Durham's Bull

Hubris Hits the Homeland

"In essence, households, banks and the government have already spent some of their future earnings. The current crisis marks the point at which the bills begin to get paid. Whereas Britain lumbered under the weight of imperial overreach, as the historian Niall Ferguson has written, the United States will be shackled primarily by its financial overreach."

David Leonhardt has a nice piece in today's Times on U.S. over-extension.  It's time to pay the piper.

The Masters of the Universe

The man in the white suit provides some social commentary on the disappearance of olde Wall Street.

The Micro-Foundations of Rent-Seeking

Spite. 

So says a new experimental economics paper from Benedikt Herrmann and Henrik Orzen at the University of Nottingham.

I wonder what the correlation is between a country's level of spite and their gini coefficient.

Here's another experimental paper on what drives our taste for political profit.

It finds, interestingly, that "punishment is largely ineffective as it induces rich representatives to capture all economic resources." 

This is the same finding predicted in George Stigler's famous "capture theory" of regulation, first expounded in his 1971 landmark work "The Theory of Economic Regulation."

For further proof on the validity of his theory, an interesting application of it was found to have recently occurred in the Department of the Interior.

Chilean Risque

An interesting piece on the sexual revolution taking place in Chile.

Progressive neo-populists who decry the tyranny of the free-market ought to acknowledge that it is the market which is responsible for many of their gains in civil-liberties. 

Conservatives who lament such advances ought to recognize their source as well: free-market economics.

Yglesias on Baby-gate

Matt Yglesias joins Ann Friedman in her distaste for McCain's efforts to insist that Bristol Palin independently decided to carry her child to term.  He argues,

"Why shouldn’t ever woman continue to enjoy the choices that Bristol Palin has? And more to the point, if women shouldn’t be allowed to choose then why does McCain’s campaign think it’s important to emphasize her agency in this process? By his own lights, McCain should be totally indifferent to whether Bristol chose this course of action or was pressured into it by her mother. McCain’s view is that he should make the choice for her and for every other pregnant woman in the country."

While he is correct in calling McCain out for his insistence upon choice, his strawman-ish summary of McCain's position isn't the only one that could be made in his defense.

It would seem more charitable to McCain to suggest that rather than wishing to make the choice for every pregnant woman in the country, that the mere fact that they are pregnant would seem to indicate that a choice has already been made.  In instances where this is untrue, exceptions ought to be made accordingly.  This does not seem relevant in this particular instance.

This juxtaposition of choice and authoritarianism, rather than choice at 9 months vs. choice after 9 months, seems a bit misleading.

Anyone who knows me well knows that I am not one who gets terribly excited about this issue, because I understand that there are reasonable cases on both sides.  That said, this sort of framing of the argument is disingenuous at best.

Free Exchange on Brooks

The Economist's economics blog didn't appreciate David Brooks' most recent column suggesting that communitarianism will ultimately prove superior to individualism. 

"He argues people can never be truly rational, and happiness really comes from relationships and being part of a community. This seems inconsistent with most economic theory, which assumes that individuals behave rationally and act in their best interest. Ultimately, such behaviour results in a better outcome for all."

Simply noting that Brooks has too much sense to take the simplifying assumptions of economics as gospel is certainly no refutation of his argument.  People are not, and will not be homo-economicus.  Methodological individualism is an analytical tool for showing us how one would act if these things were true.  While we will replicate this behavior more often than we would like to admit, I would hesitate to use this as an axiom by which I divined the secret to human behavior.

It's often said that a poor argument for your position is often more harmful to it than a stronger argument against it.  This is certainly true in this instance. 

What he ought to have said, is simply what Hayek said in Law, Legislation and Liberty.  As I don't have it in front of me at the moment, I'm forced to paraphrase.  In essence, it was Hayek's contention, not that people were perfectly rational, but that if institutions were drawn up to encourage freedom and responsibility that people would be forced to be more rational if they were to sustain their livelihood. 

Unsurprisingly, firms, designed for the purpose of profit maximization, more often approximate this reality than individuals, whose purposes are as numerous as the individuals themselves.

The Myth of the Superstar

Why has CEO compensation risen so much in recent years? 

Many would have us believe that success is simply a function of having the best talent.  Superstars create value, and if you don't have the superstars, you're screwed. 

"Sound companies should be much bigger than any individual," is the essence of a recent Financial Times article decrying the notion that superstar individuals are responsible for success.  At the margin, yes, but success is much more about processes than people. 

Successful firms are those which have the discipline to think in institutional ways about complex problems, rather than putting all of their eggs in the basket of having the most intellectual horsepower.  Aptitude matters, but discipline matters most. 

The Economics of Gay Marriage

Becker and Posner tackle the economics of gay marriage.

Balancing Work and Family

"A lot of the time, academic research serves mainly to confirm something we already knew. That is the case with a new, unwontedly controversial survey of British and American beliefs about how families are affected when the mother of the household also works outside the home. The Cambridge University report’s shock conclusion – it is tough for everyone when mothers bring up children and bring home a paycheck at the same time – is really no shock at all."

A nice article from the Financial Times on the contemporary triumph of feminism, and the unintended consequences for families.

Solzhenitsyn's Pre-Liberal Politics

Douthat and Larison defend Solzhenitsyn from NRO and the like.

Ultimately, he was an Anti-Communist and an "Anti-Capitalist" because he was first and foremost a Christian.  Capitalism for capitalism's sake is bunk.  There's no sense in caring about freedom for freedom's sake alone - the only reason we care about freedom is because we care about being free to do something in particular. 

Whining about how Solzhenitsyn didn't toe the party line on tax cuts et al should relegate one to the B list permanently.