tag:blogger.com,1999:blog-17232051.post4249992228077489802..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Michael Lind's mercantilist critiqueNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger48125tag:blogger.com,1999:blog-17232051.post-31534701043396917372013-07-22T06:06:46.883-04:002013-07-22T06:06:46.883-04:00Just out of curiosity (I am not taking sides in yo...Just out of curiosity (I am not taking sides in your dispute with Atkinson and Lind). <br /><br />Atkinson and Lind write about ten items, numbered from 1 to 10 (both inclusive), which they qualify as myths.<br /><br />You've commented on items 2, 3, 5: they are "just wrong", in your opinion.<br /><br />Then you write: "These four points [i.e. 6, 8, 9, and 10] are fair descriptions of what Econ 101 teaches".<br /><br />This leaves out points 1, 4 and 7. What about them?Magpiehttps://www.blogger.com/profile/07528637318288802178noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-91266032218728478042013-07-16T04:57:22.778-04:002013-07-16T04:57:22.778-04:00The thing that always draws people to Smith's ...The thing that always draws people to Smith's economics is the ideal of broad humanist cooperation developing the world into a place where borders are irrelevant and conflict is irrational. That's in contrast to mercantilist notions of economics being essentially zero-sum and competitive. <br /><br />Now, given the nature of money and inequality, I will be very interested to see how people react when someone makes the point that people's perceptions of fair living standards are extremely relative, but hierarchy is forever, and the only thing accomplished by free trade fundamentalism is to expand the game across borders and deny government any legitimate prerogative to regulate the thing in accordance with public perceptions of justice.C.J. Caswellhttps://www.blogger.com/profile/10105689230744789436noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-79445490058942553042013-07-16T04:41:22.687-04:002013-07-16T04:41:22.687-04:00This was the first thing I noticed about this arti...This was the first thing I noticed about this article. Lind's Econ 101 is actually Econ for the Media, and he said as much. Some of Noah's early critique should be revised as such.C.J. Caswellhttps://www.blogger.com/profile/10105689230744789436noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-9537575758332866052013-07-12T10:05:51.922-04:002013-07-12T10:05:51.922-04:00this. in practice, businesses are generally intere...this. in practice, businesses are generally interested in:<br /><br />1) differentiation, branding etc<br />2) avoiding competition (for example, getting customers to commit to a long contract)<br />3) increasing scale and reducing production costs<br /><br />the first involves binning homeogenous product, the second consumer sovereignty, and the third decreasing returns and common technology.Alexhttps://www.blogger.com/profile/17153530634675543954noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-23618755929585992092013-07-12T01:22:25.523-04:002013-07-12T01:22:25.523-04:00Correction: there is a third way colonies are prof...Correction: there is a third way colonies are profitable. If they provide a place to export unwanted excess population, it doesn't really matter whether they make a profit any other way. Think "sending the prisoners to Australia".<br /><br />This is a problem which would be better addressed with widely available birth control, of course.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-11995512436725666502013-07-12T01:20:40.201-04:002013-07-12T01:20:40.201-04:00Well, you had a good Econ 101.
My Econ 101 and 10...Well, you had a good Econ 101.<br /><br />My Econ 101 and 102... well, the professors were fine, but the *curriculum* was *garbage*. It really did suffer all the flaws which Lind describes, and more. Did I mention that *deflation was not covered*?<br /><br />Of course, it used Mankiw's book (which I have since burned). In order to learn anything I had to spend my time asking the professor questions after class.<br /><br />It got better when I took an advanced undergrad course, because then the professors were allowed to say what they really thought.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-36568042974077123002013-07-12T01:17:49.760-04:002013-07-12T01:17:49.760-04:00That would be lovely.
I'd also like to see an...That would be lovely.<br /><br />I'd also like to see an "Intro to Microeconomics" course which, after discussing "price makers" vs. "price takers" (monopsony and monopoly, the two common situations), starts right off with product differentiation and advertising, the main things which firms actually think about.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-5489596759015126612013-07-12T01:15:46.826-04:002013-07-12T01:15:46.826-04:00Extrenalities are the single most important thing ...Extrenalities are the single most important thing in economics today (because the environment is by far the most important issue today).<br /><br />And no, they aren't taught in Econ 101 or Econ 102. Econ 101 material is pretty much bullshit through and through -- though I think the micro is worse than the macro -- and they don't even draw their graphs with the independent variable in the correct places. ;-)<br /><br />The micro is disastrously broken; the "Econ 101" model of the firm is a joke, omitting everything important about the behavior of firms, from advertising to product differentiation. <br /><br />Basically "Econ 101" is a model of coal mines, nothing more -- and a model of coal mines with no externalities, which is exceptionally dreadful.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-28981489807769305042013-07-12T01:10:48.449-04:002013-07-12T01:10:48.449-04:00"Most people have instinctive sympathy for me..."Most people have instinctive sympathy for mercantilism, and they can smell the oversimplification in economists' arguments against it. They know that every country that ever got rich was fairly or extremely mercantilist during its period of rapid growth. "<br /><br />That's enough to prove that mercantilism works, to scientific standards.<br /><br />Correlation doesn't prove causation, but when the correlation is that strong, anyone claiming that mercantilism doesn't work has a *huge* pile of evidence to overcome and explain away, and nobody has ever satisfactorily explained it away. The *Occam's Razor* conclusion is that mercantilism works.<br /><br />I would say that it's possible to do mercantilism badly: to focus on an export industry which your country is objectively crap at, for instance. Growing the wrong sort of plants for your climate, stuff like that. But if you're not an idiot, mercantilism works.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-5682879825573058322013-07-11T14:05:57.735-04:002013-07-11T14:05:57.735-04:00Anonymous has the proper retort below:
<"...Anonymous has the proper retort below:<br /><br /><"But even more problematic, even though most economists know better, they present to the public, the media and politicians a simplified, vulgar version of neoclassical economics — what can be called Econ 101 — that leads policymakers astray."<br /><br />It's poor word choice on his part (and that of Salon) to call this Econ 101.><br /><br /><br /><br />If you have the pleasure (more torture) of ever engaging a libertarian in debate on an internet forum, you'll get what he's talking about. Sure, externalities & network effects might be covered in Econ 101 (barely gloassed over, rather, in the class I took, even though I think they should be the 2 dominant areas of inqury in micro these days), they don't factor at all in to the thinking of the typical glibertarian, and those people form a big chunk of the US voting public. <br /><br />Dohsanhttps://www.blogger.com/profile/07884148005077602324noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-74201682983851603822013-07-11T02:49:32.463-04:002013-07-11T02:49:32.463-04:00It's disingenuous of Lind if he is using "...It's disingenuous of Lind if he is using "ECON 101" as a shorthand for what policymakers think economists think. It's as if he knows that his assertions about what economists teach can be refuted by referencing actual, you know, ECON 101 texts, and he wants a way to wriggle out of being shown wrong- "oh I just meant the vulgar version of what is taught".<br /><br />BTW my principles of macro text does cover endogenous growth and does reference externalities (it's a macro text not a micro text after all.) And ALL principles of micro texts have chapters on monopoly and oligopoly, and a lot of material on externalities.<br /><br />Policymakers are too laissez-faire on trade!? Are you kidding me? The NAFTA "free-trade" agreement has hundreds of pages of limits, rules, exemptions, provisions for protecting particular industries. And the USA may not have an official industrial policy but in effect it protects and subsidizes legions of favored firms and industries!<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-87255974678985737602013-07-11T00:13:48.463-04:002013-07-11T00:13:48.463-04:00Yes, this exactly.Yes, this exactly.Eric Lhttps://www.blogger.com/profile/17688525347746547529noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-67024325438892396932013-07-11T00:11:33.177-04:002013-07-11T00:11:33.177-04:00I took econ 101 about a decade ago. Externalities...I took econ 101 about a decade ago. Externalities were mentioned in a single lecture on a day the professor was absent and a TA was teaching. It did not appear in any homework or tests. So, progress I guess!<br /><br />I have come to the conclusion that learning a little bit about economics leaves you less well prepared to understand the world we live in than learning none at all.Eric Lhttps://www.blogger.com/profile/17688525347746547529noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-16169175264148652962013-07-10T17:39:51.843-04:002013-07-10T17:39:51.843-04:00Yeah, one could think of "Econ 101" as o...Yeah, one could think of "Econ 101" as optimal policy given that there is no coercion. Economists typically frame their arguments too often in terms of "this policy is the best for all people all the time." For example, a policy everybody agrees is horrible, rent control, could be quite good for the renter at the time it's enacted and who has no plans for moving. Even with a competitive market expanding supply of housing for population-growing areas, the current renter still gets a lower price than the resulting competitive price due to the upward-sloping supply curve.<br /><br />Reading the subtexts of many arguments, the "beggar-thy-neighbor" nature is not that hard to see. In the past, like you say, Mercantilism would just go ahead and force the other population to give up gold or natural resources. Today, arguments are made in a vacuum to, say, put up artificially high barriers of entry to certain occupations. The assumption at the time is that the price of all other goods will remain the same, but unlike Mercantilism all other occupations are also free to put up high barriers to entry.<br /><br />I think that people are capable of understanding such nuance in the economic models and it would help sharpen the debate for free market mechanisms. Yes, things would be nice for you if your rent never increased or, if you own, to constrain supply, but that's also nice for everybody else who rents or owns. If you happen to move or if your children or parents want to find a place, you or their living standards will be far worse due to such policies.Matt Watershttps://www.blogger.com/profile/11819415702193198144noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-16979707006149434122013-07-10T16:28:11.176-04:002013-07-10T16:28:11.176-04:00This is a brilliant comment. Most econ profs don&#...This is a brilliant comment. Most econ profs don't have a degree in education philosophy, but perhaps they should.<br /><br />Spending an enormous amount of time delving into intricate models of a perfect competitive market, then mentioning that this conception is based on five conditions--conditions that almost never exist--is not the rounded picture some suggest--at least not for those doing the learning.<br /><br />Imagine if Econ 101 started with one week focused on the best, most detailed description of the basics (supply and demand, price floor and ceilings, elasticity) that you could fit into three 50 minute lectures, then--instead of delving further into the details of perfectly competitive model spent the entire rest of the course dealing exceptions to the normal rule--not just monopolies, but actual models of monopolistic and oligopolistic markets; what happens when Adam Smith's five assumptions don't hold; market power; externalities; cluster effects; network effects; first mover advantage.<br /><br />In other words, what if profs made these exceptions the main subject of the Econ 101 course? Wouldn't that make sense since in the real world it's these exceptions that dominate and the "perfectly competitive marketplace" that is actually rare?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-75727100778086336672013-07-10T16:07:06.442-04:002013-07-10T16:07:06.442-04:00I think Lind's piece is a bit sloppy and all o...I think Lind's piece is a bit sloppy and all over the place, but this is a bizarre criticism from Smith.<br /><br />Econ 101 courses and texts certainly do not focus on endogenous growth (#2), externalities (#3) or the nature of government spending (#5) (as opposed to treating it as a simplified blackbox). An undergraduate program in economics would cover all these topics and more, but not a single course.<br /><br />Rather Econ 101 courses, in my experience, are overwhelmingly tilted towards introducing students to micro-economic concepts assuming a perfectly competitive market place (elasticity, utility, indifference curves, how to derive a demand curve) and big picture macro issues (identities, multipliers, etc.).<br /><br />Even if that isn't Noah's or anyone else's experience, Lind's makes it very clear that he's using the phrase "Econ 101" to describe the persistent bias that many economic thinkers have towards considering as a perfectly competitive and frictionless marketplace. This is indeed a big problem.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-47662208901583515012013-07-10T13:26:03.256-04:002013-07-10T13:26:03.256-04:00" I don't see why doubts "most peopl..." I don't see why doubts "most people have" about economics should be any more relevant to policymaking than doubts "most people have" about cell towers causing cancer or nuclear plants being dangerous should be to urban planners."<br /><br />No.<br /><br />By guiding and justifying policy in this country that has resulted in a seriously damaged and shrinking middle and working class, with a corresponding huge increase in wealth and income for the top 1%, mainstream economics has had a pernicious effect on the lives and hopes of all non-wealthy Americans. This has damaged democracy itself.<br /><br />Lind's ideas and other heterodox ideas should be listened to with respect - with a focus on revising conventional thinking, not defending it. Also those who have upheld conventional thinking should apologize and withdraw. If they don't the whole profession will lose credibility. We are a democracy not a monarchy. <br />minkahttps://www.blogger.com/profile/04067741747813131873noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-82240190271803415002013-07-10T12:02:42.111-04:002013-07-10T12:02:42.111-04:00"Or that certain Freshwater economists, Casey..."Or that certain Freshwater economists, Casey Mulligan in particular, always treat part of an argument as though it is whole."<br /><br />If you're talking about Casey's frankly fraudulent argument that the Great Depression was really the 'Great Vacation', it's not that - it's that he's lying, pure and simple.Barry DeCiccohttps://www.blogger.com/profile/04735814736387033844noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-76346786790044966452013-07-10T08:59:33.534-04:002013-07-10T08:59:33.534-04:00...adding:
"So whether Lind is right or wron......adding:<br /><br />"So whether Lind is right or wrong on the substance, economists should think twice before jeering and dismissing him. Lind's mercantilist critique is quite representative of the doubts that many, many people have about economists and economics."<br /><br />I completely agree with this. Much of the animosity directed at economists by the public is well-deserved. As I noted above in my response to Myth 1, we've failed to purge economists who are more interested in playing politics than in giving the public the right answer. <br /><br />There are economists around with pretty good answers -- the New Keynesians and Post Keynesians/MMTers are pretty good, IMO -- but asking the guy on the street to differentiate the serious economists from the clowns is even more challenging than asking them to differentiate serious climatologists from that field's group of clowns.drewhttps://www.blogger.com/profile/17065171132689799410noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-78066555382365390772013-07-10T08:45:22.010-04:002013-07-10T08:45:22.010-04:00I, too, am more sympathetic to mercantilism than m...I, too, am more sympathetic to mercantilism than most economists I know, but I thought Lind's piece was kind of a trainwreck.<br /><br />I'll preface this with two points: (1) As others have noted, Econ 101 comes in a lot of different flavors both across departments and within departments. The lecturer matters. And (2) having my degree from FSU, I was mostly subjected to very right-wing professors at the intro level (less so in higher-level coursework).<br /><br />So my criticism here is entirely based on my experience as an undergrad years ago:<br /><br />Myth 1 actually gains some sympathy with me, although I think the problem in economics is more about a lack of data and a failure to purge political asshats than anything. The correct answer on the minimum wage survey, per the literature (as I recall) is "Disagree" on that survey. The survey asks if raising the wage would "noticeably" hurt low-wage workers. The papers I've seen suggest the impact is incredibly small one way or the other and probably statistically insignificant.<br /><br />Myth 2 is completely wrong. The goal of economic policy is to achieve the political aims of officials. Whether or not those aims are efficient is an empirical question. Whether any inefficiency is justified by the ends is a matter of opinion.<br /><br />Myth 3 is nonsense. Government is no less a market player than firms, households, banks, investors, etc. An economy is the sums of its markets, and all market players matter.<br /><br />Myth 4 seems to me to misstate the EMH. And the fact that Bernanke and Greenspan didn't see the housing bubble for what it was doesn't imply that all economists failed to see it. As you've noted, many -- Baker, Roubini, etc -- did. I think Bernanke and Greenspan's collective failure is as much a reflection of the Washington bubble as it is a failure of economics.<br /><br />Myth 5 is an extension of the Economics As Morality Play fallacy. Profits, losses, assets, liabilities, etc, are not "good" or "bad". Also, for someone getting all judgy about what is and is not science, the straw man about Adam Smith "proving" something is somewhat amusing.<br /><br />Myth 6 is nonsense. There's good and bad in both, just as there is in perfect competition. Higher prices may well be a good thing if, say, consumers have access to differentiated products. I'm willing to pay a bit more for a vehicle to have the choice of a Camaro or a Jeep, or a bit more for a computer so I can choose between a Mac and a PC.<br /><br />Myth 7 is, again, nonsense. Maybe Lind ought to go read some Stiglitz. I don't dispute that people at Cato say this, but the Cato Institute isn't what I would consider a good representative agent for economists.<br /><br />Myth 8 has some merit. Generally it was presented as theoretically workable, but that economists were skeptical of the ability of governments to make smart choices on which industries and companies to support.<br /><br />Myth 9 is just Myth 8 in another form.<br /><br />Myth 10 also probably has some merit. I don't think we even did trade theory in Econ 101. It was a different class. And in international trade and intermediate macro, we did actually study the simplistic comparative/competitive advantage stuff, and then moved on to real-world complexity.drewhttps://www.blogger.com/profile/17065171132689799410noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-39073353019256094452013-07-10T08:36:56.193-04:002013-07-10T08:36:56.193-04:00"So whether Lind is right or wrong on the sub..."So whether Lind is right or wrong on the substance, economists should think twice before jeering and dismissing him. Lind's mercantilist critique is quite representative of the doubts that many, many people have about economists and economics."<br /><br />OK, I'm confused. In some places, you seem to argue that mercantilist thinking is worth a look because it represents reality in some sense. In other places, you point out that regular folk seem to realize that mercantilism has a record of success. Those are related points, but different nonetheless. When you wrap up, you want economists to care about Lind's point not because he has a point - or because he misses the point, but in the process of getting everything wrong, draws our attention to some things that are right - but rather because a bunch of people think the way he does. <br /><br />Where exactly are we? If Lind is wrong but saying things a lot of people think, then he is in a class with gold-bugs and alien-abduction types. That's all the more reason to bury him in criticism. If economists are wrong to dismiss mercantilism are roundly as they do, but Lind is not a very good guide to why that is true, that's all the more reason to ignore him and repeat your own arguments about why mercantilism isn't as stinky as Econ 101 claims. <br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-63721626505572619502013-07-10T06:39:25.114-04:002013-07-10T06:39:25.114-04:00P.S. And externalities are not necessarily the onl...P.S. And externalities are not necessarily the only important "add-on" that changes the picture completely. Assymetric information is just as important.reasonhttps://www.blogger.com/profile/10958786975015285323noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-44164299838651067742013-07-10T06:32:40.867-04:002013-07-10T06:32:40.867-04:00Very good.
Or that certain Freshwater economists,...Very good.<br /><br />Or that certain Freshwater economists, Casey Mulligan in particular, always treat part of an argument as though it is whole.<br /><br />The biggest problem for economics is that it is dealing with a complex integrated system and tries to analyse it one bit at a time.reasonhttps://www.blogger.com/profile/10958786975015285323noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-15705882969746414922013-07-10T06:13:59.820-04:002013-07-10T06:13:59.820-04:00Re point 2,
you are both right and wrong.
Right...Re point 2,<br /> you are both right and wrong. <br /> Right because investment decisions do of course consider future production, and optimisation includes optimisation over time based on expectations. <br /> But wrong in that traditionally economics uses a comparitive static framework not a truly dynamic one. In particular, I worry about about trade models that don't worry enough about potential productivity growth in recommending specialisation (behaps because they exclude costs of adjustment in their calculations).reasonhttps://www.blogger.com/profile/10958786975015285323noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-74755514912711459472013-07-10T01:47:51.230-04:002013-07-10T01:47:51.230-04:00I don't think Lind wrote carefully, and I have...I don't think Lind wrote carefully, and I have no interest in defending him. All the same, the messaging of Econ 101 depends on its framing, not its detailed content. Externalities, for instance, are there in the textbook, but they are an add-on. The frame is a vision in which they don't exist. A sophisticated economist will say, the point of the frame is to give us something to compare the real world to. The student reading the textbook remembers the frame and forgets the rest.Peter Dormanhttps://www.blogger.com/profile/00093399591393648071noreply@blogger.com