Almost Classical

American economist James Buchanan won the 1986 Nobel Prize in Economics. (Photo credit: Wikipedia ) Democracy in Chains  by Historian Nancy MacLean was worthy of a few online posts earlier this summer, when I first read a loaned copy and was pained by how often the text misstated economic theories associated with libertarians (and some conservatives). As a historian, she makes the all too common  mistake of conflating the "radical right" (named on the book's cover) with standard, rather unexceptional and mundane, free-market economic models and theories. She presents common knowledge and well-known debates over theories within economics as some sort of secret plot to destroy democracy when, in fact, the people and theories she discusses seek to protect minority rights and freedoms from an easily manipulated government. I didn't post my columns to my blogs because others, including the economists and political scientists from perspectives other than the Chica...

If socialists and statists wanted to damage limited government and republicanism they could not have chosen better men as Manchurians than Trump and Brownback. Trump is the poster child for crony capitalism and everything against the ideals of a free and open society you could imagine. Open: as in trade, borders, tolerance, speech.... Brownback apparently never completed a serious economics course and certainly never read Adam Smith, Hayek, or Milton Friedman. You balance budgets with mildly progressive taxes that recognize the commons must be funded or the middle-class  will revolt. (Smith noted all rebellions in English politics are from the monied classes, not the bottom.) Low taxes are ideal. As low as the community will tolerate, ideally. Low and fair, rewarding hard work. But you cannot cut taxes without a plan to determine what should be funded and why. In my ideal world, only first-responders and a handful of other priorities are funded through taxes. As little a...

Map of U.S. Minimum Wage laws (Photo credit: Wikipedia ) Minimum wage debates tend to overstate the estimated and real effects of any changes to the minimum wage in the Unites States. Most studies show a minor increase in a place with wages already rising  has no significant effect on employment. But, there is a cost when wages rise quickly and there is an effect when wages fail to keep pace with the cost of living. The problem is that the minimum wage is not, contrary to any mythologies, the income of most adults with full-time work. As the debates below suggest, there is a limit to what a local economy can bear in terms of wage growth. At the same time, we know that low wages also reflect jobs that can be or will be automated away in many instances. We are in a new era of creative destruction, with no real plan for the displaced workers without skills. Allow me to provide an example of how silly on all sides the debate on wages is. Mark Perry gets the facts right in hi...

English: Number of self-identified Democrats vs. self-identified Republicans, per state, according to Gallup, January-June 2010 http://www.gallup.com/poll/141548/States-Competitive-Terms-Party-Identification.aspx. 18 point Democratic advantage 10-17 point Democratic advantage 3-9 point Democratic advantage 2 point Democratic advantage through 2 point Republican advantage 3-9 point Republican advantage 10-17 point Republican advantage 18+ point Republican advantage (Photo credit: Wikipedia ) Best interview I've read on the Trump voters. Period. And the Slate reporter? Total jerk. Cannot stand the tone of the questions. I resent the tone. It is precisely why I am not and will never be a Democrat. The insulting, condescending, Thomas Frank "you're all idiots back home" rhetoric pushes me away from the "elites." The reporter? I dislike him more and more as the interview transcript progresses. A self-absorbed, self-righteous intellectual moron. I dislik...

English: Economic regions of California, as defined by California Economic Strategy Panel, October 2006 Northern California Northern Sacramento Valley Greater Sacramento Bay Area Central Coast San Joaquin Valley Central Sierra Southern California Southern Border (Photo credit: Wikipedia ) What do the strongest state economies in the United States share? Blue states with high taxes? NOPE. Red states, with low taxes and right-to-work laws? NOPE. In the end, it is LOCATION. In particular, the states in the West and Southwest are the big powers of the U.S. economy. That's the only thing they have in common. Really. Read more: Economic Power States for 2016-17  - All in the West. The perennial leaders have been California and Utah , two states without a whole lot in common other than mountains, saltwater lakes and the tech industry. Texas kinda sorta belongs on the leader list, too, given that it didn't miss the 2016 top 10 by all that much (it came in 17th place), and i...

Economists agree on more than they disagree. This might seem like an exaggeration, since the debates on policy are so heated. But policy debates are not about the resolved math or well-established theories within economics. Instead, policy debates are driven by value judgments. What economists and their colleagues in behavioral science, data science, psychology, linguistics, rhetoric (my little niche) and elsewhere can agree on are some rather basic tested notions. What we disagree on is what makes for a "good and righteous" society — and even if we want a values-based government at all. Charles Wheelan 's Naked Economics: Undressing the Dismal Science is 15 years old. Yet, the book reminds me that until recently there was generally more agreement than disagreement within the field of economics and its associated disciplines. I'm rereading Naked Economics  because the hyperbolic rhetoric from the left and right, which are not even that extreme in the United St...

Economics is not a simple discipline to understand. Yet, all around us are people claiming that complex economic matters can be as clear as "Econ 101" when debating public policy. Sorry, but Econ 101 doesn't answer anything and the rhetorical shorthand does the discipline (and policy debates) a disservice. When you take an introductory class in any topic, from physics to programming, the concepts are necessarily simplified. It is like teaching a child to read. You start with phonics in English and tell the child that letters make sounds. Oops. But it isn't really that simple, is it? Phonetic rules change and words in English have complex etymologies. Rules you learn as a new reader quickly vanish or have to be understood as a small part of a complex flowchart. Economic principles like "supply and demand" or "externalities" seem simple enough in the language and models of Econ 101. And then you head into the bushes and discover there are more...

My original title for this posting was a bit presumptuous: Rhetoric of the Liberal Professor Afraid to Debate After reflection, I realize the professor isn't "afraid" to debate an economic issue, but simply doesn't realize there is a debate because his worldview and selection biases screen out other information. At least, that's my theory. Recently, as part of a trend of articles on the dangers of too much political correctness and identity politics on campus, an anonymous "liberal professor" mentioned that a (racist) student wrongly associated Fannie and Freddie with the housing bubble. This example was to show that the professor handled "debates" well in the past. Actually, the example shows quite the opposite: that conservative and libertarian ideas are depicted as racist, mean-spirited, ill-informed, and furthered by ignorant people. Quite simply, the example is a stereotype. Accurate of events or not, this shining example of how...

Middle-class families have found themselves stagnating for the last two decades (at least). The Washington Post has published an outstanding series on the issues affecting the middle-class. The stories are long and well researched. ABOUT THIS SERIES: The American middle class is floundering, and it has been for decades. The Post examines the mystery of what's gone wrong and shows what the country must focus on to get the economy working for everyone again. Chapter 1: Why America's middle class is lost http://www.washingtonpost.com/sf/business/2014/12/12/why-americas-middle-class-is-lost/ Chapter 2: The devalued American worker http://www.washingtonpost.com/sf/business/2014/12/14/the-devalued-american-worker/ Chapter 3: The college trap that keeps people poor http://www.washingtonpost.com/sf/business/2014/12/15/the-college-trap-that-keeps-people-poor/ Chapter 4: A black hole for our best and brightest http://www.washingtonpost.com/sf/business/2014/12/16/a-black-hole-f...

Teaching within a top-ranked business school associated with nine Nobel laureates in economics, I am honored to meet some of the brightest young minds in the world. These students excel at math, as one might expect, and many also pursue second degrees or minors in additional STEM (science, technology, engineering, and math) fields. At our institution, economics is paired with statistics by default, as we emphasize quantitative economics over the philosophical approaches to the field. Although I admire these students, I'm also saddened that so many chase financial industry careers over working in other STEM fields or in the public sector. These great minds set forth to turn money into more money, when they might use their skills to apply the lessons of economics and statistics to greater social good. As Washington Post reporter Jim Tankersley writes, it isn't that finance is a "good" or "bad" pursuit for an individual — but in the last two decades finan...

Yesterday, I reminded my undergraduate economics students that modern economics, with its quantitative bias, is not about what is "fair" in life. While we can use economics to identify what isn't "fair" and how to better allocate resources, at its core economics is the study of efficiently allocating scarce resources. Math is not moral; it is an amoral aspect of economics that should be informed by philosophical inquiries. For example, quantitative economics can answer when a person is "unproductive" and "inefficient" within the system. But, economics does not answer if it is moral to reallocate resources from the unproductive to either the currently or potentially productive members of a community. Raw numbers tell us the money spent on extending the last year or two of life might be best spent on educating the young. But is that the right way to approach problems? Economic models do not tell us if stock market gains driven by low inter...

Where's the inflation? Where's the run-up in bond rates? Despite high debt, unsustainable long-term social spending, unfunded pension liabilities, and numerous other fiscal challenges, the U.S. bond market is strong and interest rates remain low. Companies are facing increasing energy costs, unstable global situations, falling unemployment, rising minimum wages in larger cities, and a regulatory landscape that has shifted. The Tea Party and the Occupy movements aren't exactly in the mood to reform corporate taxes, and the politicians reliant on both extremes aren't going to collaborate to improve the business climate in any meaningful way. (Yes, there are areas of agreement among most economists, across the political and theoretical spectrum, that good policy isn't good politics.) If business costs and risks are rising, prices should be rising. With all levels of government fiscally unsound (and ungovernable), bond vigilantes should be circling. In theory,...