Wednesday, July 22, 2009


"I learned long ago the three best reasons for being a professor: June, July, and August."
Hmmm, I wonder what he's talking about?

Economic Problems

MARIO RIZZO has a very interesting and thought provoking post about problems in macroeconomics:
"Second, what is the root of the difficulty in which macroeconomics finds itself?

I think it is the inability to reconcile a reasonable treatment of radical uncertainty with the strictures of out-of-control formalism. We have come a long way from Alfred Marshall’s idea that one does the mathematics and then burns it. In a 1906 letter to A.L. Bowley (of the Edgeworth-Bowley box fame) Marshall says:

“But I know I had a growing feeling in the later years of my work at the subject that a good mathematical theorem dealing with economic hypotheses was very unlikely to be good economics: and I went more and more on the rules – (1) Use mathematics as a shorthand language, rather than an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life. (5) Burn the mathematics. (6) If you can’t succeed in (4), burn (3). This last I did often.”

Clearly, the adherents of DSGE did not follow points (4) through (6). "
DSGE is shorthand for the dominant macro model today. I had never heard of this idea of Marshall before, but it seems to me one worthy of much reflection. It also seems to me that most micro economists today also miss the significance of radical uncertainty for the questions and issues they study.

Saturday, July 18, 2009

Constitutional Matters

I've been looking through middle school textbooks on Civics and Economics. I just ran across the following in one of the textbooks:
Why It Matters: The Constitution outlines the ideals of American government and describes how they should be achieved. It tells you what your rights and privileges are. The Constitution affects you, your family, and your friends as much today as it affected those who wrote it more than 200 years ago.
I suspect there are many who would agree with this, but I think it is a view of the Constitution that has a great deal wrong with it.

The key problem with this view is that we are told that the Constitution tells us what our rights and privileges are. On the contrary, the view of government and the citizen that provides the conceptual foundations for the Constitution are those of Locke, which were marvelously expressed by Jefferson in the Declaration of Independence:
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.
In other words, instead of finding a list of our rights and privileges in the Constitution, we are each born with (endowed with) unalienable rights. These rights are prior to both the Constitution and to government, while the view expressed in the textbook suggests that the Constitution and government come before our individual rights.

Furthermore, while we do find an explicit accounting of some of our individual rights in the amendments to the Constitution known as the Bill of Rights, the Bill of Rights itself includes explicit statements consistent with the idea that our rights come prior to government:
9th Amendment: The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

10 Amendment: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
In other words, our rights are prior to government and we do not find a list of those rights in our Constitution.

A second concern I have with this statement about why the Constitution matters involves the idea that "the Constitution affects you." I'm sure it is accurate to say that the Constitution in some way affects each of us in our daily lives. But I think this is not a very important idea to note about the Constitution, and I think one of the most important ideas to note about the Constitution is completely neglected, perhaps entirely obscured, by the idea that the Constitution affects you. Our Constitution defines a government of only specific enumerated powers. It is a Constitution, along with the Bill of Rights, which explicitly constrains our national government by limiting its power over our daily lives. Our Constitution is directly about government and its constraints and limits, and only very indirectly about you and me. The Constitution indirectly affects you and me in that the government which follows from the Constitution uses its power to create and enforce statutes which have direct effects on our daily lives. The Constitution is about defining and constraining the nature of government we have to live with.

Why is it important to fuss over a statement like this in a middle school textbook? The conceptual view I express here about the Constitution is a view which has been vital to the prosperity you and I enjoy in our lives today. Most of economic history, in all places and all times, has been a history of poverty for most people, and at least some scholars have suggested that the conceptual view of government and the individual I believe is the foundation of our Constitution is the key change in conceptual views of the world that has made the prosperity we enjoy today possible. If this is the case, then the view of the Constitution I'm concerned with here has played a significant role in allowing government to break free of the bounds and constraints written into our Constitution with the result that our system of political economy today, while certainly prosperous, falls significantly short of its potential for people to enjoy prosperous lives. It is also my view that the greater the extent to which people see our Constitution from the perspective I'm concerned with here, the greater will be the extent to which the prosperity of our children and our grandchildren will fall below potential prosperity.

A curriculum for a prosperous republic would present a view of the Constitution which is consistent with Locke, Jefferson, and Madison (who drafted the 9th Amendment), and not the view I'm fussing over here today.

Thursday, July 16, 2009

We Are All Fascists Now

Roger Koppl:
"We have forgotten the foundations of liberty and we may not have long to save them from oblivion. The search to recover our lost heritage of liberty will begin when we question the leadership principle, when we begin to wonder what might keep our “leaders” from oppressing us. The search to recover our lost liberty will begin, in other words, when we remember to ask the question the ancient Roman satirical poet Juvenal asked: Sed quis custodiet ipsos custodes? “And who will guard the guardians themselves?” The search to recover our lost liberties will have been put on the right path when we remember the marvelously compact lesson in good government provided by James Madison’s defense of the Constitutional system of checks and balances.

But what is government itself, but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.

Madison’s “auxiliary precautions” have been swept away by militarism, collective economics, and the leadership principle. It is time to recall the lessons of Juvenal and Madison. It is time to turn away from state power and the leadership principle. We are all fascists now. Let us remember, however, that we were once Americans and can be so again if we so choose."

Well put.