Econtalk

Friday 25 July 2008

I never took a course in economics, but it always seemed like a fascinating subject. It strikes me as either cutting to the heart of the matter, or completely missing the point. I've long wanted to understand more about how economists think, and what they think about, so the EconTalk podcast has been a great find.

Russ Roberts does a good job interviewing other economics thinkers, mostly keeping out of the way, and giving them a chance to explain their ideas. He'll chime in with his own ideas, but rarely falls into the trap of hogging the spotlight for himself.

One thing is clear: Russ and most of his guests have a particular world view. They are unapologetic free-market small-goverment guys. For example, the episode on Subsidies and Externalities is really a chummy conversation about the absurdity of government planning doing a better job than the free market. I was disappointed that Roberts couldn't put aside his politics to find even one example of a good reason for a subsidy. To chalk up North Carolina's subsidizing of their forestry farmers to the powerful farmer lobby seems simplistic.

The most interesting episode politically was Sowell on Economic Facts and Fallacies, wherein Thomas Sowell shed light on his view of economic fallacies. While I disagree with him politically, it was interesting to hear a consistent approach to a number of issues ranging from CEO pay to third-world labor, all of them coming down clearly on the side of letting the market have its way. He attributes concern over CEO pay to people (he never says liberals, but you know he wants to) wanting to design society according to their own ideas. He comes back to this misguided notion a few times. The final topic he discusses is immigration, where he suddenly does an about-face and without the least shame, declares that we need to control who can immigrate to this country, so that we can make sure that the right people come in and the wrong people stay out!

I'd be interested to know if there are similar podcasts making counter-arguments out there. It would be good to get the other side as well.

These political peccadilloes aside, many of the podcasts are very interesting as a discussion of economics, though sometimes quite advanced. Being professors talking together, it can also veer a bit to the inside: Roberts will throw around names and terms like Austrian School without explaining them.

But it has helped deepen my understanding, both in the specifics of economics, and in familiarizing myself with the idiosyncrasies of economic thought. For example, there's the classic mindset that says that if the world does something a particular way, then by definition it must be a good way to do it. This overlooks the possibility of a radical shift that uncovers a previously untried possibility. For example, food markets in the early half of the 20th century employed counter clerks to retrieve items from shelves. An economist of the time would have said, "everyone does it this way, there must be an economic advantage". But then someone invented the supermarket, where customers could get things for themselves, and everyone switched.

Economists often pretend real-world forces like culture and non-economic interests ("I invest in cattle stocks because I always wanted to be a cowboy") don't exist. Ideal markets are an abstraction. But economics is the best way we've found to explain the anthill of human business activity. EconTalk has helped deepen my understanding of it.

Comments

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Jonas Beckman 7:09 AM on 25 Jul 2008

Thanks for a great resource! Much like you, I am very interested in how economists view the world and wary of the underlying assumptions that often go with it. Do we really live in the best of all possible worlds? If not, we really should try to formulate the better alternatives.

Of course, seasoned software developers and economists may have something in common: sometimes we knowingly defend far too simplified mental models. Why? Simply because we can find no better way of getting our work done in time.

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Rami 7:15 AM on 25 Jul 2008

Russ and most of his guests have a particular world view
Judging by Roberts' association with the Cafe Hayek blog, it's clear he's a fan of the Austrian School (traditionally very laissez-faire)... so I wouldn't be too surprised ;-)

Just as accessible and a slightly different picture of economic thought is http://freakonomics.blogs.nytimes.com -- it does provide snapshots of a couple of different schools of thought, too.

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scott pierce 8:11 AM on 25 Jul 2008

Hi Ned,

Thanks for sharing this. Though I likely disagree with you on much politically (and agree w/ the resource you share more), I have appreciated your ability to see through the eyes of others and not be shrill w/ those you disagree with.

sp

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Bill Mill 9:14 AM on 25 Jul 2008

Ned,

I run /r/economics on reddit, so here are some other good resources I've come across. (Plus the freakonomics blog, already recommended by Rami)

An economist you are likely much more in agreement with: http ://lanekenworthy.net/

there are three great harvard blogs, which are also generally less libertarian than the guys you hear on econtalk:
http ://gregmankiw.blogspot.com/
http ://content.ksg.harvard.edu/blog/jeff_frankels_weblog/
http ://rodrik.typepad.com/

A development economist has probably my favorite econ blog and very interesting perspective on world (especially african) events:
http://chrisblattman.blogspot.com/

And, way on the economic libertarian side but truly fantastic nonetheless:
http://www.marginalrevolution.com/

Finally, since you like podcasts (I don't, generally, so I can't help you too much here), there's often economists I respect featured at:
http://bloggingheads.tv/

which may or may not be any good; I get frustrated by the format. I did watch a video yesterday that I really liked though; it's Tyler Cowen from Marginal Revolution talking about how globalization affects music, using examples ranging from Russian throat-singers to Mexican rappers to Madagascarian (?) doo-wop singers:

http://www.isi.org/lectures/flvplayer/lectureplayer.aspx?file=v000215_cowen_022608.flv

(I had to castrate my links because your comment system thinks I'm a spammer :(

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Jack Diederich 11:10 AM on 25 Jul 2008

The joke goes: An economist meets a friend for lunch and says "I saw the strangest thing on the way over - a $100 bill on the ground." The friend congratulates him on his good luck and the economist replies "I didn't pick it up." The friend asks why not and the economist says "If it was worth doing someone would have done it already."

This is a joke told by economists as a reminder that the world isn't as clean as a model.

You might like the Austrian school; well, the foundations but not the conclusions. It is all about people (Praxeology) and local information, and not models or graphs. The $100 bill joke doesn't apply to Austrians because they would say the first person who spots the $100 bill has better information than anyone else. Likewise to your grocer example: the Austrian wouldn't say that the stock-boy setup is good just because everyone uses it. He would say that you mess with the setup at your own profit or peril. People did mess with it, of course; A&P pioneered the self-serve supermarket and later Wal-Mart and Costco took the supermarket concept even further. If the supermarkets were centrally planned the leap to A&P or Costo would be unthinkable: if 1 million stock-boys were voters (or forbid, government employees!) the position could never be eliminated.

Thomas Sowell does well when he isn't talking about politics. His books Basic/Advanced economics are good but his political forays like "Vision of the Anointed: Self Congratulation as a basis for political policy" are bad (not Ann Coulter bad, but bad). Sowell was a protege of Milton Freedman of the Chicago school (the Chicago school is soft Austrians).

Check video.google.com for "free to choose" for lots of economic material. During the round table discussions Sowell is the black guy.

P.S. Yes, I have hobbies outside of python.

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mike bayer 11:13 AM on 25 Jul 2008

I'd recommend a book I read some years ago called "Everything For Sale: The Virtues and Limits of Markets" by Robert Kuttner. He takes the argument that free-market everything is not generally a great idea, with a very strong emphasis on financial markets. He makes an argument that the asian stock market crisis in 1997 was a direct result of under-regulation of markets. You can make the same argument about the current state of affairs re: housing and such.

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Braden 11:51 AM on 25 Jul 2008

In the undergrad econ class I took this spring, we did discuss some arguments for protectionism, particularly the infant industry argument. I think this Iowa State protectionism overview does a pretty good job.

On the whole, though, I'm inclined to agree with the position Brian Caplan articulated in his The Myth of the Rational Voter on p. 200:

"Each of us should begin, like Bastiat, by contrasting the popular view of a topic with the economic view. Make it obvious that economists think one thing and noneconomists think something else. Select a few conclusions with profound policy implications--like comparative advantage, the effect of price controls, and the long-run benefits of labor-saving innovation--and exhaust them. As Bastiat advises, 'We must . . . present our conclusions in so clear a light that truth and error will show themselves plainly; so that once and for all victory will go either to protectionism or free trade.' . . . A stereotype--that they fail to offer definite conclusions--handicaps economists."

(Those blogs look really good, Bill. Thanks for passing them on.)

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Dan Dunn 9:46 PM on 25 Jul 2008

You're hitting the roots of my political beliefs. My economics are a big chunk of my politics.

Taking up your example of the supermarket: What if the government had decided to intervene? Would it have a) mandated the creation of supermarkets or b) prohibited customers from touching food for health reasons or c) required supermarkets to maintain a minimum employee-to-customer ratio as a job saving measure?

As far as I can tell, the government is just as likely to pick (b) or (c) as (a). I'm glad that it didn't try.

It isn't that my faith in the power of the free market is so strong; it's that my faith in government is so weak.

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Bruce Perry 9:28 PM on 26 Jul 2008

You might find Brad DeLong's blog of interest. He's an economics professor at Berkeley.

http://delong.typepad.com/

Some of the posts are about his classes, but he often discusses current events and campaign issues from an economic viewpoint.

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Zoran Lazarevic - Laza 10:55 PM on 26 Jul 2008

Ned, I love EconTalk. The most popular economics blog is Marginal Revolution, followed by (I believe) EconLog, which is assiciated with EconTalk. I would also highly recommend CoyoteBlog, written by a non-professional economist.

Getting back to your supermarket example. Supermarkets became feasible when the cost of the packaged food decreased significantly relative to the cost of labor. At the same time, the standard of living increased (i.e. income increased relative to the cost of food) to the point where it did not pay to steal the food. Try opening a supermarket in rural Ethiopia during a drought! Or in the US during the depression!

'An economist of the time would have said, "everyone does it this way..."'. And the economist would have been right.

I also agree with Dan: government intervention would have most likely made the things worse.

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Pete Lyons 10:20 AM on 28 Jul 2008

Hey Ned, I've recently developed an interest in Economics too. Lots of interesting looking links among the comments. I hope you continue to apply your always interesting insights to the topic.

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Joe W. 7:33 AM on 29 Jul 2008

Thanks a lot for the recommendation. I just listened to the "Political Economy" episode on the nationalization of the private mass transit of Santiago and it was really fascinating.

I wonder what mass transit in Boston would look like if there were private companies involved.

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Chris Reckling 7:37 AM on 30 Jul 2008

Hi Ned - I just listened to Freakonomics (good link to the blog above, too!) on CD (Brookline Library has it) and it provides an approachable view of various economic situations by analyzing data to answer certain questions. Recommended.

Chris

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