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February 4, 2013

Latest Posts from Economist's View

Latest Posts from Economist's View

Posted: 24 Dec 2012 12:24 AM PST
When people are "absurdly wrong for years on end," it's time to stop listening to them:
When Prophecy Fails, by Paul Krugman, Commentary, NY Times: Back in the 1950s three social psychologists joined a cult that was predicting the imminent end of the world. Their purpose was to observe the cultists' response when the world did not, in fact, end on schedule. What they discovered ... is that the irrefutable failure of a prophecy does not cause true believers ... to reconsider. On the contrary, they become even more fervent, and proselytize even harder.
This insight seems highly relevant as 2012 draws to a close. After all, a lot of people came to believe that we were on the brink of catastrophe — and these views were given extraordinary reach by the mass media. As it turned out..., the predicted catastrophe failed to materialize. But we can be sure that the cultists won't admit to having been wrong. No, the people who told us that a fiscal crisis was imminent will just keep at it, more convinced than ever.
Oh, wait a second — did you think I was talking about the Mayan calendar thing?
Seriously, at every stage of our ongoing economic crisis — and in particular, every time anyone has suggested actually trying to do something about mass unemployment — a chorus of voices has warned that unless we bring down budget deficits now now now, financial markets will turn on America, driving interest rates sky-high. And ... very few of the prophets of fiscal doom have acknowledged the failure of their prophecies to come true so far. ...
I and other economists argued from the beginning that ... budget deficits won't cause soaring interest rates as long as the economy is depressed —... the biggest risk to the economy is that we might ... slash the deficit too soon. And surely that point of view has been strongly validated by events.
The key thing ... to understand, however, is that the prophets of fiscal disaster ... are at this point effectively members of a doomsday cult. They are emotionally and professionally committed to the belief that fiscal crisis lurks just around the corner, and they will hold to their belief no matter how many corners we turn without encountering that crisis.
So we ... will not persuade these people to reconsider their views in the light of the evidence. All we can do is stop paying attention. It's going to be difficult, because many members of the deficit cult seem highly respectable. But they've been hugely, absurdly wrong for years on end, and it's time to stop taking them seriously.
Posted: 24 Dec 2012 12:06 AM PST
Posted: 23 Dec 2012 01:53 PM PST
I get in trouble if I blog too much when family is around for the holidays, so a quick one from David Warsh:
Paradigms, after Fifty Years, Economics Principals: For a book built on a narrative of, among other things, the history of our understanding of electricity, The Structure of Scientific Revolutions, by Thomas Kuhn, has had a remarkable run. It appeared in 1962, and people have been arguing about it ever since. ... For Structure is the book that made the word paradigm, meaning a way of seeing, part of the everyday discourse of nearly everyone who deals with ideas for a living. ...

Before Kuhn, the philosophy of science was boring and the history of science a backwater... There was a lot of boilerplate instruction about the steps of the scientific method and the logic of scientific discovery (if you're not wrong, you might be right) to be found in the first chapters of textbooks, but, as Kuhn wrote at the beginning of Structure, this was no better than an image of national culture drawn from a tourist brochure.
After Kuhn, the focus shifted to the social organization of science: to the textbooks themselves, graduate education, the communities ("invisible colleges") in which science was done, and the various nexuses in which results were put to work, from scientific journals and legal briefs to corporate laboratories and entrepreneurial start-ups. ...
How does a science get started? According to Kuhn, the story goes something like this: in the beginning someone contributes a powerful example of how to think about a set of scientific problems: Aristotle's Physica, Ptolemy's Almagest, Newton's Principia, Franklin's Electricity, Lavoisier's Chemistry, Lyell's Geology. The achievements appear, not out of the blue, but they are transformative. A community forms around them because they offer not a finished theory but rather a thinking cap, a pre-analytic way of seeing things and asking questions about them.
This way-of-seeing aspect that each possessed Kuhn designated a paradigm. The word itself is ancient Greek; he borrowed it from language studies, where it described the all-but-unconscious pattern by which one learns to conjugate a verb or decline a noun when learning to speak a language. A successful paradigm is enabling. It both poses plenty of unanswered questions and suggests means by which they might be conclusively answered. ...
This is the route to what Kuhn called "normal science." By that he meant successful science, rather like filling in the outlines of a hastily drawn map once a new continent has been discovered. In this metaphor, normal scientists come in all sorts of guises: trailblazers, pioneers, settlers, sodbusters, ranchers, developers. Kuhn, unfortunately, chose two other metaphors to describe the conduct of this phase, and those labels have sometimes caused proud scientists to rebel at his description. Successful normal scientists were "puzzle-solvers," he said, working away at adducing facts, producing theories and making sure the one dovetailed with the other. Or they were, in essence, engaged in "mopping up" after a big paradigmatic invasion. ...
Kuhn was a great student of the Copernican revolution, which meant he thoroughly understood the Ptolemaic system that it overthrew – crystalline spheres arrayed around an earth at the center of the universe. Ptolemy, and the astronomers who worked in his tradition for nearly fifteen hundred years, were excellent normal scientists. They had built a system that cohered; when observation of the heavens produced a troubling fact (anomalies, Kuhn dubbed such facts), they added a sphere or two.
But the troubling facts multiplied. Eventually a scientific crisis was at hand – anomalies with which existing normal science simply could not cope under any circumstances. At that point, a "revolutionary," usually a young scientist, capable, but with little commitment to the old tradition – in this case, Copernicus – would produce a new paradigm, radically reordering the old facts, ignoring some and adducing new ones. The new paradigm would be resisted for a time, science being an inherently conservative enterprise, but gradually would gain adherents among the young. In time, the new order would be widely accepted. ...
In Structure, Kuhn went on to make the point that scientific revolutions didn't have to be huge events with sweeping cultural ramification, such as the Copernican, Newtonian or chemical revolutions. The professional groups affected by them could be far smaller. ...

An especially fascinating aspect of the story has to do with the reception of Structure. A tendency to mildly disparage it has emerged. Hacking, in his introduction, assures us that science has moved on. The Cold War is over; physics is no longer "where the action is." Today, he says, "biotechnology rules." Thus Structure, he writes, "may be – I do not say it is –more relevant to a past epoch in the history of science than it is to the sciences as they are practiced today."
David Kaiser, a physicist who is a professor in the history of science at the Massachusetts Institute of Technology (where Kuhn spent his last seventeen years), put the case clearly on the eve of a fiftieth-anniversary symposium: "Kuhn had an ambition with the book, which was common at the time: he really thought there was a structure, a hidden key that makes science tick. I think many of my colleagues today in the history and sociology of science would find that ambition wrong-headed. There is not a single magical key that will unlock the way science gets done."
There is another possibility, of course – that, for one reason or another, it is the historians and philosophers of science, taken as a group, that have got it wrong. They are, after all, "normal" scientists. For as Daryn Leboux, of Queens University, and Jay Foster, of Memorial University of Newfoundland, said in their Science magazine review of the fiftieth anniversary edition, Structure was a revolution of its own, and revolutions are complicated things. They can spark backlash as well as assimilation. It is possible, even likely, that The Structure of Scientific Revolutions is one of those books, like The Origin of Species, that take more than a generation, even two or three, to find its level – a real anomaly in the age of blink. I eagerly look forward to the seventy-fifth anniversary edition.
Posted: 23 Dec 2012 10:18 AM PST
Tyler Cowen on the negotiations over the fiscal thingie:
In the Fiscal Debate, a Little Symbolism Can Go a Long Way, by Tyler Cowen, Commentary, NY Times: ...We must decide whether to pursue a relatively loose and stimulative policy, and to trust in our later discipline, or to slam on the brakes now.
Yet there may be a way to square this circle. When it comes to income tax rates, we could raise them for virtually everyone, to send a clear message that the current fiscal situation is unsustainable. ...
To see how this could work, consider this script: Let's say the Republicans decide to largely give in to what the President Obama is proposing. There is, however, a catch: the president has to agree to raise marginal tax rates on all income classes, not just on the rich. The tax increase would be one-quarter of a percentage point, or some other arbitrary small amount, with larger increases possible for higher incomes, as has been discussed. The deal also stipulates that both the president and Congress must publicly acknowledge that current plans for government spending can't be financed unless taxes on most or all income groups climb further yet, and by some hefty amount.
Given the slow economy, it is undesirable to reverse all or even most of the Bush tax cuts. A small but publicly trumpeted clawback of some of the cuts would send the right message to voters, while minimizing the macroeconomic fallout. The nice thing about symbols — single shots across the bow — is that they often can suffice. ...
Of course, the notion of tolerating — and especially endorsing — any tax increase is anathema to many of President Obama's opponents. But keep in mind that possible alternatives, like another debt-ceiling debacle or an agreement that panders to our fiscal illusions, would probably be worse for both the economy and the longer-term reputation of the Republican Party.
In our country, the typical approach to fiscal deadlines is to kick the can down the road. But that assumes we are kicking a can, not a grenade. It's time for at least one party — and why not the electoral loser? — to do something just a little shocking. It can give in on much of the negotiations, but insist that both sides start stressing the fiscal truth.
Maybe I'm just having one of those days and can't see the obvious, a house full of family will do that, but I'm a bit confused about the spending side of this proposal. Does Tyler mean that the spending cuts Obama has proposed will remain, but the tax increase will be moderated for now and replaced by a commitment to increase them further at some future date? If so (and I may have this wrong), why is the only worry that "Given the slow economy, it is undesirable to reverse all or even most of the Bush tax cut"? Why isn't it undesirable to cut spending as well? When all is said and done, spending cuts plus tax increases, how would the burden be distributed? Is the current situation -- the baseline from where we start the changes -- fully optimal, or do we also need to correct distortions, inequities in the past distribution of income, etc.? If there are corrections that are needed, and I believe there are, then the share equally notion has much less force.
It's true that "we are all in this together" under Tyler's proposal, but it is not at all clear that the shares are equitable. In any case, it probably doesn't much matter since the chances of Republicans agreeing to vote for a tax increase, no matter how small, is extremely low.

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