can do it is to try to find some way of averting the negative consequences of anthropogenic climate change.

A global $100/barrel all-border tariff on crude oil would be a good start: such a tax would avoid the colossally complicated, inevitably inefficient, bureaucratic corruptofest that any kind of "embedded CO2" tax system would entail whilst encouraging investment in innovative alternatives to our current oil-based infrastructure.

Combine it with a cap 'n' trade system for CO2 emissions and we're well on our way to dodging the climate change bullet.