House of Eratosthenes

Sonic Charmer does his best to help Matt Yglesias understand the ultimate in economic models, which is Model Zero: reality. Yglesias is upset with the final sign-off from “A Short Lesson About the History of US Employment”, which is

Once again, we are not as wealthy as we thought we were. And there really is a significant structural component behind today’s sluggish labor market.

…leading to higher unemployment.

Paraphrasing Yglesias’ response: Yes, it’s all true, we’re not as wealthy as we thought and yes, the labor market is sluggish, but…blah blah blah demand-side blah blah blah reserve wage blah blah blah shouldn’t be happening blah blah blah China.

Imagine a reverse situation. A town full of working-class people sees its unemployment rate suddenly shoot up from 11 percent to 27 percent. Concurrently, it turns out that the town’s residents were much wealthier than they thought they were—each one of them actually had a check for $1 million sitting in their pockets. We might say it’s pretty clear what’s happened here. These folks are wealthier than they thought they were so they raised their reserve wage. But then suppose it turns out the checks were fraudulent and they all bounce. The reserve wage should fall and joblessness should decline. That it seems to me is the supply-side story about the relationship between wealth and employment.

It’s certainly not systematically true that richer countries have low unemployment rates—if that were right the United States would have less unemployment than Germany, and Chinese unemployment would be through the roof.

Giddyap, reality; whoa, reality. You shouldn’t be headed that way, go here instead. Scott Summers agrees with every word, evidently with some enthusiasm…and I’m not sure how, let alone why. It’s like applauding Phlogiston theory, is it not?

It seems there are two things going on here. One, this notion of “sticky” wages, which I understand to mean a negotiated price for labor that is resistant to change, for whatever reason, therefore it can have a disruptive effect on the supply/demand signals communicated within a free market. Seems to me to be a simple concept: The compensation is frozen, or “stuck,” but the commitment is not, thus the entire deal becomes a take-it-or-leave-it. Firm price, no haggling, do you want it or not? So, not. That’s what I’m getting out of Sonic’s ten-step “help” for Mr. Yglesias. And the other thing is: Reality is upsetting the theory, so out comes the blah blah blah, and the reality must yield. Why, how dare it.

It’s a form of Red Dot Science, these left-wing liberal economics. Let’s all just close our eyes and wish with all our might, as hard as we can. We can beat this sluggish employment!

Break Glass Perhaps the better, more descriptive term is “educated beyond one’s hat size”…

I like to say that people who are, while educated, lacking in real wisdom, are educated beyond their hat size. What I mean is that they do not possess the ability to apply their education to the real world. They are, at times, lacking common sense, and do not, apparently have the capacity to accept simple truths. These people are too enamored with nuance. I have worked with such people. Yes they are intelligent, well educated, but they can never seem to grasp that the solution to a problem, or the answer to a question might be the simplest one available. Maybe to them, simple always equals stupid. Their addiction to over thinking and over analyzing everything prevents them from accepting that some things just are what they are.

This is not to say, of course, that every answer or solution is simple, but often times they are. Our Founders had great wisdom. Yes, they were thinkers, that IS part of being wise. But wisdom also comes from accepting simple truths. Truths that are self-evident. Truths like we are created with certain rights, and simple truths like people are best left to do for themselves in most situations.

The entire science of economics seems to be educated beyond its own hat size, at least the kind practiced by Yglesias & friends. When the people educated in the theory struggle to reconcile it with the reality that has just dealt it a blow, and the people not so versed in the theory (or who don’t give a rip about it) are left on the sidelines, like me, going “Yeah, that’s what I’d expect to see happen, what’s the problem?” then the theory is not only ripe for a re-think, but it’s getting in the way. Yeah, less wealth, lots of people less wealthy, wealth has to do with the ability to afford something — so there’s less affordin’ goin’ on. Uh, like duh…so now, you’ve got some economic theory that says it shouldn’t be happening? Well, go off in your garage and twiddle with that there, Sparky.

It seems there is a blind spot with regard to the “free” in free-market. This is the dangerous thing about red-dot science; this notion of “If I wish for it hard enough, it will happen that way” contaminates not only the unified, big conclusion to be drawn about something, but the finer, more detailed conclusions as well, like transactions within the market. What’s truly worrisome is the realization that the explanation is immediately available to anyone experienced in buying things. What can stop the sale from being made? Lack of money is only the first of many things; once you have the money, or credit, there is a level of need to be evaluated. The proposal may involve an expenditure that is low, and therefore affordable, but if there is some alternative available then there will be a path-of-least-resistance factor. The liquidity of the cash reserves is an asset, just like any other, so that may factor in. And last but not least, there is consumer confidence.

The science of economics being evolved and refined as it is, it takes all this stuff into account. But these fine educated minds drawing their conclusions about will happen, don’t necessarily weigh it all correctly — it is, when all’s said & done, a science dedicated to predicting what total strangers will decide to do. Therefore, there will always be doubt in this particular scientific discipline. It’s not like astronomy, or history, in which there is some precise truth to be measured and the thing being refined is our measurement of it; economic theory either takes all the meaningful variables into account, or else it does not, and if it does not then it’s worth about as much as that wet paper filter I have to go change out of the coffee pot in the kitchen just now, and maybe the used coffee grounds within it.

And when reality steps in to let them know they biffed it, which should mean something…it is reality that must yield, say they.

People educated beyond their hat size scare me, especially when they turn their enthused scrutiny and loud opinion-making toward economic matters. It tends to emerge that they have this weird vision of employment: Good things come after it, but the employment itself, in turn, comes after bad things, so if we want more of this employment we have to make bad things happen, like Godzilla wrecking an entire city or something. The excessive “super-practical” education, if you will, seems to interfere with envisioning employment as what it really is, which is services activity associated with an ownership entity attempting to fulfill some kind of a mission…the mission being either obligatory, as is often the case in the public sector, or creation of wealth (and/or hedging against the loss of said wealth) as is generally the case in the private sector. There’s something in the over-educated mindset, that they just can’t see it that way.

There’s something in the over-educated mindset, that they just can’t see it that way.

I’ve lately come to believe that public vs. private is the key difference between liberals and conservatives.

Liberals are all-in on the notion of being Better Than You. Which means that public comparisons are built into the firmware (how do you know you’re Better?). And since health, wealth, looks, social grace, athletic prowess, etc. are all variable and often beyond one’s control — and because liberals are quite often visibly deficient in some or all of them — the only comparison which never fails is Virtue. Thus the complicated is preferred to the simple because it’s complicated. How can one show one is a deep nuancey thinker if the answer is right there in one’s face?

So too with verbal squid ink, fecktoids, red dot science, and all the rest. It’s not about winning the argument — God knows we’ve got 400+ posts of proof of that — but rather about proving that one is a deeper thinker. Witness Obama channelling Elizabeth Warren: “Nobody’s ever made a dime on his own, it’s all thanks to government.” All the stuff he cites is true of course — fecktoids, as you say — but it overlooks the big obvious fact that nothing is ever done, successfully or not, without someone taking the plunge. Infrastructure and all that are necessarily ancillary to someone actually grabbing some sack and putting his money, time, and effort on the line. But since just anybody can do that, business creation cannot be about individual initiative — if it were, then why aren’t all these super-smart, super-educated, able-to-see-the-Matrix liberals successful business owners? Why does a dummy like Joe the Plumber own his own shop, while kids with their $100K degrees from fancy places like Columbia are stuck occupying Wall Street?

Exit question: If recycling didn’t involve sticking those colorful boxes out on your curb every trash day, would liberals still do it?
- Severian | 07/18/2012 @ 09:06
[…] Severian posts some thoughtful remarks that inspire thought. And I’m thinking…I still don’t have liberals figured out, […]
- House of Eratosthenes | 07/18/2012 @ 09:46
This brings to mind something that really, really bugs me: the desire for some people to be seen “doing good things”. I’ve got nothing against recycling. Although it’s not very efficient-full cycle- in terms of energy, by and large I’m on board with getting extra use out of things. However, I don’t bother to tell people about because I don’t care what they think.

Case in point: my neighborhood was originally farmland. We’re surrounded by neighborhoods that enjoy curbside recycling courtesy of the county tax receipts. However, and here I quote the county in response to me, “We have no plans to ever add your neighborhood to the county’s curbside recycling map.” No biggee, of course. I went out, bought my own plastic bins and periodically carted accumulated stuff to the dump. Eventually, I tired of this and now pay for private collection. I wasn’t asking for pats on the back, I just did it. For some people, the pats on the back are their sole reason for doing anything. And it pisses me off. “We’re going green!” Great. Do it and have a nice tall glass of STFU about it.
- Physics Geek | 07/18/2012 @ 13:41
[…] of the college-adjunct-prof crowd, or more broadly, of those who are sometimes referred to as being “educated above their hat size”: He’s pitching it in the waste bucket, because it conflicts. The conflict is of His making, […]
- House of Eratosthenes | 05/17/2015 @ 06:19

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Wednesday, July 18th, 2012