Almost Classical

I have written in the past that I doubt the "multiplier" effect some economists and politicians cite when promoting federal spending. I believe this column makes several good points: The Myth of the Multiplier - Reason Magazine There are "indirect" multipliers, which I do believe are real — though not perfect. Money spent on roads and highways, for example, enables transportation of goods. The problem is, even spending on transit systems is seldom wisely managed. Government is not efficient. Even what it should do, such as providing for the national defense, it does inefficiently. I admire the military, but it isn't efficient. Any "multiplier" effect from military spending is long, long term and often hard to quantify versus the waste. NASA has created technologies that do provide economic benefits, certainly, but the NASA of today cannot even replace the space shuttle program in a timely fashion. The private contractors linked to NASA

Yesterday (June 22, 2011) on MSNBC's "Dylan Ratigan Show" David Stockman stood up to the nonsense of the left, in the person of Jonathan Alter. Read beyond my discussion of yesterday's debate for additional perspective on the debate participants. Alter's biases, in particular, were on fine display on MSNBC as he completely ignored facts and instead embraced the mythology of an Obama Miracle. (see http://vodpod.com/watch/11561241-david-stockman-on-the-dylan-ratigan-show ) My favorite moment was when Alter asked Stockman if he knew GE's business better than Jeffrey R. Immelt, friend and advisor to President Obama. "Yes," Stockman replied and proceeded to explain precisely how GE Capital was a financial mess, bailed out by the administration. Alter quoted Immelt as saying GE was near collapse. Well, duh? It was. But it was near collapse because of stupid choices made by Immelt and others within the company. GE was invested heavily in credit default swap

Daniel Kahneman is a Nobel laureate in economics, and a behavioral psychologist by trade. His specialty is "hedonics" — which is a fancy way of stating that he wonders what makes us happy (and sad) as humans. If you believe that economics is often the pursuit of happiness or pleasure, you can immediately see the importance of Kahneman's research. Many of us find "pleasure" (emotional reward) in obtaining a perceived bargain, according to Kahneman and other researchers. Unfortunately, what we perceive as a bargain isn't always so. I've known "coupon clippers" who would buy items for "half price" — but these were items they'd never normally purchase. Our reward impulse is not logical and reasonable because it is an impulse, not careful consideration of the variables involved. Economists used to believe in the "rational consumer" and the "rational seller." Both are statistically accurate in the macro, but at the m

I am a believer in "behavioral economics," and am convinced human nature is neither rational nor predictable at the individual level. The " Austrian School " of economics, which is closer to my views on economics than any other general school, suggests that mathematical models in economics generally overstate the predictability of humans. I am seldom stunned or shocked when economic predictions are "unexpectedly" off the mark. Too many economists are convinced they conduct "science" when they are closer to the randomness of human psychology. I dislike generalities, but mentioning the Austrian School helps place my views in some context. Note : I have argued and will continue to argue too many "sciences" should have some other label. It would be best to simply call these disciplines "studies" than sciences. Economics is one such field. I love it, but is it science? Not like physics is a science. One reason the Austrian School i

Many of my colleagues and peers complain about "wealth concentration" and the "superstar effect" without realizing these are natural trends in any group, regardless of size. As a community expands, the effect I am going to explain is magnified. The end result approximates a "natural monopoly." Seldom is there a nefarious plot to control products or knowledge -- it just happens to be more efficient to concentrate skills and products. I'm going to use a large-scale, modern example to explain how skills concentration (specialization) leads to wealth concentration and the superstar effect. Afterwards, I'll offer other examples to help clarify the concept further. For nearly 40 years, from the 1960s through the mid-1990s, when a company wanted to use computers to automate and improve a task's accuracy the firm would hire a team of programmers. As a result, companies of every size and type had customized software. This was great for programmers, but