All-Volunteer Rhetoric

David Henderson of EconLog recounts a recent lecture about the demise of military conscription in the United States:

On Thursday, February 20, I gave a guest lecture in the classroom of Ryan Sullivan at the Naval Postgraduate School. This is the third year in a row I’ve given this lecture. It’s titled “How Economists Helped End the Draft,” and the readings for it are David R. Henderson, “The Role of Economists in Ending the Draft,” Econ Journal Watch, August 2005, Christopher Jehn, “Conscription,” The Concise Encyclopedia of Economics, and David R. Henderson and Chad W. Seagren, “Time to End Draft Registration,” Defining Ideas, February 10, 2016. Almost all the students were U.S. military officers.

During the discussion, I highlighted the stormy, and illuminating, interaction between Milton Friedman, a prominent critic of the draft, and General William Westmoreland, a prominent proponent of the draft, at some hearings held by the Gates Commission on the All-Volunteer Force, appointed by President Richard Nixon.

I quoted Friedman’s telling of the story in his and Rose Friedman’s autobiography, Two Lucky People:

In the course of his testimony, he made the statement that he did not want to command an army of mercenaries. I stopped him and said, ‘General, would you rather command an army of slaves?’ He drew himself up and said, ‘I don’t like to hear our patriotic draftees referred to as slaves.’ I replied, ‘I don’t like to hear our patriotic volunteers referred to as mercenaries.’ But I went on to say, ‘If they are mercenaries, then I, sir, am a mercenary professor, and you, sir, are a mercenary general; we are served by mercenary physicians, we use a mercenary lawyer, and we get our meat from a mercenary butcher.’ That was the last that we heard from the general about mercenaries.

I drove the point home by saying, “Let me ask you, and I’m asking you to be honest here: Who, when you first thought of joining, looked at what the pay in the military was at the rank you would have?” Almost all of the students raised their hands. “You mercenaries, you,” I said, laughing. That got a few laughs and smiles.

I have long been a lukewarm supporter of the anti-conscription movement.

I am unpersuaded by the libertarian aspects of the movement. As a typical economist will tell you, conscription is a form of taxation, in that the conscriptee is forced to provide labor to the U.S. government at a wage rate that is (presumably) less than the wage rate he could earn through civilian employment. Thus conscription is (presumably) unfair to conscriptees.

But defense, itself, must be subsidized through taxation, which effectively makes conscriptees of all Americans who pay federal income taxes. I am unaware, however, of a suggestion by any serious economist (which excludes Paul Krugman) that Americans shouldn’t be taxed to defray the cost of defending the nation. So the anti-conscription movement among economists must be viewed with suspicion. Specifically, academic economists — being highly educated and therefore (relatively) highly paid — cringe at the though of being lowly-paid, bossed-around draftees, so they assume that other Americans share their distaste for servitude in the service of America.

The effort to end the draft became serious during the Vietnam War, when the anti-war movement was driven mainly by anti-draft sentiment. Fighting a distant enemy who seemed to pose no direct threat to America didn’t stir patriotic fervor in the way that the sinking of American merchant ships and the bombing of Pearl Harbor had in 1917 and 1941.

Will the draft ever be revived? Possibly, in the event of a major land war to protect vital American interests. But such things are unpredictable, so I won’t venture a prediction about the possibility of such a war. I will only predict (quite safely) that the general response of young American men to a draft will depend on two things:

whether the enemy of the time seems capable of mounting a direct threat on the liberty and well-being of Americans, and

whether the young people of that time still think of themselves as Americans.

(See also “Whither (Wither) Classical Liberalism — and America?” and the comments on that post.)

Preliminary Thoughts about “Theism, Atheism, and Big Bang Cosmology”

I am in the early sections of Theism, Atheism, and Big Bang Cosmology by William Lane Craig and Quentin Smith, but I am beginning to doubt that it will inform my views about cosmology. (These are spelled out with increasing refinement here, here, here, and here.) The book consists of alternating essays by Craig and Smith, in which Craig defends the classical argument for a creation (the Kalām cosmological argument) against Smith’s counter-arguments.

For one thing, Smith — who takes the position that the universe wasn’t created — seems to pin a lot on the belief prevalent at the time of the book’s publication (1993) that the universe was expanding but at a decreasing rate. It is now believed generally among physicists that the universe is expanding at an accelerating rate. I must therefore assess Smith’s argument in light of the current belief.

For another thing, Craig and Smith (in the early going, at least) seem to be bogged down in an arcane argument about the meaning of infinity. Craig takes the position, understandably, that an actual infinity is impossible in the physical world. Smith, of course, takes the opposite position. The problem here is that Craig and Smith argue about what is an empirical (if empirically undecidable) matter by resorting to philosophical and mathematical concepts. The observed and observable facts are on Craig’s side: Nothing is known to have happened in the material universe without an antecedent material cause. Philosophical and mathematical arguments about the nature of infinity seem beside the point.

For a third thing, Craig seems to pin a lot on the Big Bang, while Smith is at pains to deny its significance. Smith seems to claim that the Big Bang wasn’t the beginning of the universe; rather, the universe was present in the singularity from which the Big Bang arose. The singularity might therefore have existed all along.

Craig, on the other hand, sees the hand of God in the Big Bang. The presence of the singularity (the original clump of material “stuff”) had to have been created so that the Big Bang could follow. That’s all well and good, but what was God doing before the Big Bang, that is, in the infinite span of time before 15 billion years ago? (Is it presumptuous of me to ask?) And why should the Big Bang prove God’s existence any more than, say, a universe that came into being at an indeterminate time? The necessity of God (or some kind of creator) arises from the known character of the universe: material effects follow from material causes, which cannot cause themselves. In short, Craig pins too much on the Big Bang, and his argument would collapse if the Big Bang is found to be a figment of observational error.

There’s much more to come, I hope.

I Knew (of) a Man Who Knew (of) a Man …

… who, etc., etc., knew (of) George Washington.

A bit of trivia for this, the 288th anniversary of Washington’s birth on February 22, 1732 (New Style date). Washington served as president from April 30, 1789 to March 4, 1797. He died on December 14, 1799.

Martin Van Buren (8th president) was born on December 5, 1782, and was 6 to 14 years old during Washington’s presidency. Van Buren was therefore had memories of the first presidency. Van Buren served as president from March 4, 1837, to March 4, 1841. He died on July 24, 1862.

Rutherford B. Hayes (19th president) was born on October 4, 1822, and was 14 to 18 years old during Van Buren’s presidency. Hayes served as president from March 4, 1877, to March 4, 1881. He died on January 17, 1893.

William Howard Taft (27th president) was born on September 15, 1857, and was 19 to 23 years old during Hayes’s presidency. Taft served as president from March 4, 1909, to March 4, 1913. He died on March 8, 1930.

Dwight D. Eisenhower (34th president) was born on October 14, 1890, and was 18 to 22 years old during Taft’s presidency. Eisenhower served as president from January 20, 1953, to January 20, 1961. He died on March 28, 1969.

Donald J. Trump (45th president) was born on June 14, 1946, and was 6 to 14 years old during Eisenhower’s presidency. Trump’s presidency began on January 20, 2017.

From Washington to Trump: 5 degrees of separation.

(For more facts about presidents, see “Presidents: Key Dates and Various Trivia“.)

Economics: A Survey

I have revised and updated “Economics: A Survey“. Go there and find vast riches.

Trump’s Polling and Re-election Watch, Updated

Here,

Fifty-Two Weeks on the Learning Curve

I first learned of the learning curve when I was a newly hired analyst at a defense think-tank. A learning curve

is a graphical representation of how an increase in learning (measured on the vertical axis) comes from greater experience (the horizontal axis); or how the more someone (or something) performs a task, the better they [sic] get at it.

In my line of work, the learning curve figured importantly in the estimation of aircraft procurement costs. There was a robust statistical relationship between the cost of making a particular model of aircraft and the cumulative number of such aircraft produced. Armed with the learning-curve equation and the initial production cost of an aircraft, it was easy to estimate of the cost of producing any number of the same aircraft.

The learning curve figures prominently in tests that purport to measure intelligence. Two factors that may explain the Flynn effect — a secular rise in average IQ scores — are aspects of learning: schooling and test familiarity and a generally more stimulating environment in which one learns more. The Flynn effect doesn’t measure changes in intelligence, it measures changes in IQ scores resulting from learning. There is an essential difference between ignorance and stupidity. The Flynn effect is about the former, not the latter.

Here’s a personal example of the Flynn effect in action. I’ve been doing The New York Times crossword puzzle online since February 18, 2019. I have completed all 365 puzzles published by TNYT from that date through the puzzle for February 17, 2020, with generally increasing ease:

The fitted curve is a decaying exponential, which means that progress continues but at an increasingly slower rate, which is typical of a learning curve.

The difficulty of the puzzle varies from day to day, with Monday puzzles being the easiest and Sunday puzzles being the hardest (as measured by time to complete):

For each day of the week, my best time is more recent than my worst time, and the trend of time to complete is downward for every day of the week (as reflected in the first graph above). In fact:

My worst times were all recorded in March through June of last year.

Today I tied my best time for a Monday puzzle.

I set or tied my best time for the Wednesday, Friday, and Sunday puzzles in the last three weeks.

In the same three weeks, my times for the Tuesday puzzle have twice been only a minute higher than my best.

I know that that I haven’t become more intelligent in the last 52 weeks. And being several decades past the peak of my intelligence, I am certain that it diminishes steadily, though in tiny increments (I hope). I have simply become more practiced at doing the crossword puzzle because I have learned a lot about it. For example, certain clues recur with some frequency, and they always have the same answers. Clues often have double meanings, which are hard to decipher at first, but which become easier to decipher with practice. There are other subtleties, all of which reflect the advantages of learning.

In a nutshell, I am no smarter than I was 52 weeks ago, but my ignorance of TNYT crossword puzzle has diminished significantly.

(See also “More about Intelligence“, “Selected Writings about Intelligence“, and especially “Intelligence“, in which I quote experts about the Flynn Effect.)

Psychiatry Is a Disorder

I happened upon “Schizoid personality disorder” (SPD) at Wikipedia, and wondered why it is a disorder, that is, a “bad thing”. A footnote in the article leads to a summary of SPD. Here are some excerpts:

A person with schizoid personality disorder often:

Appears distant and detached

Avoids social activities that involve emotional closeness with other people

Does not want or enjoy close relationships, even with family members….

People with schizoid personality disorder often do well in relationships that don’t focus on emotional closeness. They tend to be better at handling relationships that focus on:

Work

Intellectual activities

Expectations

In other words, persons who “suffer” from SPD may in fact be highly productive in pursuits that demand (and reward) prowess in science, technology, engineering, and mathematics — a.k.a. STEM. But because they don’t conform strictly to a psychiatric definition of normality they are said to have a disorder.

What is the psychiatric definition of a normal personality? This is from a page at the website of the American Psychiatric Association (APA):

Personality is the way of thinking, feeling and behaving that makes a person different from other people. An individual’s personality is influenced by experiences, environment (surroundings, life situations) and inherited characteristics. A person’s personality typically stays the same over time. A personality disorder is a way of thinking, feeling and behaving that deviates from the expectations of the culture, causes distress or problems functioning, and lasts over time.

There are 10 specific types of personality disorders. Personality disorders are long-term patterns of behavior and inner experiences that differs significantly from what is expected. The pattern of experience and behavior begins by late adolescence or early adulthood and causes distress or problems in functioning. Without treatment, personality disorders can be long-lasting. Personality disorders affect at least two of these areas:

Way of thinking about oneself and others

Way of responding emotionally

Way of relating to other people

Way of controlling one’s behavior

Types of Personality Disorders

Antisocial personality disorder: a pattern of disregarding or violating the rights of others. A person with antisocial personality disorder may not conform to social norms, may repeatedly lie or deceive others, or may act impulsively.

Avoidant personality disorder: a pattern of extreme shyness, feelings of inadequacy and extreme sensitivity to criticism. People with avoidant personality disorder may be unwilling to get involved with people unless they are certain of being liked, be preoccupied with being criticized or rejected, or may view themselves as not being good enough or socially inept.

Borderline personality disorder: a pattern of instability in personal relationships, intense emotions, poor self-image and impulsivity. A person with borderline personality disorder may go to great lengths to avoid being abandoned, have repeated suicide attempts, display inappropriate intense anger or have ongoing feelings of emptiness.

Dependent personality disorder: a pattern of needing to be taken care of and submissive and clingy behavior. People with dependent personality disorder may have difficulty making daily decisions without reassurance from others or may feel uncomfortable or helpless when alone because of fear of inability to take care of themselves.

Histrionic personality disorder: a pattern of excessive emotion and attention seeking. People with histrionic personality disorder may be uncomfortable when they are not the center of attention, may use physical appearance to draw attention to themselves or have rapidly shifting or exaggerated emotions.

Narcissistic personality disorder: a pattern of need for admiration and lack of empathy for others. A person with narcissistic personality disorder may have a grandiose sense of self-importance, a sense of entitlement, take advantage of others or lack empathy.

Obsessive-compulsive personality disorder: a pattern of preoccupation with orderliness, perfection and control. A person with obsessive-compulsive personality disorder may be overly focused on details or schedules, may work excessively not allowing time for leisure or friends, or may be inflexible in their morality and values. (This is NOT the same as obsessive compulsive disorder.)

Paranoid personality disorder: a pattern of being suspicious of others and seeing them as mean or spiteful. People with paranoid personality disorder often assume people will harm or deceive them and don’t confide in others or become close to them.

Schizoid personality disorder: being detached from social relationships and expressing little emotion. A person with schizoid personality disorder typically does not seek close relationships, chooses to be alone and seems to not care about praise or criticism from others.

Schizotypal personality disorder: a pattern of being very uncomfortable in close relationships, having distorted thinking and eccentric behavior. A person with schizotypal personality disorder may have odd beliefs or odd or peculiar behavior or speech or may have excessive social anxiety.

Holy mackerel, Andy, there’s hardly a “normal” person alive. And certainly none of them is a psychiatrist. The very compilation of a list of personality traits that one considers “abnormal” is a manifestation of narcissistic personality disorder and obsessive-compulsive personality disorder, at the very least.

Other than an actual disease of the brain, there is only one kind of mental “disorder” that requires treatment — criminal behavior. And the proper treatment for it is the application of criminal justice, sans psychiatric intervention. (See the articles by Thomas Szasz at FEE.)

Economics Explained — Part IV: Loose Ends and Finishing Touches

This is the fourth installment of a long post. I may revise it as I post later parts. The whole will be published as a page, for ease of reference. In Parts I, II, and III I necessarily omitted many topics that might seem relevant to the principles of economics and their application in the real world. I address a few of those topics in this coda.

Macroeconomics

Macroeconomic aggregates (e.g., aggregate demand, aggregate supply) are essentially meaningless because they represent disparate phenomena.

Consider Chuck and Debbie, who discover that, together, they can have more clothing and more food if each specializes: Chuck in the manufacture of clothing, Debbie in the farming and cultivation of foodstuffs. Through voluntary exchange and bargaining, they find a jointly satisfactory balance of production and consumption. Chuck makes enough clothing to cover himself adequately, to keep some clothing on hand for emergencies, and to trade the balance to Debbie for food. Debbie does likewise with food. Both balance their production and consumption decisions against other considerations (e.g., the desire for leisure).

Chuck and Debbie’s respective decisions and actions are microeconomic; the sum of their decisions, macroeconomic. The microeconomic picture might look like this:

Chuck produces 10 units of clothing a week, 5 of which he trades to Debbie for 5 units of food a week, 4 of which he uses each week, and 1 of which he saves for an emergency.

Debbie, like Chuck, uses 4 units of clothing each week and saves 1 for an emergency.

Debbie produces 10 units of food a week, 5 of which she trades to Chuck for 5 units of clothing a week, 4 of which she consumes each week, and 1 of which she saves for an emergency.

Chuck, like Debbie, consumes 4 units of food each week and saves 1 for an emergency.

Given the microeconomic picture, it is trivial to depict the macroeconomic situation:

Gross weekly output = 10 units of clothing and 10 units of food

Weekly consumption = 8 units of clothing and 8 units of food

Weekly saving = 2 units of clothing and 2 units of food

You will note that the macroeconomic metrics add no useful information; they merely summarize the salient facts of Chuck and Debbie’s economic lives — though not the essential facts of their lives, which include (but are far from limited to) the degree of satisfaction that Chuck and Debbie derive from their consumption of food and clothing.

The customary way of getting around the aggregation problem is to sum the dollar values of microeconomic activity. But this simply masks the aggregation problem by assuming that it’s possible to add the marginal valuations (i.e., prices) of disparate products and services being bought and sold at disparate moments in time by disparate individuals and firms for disparate purposes. One might as well add two bananas to two apples and call the result four bapples.

The essential problem, as discussed in the next section, is that Chuck and Debbie derive different kinds and amounts of enjoyment from clothing and food, and that those different kinds and amounts of enjoyment cannot be summed in any meaningful way. If meaningful aggregation is impossible for Chuck and Debbie, how can it be possible for an economy that consists of millions of economic actors and an untold variety of goods and services? And how is it possible when technological change yields results like this?

Buffalo (NY) journalist and historian Steve Cichon has an article on the Trending Buffalo website (“Everything from 1991 Radio Shack ad I now do with my phone“) featuring a full-page Radio Shack ad from the Buffalo News on February 16, 1991 (see graphic above). Of the 15 electronics products featured in the Radio Shack ad, 13 of them can now be replaced with a $200 iPhone according to Steve’s analysis. The 13 Radio Shack items in the ad (all-weather personal stereo, AM/FM clock radio, headphones, calculator, computer, camcorder, cell phone, regular phone, CD player, CB radio, scanner, phone answering machine, and cassette recorder) would have cost a total of $3,055 in 1991, which is equivalent in today’s dollars to $5,225. Versus only $200 for an iPhone 5S.

In hours worked at the average wage, the 13 electronics items in 1991 would have had a “time cost” of 290.4 hours of work at the average hourly wage then of $10.52 (or 7.25 weeks or 36.3 days). Today, the $200 iPhone would have a “time cost” of fewer than 10 hours (9.82) of work at the average hourly wage today of $20.35, and just one day of work, plus a few extra hours.

The piece is six years old and out of date in its details. But it’s nevertheless representative of almost all goods that have been produced since the founding of the United States, and almost all means of production.

GDP, in other words, is nothing more than what it seems to be on the surface: an estimate of the dollar value of economic output. Even at that, it’s not susceptible of quantitative modeling. (See “Macroeconomic Modeling: A Case Study” at this post.) Nor can real economic output — as opposed to government spending — be pushed upward by government spending, as I explain at length here.

GDP is certainly not a measure of “social welfare”, as most economists will admit — but for the wrong reason. They point to the “intangibles” that aren’t counted in GDP, one of which is the actual amount of happiness that each person derives not only from things counted in GDP but from the many things that aren’t counted in it (e.g., marital happiness, the love of children for parents, the malaise that prevails in times of prolonged international strife). In admitting that much, economists hint at — but fail to mention — the deeper reason that GDP doesn’t measure social welfare is that there is no such thing.

I will explain the non-existence of social welfare after tackling its running-mate: social justice.

Social Justice

This discussion covers a lot of ground. Little of it fits within my strict definition of economics — the voluntary production and exchange of goods — but it bears directly on two important byproducts of economic activity: income and wealth.

Social welfare (discussed below) is the implicit desideratum of seekers of “social justice”. Thomas Sowell has a better term for it: cosmic justice.

The seekers of cosmic justice are not content to allow individuals to accomplish what they can, given their genes, their acquired traits, their parents’ wealth (or lack of it), where they were born, when they live, and so on. Rather, those who seek cosmic justice cling to the Rawlsian notion that no one “deserves” better “luck” than anyone else. (For a critique of John Rawls’s theory of economic and social justice, see this.)

But “deserves” and “luck” (like “greed”) are emotive, value-laden terms. Those terms suggest (as they are meant to) that there is some kind of great lottery in the sky, in which each of us participates, and that some of us hold winning tickets — which equally “deserving” others might just have well held, were it not for “luck.”

This is not what happens, of course. Humankind simply is varied in its genetic composition, personality traits, accumulated wealth, geographic distribution, etc. Consider a person who is born in the United States of brilliant, wealthy parents — and who inherits their brilliance, cultivates his inheritance (genetic and financial), and goes on to live a life of accomplishment and wealth, while doing no harm and great good to others. Such a person is neither more “lucky” nor less “deserving” than anyone else. He merely is who he is, and he does what he does. There is no question of desert or luck. (I address luck in this post and those linked to therein.)

Such reasoning does not dissuade those who seek cosmic justice. Many of the seekers are found among the “80 percent”, and it is their chosen lot to envy the other “20 percent”, that is, those persons whose brains, talent, money, and/or drive yield them a disproportionate — but not undeserved — degree of fortune, fame, and power. The influential seekers of cosmic justice are to be found among the “20 percent”. It is they who use their wealth, fame, and position to enforce cosmic justice in the service (variously) of misplaced guilt, economic ignorance, and power-lust. (Altruism — another emotive, value-laden term — does not come into play, for reasons discussed here and here.)

Some combination of misplaced guilt, economic ignorance, and power-lust motivates our law-makers. (Their self-proclaimed “compassion” is bought on the cheap, with taxpayers’ money.) They accrue power by pandering to seekers of cosmic justice and parasites who seek to gain from efforts to attain it. Thus politicians have saddled us with progressive taxation, affirmative action, and a plethora of other disincentivizing, relationship-shattering, market-distorting policies. It is supremely ironic that those policies have made most of persons (including many parasites) far worse off than they would be if government were to get out of the cosmic-justice business.

As Anthony de Jasay writes in “Risk, Value, and Externality”,

Stripped of rhetoric, an act of social justice (a) deliberately increases the relative share … of the worse-off in total income, and (b) in achieving (a) it redresses part or all of an injustice…. This implies that some people being worse off than others is an injustice and that it must be redressed. However, redress can only be effected at the expense of the better-off; but it is not evident that they have committed the injustice in the first place. Consequently, nor is it clear why the better-off should be under an obligation to redress it….

There is the view, acknowledged by de Jasay, that the better-off are better off merely because of luck. But, as he points out,

Nature never stops throwing good luck at some and bad luck at others, no sooner are [social] injustices redressed than some people are again better off than others. An economy of voluntary exchanges is inherently inegalitarian…. Striving for social justice, then, turns out to be a ceaseless combat against luck, a striving for the unattainable, sterilized economy that has built-in mechanisms … for offsetting the misdeeds of Nature.

In fact, “social justice” not only penalizes but also minimizes and ostracizes the kinds of persons who have been mainly responsible for economic (and artistic and social) progress in the Western world, namely, straight, white, heterosexual males of European origin and descent — including, notably, Ashkenzi Jews. Many members of the aforementioned group are themselves advocates of “social justice”, which is just another indication that they are among the spoiled children of capitalism who have lost sight of what got them to where they are — and it wasn’t kow-towing to lunacies like “social justice”.

SOCIAL WELFARE

Some proponents of cosmic justice appeal to the notion of social welfare (even some economists, who should know better) . Their appeal rests on two mistaken beliefs:

There is such a thing as social welfare.

Transferring income and wealth from the richer to the poorer enhances social welfare because redistribution helps the poorer more than it hurts the richer.

Having disposed elsewhere of the second belief, I now address the first one. I begin with a question posed by Arnold Kling:

Does the usefulness of the concept of a social welfare function stand or fall on its mathematical properties?

My answer: One can write equations until kingdom come, but no equation can make one person’s happiness cancel another person’s unhappiness.

The notion of a social welfare function arises from John Stuart Mill’s utilitarianism, which is best captured in the phrase “the greatest good for the greatest number” or, more precisely “the greatest amount of happiness altogether.”

From this facile philosophy (not Mill’s only one) grew the ludicrous idea that it might be possible to quantify each person’s happiness and, then, to arrive at an aggregate measure of total happiness for everyone (or at least everyone in England). Utilitarianism, as a philosophy, has gone the way of Communism: It is discredited but many people still cling to it, under other names.

Today’s usual name for utilitarianism is cost-benefit analysis. Governments often subject proposed projects and regulations (e.g., new highway construction, automobile safety requirements) to cost-benefit analysis. The theory of cost-benefit analysis is simple: If the expected benefits from a government project or regulation are greater than its expected costs, the project or regulation is economically justified.

Here is the problem with cost-benefit analysis — which is the problem with utilitarianism: One person’s benefit cannot be compared with another person’s cost. Suppose, for example, the City of Los Angeles were to conduct a cost-benefit analysis that “proved” the wisdom of constructing yet another freeway through the city in order to reduce the commuting time of workers who drive into the city from the suburbs. In order to construct the freeway, the city must exercise its power of eminent domain and take residential and commercial property, paying “just compensation”, of course. But “just compensation” for a forced taking cannot be “just” — not when property is being wrenched from often-unwilling “sellers” at prices they would not accept voluntarily. Not when those “sellers” (or their lessees) must face the additional financial and psychic costs of relocating their homes and businesses, of losing (in some cases) decades-old connections with friends, neighbors, customers, and suppliers.

How can a supposedly rational economist, politician, pundit, or “liberal” imagine that the benefits accruing to some persons (commuters, welfare recipients, etc.) somehow cancel the losses of other persons (taxpayers, property owners, etc.)? To take a homely example, consider A who derives pleasure from causing great pain to B (a non-masochist) by punching him in the nose. A’s pleasure cannot cancel B’s pain.

Yet, that is how cost-benefit analysis (utilitarianism) works, if not explcitly then implicitly. It is the spirit of utilitarianism (not to mention power-lust, arrogance, and ignorance) which enables politicians and bureaucrats throughout the land to impose their will upon us — to our lasting detriment.

Conclusion: Politics Trumps Economics

In sum, and despite all of the feel-good rhetoric to the contrary, the United States differs only in degree (but not in kind) from modern communism and socialism. It’s a “social democracy”, in which the demos (mob) dictates the economic (and social) order through its various political patrons. But the political patrons (including the affluent elites who play footsie with them) are in charge, make no mistake about it, and they freely demonize those segments of the demos which turn against them. They are able to do so because the franchise has been so extended (and will continue to be extended by untrammeled immigration) that they won’t run out of votes to advance their essential agenda, which is control of the social and economic affairs of all Americans.

Despite the advent of Donald Trump, and the lesson that it should have taught high-ranking politicos, most of them (regardless of party affiliation) remain wedded to the patronage system because it’s their path to power and riches.

What this all means, as I once explained to a very smart economist, is that politics trumps economics. Ignoring politics (and being ignorant of it) while trying to understand and explain economics is like ignoring the heart while trying to explain the circulatory system without which there is no life.

Further Reflections on the Keynesian Multiplier

In “Keynesian Multiplier: Fiction vs. Fact“, I piggyback on the insights of Murray Rothbard and Steven Landsburg to show that the fiscal multiplier is fool’s gold. In addition to showing this mathematically and empirically, I address the mechanics of the multiplier:

How is it supposed to work? The initial stimulus (∆G) [an exogenous — unfunded — increase in government spending] creates income (don’t ask how), a fraction of which (b) [the marginal propensity to consume] goes to C [consumption spending]. That spending creates new income, a fraction of which goes to C. And so on. Thus the first round = ∆G, the second round = b(∆G), the third round = b(b)(∆G) , and so on. The sum of the “rounds” asymptotically approaches k(∆G) [where k is the multiplier]….

Note well, however, that the resulting ∆Y [change in real, inflation-adjusted GDP] isn’t properly an increase in Y, which is an annual rate of output; rather, it’s the cumulative increase in total output over an indefinite number and duration of ever-smaller “rounds” of consumption spending.

The cumulative effect of a sustained increase in government spending might, after several years, yield a new Y — call it Y’ = Y + ∆Y. But it would do so only if ∆G persisted for several years. To put it another way, ∆Y persists only for as long as the effects of ∆G persist. The multiplier effect disappears after the “rounds” of spending that follow ∆G have played out.

The multiplier effect is therefore (at most) temporary; it vanishes after the withdrawal of the “stimulus” (∆G). The idea is that ∆Y should be temporary because a downturn will be followed by a recovery — weak or strong, later or sooner.

Further,

the Keynesian investment/government-spending multiplier simply tells us that if ∆Y = $5 trillion, and if b = 0.8, then it is a matter of mathematical necessity that ∆C = $4 trillion and ∆I + ∆G = $1 trillion. In other words, a rise in I + G of $1 trillion doesn’t cause a rise in Y of $5 trillion; rather, Y must rise by $5 trillion for C to rise by $4 trillion and I + G to rise by $1 trillion. If there’s a causal relationship between ∆G and ∆Y, the multiplier doesn’t portray it.

And the clincher:

Taking b = 0.8, as before, the resulting value of k_c is 1.25. Suppose the initial round of spending is generated by C instead of G. (I won’t bother with a story to explain it; you can easily imagine one involving underemployed factories and unemployed persons.) If ∆C = $1 trillion, shouldn’t cumulative ∆Y = $5 trillion? After all, there’s no essential difference between spending $1 trillion on a government project and $1 trillion on factory output, as long as both bursts of spending result in the employment of underemployed and unemployed resources (among other things).

But with k_c = 1.25, the initial $1 trillion burst of spending (in theory) results in additional output of only $1.25 trillion. Where’s the other $3.75 trillion? Nowhere. The $5 trillion is phony. What about the $1.25 trillion? It’s phony, too. The “consumption multiplier” of 1.25 is simply the inverse of b, where b = 0.8. In other words, Y must rise by $1.25 trillion if C is to rise by $1 trillion. More phony math.

The essential falsity of the multiplier can be found by consulting the equation of exchange:

In monetary economics, the equation of exchange is the relation:

MV = PQ

where, for a given period,

M is the total nominal amount of money supply in circulation on average in an economy.

V is the velocity of money, that is the average frequency with which a unit of money is spent.

P is the price level.

Q is an index of real expenditures (on newly produced goods and services).

Thus PQ is the level of nominal expenditures. This equation is a rearrangement of the definition of velocity: V = PQ/M. As such, without the introduction of any assumptions, it is a tautology. The quantity theory of money adds assumptions about the money supply, the price level, and the effect of interest rates on velocity to create a theory about the causes of inflation and the effects of monetary policy.

In earlier analysis before the wide availability of the national income and product accounts, the equation of exchange was more frequently expressed in transactions form:

MV_T = PT

where,

V_Tis the transactions velocity of money, that is the average frequency across all transactions with which a unit of money is spent (including not just expenditures on newly produced goods and services, but also purchases of used goods, financial transactions involving money, etc.).

T is an index of the real value of aggregate transactions.

(Note the careful — but easily overlooked — qualification that quantities are for “a given period”, as I point out in the first block-quoted passage. One cannot simply add imaginary increases in real output over an unspecified span of time to an annual rate of output and obtain a new, annual rate of output.)

If the values for M, V, P, and Q are annual rates or averages, then MV = PQ = Y, the last of which I am using here to represent real GDP.

If the central government “prints” money and spends it on things (i.e., engages in deficit spending financed by the Federal Reserve’s open-market operations), then ∆G (the addition to the rate of G) = ∆M (the average annual increase in the money supply). What happens as a result of ∆M depends on the actual relationships between M and V, P, and Q. They are complex relationships, and they vary constantly with the state of economic activity and consumers’ and producers’ expectations. Even a die-hard Keynesian would admit as much.

If new economic activity (Y) is relatively insensitive to ∆G, as it is for the many reasons detailed here, it is equally insensitive to ∆M. For one thing — one very important thing — ∆M may be absorbed almost entirely by an increase in V_Twithout a concomitant increase in Q. That is to say, ∆G necessarily implies (in the short run) an increase in transactions velocity (V_T) and it is most likely to be spent on resources that are already employed (i.e, either on things that were already being produced or by displacing private purchases of things that were already being produced).

The equality MV = PQ long predates Keynes’s General Theory, in which he introduces the multiplier, and so it was well known to Keynes. As it happens, the equality is at the heart of his multiplier:

The state of the economy, according to Keynes, is determined by four parameters: the money supply, the demand functions for consumption (or equivalently for saving) and for liquidity, and the schedule of the marginal efficiency of capital determined by ‘the existing quantity of equipment’ and ‘the state of long-term expectation’ (p 246).

Adjusting the money supply is the domain of monetary policy. The effect of a change in the quantity of money is considered at p. 298. The change is effected in the first place in money units. According to Keynes’s account on p. 295, wages will not change if there is any unemployment, with the result that the money supply will change to the same extent in wage units.

We can then analyse its effect from the diagram [reproduced below], in which we see that an increase in M̂ shifts r̂ to the left, pushing Î upwards and leading to an increase in total income (and employment) whose size depends on the gradients of all 3 demand functions. If we look at the change in income as a function of the upwards shift of the schedule of the marginal efficiency of capital (blue curve), we see that as the level of investment is increased by one unit, the income must adjust so that the level of saving (red curve) is one unit greater, and hence the increase in income must be 1/S'(Y) units, i.e. k units. This is the explanation of Keynes’s multiplier.

Here’s the diagram:

If that is the explanation of Keynes’s multiplier, it is even more backward than the usual explanation that I shredded earlier. All it says is that if the real money supply (M̂) is increased (i.e., not translated into higher prices) due to an exogenous increase in government spending, the real interest rate (r̂) decreases. And if the decrease in the real interest rate leads to an increase in investment, Y must rise by enough to preserve the theoretical relationship between Y and saving (S) and investment (I).

In this case, Keynes depicts the multiplier as the effect of an increase in I resulting from an increase in M, which is really an increase in G (∆G) under the condition of less than full employment (whatever that is). The increase in I is made possible by the decrease in the real rate of interest. That’s odd, because the popular view of the multiplier is that it is the rise in real GDP that is directly attributable to a rise in government spending. Will the real multiplier please stand up?

Regardless, the relationship between the increase in I and the increase in Y is no less tautologous than it is in the usual explanation of the multiplier.Simply put, the increase in I is the increase that must result if Y increases, given an ex-post relationship between I and Y. There is no causality, except in the imagination of the proponent of increased government spending.

We are back where we started, with a mythical multiplier that explains nothing.

Intuition vs. Rationality

To quote myself:

[I]ntuition [is] a manifestation of intelligence, not a cause of it. To put it another way, intuition is not an emotion; it is the opposite of emotion.

Intuition is reasoning at high speed. For example, a skilled athlete knows where and when to make a move (e.g., whether and where to swing at a pitched ball) because he subconsciously makes the necessary calculations, which he could not make consciously in the split-second that is available to him once the pitcher releases the ball.

Intuition is an aspect of reasoning (rationality) that is missing from “reason” — the cornerstone of the Enlightenment. The Enlightenment’s proponents and defenders are always going on about the power of logic applied to facts, and how that power brought mankind (or mankind in the West, at least) out of the benighted Middle Ages (via the Renaissance) and into the light of Modernity.

But “reason” of the kind associated with the Enlightenment is of the plodding variety, whereby “truth” is revealed at the conclusion of deliberate, conscious processes (e.g., the scientific method). But those processes, as I point out in the preceding paragraph, are susceptible of error because they rest on errors and assumptions that are hidden from view — often wittingly, as in the case of “climate change“.

Science, for all of its value to mankind, requires abstraction from reality. That is to say, it is reductionist. A good example is the arbitrary division of continuous social and scientific processes into discrete eras (the Middle Ages, the Renaissance, the Enlightenment, etc.). This ought to be a warning that mere abstractions are often, and mistakenly, taken as “facts”.

Reductionism makes it possible to “prove” almost anything by hiding errors and assumptions (wittingly or not) behind labels. Thus: x + y = z only when x and y are strictly defined and commensurate. Otherwise, x and y cannot be summed, or their summation can result in many correct values other than z. Further, as in the notable case of “climate change”, it is easy to assume (from bias or error) that z is determined only by x and y, when there are good reasons to believe that it is also determined by other factors: known knowns, known unknowns, and unknown unknowns.

Such things happen because human beings are ineluctably emotional and biased creatures, and usually unaware of their emotions and biases. The Enlightenment’s proponents and defenders are no more immune from emotion and bias than the “lesser” beings whom they presume to lecture about rationality.

The plodding search for “answers” is, furthermore, inherently circumscribed because it dismisses or minimizes the vital role played by unconscious deliberation — to coin a phrase. How many times have you found the answer to a question, a problem, or a puzzle by putting aside your deliberate, conscious search for the answer, only to have it come to you in a “Eureka!” moment sometime later (perhaps after a nap or good night’s sleep). That’s your brain at work in ways that aren’t well understood.

This process (to put too fine a word on it) is known as combinatorial play. Its importance has been acknowledged by many creative persons. Combinatorial play can be thought of as slow-motion intuition, where the brain takes some time to assemble (unconsciously) existing knowledge into an answer to a question, a problem, or a puzzle.

There is also fast-motion intuition, an example of which I invoked in the quotation at the top of this post: the ability of a batter to calculate in a split-second where a pitch will be when it reaches him. Other examples abound, including such vital ones as the ability of drivers to maneuver lethal objects in infinitely varied and often treacherous conditions. Much is made of the number of fatal highway accidents; too little is made of their relative infrequency given the billions of daily opportunities for their occurrence. Imagine the carnage if drivers relied on plodding “reason” instead of fast-motion intuition.

The plodding version of “reason” that has been celebrated since the Enlightenment is therefore just one leg of a triad: thinking quickly and unconsciously, thinking somewhat less quickly and unconsciously, and thinking slowly and consciously.

Wasn’t it ever thus? Of course it was. Which means that the Enlightenment and its sequel unto the present day have merely fetishized one mode of dealing with the world and its myriad uncertainties. I would have said arriving at the truth, but it is well known (except by ignorant science-idolaters) that scientific “knowledge” is provisional and ever-changing. (Just think of the many things that were supposed to be bad for you but are now supposed to be good for you, and conversely.)

I am not a science-denier by any means. But scientific “knowledge” must be taken with copious quantities of salt because it is usually inadequate in the face of messy reality. A theoretical bridge, for example, may hold up under theoretical conditions, but it is likely to collapse when built in the real world, where there is much uncertainty about present and future conditions (e.g., the integrity of materials, adherence to best construction practices, soil conditions, the cumulative effects of traffic). An over-built bridge — the best kind — is one that allows wide margins of error for such uncertainties. The same is true of planes, trains, automobiles, buildings, and much else that our lives depend on. All such things fail less frequently than in the past not only because of the advance of knowledge but also because greater material affluence enables the use of designs and materials that afford wider margins of error.

In any event, too little credit is given to the other legs of reason’s triad: fast-motion and slow-motion intuition. Any good athlete, musician, or warrior will attest the the value former. I leave it to Albert Einstein to attest to the value of the latter,

combinatory [sic] play seems to be the essential feature in productive thought — before there is any connection with logical construction in words or other kinds of signs which can be communicated to others….

[F]ull consciousness is a limit case which can never be fully accomplished. This seems to me connected with the fact called the narrowness of consciousness.

Related page and category:

Modeling and Science
Science and Understanding

The Impeachment Effect: A Final(?) Report

The following graph depicts Trump’s approval ratings, according to Rasmussen Reports, since the onset of the failed effort to remove Trump from office by impeachment and trial:

Rasmussen’s polling method covers all respondents (a sample of likely voters) over a span of three days. The gaps represent weekends, when Rasmussen doesn’t publish the results of the presidential approval poll.

The Washington Post broke the story on September 20 about Trump’s July 25 phone conversation with the president of Ukraine. Thus the results for September 16 through September 20 didn’t reflect the effects of the story on the views of Rasmussen’s respondents. Trump’s approval ratings continued to rise after September 20, and peaked on September 24, the day on which the House officially initiated an impeachment inquiry. Trump’s approval ratings bottomed on October 25 but since then — despite much sound and fury, culminating in articles of impeachment and acquittal by the Senate — they have returned to where they were on September 16, given the range of error advertised by Rasmussen (±2.5 percentage points with a 95-percent level of confidence.).

If the impeachment effort had any effect, it was to strengthen allegiance to Trump among the kind of voter who put him in office in the first place — the person who sees the Democrat party as the enemy of real people. It is far too soon to say that Trump’s re-election is assured. But it isn’t too soon to say that the impeachment effort made it more likely.

Another Word or Two about Mindless Transnationalism

Eons ago, or so it seem, I posted “Transnationalism and National Defense“, in which I said this:

Transnationalists equate sovereignty with jingoism, protectionism, militarism, and other deplorable “isms.” Transnationalists ignore or deny the hard reality that Americans and their legitimate overseas interests are threatened by nationalistic rivals and anti-Western fanatics.

In the real world of powerful rivals and determined, resourceful fanatics, the benefits afforded Americans by our (somewhat eroded) constitutional contract — most notably the enjoyment of civil liberties, the blessings of free markets and free trade, and the protections of a common defense — are inseparable from and dependent upon the sovereign power of the United States. To cede that sovereignty for the sake of transnationalism is to risk the complete loss of the benefits promised by the Constitution.

I expressly slammed leftists and extreme libertarians. But I didn’t spare the smug “liberal order“; for example:

This benighted attitude [transnationalism] is found in this post by Don Boudreaux, an otherwise sensible libertarian:

One of the great tenets of liberalism — the true sort of liberalism, not the dirigiste ignorance that today, in English-speaking countries, flatters itself unjustifiably with that term — is that no human being is less worthy just because he or she is outside of a particular group. Any randomly chosen stranger from Cairo or Cancun has as much claim on my sympathies and my respect and my regard as does any randomly chosen person from Charlottesville or Chicago.

The problem with such sentiments — correct as they may be — is the implication that we have nothing more to fear from people of foreign lands than we have to fear from our own friends and neighbors. Yet, as Boudreaux himself acknowledges,

[t]he liberal is fully aware that such sentiments [about “us” being different from “them”] are rooted in humans’ evolved psychology, and so are not easily cast off. But the liberal does his or her best to rise above those atavistic sentiments.

Yes, the liberal does strive to rise above such sentiments, but not everyone else [i.e., enemies and parasites] makes the same effort, as Boudreaux admits. Therein lies the problem.

I remembered the post after I published “Crocodile Tears (on the Left) for Soleimani“, wherein I remarked that Donald Trump

manifestly loves America and, unlike his predecessor, [and] is firmly committed to its defense against legions of enemies (some of whom masquerade as Americans and America’s allies).

France is among those so-called allies. And France’s president, le petit garçon Emmanuel Macron, gained 15 minutes of notoriety by publicly chiding Trump for his nationalism. Macron is representative of those transnationalists who are able to spew their idiocy because they are rich or powerful or otherwise comfortably insulated from the consequences of transnationalism. One of those consequences is la dictature des clercs — dictatorship by bureuacrats of distant and unaccountable uber-governments.

Crocodile Tears (on the Left) for Soleimani

Many leftists, I have noticed, are up in arms about the killing of General Soleimani (or Suleimani), about which I commented a while back (here and here). See, for example, “Suleimani’s Extrajudicial Killing Legitimizes Assassination as a Foreign Policy Tool” in ~~The Tool of Communism and Socialism~~ The Nation. The thrust of the piece is to urge the U.S. to subject itself to asymmetrical warfare; that is, to obey international law (a chimera wrapped in a fantasy inside a hallucination) while our enemies blithely violate it.

Law works only when all parties abide by it, or can be made to abide by it. Leftists should be fully aware of that truth, inasmuch as they are responsible for some major breaches of the rule of law in this country. Examples include the practices of leftist-controlled States and municipalities that actively encourage illegal immigration and turn criminals loose to kill rather than turn them over to ICE. The recent impeachment fiasco, which turned the Constitution’s impeachment provisions upside down, is a meta-example.

Consistency, which is in short supply in the left, would cause leftists to support the killing of Soleimani, a known terrorist thug. After all, leftists (among others) drool over a recurring (and admittedly attractive) fantasy: the killing of Hitler before he comes to power, or begins to persecute and kill Jews, or starts World War II. Consistency (and a willingness to face facts about the character and deeds of various icons of the left) would apply the same fate not only to Soleimani but also to Lenin, Stalin, Mao, Pol Pot, and on and on.

But only Hitler seems to be fair game for leftists.

You know why, don’t you? For one thing, leftists mistakenly label Hitler a right-winger. For another thing, most leftists are of a type that W.S. Gilbert captures neatly in “I’ve Got a Little List” (The Mikado, 1885),

the idiot who praises, with enthusiastic tone
All centuries but this, and every country but his own.

Who are you going to believe? America-hating leftists or a man (Donald Trump) who manifestly loves America and, unlike his predecessor, is firmly committed to its defense against legions of enemies (some of whom masquerade as Americans and America’s allies)?

Related pages and posts:

Leftism
Leftism: A Bibliography

Asymmetrical (Ideological) Warfare
An Addendum to (Asymmetrical) Ideological Warfare
Preemptive War Revisited (and the several posts about preemptive war that are linked to at the end)

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Macroeconomics

Social Justice

Conclusion: Politics Trumps Economics

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