Quote of the Day - Matt Yglesias

"The concept of "redistribution" falsely implies that the existence of property is prior to the existence of the state."

-Matthew Yglesias


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Conscience Warrior Store

We are pleased to announce this week the launch of the Conscience Warrior Store. The Store is powered by Amazon, and will include books, films, and other products that may be of interest to readers of Conscience Warrior. 

All transactions made in the Store will be handled by Amazon. In the interest of full disclosure, CW will receive a small fee for each transaction. That said, all products listed in the Store are actually endorsed by CW, with the exception of those listed in the 'Similar Items' sidebar, which are generated by Amazon's magic algorithms.

If you have any comments or suggestions regarding the Store, please email here.

Conscience Warrior Store

Links of the Week - 5 April 2013

Is "Intellectual Property" a Misnomer?
Tim Taylor

The choice between debts and austerity
Larry Summers, via Jonathan B. Wight

The problem with Twitter
Ezra Klein

The Rewards of Being Very Serious
Paul Krugman

The Price Is Wrong
Paul Krugman

Jack-booted Insurance-bringing Thugs
Paul Krugman

Soup Kitchens Caused the Great Depression
Jonathan Wight

Stockman, Morality Plays, and Wishful Thinking

An excellent video here on the David Stockman kerfuffle. The most important takeaway for me was the idea, previously articulated elsewhere, that macroeconomics is not a morality play. That is to say, if the answer to a macro problem is normatively pleasing, that fact is a coincidence.

Many of us have normative views about 'what ought to be.' These views may differ from person to person; that's ok. Views on 'how the world works' are of a different genus. These things are testable. Disagreements of this nature are resolvable through empiricism, if the data exist.

A related idea: if your theory of how the world works is untestable, it's not really a theory; it's probably just a wish.



**UPDATE: Neil Irwin disassembles Stockman's argument, looks around inside, and doesn't find much.

Quote of the Day - Martin Luther King, Jr: I've Been to the Mountaintop

3 April 1968
I’ve Been to the Mountaintop
Memphis, TN

audio

Thank you very kindly, my friends. As I listened to Ralph Abernathy and his eloquent and generous introduction and then thought about myself, I wondered who he was talking about. [Laughter] It's always good to have your closest friend and associate to say something good about you, and Ralph Abernathy is the best friend that I have in the world.

I'm delighted to see each of you here tonight in spite of a storm warning. You reveal that you are determined [Audience:] (Right) to go on anyhow. (Yeah, All right) Something is happening in Memphis, something is happening in our world. And you know, if I were standing at the beginning of time with the possibility of taking a kind of general and panoramic view of the whole of human history up to now, and the Almighty said to me, "Martin Luther King, which age would you like to live in?" I would take my mental flight by Egypt (Yeah), and I would watch God's children in their magnificent trek from the dark dungeons of Egypt through, or rather, across the Red Sea, through the wilderness, on toward the Promised Land. And in spite of its magnificence, I wouldn't stop there. (All right)

Quote of the Day - Martin Luther King, Jr: Beyond Vietnam

4 April 1967
Beyond Vietnam
New York, NY

audio

Mr. Chairman, ladies and gentlemen, I need not pause to say how very delighted I am to be here tonight, and how very delighted I am to see you expressing your concern about the issues that will be discussed tonight by turning out in such large numbers. I also want to say that I consider it a great honor to share this program with Dr. Bennett, Dr. Commager, and Rabbi Heschel, some of the most distinguished leaders and personalities of our nation. And of course it’s always good to come back to Riverside Church. Over the last eight years, I have had the privilege of preaching here almost every year in that period, and it’s always a rich and rewarding experience to come to this great church and this great pulpit.

Links of the Week - 29 March 2013

The Economics of Evil Google: Paul Krugman


Attacking Success: Paul Krugman


Markets in almost nothing: Noah Smith


Three Cheers for the Nanny State: Sarah Conly


The Unnatural Rate Hypothesis: Paul Krugman


Crying Wolf, Bear, Lion -- Whatever It Takes: Mark Thoma

Quote of the Day - Winston Churchill on the Moochers

"Here let me remark that the best way to insure against unemployment is to have no unemployment.

"There is another point: unemployables, rich or poor, will have to be toned up. We cannot afford to have idle people. Idlers at the top make idlers at the bottom. No one must stand aside in his working prime to pursue a life of selfish pleasure.

"There are wasters in all classes. Happily they are only a small minority in every class, but anyhow we cannot have a band of drones in our midst, whether they come from the ancient aristocracy or the modern plutocracy, or the ordinary type of pub crawler."

-Winston Churchill


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Strong-Dollar Debate

Frederic Mishkin, John Taylor, Steve Forbes, and James Grant debate the motion "America doesn't need a strong-dollar policy."

The Federal Reserve has two basic methods by which to conduct monetary policy. One is to hold the growth level of the money supply (relatively) fixed, and allow interest rates to adjust to macro conditions. The other is to target a range of inflation and interest rates, and allow the money supply to fluctuate with macro conditions.

I describe this contrast because it is analogous to a very good point that came out of the above debate. If we fix the value of money to some sort of benchmark*, the macroeconomy will then be allowed its full natural range of fluctuations and gyrations, for better or for worse. Better, perhaps, to target various macro indicators**, and make (less harmful) monetary adjustments to maintain target ranges. This is, of course, both what the Fed has done since the mid 1980s and what conservative economist John Taylor has prescribed for twenty years.


*Gold, wheat, oil, gummy bears, and so forth.

**Such as changes in CPI and PPI, various short and long interest rates, change in GDP, unemployment levels, etc.

Links for the week - 22 March 2013

Increasing the Minimum Wage does not lower Employment, Continued

Singapore’s Lessons for an Unequal America

Is capitalism moral?

What Ben Bernanke would say...

"If it were any less diverse it would look like the Senate."

Google and the Lucas Critique

The Economics of Evil Google

Jersey-number assignment equilibrium: When one buyer pays another, and the seller gets nothing

Background

In the National Football League, when a high-profile player is signed to a contract by a new team, he oftentimes wants to keep using the jersey number he wore with his previous team. If the player wearing that number on the new team is suitably low-profile, a deal is sometimes struck, in which the new player buys the right to that number from the existing player for an amount that is relatively insignificant to the high-profile player, but may represent a nontrivial 'bonus' to the marginal player. So long as everyone holds up his end of the bargain, this usually goes off without a hitch.


Problem

But what to do if a team signs two players who each desire the same number? Since the team is prohibited from selling the number to the highest bidder, how can we resolve this dilemma?


Solution

The utility-maximizing approach would be to have each player submit a blind bid for the number, and the number is awarded to the player with the higher bid, who then pays the other player the mean of the two bids.

The player who gets the number gets it for less than he was willing to pay, and the player who doesn't get the number gets more than he was willing to pay. Also, the players are disincentivized to either over- or under-bid, as over-bidders are wasting money and under-bidders are leaving money on the table.


Examples

Smith and Jones are both signed by the same team and both very much want to wear number 19, which is currently unassigned. Smith submits a blind bid for $10,000 and Jones submits a blind bid for $12,000. These amounts are theoretically the value each places on wearing number 19. In this example, Jones gets number 19 and pays Smith $11,000.  Smith, who was willing to pay $10,000 for the right to wear 19 gets $11,000 instead. Jones, who was willing to pay $12,000, gets the number for $11,000. Both players come out ahead.

Let's relax the assumption that each player bids the value he places on wearing 19. If Smith underbids by offering only $7,000, then he gets only $9,500, which is less than the true value he placed on number 19. If, on the other hand, Jones overbids by offering $15,000, then he has to pay $12,500, which is greater than the true value he placed on number 19.


Conclusion

The example shows that, while it is possible that players could strategically over- or under-bid, doing so would run them the risk of dissatisfaction with the outcome. The only way that both players fail to come out ahead is if one or both fail to bid their true value, unless, of course, they both bid the same amount, a situation for which I don't yet have a satisfactory equilibrium, and is an avenue for further research.



UPDATE: Professor Walt Wessels suggests that the best solution uses the same bidding technique, but has the higher bidder get the number and pay the lower bidder the amount of the lower bid.

Quote of the Day: 19th Century Sewers

"Suffering and evil are nature’s admonitions; they cannot be got rid of; and the impatient efforts of benevolence to banish them from the world by legislation, before benevolence has learned their object and their end, have always been more productive of evil than good."

-The Economist, regarding proposals for a sewer in London, 1848


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