Mainstream Economics Is Superstition

– December 2, 2019 Reading Time: 5 minutes

 

Sit in any time beyond the first month of a typical ECON 101 class and here’s what you’ll be taught: free markets work well, but only under conditions that seldom prevail in reality – a regrettable fact that requires the state to intervene to correct each of the many market failures.

The apparent science on display seems impressive. Curves are drawn on the whiteboard to portray the difference left by free markets between marginal private cost and marginal social cost, between marginal private benefit and marginal social benefit, and the resulting failure of markets to produce socially optimal quantities of outputs and to attach to these outputs socially optimal prices.

Gazing at the curves – or, if the class is especially mathematical, studying the equations – reveals the remedial action that must be taken if society’s welfare is to be optimized. Shift this curve upward, or that one downward – or in the equations modify this coefficient that way or that coefficient this way – and, voila!, society is engineered to optimality with the aid of Scientific Economics.

It all seems to be so objective and free of any taint of ideology. After all, you can see it right there in the graph, in black and white: the marginal private cost of operating the oil refinery is lower than is the marginal social cost of doing so. Only a libertarian ideologue objects to using government to bring marginal private cost into equality with marginal social cost. This libertarian stubbornly elevates his ideology over the public good, for, as the graphs and equations make clear, bringing marginal private costs into equality with marginal social costs yields net social gains. Such engineering is Kaldor-Hicks-Scitovsky efficient. (It’s impressive to have scientific terms that non-specialists must google.)

It’s a Scientific Fact: Economic Reality is Highly Complex and Often Unobservable

But the reality is that this allegedly scientific case for intervention is not close to being as scientific as it is widely believed to be, especially by economists.

Curves and equations are often very useful tools for helping us to think clearly about reality. But these curves and equations are seldom realities on which researchers can gather actual data. While Jones does incur particular costs by increasing her factory’s output, those costs are not observable to outsiders. Nor are Jones’s costs the same as the costs to Smith who increases his factory’s output by the same amount as does Jones.

Also not observable are the marginal social costs of these factories’ operations. The factory across town might indeed spew pollutants into the air that my neighbors and I breathe. But I challenge anyone to objectively quantify the cost that each of us experiences as a result of a one-percent increase in the factory’s output – then of a two-percent increase – then of a three-percent increase… and then to add these costs together in order to construct a genuinely objective marginal-social-cost schedule.

This challenge cannot be met, although meeting it can be faked. The best that can possibly be done is for a fair-minded researcher to estimate – inevitably using her own subjective evaluations – the costs that I and each of my neighbors individually bear. But how does this researcher know my discount rate – or, rather, know the length of time over which I regard as relevant my exposure to the factory’s emissions? She doesn’t. She can’t possibly know such a thing. And what’s true for her knowledge of my discount rate is true for her knowledge of my evaluation of the precise degree to which the factory’s emissions negatively affect my present well-being.

This researcher – assumed here to stick as closely as possible to the scientific tenets of economics – knows that the preferences, risk tolerances, and discount rates of all individuals affected by the factory’s output differ from each other. Therefore, to scientifically quantify “marginal social costs,” this researcher must get not only such ungettable information about me; she must also get such ungettable information for each of the many individuals who is or who might become affected by the factory’s emissions.

Even ignoring the fact that preferences, risk tolerances, and discount rates can and do change in unpredictable ways, this researcher’s task is undoable.

This impossibility is no small matter. If the researcher overestimates the social costs of the factory’s emissions, she – in league with government officials – imposes her own “social” cost on others. She obliges the factory to reduce output to a level below that which is textbook optimal. The cost to society of this suboptimal level of output might well be as large as, or even larger than, the cost to society of simply leaving the factory free to operate without government attempts to “internalize” on it the social costs of its emissions.

The Scientific Appearance Is a Mirage

At this point the mainstream economist pushes back. He doesn’t deny (How could he?!) that, as a technical matter, getting precise information on marginal social costs is practically impossible. But he insists that such an ideal standard is inappropriate. “We can estimate the divergence between private and social costs closely enough,” the mainstream economist assures us, “and then have government act on those estimates. It’s better than doing nothing.”

While it’s true that the perfect should never be allowed to obstruct the good, there are at least two looming problems with this mainstream-economics approach – problems that warn against trusting it to serve as a reliable guide to government policy.

First, as explained above, there’s no good reason to think that estimates made of social costs by even well-intentioned and sparklingly brilliant government officials will be close-enough to accurate to trust that a government empowered to correct market failures will, on the whole, raise social welfare. The assumption that such officials will typically perform well enough on this front is based on no science; it’s merely an assumption – or, rather, an aspiration.

Second, there’s no good reason to think that government officials in reality face incentives that prompt them to behave as their doppelgängers in textbooks behave. The entire case for using government to correct alleged market failures is built on the belief that self-interested actions of private decision-makers lead them to seek private benefits at the greater expense of the public. But if we assume that people act self-interestedly in their private spheres we must make the same assumption about people’s motivations in public spheres.

Yet despite more than a half-century of warnings from public-choice economists, mainstream economists continue to assume, without much apparent thought, that government officials act in a way that is categorically different from the way these same persons would act were they in the private sector: private persons are assumed to act to promote their own self-interests, while government officials are assumed to act to promote the public interest.

What, however, could be more unscientific than this assumption of dual motivations? It is justified neither by science nor by common sense, but it is crucial to the “scientific” case for government action to correct market failures.

My argument is not that markets are perfect. (They certainly are not.) Nor is my argument that a highly informed and well-meaning deity could not intervene in markets in ways that improve their performance. (Such a splendid creature certainly could.) My argument is that because economists advise government officials rather than deities, the economic case for using government to correct market failures is scientific only in the most superficial sense. Deep down it’s mostly superstition.

From AIER, here.

Bringing Korban Pesach: One Day, They Will Say They Never Really Disagreed…

The Longed-For Sunset of the Rabbinic Establishment

My Passover plans ran into a few hitches this year. As everybody who knows anything about me knows, I have been preparing for Korban Pesah for some time. In previous years, I hoped and prayed that we would be allowed to have our Passover service, and early in the afternoon of the fourteenth of Nisan I would check the news often and wait for that phone call telling me that the sacrifice was on, at which point I would take my pre-packed suitcases and hightail it with the family for Jerusalem. However, because the fourteenth of Nisan was the Sabbath this year, and intercity travel is prohibited by Torah law thereon, I had to make sure to be in Jerusalem before the Sabbath. Then again, as I was telling anyone who would listen for the last year, YOU also had to make sure to be in Jerusalem before the Sabbath, or else YOU would not have been able to eat of the Korban Pesah. I am astounded by the sheer multitudes of people who did not make suitable arrangements.

Whatever the case, we were in Jerusalem early the afternoon of Friday, and then, on the morning of the Sabbath, because one who is ritually impure is not allowed to consume sacrificial meat, I dutifully immersed myself in a local miqweh shortly after the morning prayers, before I consumed my second-Sabbath and final-leaven meal. Then, after some relaxing/stressful quality time with the kids, I put on my finest clothes and began my 45 minute trek to (what now, due to our neglect, only remains of) the Temple. I told my wife that our sacrificial animal would remain on the Temple Mount that afternoon with whomever was in charge of our group, while I would return sometime later that afternoon. Because it is strictly forbidden to prepare in any way for the night of Yom Tov on the Sabbath, we would then sit tight at our place of lodging until the Sabbath ended, at which point we would gather the kids and begin the march, as a family, back to the Old City to have our seder. The initial walk was pleasant enough, but as I began my final decent from the Jewish Quarter’s parking lot to the area of the Kotel Plaza, I met another Jewish man and his family, and in response to my query, he said that the sacrifice had not been offered. Because it was still fairly early in the afternoon, I proceeded, and presented myself to the lone guard stationed at the entrance of the Temple Mount, and requested to be admitted so that I could view the slaughter of the Pesah. The guard, with out flinching, asked to see my goat, to which I answered that I was but one member of a larger group, and that the Rabbi was in charge of bringing our animal, and I was still unaware if it was to be a goat or a lamb. Struck by the readiness of that answer, he countered that the Mount was to remain closed, but as the aforementioned Jewish man I had encountered had also told me, the Mount would be open the next morning at 7am. That was all well and good, but the time for Korban Pesah is only the afternoon of the fourteenth.

Dejected, I prepared for the afternoon prayers (at least they don’t stop us from doing that) at the Kotel (not because it is any better than any other Old-City synagogue but because that’s where I could find a convenient minyan), and went home to disappoint the family by announcing that we would be staying put and having a b’diavad seder once again this year, and Haggadat Hapesah would have to wait for the next year.

But that was not the first hitch.

Continue reading…

From Rabbi Avi Grossman, here.

Lenin’s Full Speech on Armed Revolution

On Authority

Works of Frederick Engels 1872


Written: 1872;
Published: 1874 in the Italian, Almanacco Republicano;
Source: Marx-Engels Reader, New York: W. W. Norton and Co., second edition, 1978 (first edition, 1972), pp 730-733.;
Translated: Robert C. Tucker;
Transcribed: by Mike Lepore.


A number of Socialists have latterly launched a regular crusade against what they call the principle of authority. It suffices to tell them that this or that act is authoritarian for it to be condemned. This summary mode of procedure is being abused to such an extent that it has become necessary to look into the matter somewhat more closely.

Authority, in the sense in which the word is used here, means: the imposition of the will of another upon ours; on the other hand, authority presupposes subordination. Now, since these two words sound bad, and the relationship which they represent is disagreeable to the subordinated party, the question is to ascertain whether there is any way of dispensing with it, whether — given the conditions of present-day society — we could not create another social system, in which this authority would be given no scope any longer, and would consequently have to disappear.

On examining the economic, industrial and agricultural conditions which form the basis of present-day bourgeois society, we find that they tend more and more to replace isolated action by combined action of individuals. Modern industry, with its big factories and mills, where hundreds of workers supervise complicated machines driven by steam, has superseded the small workshops of the separate producers; the carriages and wagons of the highways have become substituted by railway trains, just as the small schooners and sailing feluccas have been by steam-boats. Even agriculture falls increasingly under the dominion of the machine and of steam, which slowly but relentlessly put in the place of the small proprietors big capitalists, who with the aid of hired workers cultivate vast stretches of land.

Everywhere combined action, the complication of processes dependent upon each other, displaces independent action by individuals. But whoever mentions combined action speaks of organisation; now, is it possible to have organisation without authority?

Supposing a social revolution dethroned the capitalists, who now exercise their authority over the production and circulation of wealth. Supposing, to adopt entirely the point of view of the anti-authoritarians, that the land and the instruments of labour had become the collective property of the workers who use them. Will authority have disappeared, or will it only have changed its form? Let us see.

Let us take by way if example a cotton spinning mill. The cotton must pass through at least six successive operations before it is reduced to the state of thread, and these operations take place for the most part in different rooms. Furthermore, keeping the machines going requires an engineer to look after the steam engine, mechanics to make the current repairs, and many other labourers whose business it is to transfer the products from one room to another, and so forth. All these workers, men, women and children, are obliged to begin and finish their work at the hours fixed by the authority of the steam, which cares nothing for individual autonomy. The workers must, therefore, first come to an understanding on the hours of work; and these hours, once they are fixed, must be observed by all, without any exception. Thereafter particular questions arise in each room and at every moment concerning the mode of production, distribution of material, etc., which must be settled by decision of a delegate placed at the head of each branch of labour or, if possible, by a majority vote, the will of the single individual will always have to subordinate itself, which means that questions are settled in an authoritarian way. The automatic machinery of the big factory is much more despotic than the small capitalists who employ workers ever have been. At least with regard to the hours of work one may write upon the portals of these factories: Lasciate ogni autonomia, voi che entrate! [Leave, ye that enter in, all autonomy behind!]

If man, by dint of his knowledge and inventive genius, has subdued the forces of nature, the latter avenge themselves upon him by subjecting him, in so far as he employs them, to a veritable despotism independent of all social organisation. Wanting to abolish authority in large-scale industry is tantamount to wanting to abolish industry itself, to destroy the power loom in order to return to the spinning wheel.

Let us take another example — the railway. Here too the co-operation of an infinite number of individuals is absolutely necessary, and this co-operation must be practised during precisely fixed hours so that no accidents may happen. Here, too, the first condition of the job is a dominant will that settles all subordinate questions, whether this will is represented by a single delegate or a committee charged with the execution of the resolutions of the majority of persona interested. In either case there is a very pronounced authority. Moreover, what would happen to the first train dispatched if the authority of the railway employees over the Hon. passengers were abolished?

But the necessity of authority, and of imperious authority at that, will nowhere be found more evident than on board a ship on the high seas. There, in time of danger, the lives of all depend on the instantaneous and absolute obedience of all to the will of one.

When I submitted arguments like these to the most rabid anti-authoritarians, the only answer they were able to give me was the following: Yes, that’s true, but there it is not the case of authority which we confer on our delegates, but of a commission entrusted! These gentlemen think that when they have changed the names of things they have changed the things themselves. This is how these profound thinkers mock at the whole world.

We have thus seen that, on the one hand, a certain authority, no matter how delegated, and, on the other hand, a certain subordination, are things which, independently of all social organisation, are imposed upon us together with the material conditions under which we produce and make products circulate.

We have seen, besides, that the material conditions of production and circulation inevitably develop with large-scale industry and large-scale agriculture, and increasingly tend to enlarge the scope of this authority. Hence it is absurd to speak of the principle of authority as being absolutely evil, and of the principle of autonomy as being absolutely good. Authority and autonomy are relative things whose spheres vary with the various phases of the development of society. If the autonomists confined themselves to saying that the social organisation of the future would restrict authority solely to the limits within which the conditions of production render it inevitable, we could understand each other; but they are blind to all facts that make the thing necessary and they passionately fight the world.

Why do the anti-authoritarians not confine themselves to crying out against political authority, the state? All Socialists are agreed that the political state, and with it political authority, will disappear as a result of the coming social revolution, that is, that public functions will lose their political character and will be transformed into the simple administrative functions of watching over the true interests of society. But the anti-authoritarians demand that the political state be abolished at one stroke, even before the social conditions that gave birth to it have been destroyed. They demand that the first act of the social revolution shall be the abolition of authority. Have these gentlemen ever seen a revolution? A revolution is certainly the most authoritarian thing there is; it is the act whereby one part of the population imposes its will upon the other part by means of rifles, bayonets and cannon — authoritarian means, if such there be at all; and if the victorious party does not want to have fought in vain, it must maintain this rule by means of the terror which its arms inspire in the reactionists. Would the Paris Commune have lasted a single day if it had not made use of this authority of the armed people against the bourgeois? Should we not, on the contrary, reproach it for not having used it freely enough?

Therefore, either one of two things: either the anti-authoritarians don’t know what they’re talking about, in which case they are creating nothing but confusion; or they do know, and in that case they are betraying the movement of the proletariat. In either case they serve the reaction.

From Marxists.org, here.

אמירה לנכרי: המדינה שולחת את ‘הרש”פ’ לתגמל את רוצחי משפחת פוגל הי”ד

רוצחי משפחת פוגל עתידים לקבל תוספת שכר של 50% מהרשות

לאחר שהשלימו כמעט 10 שנות מאסר, השכר שמשלמת הרשות הפלסטינית לרוצחי משפחת פוגל עומד לעלות ב50%, מ-4,000 ל -6,000 ש”ח לחודש.

  • מבט לתקשורת הפלסטינית
  • כ”ז אדר תשפ”א – 13:35 11/03/2021

כחלק ממדיניות הרשות הפלסטינית לשלם תגמולים כספיים למחבלים מאז יום מעצרם, משלמת הרשות לרוצחי משפחת פוגל משכורות חודשיות. כחלק ממדיניות זו, עד כה, כבר שילמה הרשות לכל אחד מהרוצחים 338,400 ש”ח.

על פי חוק האסירים ואסירים משוחררים ותקנותיו, השכר שמשלמת הרשות למחבלים הכלואים עולה בהדרגה יחד עם תקופת ישיבתם בכלא.


כפי שחשף לאחרונה מכון “מבט לתקשורת פלסטינית”, בשנה האחרונה, למרות משבר הקורונה, הרשות הפלסטינית שילמה מעל חצי מיליארד ש”ח בתגמולים כספיים למחבלים הכלואים ולמחבלים המשוחררים.
בנוסף שילמה הרש”פ מאות מיליוני שקלים למחבלים פצועים ולמשפחות מחבלים הרוגים.
כאן המקום להזכיר, שלמרות שחלפו למעלה מחודשיים, טרם יושם החוק להקפאת כספים (חוק הקיזוז), שהתקבל ברוב עצום בכנסת, ששילמה הרשות הפלסטינית בזיקה לטרור מהכספים המועברים אליה על ידי מממשלת ישראל.
חוק הקיזוז נועד להעניש את הרשות בגין התגמולים שהיא משלמת למחבלים, ובכלל זה מחבלים כלואים, מחבלים משוחררים, מחבלים פצועים ובני משפחות של מחבלים הרוגים.
על פי החוק, בתום כל שנה, אמור שר הביטחון להגיש לאישור ועדת השרים לענייני ביטחון לאומי (הקבינט הביטחוני), דו”ח המפרט את תשלומי הרשות למחבלים בשנה החולפת והסכום ששילמה הרשות למחבלים מוקפא, מהמיסים שישראל גובה ומעבירה לרשות בהתאם להסכמי אוסלו.
בשנה האחרונה, חל עיכוב משמעותי ביישום החוק, ולמעשה לא התקבלה החלטה של הקבינט הביטחוני. העיכוב משדר מסר בעייתי מאוד ופוגע בהרתעה של מדינת ישראל.
מאת עו”ד מוריס הירש

This World Entails Suffering, But You Get to Choose WHICH Suffering!

Everything is hard

I have a daughter in her Junior year in high school. Do you remember that year? If you do, you likely remember that it was the hardest year in high school. It’s like every teacher wants to give you tons and tons of homework. She is working hard but wishes it was easier. And you know what I tell her? Everything is hard.

I lead a group of amazingly talented folks at work. They can do just about anything. Nevertheless, today we had a meeting to talk about a new feature. You know what we discovered, right? Once we got into the details it was clear it wasn’t going to be easy. Or even straightforward. Why? Because anything worth doing takes work. Everything is hard.

I’ve spent the last two years working harder than the last few years to lose some weight. And it’s worked. I lost weight during the pandemic – much to my family’s frustration. 🙂 But nothing about it is easy.

And this morning I wanted everything that Starbucks sells. Hot Chocolate AND Passion Tea Lemonade. Plus several croissants. I ordered it all. And ate it all. Not because it was a cheat day. I just didn’t have the extra energy to be disciplined this morning. Why? Because it’s hard. Everything is hard.

Here’s the crazy thing.

If you want to stay fit (and no, I’m not the definition of fit), it’s going to be hard.
But if you decide not to care about your health, it’s going to be hard too.

Living in debt and not in control of your finances, life is going to be hard.
But if you choose to spend less than you earn, it’s going to be hard too.

I meet with entrepreneurs regularly and their success takes tons of work.
But when you wing everything and struggle to have a strategy, it’s work too.

Every way you live. Every choice you make. It doesn’t matter. Everything is hard.

There’s no getting around work.

You work one way or another: dealing with the chaos or creating the order.

So if you know it’s going to be work, no matter what, here’s my recommendation:

Choose the work that creates the life you want to live.

Sure, it will be hard. But everything is hard.

From Chris Lema, here.