Archive for April, 2013

About a year ago, Dr. Thomas Sowell discussed the role of the Tea Party. In this interview he also talked about his book ‘Basic Economics‘ and the economics profession:

One of the sad things about the economics profession is that you have excellent people at the top but very little of that ever gets down to the actual public. Or even to the politicians, not that they would care that much.

In the second part of the interview, he dissects the impact of stimulus spending:

I am amazed that no one looks at the track record of what actually happens if you do nothing as compared to when the government intervenes.


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The other I came across this article by Gneezy, Niederle and Rustichini, published in The Quarterly Journal of Economics in 2003. The authors use experimental data to explore male-female performance differences in competitive environments.

Performance in Competitive Environments: Gender Differences

Large gender differences prevail in competitive high-ranking positions. Suggested explanations include discrimination and differences in preferences and human capital. In this paper we present experimental evidence in support of an additional factor: women may be less effective than men in competitive environments, even if they are able to perform similarly in noncompetitive environments. In a laboratory experiment we observe, as we increase the competitiveness of the environment, a significant increase in performance for men, but not for women.

One may wonder if this kind of research has been taken into account in the German parliament during recent talks about a gender quota

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false dilemma

Aaron Ross Powell, a research fellow at the Cato Institute, dissects a false dilemma that is frequently used against libertarian policies.

Libertarianism, Bill Maher, and False Dilemmas

A person commits it when he limits the available choices in an argument too much. You can pick between A or B, he says, when in fact there’s an option C (and D, E, and F), as well.

Libertarians bear some of the blame for this. Quite often when choosing our rhetoric, we have a tendency to focus on “not A” instead of saying, “B’s not good either, so let’s instead do C.”

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A brilliant example of technological progress, found on Greg Mankiw’s blog:

When we first started in business [a few decades ago] we could do about five to ten pounds of potato chips in an hour.

Today, with all the equipment and technology we make between five and six tons of potato chips every hour.

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Anyone interested in learning more about the economics of Marxism might refer to a book published by Thomas Sowell back in 1985, called ‘Marxism: Philosophy and Economics‘.

In her review, Diana Hsieh discusses the main aspects of the book. As she points out, Marx’s crucial concept of “surplus value” was insinuated rather than explicitly established, either logically or empirically. Surplus value is simply defined as an “increment or excess over the original value” invested in production. And Marx quickly assumed labor to be the (only) factor responsible for this increment in value or of output. As Sowell notes:

It was an assumption deeply embedded in classical economics… [an assumption] devastated by the new conceptions and analyses introduced by neo-classical economics.

As a theoretical system, Marxian economics begins the story of production in the middle–with firms, capital, and management already in existence somehow, and needing only the addition of labor to get production started. From that point on, output is a function of labor input, given all the other factors somehow already assembled, coordinated, and directed toward a particular economic purpose.

[However,] once output is seen as a function of numerous inputs, and the inputs are supplied by more than one class of people, the notion that surplus value arises from [the] labor [of the proletariat] becomes plainly arbitrary and unsupported.

With his definition of surplus value, however, Marx completely neglects the roles of knowledge and risk in an economy: Since there are also failing firms which also hired workers, we see that there is no guarantee of receiving surplus value after hiring workers.

Sowell proceeds and explains how Marxism has been put into practice:

When economic incentives were drastically reduced or abolished in the heady egalitarian period following the Bolshevik revolution, the Soviet economy ground to a halt. Widespread hunger and a halt to vital services forced Lenin to resort to his “New Economic Policy” that restored the hated capitalist practices.

The later nationalizing of all industry under Stalin and his successors did not restore egalitarianism. Quite the contrary. There were highly unequal rewards to management, including whole systems of special privilege stores to which ordinary Soviet workers [had] no access.

This recognition of the fundamental failure of Marxian economics has later been described as

…mere betrayals of Marxist ideals, missing the more fundamental point that a crucial false assumption must be corrected in practice if people are to survive.

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no education

The other day I found some interesting thoughts on educational issues in an 18-year old article by Theodore Dalrymple in the City Journal:

We Don’t Want No Education

Since failure is now regarded as fatally damaging to self-esteem, anyone who actually presents himself at an examination is likely to emerge with a certificate.

Everything is reduced to a mere contest of wills, and so the child learns that all restraint is but an arbitrary imposition from someone or something bigger and stronger than himself. The ground is laid for a bloodyminded intolerance of any authority whatever.

Perhaps the method of teaching by turning everything into a game can work when the teacher is talented and the children are already socialized to learn; but when, as is usually the case, neither of these conditions obtains, the results are disastrous, not just in the short term but probably forever.

The unemployed young person considers the number of jobs in an economy as a fixed quantity. Just as the national income is a cake to be doled out in equal or unequal slices, so the number of jobs in an economy has nothing to do with the conduct of the people who live in it, but is immutably fixed. This is a concept of the way the world works which has been assiduously peddled, not only in schools during “social studies” but in the media of mass communication.

There is one great psychological advantage to the white underclass in their disdain for education: it enables them to maintain the fiction that the society around them is grossly, even grotesquely, unjust, and that they themselves are the victims of this injustice.


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