Early in his career as a mixing engineer, Dave Pensado discovered a version of Nobel laureate economist Kenneth Arrow’s impossibility theorem. As he puts it in his co-authored book with his Pensado’s Place co-host Herb Trawick, The Pensado Papers: The Rise of the Visionary Sensation:
“I learned very early on, even before I came to L.A., that no one ever hired me again because I did something cheap or fast. That doesn’t happen in my profession. The triangle has cheap at the top, fast on one corner, and good on the other. pick two. That’s pretty much what you have to do.”
Yet another example that good economic thinking doesn’t always come from economists.
Posted in Books, Economics, Music, The Arts
Tagged arrow impossibility theorem, audio, dave pensado, Economics, herb trawick, kenneth arrow, pensado's place, recording, tradeoffs
Art Carden has an amusing article up at Forbes titled “Ruining Christmas: An Economist’s Guide.” Here’s a taste:
1. You Shouldn’t Have. No, Really. You Shouldn’t Have. The classic salvo in the literature on the economics of Christmas is Joel Waldfogel’s “The Deadweight Loss of Christmas,” which provides a bit of evidence that people would be happier if you gave them cash instead of an equally-expensive present. Yes, it’s the thought that counts, but how many of us have given (or gotten) gifts that have ended up in an end-of-year Goodwill donation or a Spring yard sale?
We learned this first-hand at a family holiday party that involved a white elephant gift exchange. Everyone went home happy, but one participant (an Alabama fan) opened a box of Auburn stuff, another (an Auburn fan) opened Alabama stuff, and one of the gifts I (an Alabama fan) opened was an LSU cap. Again, everything worked out in the end, but the initial distribution was incredibly inefficient.
Read the whole thing. Carden also wrote the equally amusing “How Economics Saved Christmas.” My review of Waldfogel’s book is here.
No man is an island. Economics is based on that fact. You can’t make an exchange, and markets cannot emerge, with solitary people leading solitary lives. Evolution bears this out. Our predecessors, from at least Australopithecus on down, lived in bands and tribes. Not alone. They lived, loved, ate, fought, and died together. We are evolved to need each other.
Rousseau, who died over 70 years before Darwin’s Origin of Species, thought differently. His Original Man in the state of nature assumes away our innate social tendencies. From his false premises come many of his false conclusions:
He [Rousseau] begins with a portrait of natural man as a solitary animal devoid of reason and speech, a being whose limited needs can be easily satisfied without depending on anyone, whose soul is restricted to the sole sentiment of his existence without any idea of the future, as near as it may be.
Robert Zaresky and John T. Scott, The Philosophers’ Quarrel: Rousseau, Hume, and the Limits of Human Understanding, location 381 in the Kindle edition.
From that miserable Rousseauian Eden, we are fallen. Thank goodness.
Have a listen here.
In a recent NBC interview, President Obama blamed ATMs for taking away bank tellers’ jobs, and computerized airline check-in kiosks for eliminating aviation jobs. Communications Coordinator Lee Doren points out that innovation doesn’t affect the number of jobs so much as the types of jobs. Accomplishing more while using less labor is actually the key to prosperity. People looking for an explanation for today’s high unemployment need to look elsewhere.
Posted in CEI Podcast, Economics
Tagged atms, basic economics, cafe hayek, causes of unemployment, Don Boudreaux, econ 101, economic fallacies, Economics, jobs, jonah goldberg, lee doren, luddites, obama, obama atm, president obama, unemployment
Ben Powell does a great job of explaining why it’s easy for spending to go up, but hard for it to go down. Well worth two minutes of your time.
Sometimes the green part of green regulations isn’t the environment. It’s money.
Economics says that people act according to their incentives. Public choice theorists say that politicians and regulators also act according to their incentives — just like the rest of us. Those incentives include maximizing agency budgets and winning elections.
This short video from Reason.tv shows public choice theory in action:
“[T]he law ought always to trust people with the care of their own interest, as in their local situations they must generally be able to judge better of it than the legislature can do.”
-Adam Smith, The Wealth of Nations, Book IV, Ch. 5.
This sentence must have had a tremendous influence on Hayek’s thought.
And hence it is, that to feel much for others and little for ourselves, that to restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature; and can alone produce among mankind that harmony of sentiments and passions in which consists their whole grace and propriety.
-Adam Smith, Theory of Moral Sentiments, p. 25.
That sentence is more important to understanding how markets work than most people realize. The ability to feel empathy is part of what makes us human. It is also what makes market economies possible.
Without empathy, killing the customer would be at least as common as serving him. Mutual exchange — trade — is an act of peace. That wouldn’t be possible without the human ability to put ourselves in others’ shoes and feel for them. After all, it’s a lot easier to hit someone and take their stuff. And yet few people do. Empathy is a big reason why.
Adam Smith was one perceptive guy. Others have filled in gaps in his thought, and proven him wrong on some details. That does not take away from the fact that he was as perceptive as any thinker in history.
Posted in Economics, Great Thinkers, Philosophy
Tagged adam smith, benevolence, Economics, enlightenment, liberalism, market economies, market process, peace, Philosophy, scottish enlightenment, selfishness, sentiments, theory of moral sentiments, Trade, war
My colleague Ryan Radia and I recently sent this letter to The New York Times:
Editor, New York Times:
Catherine Rampell’s September 7 article, “Once a Dynamo, the Tech Sector Is Slow to Hire,” mourns the recent decline in U.S. data processing jobs. She blames much of the decline on the automation of previously tedious tasks.
May we suggest one way to get those jobs back: No more automation. Ban the use of computers for data processing. Imagine how much information flows through today’s global economy in an average day. Computers handle most of the load. That costs millions of jobs.
The effects would reverberate far beyond the tech sector. The paper, pen, and pencil industries would also boom.
Companies are dead-set on doing more with less. True, that creates more jobs in the long run by freeing up resources — and employees — for new ventures. But if only they would consider doing less with more, they could create more data processing jobs.
Ryan Young and Ryan Radia
Competitive Enterprise Institute
Posted in Business Cycles, Economics, The Market Process
Tagged basic economics, catherine rampell, creative destruction, data processing, econ 101, Economics, economics 101, employment, high tech jobs, jobs, new york times, outsourcing, progress