April 2014

Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30      
Blog powered by Typepad

« Lots of Thoughts on "The Future of Marriage" | Main | New Blog Spot for Hayek Scholars »

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451eb0069e200e54ff352bc8833

Listed below are links to weblogs that reference Steve Pejovich Knows How to Ask the Right Questions?:

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Steve Pejovich seems to imply, in his 1982 Kyklos article, "Karl Marx, property rights school and the process of social change", that the precursor of his endogenous approach to the formation of property rights and institutions in general is none-other than the writer of Das Kapital ! Now that's a really great change of direction regarding the influence of Marx's ideas, but how much of this genealogy do you think is justify ?

On the other hand, do you by chance know any other economist out there who has a quasi anarcho-capitalist perspective on society while quoting Marx as an inspiration ?

Bogdan,

David Prychitko and Don Lavoie would fit your description.

Pete

David Prychitko is awesome, though his books can be difficult to procure if you're not involved with an academic institution or rich.

He's the rare Austrian economist who has some good things to say, and history to back it up, about worker controlled enterprises.

Pete,

Um, Isn't this a willful misinterprutation of what proponents of counter-cyclical policy believe!?

Take Milton Friedman for example. He would have agreed that an aggressive expansion of the money supply in the early 1930's would have prevented the Great Depression. YET, he would not have agreed with someone who thought printing money was a path to long-term growth. AND he would have agreed that socialist economies suffer in the long-run.

This is NOT a good question, AT ALL.

Note:
Before anyone complains that "Milton Friedman would have prefered the Fed not to have discretionary power to begin with" let me tell you that is beside the point.

Pejovich was not arguing that "governments should not be counted on to always act appropriatley, even if there are occasional instances where their intervention might improve economic performance". Instead, he simply asserts that government cannot improve economic performance. PERIOD.

Milton Friedman would clearly find Pejovich's theoretical position far too strong, even if he may have liked the flavor of Pejovich's politics.

What???

Obviously government CAN get us out of recession with a properly timed stimulus package, just as it has gotten us into one with its badly timed ones. Whether it SHOULD try any of this is a different question. (This was Friedman's position.)


The Pejovich observation conflates fiscal policy and central planning. They are entirely different. He's asking an inane question.

I think both Dee and Arrow-Debreu need to go back and re-read Milton Friedman!!! Especially his work on Rules vs. Discretion.

Also, to push the point a bit, watch Sam Peltzman's interview in The Commanding Heights where he turns to the camera after explaining Keynesian fine-tuning and says "Sould like central planning doesn't it?"

Good luck with the "properly timed" stimulus package --- it is the proper timing aspect which is being questioned by thinkers from Hayek to Friedman to Buchanan to Pejovich.

My own view, government can only get us out of recession by getting out of the way and letting the market adjustments take place. The policy packages as remedies only make matters worse in the long run. The explanation for the "success" in the past is due not to government policy, but do instead to the simultaneous development through the market mechanism of gains from trade and gains from innovation. There is a horse race so to speak of going on between the Smithian horse of trade, the Schumpeterian horse of innovation, and the Studipidty horse of government. As long as Smith and Schumpeter stay ahead of Stupidity, we can put up with a lot of Stupidity. But when Stupidity gets the lead, or in combination with even more STUPIDITY somehow ties up Smith and Schumpeter, then things get bad fast.

Let the market adjust to the changing circumstances, weed out the bad investments, reallocate capital and labor, and reap the benefits of the gains from trade and the gains from innovation, and recessions will be short lived and long term economic growth will be restored to the appropriate path. But let politics dictate your policies and recessions become depressions, signals remain false so systemic waste is embedded in the system, and economic growth is thwarted.

Just as Hayek, Friedman, and Buchanan taught us the problems with timing, they also provided solid economic arguments for why market processes if left on their own work to generate long term economic growth and generalized prosperity.

Pete,

That wasn't what Pejovich said. He did not say that governments are ill equipped to reliably get us out of recession, he said that it simply wasn't possible. period. That is most certainly NOT Friedman's argument.

Also, if Keynesian fine-tuning is the same as central planning, then America is just another centrally planned welfare state. So doesn't that make the US a fine counter-example to Pejovich's final point that such countries perform poorly?

Woops. That last one was me (student). I'm too used to typing in my normal blogging alias. Pete is the only blogger I read that requests people use their real name. And since he is good enough to engage in thoughtful discussion, I am happy to oblidge.

Pete didn't say Keynsian fine tuning is the same as a central planning- he quoted someone that said it "sounds like it" i.e., it has a similar economic foundation; that government can somehow control the economy 'better'(from the government's point of view) than the market. Of course the US cannot be compared in the least degree to true central planning- although there are many interventionist and 'welfare' policies there are still market prices.

Dee, your point that the fact that the US performs well despite interventionist and welfare policies is a key example of why economic theories cannot be derived from experience; its impossible to isolate the effects of one variable; why do we say the Smithian Horse and Schumter's Horse drive growth instead of the Stupidity horse? Economic theory explains this.

Jacob,

Then I am confused. Arrow's complaint was that Pejovich was conflating Keynesian fine-tuning with central planning. If Pete actually agrees that they are not the same, I'm not sure why he hinted that they were.

If you agree that they are different, then you should also agree that Pejovich is willfully misrepresenting the arguments of his opponents. One can easily believe that the government CAN smooth the business cycle without being a socialist, despite Pejovich insinuation to the contrary.

Dee,

First, thanks for using your name ... I didn't realize I was violating a norm, I just thought I was asking for the sort of honest exchange we hope defines intellectual discussion. But Horwitz has told me that my request is violating blog norms.

Second, on US central planning, what I would say is that we overestimated the extent of socialism in Soviet Russia, and understimated the extent of socialism in the US. The empirical record is clouded by a variety of factors and the fact that we are not dealing with "pure" experiments. However, the question on the US is one of the counter-factual --- absent this set of policies what could have been achieved? This is always a very tough question to pursue in a convncing manner. But there is no doubt counter-factuals that much be considered in making an assessment.

Pete

Hey, a *request* to use real names is a GOOD thing. A *requirement* that people do would be an unusual change from most blogging norms. People do have reasons to want to be anonymous.

What IS useful is that those who wish to be anonymous pick ONE name and stick to it.

Friedman believed fine tuning would make things worse because of timing and incentive problems, not that it was inherently impotent or contradictory.

Was it reasonable for the Fed to have acted quickly following 9/11 to stabilize the economy? Maybe so... and any argument otherwise that dwelt on the problems of socialism would have been off point.

If you were trying to argue with, say, Paul Krugman, against a stimulus package, it would be senseless to argue that market economies outperform socialist ones; this point is not in contention re stimulus, and it is simply sloppy thinking on SP's part to suggest it is.

I happen to think the fiscal stimulus is a bad idea, and socialism is, too. But the arguments against them are entirely different.

Couldn't the argument be made that a stimulus could speed along the process of re-allocating the capital which was malinvested in housing?

I'm not saying I agree with that, but if someone rejects the idea that excess credit-driven stimulus caused the housing bubble, mightn't they think something like this?

"Friedman believed fine tuning would make things worse because of timing and incentive problems, not that it was inherently impotent or contradictory."

What if those timing and incentive problems cannot be solved by policymakers? Doesn't that make them "inherent" in the counter-cyclical policy process and therefore make said process "impotent" if not counter-productive?

Your argument rests on the hidden premise that the issues of timing and incentives are solvable within the framework of government policymaking. What if they aren't? (And I don't think it's a stretch to believe Friedman would think they weren't.) Isn't it then the case that the same sort of concerns about timing and incentives (not to mention knowledge) that inherently plague central planning also inherently plague counter-cyclical policymaking, even if they are not as severe and the unpleasant results not as dramatic?

Steven,

But again, you miss the point Pejovich was making. If his problem with counter-cyclical policy was that it ussually ill timed, he would not have asked "why wait for a recession".

The obvious reply to that question is that the ENTIRE POINT of counter-cyclical policy is to smooth the business cycle, not foster long-term growth. Therefore, when a recession isn't looming, there is no reason for government intervention.

Again, Pejovich was willfully misunderstanding the argument of stimulus proponents. He could have made better arguments, but he didn't. Why? I don't know. My guess is that he was looking for a slam dunk case and himing and hawing about economic reality didn't have the punch he was looking for.

Understood Dee. I wasn't so much defending Pejovich as responding to Arrow.Debreu's point about Friedman.

Re my article in Kyklos: The issue is whether analysis in the article was good economics or bad economics. All other labels have nothing to do with scholarship.

Re government got us in this mess and should get us out: If the former were true why should we have faith in the latter?

Steve Pejovich,

That's certainly a betty question than the ones posed in the Dallas Morning News (namely, it avoids conflating counter-cyclical policy with socialism).

Of course, I'm not convinced the looming recession (or even the Housing Boom/Bust in particular) is the government's fault. The Fed started tightening monetary policy in 2004, but long-term interest rates stayed very low for years afterward. In 2006, some people called this the "flat yield curve paradox". In 2007, many more forgot all about it and blamed the housing bust on the loose monetary policy that ended 3 years earlier. Memory is a funny thing.

But, those are just my own doubts. One could easily make arguments in favor of the boom-bust story. It all depends on what assumptions you make and whether they hold up in reality. And I think those questions would be much more interesting to read about in my daily news. It's a pity more people don't write about them.

excuse me. I meant to say "better question", "betty question".

Professor Pejovich,

I agree that labels have nothing to do with scholarship per se, although I'm sure that you will agree that just like ideologies or institutions they fulfill an economizing function and we might say they help reduce transaction cost in discourse.

Anyway, my use of the term anarcho-capitalist in my first comment was intent to gently underline the irony of the parallel between Marx's self describe communist anarchism and the logical consequences that could stem from a spontaneous laissez-faire perspective endorsed by other economists - but which I know, as far as my knowledge of your writing goes, you do not share, hence the prefix "quasi".

On the other hand, I mentioned the Kyklos article only because I was genuinely curious if other people find the marxist genealogy of the property rights/institutional approach - well argued in the article - convincing. I myself tend to believe that Hayek and not Marx provided the inspiration, but I know at least one person more knowledgeable in Marx's writings (or yours for that matter) than me who agrees with your genealogical perspective (as a side note, I've heard that the favorable mention of Marx in your article might explain why it seemes to have escaped the cultural censorship of the Romania communist authorities and was read by some students and academics at the end of the 1980s).

To Horwitz: Friedman didn't doubt that government monetary and fiscal interventions had real effects. Hence in principle, they might be useful in certain circumstances for smoothing over sudden disruptions. (E.g. compare to a New Classical who would claim Ricardian equivalence makes fiscal policy impoetnt.)

Friedman did doubt they could be timed properly to do this in a systematic fashion. This is a different issue. I beleive he was correct on both counts.

Pejovich comment suggested that since government cannot plan the entire economy, on an ongoing, permanent basis, that therefore it is also unreasonable to think they can succesfully engage in countercyclical policy. The two kinds of interventions are entirely different, and the "therefore" simply does not follow.

"how come socialist/welfare states consistently perform worse than free-market economies?"

I've been looking for hard-fact to support this exact claim. Any idea what historical evidence or otherwise he's drawing on to make this statement?

Писака юморист

This was an age of innocence and happiness.God bless you all, and God bless America !

Tomorrow is an other day!@

The comments to this entry are closed.