Monthly Archives: December 2014

The assumption of cluelessness and the magic pudding

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The video of Trey Gowdy cross-examining Jonathan Gruber is for the ages. I have added this to what already is found below, but it speaks volumes. And at the end, there is a question asked by the Chairman that sums everything up on the left side of politics.

The Democrats, like all parties of the left, are still working on the principle that the people who support them really are stupid. This is about Gruber and Obamacare, but why could it not be Bill Shorten discussing the devastation that has taken place in the Australian economy since the ALP applied its stimulus:

“Let me be clear, I am extremely frustrated with Dr. Gruber’s statements,” Cummings continued. “They were irresponsibly, incredibly disrespectful, and did not reflect reality. And they were indeed insulting.”

“I was in Congress when this law was debated, and Dr. Gruber does not speak for me, or the chairman of the other committees who worked tirelessly on this bill,” he said. “We debated this legislation for nearly a year before it was finally passed and signed by the president! Never once did I believe or did anyone suggest that we were somehow hiding our goals from the American people.”

“But worst of all,” the ranking member concluded, “Dr. Gruber’s statements gave Republicans a public relations gift in their relentless political campaign to tear down the ACA and eliminate health care for millions of Americans!”

As for Australia, so far as the ALP is concerned, it matters not at all that they dug the hole which was specifically designed for the Coalition to fall into once it took government. They can now go on about the economic problems the country has, and harangue about every attempt to fix what they have done. They know the problems exist, how necessary it is to get things right and how intractable they are since they tried to fix them but couldn’t. But whatever they know, they are using the problems Abbott must deal with as reasons to get themselves back into government two years from now.

The assumption of cluelessness and the magic pudding must be very deeply built into how these people think about their supporters.

Why politics is driven towards the left side of the middle

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The video is about selling but if you think of the competition involved, you will see the closest imaginable parallel to politics. All parties of the mainstream are driven towards the middle. That, of course, assumes that everyone is evenly distributed along the beach. But if most potential customers are on the left and far left side of the beach, that is where the “middle” will end up.

A review of my Free Market Economics

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A review of the first edition of Free Market Economics, which is even more so than this now that it is in its second edition. This is how it starts:

Not since 1924 has there been a comprehensive yet readable book on economics aimed at the ordinary but intelligent citizen that defends and incorporates the field’s foundational principle, Say’s Law (named after Jean-Baptiste Say, 1767–1832) and its main corollaries: the primacy of production, the entrepreneur as prime mover, and prices as the commercial language that coordinates economies and their subsectors. Now we have such a book: Free Market Economics: An Introduction for the General Reader by Australian business economist Steven Kates. His prior books examined the prevalence of Say’s Law among top economists during the pro-capitalist 19th century and its abandonment by most economists in the anti-capitalist 20th century.

The handful of texts on economic principles since the 1920s that recognize the superiority of a free economy have been too technical, narrowly devoted to refuting economic fallacies, or tainted by dubious philosophy. This book avoids such flaws. Kates accomplishes what was last achieved by Oxford professor Henry Clay (1883–1945) in Economics: An Introduction for the General Reader (1924). Better still, Kates’s book offers a modern, more sophisticated, more pro-capitalist treatment than did Clay’s book, and it provides the ideas people need to grasp and refute the disastrous dogmas and policies of Keynesianism.

Stupid people who want to be thought smart

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The left are generally undereducated dunces who would like to sound cultured and informed without actually going to the trouble of in-depth study and deep learning. It is the sophistication of fools. Thus, at the end of a quite rewarding article we find this:

Leftism is politicized envy.

You see, the Left are losers. They are stupid people who want to be thought smart; people with no taste who want to be thought cultured and artistic; selfish cowards who want the palm leaf of martyrdom and the gold medal of heroism; but who, in no case, can actually perform.

That is what I think, too.

Everymann

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We’ve been to see Interstellar whose villain is Dr Mann. No first name, just Dr Mann, although the coincidence of the last name with the absence of a stated first name gives a strong presumption that we are parodying a particular Dr Mann. Which brings me to How the Science Got Settled, the latest posting by Mark Steyn on the fifth anniversary of the release of the “climategate” emails. Here I’ll just repeat the quotes from the various climate scientists quoted by Steyn but do go to the article to see the context and the commentary.

“The two MMs [McKitrick and McIntyre, the latter the dogged retired Ontarian who runs the Climate Audit website] have been after the CRU station data for years. If they ever hear there is a Freedom of Information Act now in the U.K., I think I’ll delete the file rather than send to anyone.”

“The scientific community would come down on me in no uncertain terms if I said the world had cooled from 1998. Okay it has but it is only seven years of data and it isn’t statistically significant.”

“Plots (1 at a time) yearly maps of calibrated (PCR-infilled or not) MXD reconstructions of growing season temperatures. Uses ‘corrected’ MXD – but shouldn’t usually plot past 1960 because these will be artificially adjusted to look closer to the real temperatures.”

“ARGH. Just went back to check on synthetic production. Apparently – I have no memory of this at all – we’re not doing observed rain days! It’s all synthetic from 1990 onwards. So I’m going to need conditionals in the update program to handle that. And separate gridding before 1989. And what TF happens to station counts?”

“OH F**K THIS. It’s Sunday evening, I’ve worked all weekend, and just when I thought it was done I’m hitting yet another problem that’s based on the hopeless state of our databases. There is no uniform data integrity, it’s just a catalogue of issues that continues to grow as they’re found.”

It’s a scandal but the biggest scandal is that just about no one seems to be scandalised.

And let me also just note this from Watt’s Up with That:

global poll

The revealed truth is that of the sixteen choices given to people regarding what they think are the important issues in their lives, climate change is dead last. Not only that, but in every sub-category, by age, by sex, by education, by country grouping, it’s right down at the bottom of the list. NOBODY thinks it’s important.

The smarter they start the smarter they get

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There are many forms of unfairness in life and this is just one. This is the title Socioeconomic status and the growth of intelligence from infancy through adolescence and here is the abstract:

Low socioeconomic status (SES) children perform on average worse on intelligence tests than children from higher SES backgrounds, but the developmental relationship between intelligence and SES has not been adequately investigated. Here, we use latent growth curve (LGC) models to assess associations between SES and individual differences in the intelligence starting point (intercept) and in the rate and direction of change in scores (slope and quadratic term) from infancy through adolescence in 14,853 children from the Twins Early Development Study (TEDS), assessed 9 times on IQ between the ages of 2 and 16 years. SES was significantly associated with intelligence growth factors: higher SES was related both to a higher starting point in infancy and to greater gains in intelligence over time. Specifically, children from low SES families scored on average 6 IQ points lower at age 2 than children from high SES backgrounds; by age 16, this difference had almost tripled. Although these key results did not vary across girls and boys, we observed gender differences in the development of intelligence in early childhood. Overall, SES was shown to be associated with individual differences in intercepts as well as slopes of intelligence. However, this finding does not warrant causal interpretations of the relationship between SES and the development of intelligence.

This is the news report to help you understand the point: Does poverty impact intelligence? Deprived children are 6 IQ points worse off than wealthy peers – and the gap widens with age.

Poverty affects the intelligence of children as young as two, a study has found – and its impact increases as the child ages.

Deprived young children were found to have IQ scores six points lower, on average, than children from wealthier families.

And the gap got wider throughout childhood, with the early difference tripling by the time the children reached adolescence. . . .

The results, published in the journal Intelligence, revealed that children from wealthier backgrounds with more opportunities scored higher in IQ tests at the age of two, and experienced greater IQ gains over time.

Dr Sophie von Stumm, from Goldsmiths, University of London, who led the study, said: ‘We’ve known for some time that children from low socioeconomic status (SES) backgrounds perform on average worse on intelligence tests than children from higher SES backgrounds, but the developmental relationship between intelligence and SES had not been previously shown.

‘Our research establishes that relationship, highlighting the link between SES and IQ.

‘We hope that our findings will drive future research into the specific mechanisms and factors that underpin the link between SES and IQ and thus, contribute to widening the IQ gap.’

Debating Keynesian theory – the story so far

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I am in the midst of a debate on the Elgar blogsite with the editor of the Review of Keynesian Economics over the question: How to Promote a Global Economic Recovery. The issue is the validity of Keynesian theory and policy. Such debates are strangely rare, and what is more astonishing is that there really is very little of it at the present time, even with our economies having been subjected to a Keynesian stimulus with no apparent positive results. Even Paul Krugman has insisted that the stimulus has been disastrous, but in his view because there was too little and not too much.

I, of course, represent the anti-Keynesian side of the story which, as surprising as this may seem, is not all that common. There are some who are non-Keynesian, but who do not make much if any effort to draw distinctions between their own theoretical arguments and the arguments of modern Keynesians. Whatever it is they might believe, they do not spell out chapter and verse what they believe is wrong with Keynesian theory. They argue on behalf of their own views and leave it at that. They therefore provide little assistance in policy debates to those who are trying to explain what is wrong with the single most common treatment found in macroeconomics texts across the world, and in particular, what is wrong with public spending as a means to bring recessions to an end.

There are also some who rest whatever disagreements they have with Keynes on the results of empirical investigations. They also do not specify any particular disagreement with Keynes but rely on the specifications of their own empirical results to show that the results of Keynesian policies do not lead to the outcomes that were expected. The theoretical side is either played down or ignored altogether.

Thus far there have been four posts, two from each of us.

Here are the four in order of publication.

First I weighed in on The Free Market approach which is as much a critique of Keynesian theory as can be fitted into 1700 words.

Louis-Philippe Rochon replied with “The worst infliction we can impose on our economies is to leave them to the tyranny of the markets”.

To this, I replied with “Markets… have been the single most liberating institution in possibly the entire history of the human race” which, in spite of its title, is almost entirely devoted to criticising Keynesian theory.

LPR then replied with this: “It is pure fantasy to believe that anything but demand is the driving force of economic activity” which puts the issue squarely before us. This is his opening para:

I read with much interest your most recent letter and I will confess I agree with you … we are indeed far apart! But surely this is not surprising as we both defend not only a very different vision of economic theory, but also a different vision of markets and society. At the core of our disagreement lies an understanding of markets, which you see as self-regulating, whereas I claim they are not. I view markets as chaotic and prone to instability and, quite honesty, capable of exploding (or rather deteriorating) into crises, with unimaginable consequences. Perhaps you are OK with that, but I am not. So when I said that the ‘worst infliction’ is to leave us exposed to the ‘tyranny of markets’, I meant precisely that: because of periodic crises, but also because of oft-occurring recessions, we cannot place our complete faith in free-markets. I see unregulated markets and unfettered capitalism as a scourge that must be tamed. To deny or ignore this would be a grave mistake, which would condemn us all to misery, and worse. How else would you characterize the massive inequality of income and wealth around the world and in particular in the United States, which is one of the most unequal developed economies? Is the fact that 40% of the wealth in the US rests within 1% of the population not a tyranny? Does this not shock you? It shocks me, and I will say it again: unless we address this calamity, we are bound to relive a crisis – and soon. Mark my words: another crisis is coming.

Although Keynesian theory comes in many different disguises – there is a different Keynes for every Keynesian – this is pretty close to the real thing. Any thoughts would be welcome.

We need a Parliament Act of our own

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Let us take it as read that the Government has to get its budget in order, not because it is good for the Government, but because it is good for the country.

The level of public outlays is too large and the revenue base, as large as it is, is still too low to cover all expenditure. If we don’t fix it, as everyone knows, Australia will have a diminished future. All this is agreed by everyone (see W. Swan for confirmation).

So the Government brought down a budget that was designed to limit public spending and allow some fiscal repair. Since everyone might have gone about it in a different way, let us again state for the record that the one particular way chosen by the Treasurer is different from the one each of us might have chosen ourselves. But that is mere detail. It is the Government and it was elected to find a way to get these things right.

But we are blessed with the Senate from Hell. A series of people of such comprehensive economic ignorance matched with a bizarrely wilful malevolence will allow nothing through. And it will ruin us, let there be no doubt about that. Not fixing the budget will leave just about everyone less well off. The economy will shrink and take us down with it.

Since we are in the mood for constitutional amendments, let’s at least do something useful. What we need is a constitutional amendment that will prevent the Senate from rejecting money bills. Here is the story from the UK:

The Parliament Act 1911 is an Act of the Parliament of the United Kingdom. It is constitutionally important and partly governs the relationship between the House of Commons and the House of Lords which make up the Houses of Parliament. This Act must be construed as one with the Parliament Act 1949. The two Acts may be cited together as the Parliament Acts 1911 and 1949.[1]

Following the rejection of the 1909 budget, the House of Commons sought to establish its formal dominance over the House of Lords, who had broken convention in opposing the Bill. The budget was eventually passed by the Lords after the Commons’ democratic mandate was confirmed by holding elections in January 1910. The following Parliament Act, which looked to prevent a recurrence of the budget problems, was also widely opposed in the Lords and cross-party discussion failed, particularly because of the proposed Act’s applicability to passing an Irish home rule bill. After a second general election in December, the Act was passed with the support of the monarch, George V, who threatened to create sufficient Liberal peers to overcome the present Conservative majority.

The Act effectively removed the right of the Lords to veto money bills completely, and replaced a right of veto over other public bills with a maximum delay of two years.

The Senate is our House of Lords, although the name could not be more inappropriate given many of the present incumbents. Its ability to interfere with the proper management of the country is unacceptable. It should become, like the Canadian Senate, a house of review and advice, but the government should be run from the House of Reps.

This is the constitutional amendment we need. The Senate represents little more than egocentric grandstanding. Let us keep the Senate, by all means, but let us restrict the damage it can do to good governance and sound management of the economy.

The Australian Democrats once held the balance in the Senate for many years based on its promise not to block supply. This should now become an obligation imposed on the Senate by the Constitution.