[maxiep]

Originally Posted by Stepping Razor

How is Chicago School economics not right wing?

It's not right wing, because it's amoral. Its concern is with maximizing utility, not in the distribution of income.

For example, Austan Goolsbee is one of the young turks of the Chicago school and he's Barack Obama's chief economic advisor.

[Talkhard]

Originally Posted by Stepping Razor

The Hoover Institution . . . is basically a highly-ideological right wing think tank (similar to the Cascade Policy Institute in the NW), dedicated to advancing right wing political interests.

Eee gads!! What do you think UC Berkeley is, if not a mouthpiece for liberal ideology in all of its manifestations? Yale, Brown, Princeton, Harvard and the rest of the Ivy League, along with most major universities in this country, all advance the liberal left-leaning agenda, while claiming to be "objective and open-minded" centers of higher learning.

[Stepping Razor]

Originally Posted by maxiep

It's not right wing, because it's amoral. Its concern is with maximizing utility, not in the distribution of income.

Wow. We'll have to agree to disagree about that one. (I suspect that one of the core values that makes a person lean either to the left or to the right is, in fact, whether or not he considers distribution of income to be a moral issue or merely a question of maximizing utility. Not saying you're wrong, just that there is a fundamental difference of outlook there, and its reflected in political views. Those of us on the left consider Chicago Schoolers to be right-wingers, while Chicago Schoolers consider themselves to be apolitical. It's interesting.)

For example, Austan Goolsbee is one of the young turks of the Chicago school and he's Barack Obama's chief economic advisor.

One of a million reasons why Barack Obama should be considered much more of a centrist than a leftist or liberal.

Stepping Razor

[Stepping Razor]

Originally Posted by Talkhard

Eee gads!! What do you think UC Berkeley is, if not a mouthpiece for liberal ideology in all of its manifestations? Yale, Brown, Princeton, Harvard and the rest of the Ivy League, along with most major universities in this country, all advance the liberal left-leaning agenda, while claiming to be "objective and open-minded" centers of higher learning.

There are obviously tons of left-leaning professors at those places. (Though also more right-leaning profs than you'd think.) The institutions, themselves, however, don't exist for the sole purpose of advancing a particular political/ideological agenda. That's one reason why the right-wing think tanks (Hoover, Heritage, Cato, ec.) have been much more successful than all the left-leaning profs in the world in advancing a particular political movement. It's because that's what they're trying to do. Meanwhile your Marxist humanities prof at Berkeley is neck-deep in "the heuristics of knowledge" or some other BS and has precisely zero impact upon the real world.

Stepping Razor

[maxiep]

Originally Posted by Stepping Razor

Wow. We'll have to agree to disagree about that one. (I suspect that one of the core values that makes a person lean either to the left or to the right is, in fact, whether or not he considers distribution of income to be a moral issue or merely a question of maximizing utility. Not saying you're wrong, just that there is a fundamental difference of outlook there, and its reflected in political views. Those of us on the left consider Chicago Schoolers to be right-wingers, while Chicago Schoolers consider themselves to be apolitical. It's interesting.)


One of a million reasons why Barack Obama should be considered much more of a centrist than a leftist or liberal.

Stepping Razor

If you look at the voting patterns and the hiring criteria of both the Chicago GSB and the U of C Econ Department, I think you'd be surprised. It's a place of ideas, not ideology. It's a place that welcomes both Gene Fama and Richard Thaler, people on opposite ends of the political spectrum.

The easiest insight into how a Chicago economist approaches a problem is the book "Freakonomics".

Many people look at problems knowing the answer and then seeking data to support it. At Chicago, the training is to spot data trends and then see what questions the data suggests. Whatever conclusion the data proves, the data proves. The last thing that approach should be called is "ideological".

As for claiming income-distribution over maximizing utility, that's not ground anyone wants to take. If you do you run the risk of everyone being equally miserable.

Take three people (rich, middle, poor) who have the ingredients to make two pies. One pie is made messily and yields 15 oz.. The other is made with equipment supplied mostly by the rich person and partially by the middle person. This equipment creates efficiencies that yields a 21 oz. pie. With the first pie, all three pieces are 5 oz. Sal****er economists are happy as the distribution is equal (and in their minds, fair). Freshwater economists prefer the second pie.

With the 21 oz. pie, the rich guy gets 8 oz, the middle guy gets 7 oz and the poor guy gets 6 oz. Both the freshwater and sal****er economists are satisfied, although the sal****er economist is less so as the distribution is unequal.

Now let's give the rich guy 9 oz and the poor guy 5 oz. That's even worse in the mind of the sal****er economist, who at that point would prefer the 15 oz. pie if the pie can't be split into equal 7 oz. slices. At that point, however, society as a whole is worse off.

It's been shown time and time again that a properly regulated system where utilities are maximized makes everyone better off, even if the benefits aren't equally spread. Equal distribution gives you the failed experiment of the Soviet Union.

[maxiep]

Strange that the word s-a-l-t-w-a-t-e-r gets posted as sal****er...oh, wait...I just got it.

[Stepping Razor]

Wow, who knew that "salt water" was so obscene?

[Stepping Razor]

Originally Posted by maxiep

If you look at the voting patterns and the hiring criteria of both the Chicago GSB and the U of C Econ Department, I think you'd be surprised. It's a place of ideas, not ideology. It's a place that welcomes both Gene Fama and Richard Thaler, people on opposite ends of the political spectrum.

The easiest insight into how a Chicago economist approaches a problem is the book "Freakonomics".

Many people look at problems knowing the answer and then seeking data to support it. At Chicago, the training is to spot data trends and then see what questions the data suggests. Whatever conclusion the data proves, the data proves. The last thing that approach should be called is "ideological".

As for claiming income-distribution over maximizing utility, that's not ground anyone wants to take. If you do you run the risk of everyone being equally miserable.

Take three people (rich, middle, poor) who have the ingredients to make two pies. One pie is made messily and yields 15 oz.. The other is made with equipment supplied mostly by the rich person and partially by the middle person. This equipment creates efficiencies that yields a 21 oz. pie. With the first pie, all three pieces are 5 oz. Sal****er economists are happy as the distribution is equal (and in their minds, fair). Freshwater economists prefer the second pie.

With the 21 oz. pie, the rich guy gets 8 oz, the middle guy gets 7 oz and the poor guy gets 6 oz. Both the freshwater and sal****er economists are satisfied, although the sal****er economist is less so as the distribution is unequal.

Now let's give the rich guy 9 oz and the poor guy 5 oz. That's even worse in the mind of the sal****er economist, who at that point would prefer the 15 oz. pie if the pie can't be split into equal 7 oz. slices. At that point, however, society as a whole is worse off.

It's been shown time and time again that a properly regulated system where utilities are maximized makes everyone better off, even if the benefits aren't equally spread. Equal distribution gives you the failed experiment of the Soviet Union.

1. I don't think many people (certainly not me) are advocating truly equal distribution of income. But it's possible to view the current maldistribution of income as a moral issue, and to pursue policies that might lead to a *more equal* distribution of income than we have today, without being a Communist. There is a middle ground here. Call it Keynesianism, the mixed economy, the New Deal, whatever...

2. I get the pie analogy and I understand the theories of the utility-maximizers. I just think that reality is more complicated. If you believe that the normal state of economic affairs is market efficiency, then any intervention into the market will necessarily create "deadweight loss" (another highly ideological term IMO) and reduce utility. But if you believe that the normal state of economic affairs is far from market efficiency -- that negative externalities, monopoly behaviors, cheating, bad information, coercion, etc. are so pervasive that the efficient market of economic theory rarely exists in reality -- then interventions into the economy might make things worse, or they might make things better. I fall into the latter camp.

I'm not smart enough to be much of a theorist, so as a historian I'm mostly just a knuckle-headed empiricist. But I think the free-market theorists who predominate intellectual and political life today have a major empirical problem to deal with: Why did the US and global economies perform better from 1945-1972 -- an era of high marginal taxation on the wealthy, high unionization, and heavy government regulation -- than they did in the more free-market-dominated periods before and after?

The truth is that macroeconomic performance in the Friedman/Reagan era has been poor, at home and abroad. Economic growth has been much slower than in the preceding Keynes/Roosevelt era. And distribution of wealth has been much more uneven. Perhaps the supposed choice between growth and equity (the pie example) isn't actually a choice at all.

Stepping Razor

[maxiep]

Originally Posted by Stepping Razor

1. I don't think many people (certainly not me) are advocating truly equal distribution of income. But it's possible to view the current maldistribution of income as a moral issue, and to pursue policies that might lead to a *more equal* distribution of income than we have today, without being a Communist. There is a middle ground here. Call it Keynesianism, the mixed economy, the New Deal, whatever...

2. I get the pie analogy and I understand the theories of the utility-maximizers. I just think that reality is more complicated. If you believe that the normal state of economic affairs is market efficiency, then any intervention into the market will necessarily create "deadweight loss" (another highly ideological term IMO) and reduce utility. But if you believe that the normal state of economic affairs is far from market efficiency -- that negative externalities, monopoly behaviors, cheating, bad information, coercion, etc. are so pervasive that the efficient market of economic theory rarely exists in reality -- then interventions into the economy might make things worse, or they might make things better. I fall into the latter camp.

I'm not smart enough to be much of a theorist, so as a historian I'm mostly just a knuckle-headed empiricist. But I think the free-market theorists who predominate intellectual and political life today have a major empirical problem to deal with: Why did the US and global economies perform better from 1945-1972 -- an era of high marginal taxation on the wealthy, high unionization, and heavy government regulation?

The truth is that macroeconomic performance in the Friedman/Reagan era has been poor, at home and abroad. Economic growth has been much slower than in the preceding Keynes/Roosevelt era. And distribution of wealth have been much more uneven. Perhaps the supposed choice between growth and equity (the pie example) isn't actually a choice at all.

Stepping Razor

Regarding the distribution of income, it really comes down to how free and unfettered you wish your life to be. I personally believe in the right to pursue happiness within the bounds of the law. I also believe that choices have consequences. In short: incentives matter.

If I choose to sit on my can and watch TV all day, I don't expect to have much provided for me. If I choose to pursue a life of the mind, I don't expect to be compensated for that endeavor either. If I choose to focus on providing for myself and my family, I don't expect to be forced to subsidize the former two. I do not mind subsidizing those that are incapable of helping themselves, because in my mind that's part of the social compact. Subsizing those that are unwilling to hold up their end of the implied agreement? Well, I have little sympathy for them. If that makes me "heartless" or "cruel", so be it. Again, incentives matter.

As for the economy being complicated, of course it is. That's why you create rational actors and simple models to attempt to predict behavior. Humans are too irrational and the economy is far too complex to be able to encapsulate in a model or a theory. You use them to get you most of the way there and to align incentives to support proper behavior.

As for your contention that markets do not trend toward efficiency because of bad actors, historical data disagree. Are there bad actors in every case? Of course. However, those actors are the exception and not the rule. When they overreach, that's where regulation kicks in. Where governments have made mistakes is where they put regulation before the market, government before the individual. It's no different than putting the proverbial cart before the horse.

Adam Smith had it right, and doesn't get nearly enough credit for his (now obvious) insight: Markets by and large are self-correcting and work best unfettered. In a market where people don't deal directly with one another, do we need regulation? I don't think anyone disagrees with that contention. Do private monopolies need to adhere to a different set of rules? Of course. However, it's strange how monopolies are never criticized by Keynesians when they come from the government. Those are "good" monopolies. I don't buy it. Competition is healthy. Period.

As for dead weight loss, it isn't an ideological term, it's a real externality with real costs. Those costs don't equate to any additional benefit, hence they're a drag on the economy.

Second, comparing the post WWII time period to any other is a mistake. It was an anomalous time period where global growth was higher because all of Europe and Japan needed to be rebuilt. America provided much of the supplies and equipment for that reconstruction. The real question is what would our growth have been if a classical economic model have been instituted.

Third, Keynesian monetary policies--while useful in an earlier time to rectify certain inequities--have been backtracking since the days of Thatcher, much to the benefit of living standards all over the planet. Even the poorest among us lives better today than they did 25 years ago and for the average person, it's not even comparable. The only places where living standards have lagged are those countries where command economies still have a chokehold on the populace.

As for the choice between the equal or unequal distributed pie, it was proven to be true by the collapse of the Soviet Union and its satellite states. It was a real choice, and the larger pie won.

[Stepping Razor]

As I said a few posts up, we'll have to agree to disagree on this one.

Would I choose absolute, unfettered free markets over Soviet Communism? Sure.

Would I choose absolute, unfettered free markets over the New Deal? Nope, not in a million years. I know my position is ideologically incorrect to those who believe absolutely in Chicago School-style market supremacy. I think the (necessarily messy and complex) empirical historical record is more on my side, although obviously, as you point out, the unique circumstances of any particular historical time or place leave open many avenues of interpretation. I definitely respect your right to disagree

Stepping Razor

[It's_GO_Time]

"In short, Bush hatred is not a rational response to actual Bush perfidy. Rather, Bush hatred compels its progressive victims--who pride themselves on their sophistication and sensitivity to nuance--to reduce complicated events and multilayered issues to simple matters of good and evil. Like all hatred in politics, Bush hatred blinds to the other sides of the argument, and constrains the hater to see a monster instead of a political opponent."

Does anyone see the irony here? TH is citing an article that is saying Bush hatred has reached a point where people reduce complicated events and multilayered issues to simple matters of good and evil.

Yet all TH ever does is reduce complicated events and multilayer issues on this board to left/liberal thinking v. right/conservative thinking.

[ryanjend22]

http://www.youtube.com/watch?v=KhieldvUOiA