“economics”
65 posts under this tag.
Who of all the Wise could have foreseen it?
Or, if they are wise, why should they expect to know it, until the hour has struck?
J.R.R. Tolkien, The Fellowship of the Ring
Foretelling MUST be part of any worthwhile understanding.
(We can all come up on demand with plausible histories after the fact
and “description—often bad description—hiding behind obfuscatory rubbish.”)
Speculation’s to finance, what experimentation’s to science: THE TEST.
No one salubriously rich can claim to understand finance.
Whoever REALLY understands it is welcome to big bucks any day.
Heard that Douglas Adams’s creation story?
There is a theory which states that if ever anyone discovers exactly what the Universe is for and why it is here, it will instantly disappear and be replaced by something even more bizarrely inexeplicable. There is another theory which states that this has already happened.
Same thing may happen with finance:
Any understandable glimmer of it is too good an opportunity not to be instantly complicated away in the efforts to milk it.
This all but an instance of a bigger theory that claims:
your inability to foretell things foretelling abler (smarter) than you.
The future, society, others, and even you, among such things.
Virginia Postrel back to writing with a vengeance. Here my favorite of her latest essays. Most liked the comparison between simple economic hypotheses, cleverly verifiable, and the “unfalsifiable tautologies about differing tastes” all around us. (Such straightforward, plain-language hypotheses pretty much the only subset of economics that feels real to me.)
David Friedman ELZR introduces a fascinating classification of human cooperation in The Machinery of Freedom ELZR. There’s
force (imposing my end on you),
trade (“I’ll help you achieve your end if you help me achieve mine”),
and love (“making my end your end”).
The definition of love alone is, I think, a great achievement. It surely doesn’t include everything we mean by that impossibly burdened word (it doesn’t mention romance, liking or sex) but it does reveal one of love’s most important yet often implicit threads. It is abstract yet the more likely we are to call a love pure, the more likely it is about A caring about B for B’s sake alone.
An interesting exercise came to mind after reading the classification: What human activity/field corresponds to each kind of human cooperation?
The first two kinds are straightforward loosening words up a bit: Politics is the exercise of force. Economics is the exercise of trade. With love, I stumbled for the longest time. I have an answer now.
The exercise of love is… technology. A tool is the purest embodiment of love, of making someone else’s end your end. That’s why technology is so ambiguous, its ends are its users’ ends. Giving you a tool is the ultimate act of love, the more so the more control of it I give you, because by doing that I make my end your end, whatever your end may be—defending your life or stealing. Think of the geeks that cobbled up the internet, ignoring wtf the thing would be used for, coding only so that it would allow for it.
Don’t dismiss this as one geek’s techno-euphoria. There’s something deep in here. Technology is the exercise of love. “If you want to do good, work on the technology, not on getting power.” Nothing less than the meaning of our lives could be here.
Liking David Friedman’s Hidden Order a whole lot. Not trivial reading, but rewarding. Through intuitive graphs and simplification he comes up with some interesting economics theory (with my math background the hand waving and naivete of the presentation’s obvious but I’m still rather unconvinced of a formal, math-based economics).
But perhaps the part I liked most is this inspiring little quote, awfully important in an age when technology allows contracts to make the dreams and nightmares of both sellers and buyers to come true, from DRM to discography torrents.
Suppose you are a businessman or an attorney negotiating a contract. It is tempting to go through the contract term by term, trying in each case to get whatever term is most favorable to you or your client.
But a more profitable strategy may be to go through looking for the contract terms that maximize the combined gain to both parties. Only when you get to the final term—the price—do you shift back to trying to make it as favorable as possible, thus collecting as much as possible of the gain produced by your well-designed contract. Most of your job is maximizing the size of the pie. The bigger the pie, the bigger you can make the slices for both sides.
I still remember how impressive Lehman Brothers’ New York headquarters were…
There are two ways we can produce automobiles. We can build them in Detroit or we can grow them in Iowa. Everyone knows how we build automobiles. To grow automobiles, we first grow the raw material from which they are made—wheat. We put the wheat on ships and send the ships out into the Pacific. They come back with Hondas on them.
From our standpoint, growing Hondas is just as much a form of production—using American farmworkers instead of American autoworkers—as building them. What happens on the other side of the Pacific is irrelevant; the effect would be just hte same for us if there really where a gigantic machine sitting somewhere between Hawaii and Japan turning wheat into automobiles. Tariffs are indeed a way of protecting American workers —from other American workers.
David D. Friedman, Hidden Order
particularly now that my lil sis studies economics, how funny it is that economists are far and away mostly of use to govt’s. While theirs is a fine and beautiful knowledge, the only people that actually pay economists to work —besides universities, who employ them to train more economists, a nice pyramid scheme— are either bureaucrats or lobbyists warding or manipulating bureaucrats. At first that made me wary, but lately I’ve come to realize that what good economists (as opposed to bribed sycophants or bad economists) actually have to say to the gov’t is fuck off—stay away, you do more harm than good. Dismantling or even just holding off the gov’t beast is a worthy mission, quite possibly one of the most important.
For my sister, Alex, who will start her Economics major this July
Economists are philosophers of human action.
They’re close to psychologists, neurologists, sociologists, anthropologists, and ethicists.
But psychologists focus on the mind behind the human action, neurologists focus on the underlying brain, sociologists on the surrounding society, anthropologists on the enveloping culture. Ethicists focus on the aesthetics of human action, on what human action should be.
Economists, on the other hand, focus on the actions themselves, on trying to understand them in their own terms. They ask questions like:
What patterns does human action follow? What different kinds can we usefully distinguish? Why are these actions taken? What are the goals behind these actions? What would the consequences be of these actions? Why do these actions have these consequences? In other words, what is the interplay between goals, conditions, actions, and consequences? If someone took these actions what actions are others expected to take? How will these actions affect others? What are the best actions to take given these goals? How best to organize and coordinate human action? What are the limits of human action? How to improve human action?
Free trade is when a trade doesn’t need the consent of anyone but the traders.
A trader is an owner of property to be traded.
The above definitions after this inspiring but somewhat muddled definition of free trade. I particularly like the second, satellite definition because it safeguards the first: If you want to contort a party into a trade and still call it free, having to specify exactly what it is this party owns can make the contortion clearer—all sorts of patronizing, noble-sounding words can be used to camouflage deception, but to own is a very strong word that makes us pay attention and rightly so.
It’s claimed that government is a legitimate party in sex trade (say, prostitution) because it has to defend public morals, clients and prostitutes, but what is it that gov’t owns? Clients’ and prostitutes’ bodies and money? Public morals? Gov’t is also claimed a legitimate party to international trade (say, immigration) in the name of protecting domestic industry, but what is it that gov’t owns? Domestic industry? Employers’ or employees’ time and money?
Human beings are not just more mouths to feed, but are productive and inventive minds that help find creative solutions to man’s problems, thus leaving us better off over the long run… Every time a calf is born, the per capita GDP of a nation rises. Every time a human baby is born, the per capita GDP falls?
Julian Simon
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