Religion and institutions

I see the Pope made some comments about capitalism and social justice, and a bunch of economists were unhappy with this (Mankiw, Sumner) – or were unhappy with the way economists viewed the Pope’s comments.  Note:  This piece is a good discussion.

My view is easily summarized.  Meh.  I grew up in a Catholic family, going to church every week and doing all the classes – and if there was anything I learnt from reading all the “social justice literature” it was that Catholicism as an institution likes to frame things as battles between “right” and “wrong” rather than actually trying to understand the subtle undertones of what is actually happening.  The Pope seems like a nice guy, who is well intentioned, but he relies on “common sense” views of rising injustice – rather than looking at the facts.  While this makes Catholics feel good about themselves, it is a lazy way to talk about justice and fairness – which implies that there is some truth to what he says (we should talk about these matters) but it also propagates dangerous falsehoods.

Note:  If anyone is wondering, I’m not being bitter here.  Growing up my church was filled with good people who were incredibly supportive, who gave me good life advice, and who were always kind – I have nothing but good feelings about any of this.  But the general attitude that exists in society as a whole, that there are obvious good and evil things, is dangerously naive.

Yes, many Catholics have different value judgments than wider society – with far more redistribution desired (I will of course admit to being in this direction on a personal level).  And this is cool!  But I just don’t see this as a reason to employ empty rhetoric to persuade others to introduce policies that favour your value judgments, which is what they are doing.

Of course, this brings us to the actual subject of this post – religion is an institution, an institution that fills a certain role within society and the lives of an individual.  When we think about ideas of ‘social capital’, religion offers us a lens on the type of community/social institutions we are talking about when thinking about this issue.  This is a common idea, and with the use of a little game theory we can even state that Jesus was an early applied economist.

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On studying economics

I was going to do a quote by Joan Robinson as a quote of the day – but then I realised, I’d done this before!

The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.

And in 2008 I made the same point I was about the make now:

Training to be an economist does not tell you the answer to any economic question – it gives you the tools with which to determine answers for yourself, given your own set of value judgments.

Although I would note “any” is a bit strong, it really depends what the question is 🙂 .  So why was I going to post this quote again? Read more

Quote(s) of the day: Keuzenkamp on controls and data mining

As I indicated here I am reading Probability, Econometrics, and Truth.  A nice outline of things, I’m enjoying it at present (I was 20% of the way through when I wrote this post over five weeks ago).

Two quotes I’d like to note down here: Read more

Isn’t Economic History grand

The discussion about Milton Friedman going on at the moment is great fun – with a bunch of people discussing whether Friedman was Keynesian and what this even means.

It all starts with Krugman attacking Friedman’s obsession with monetary aggregates.

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The attacks on Keynes and how to be a bad analyst

Brad Delong, combined with an imbedded quote by Krugman, covers off the bone-headed remarks of Niall Ferguson on Keynes in this post.

[Note:  You might wondering why I’m posting when he has apologised – isn’t that a bit uncharitable of me.  Well, he’s said these things in the past so I believe that some element of them remains core to his analysis, and even for off the cuff remarks they indicate a rot that exists among analysts when it comes to looking at models that I want to rant about.]

Now I am not calling Niall Ferguson an idiot for no reason – I accept he is a man of high regard who has, and will, achieve more than I ever will.  Furthermore, as a historian, even as a good analyst, the ideas and philosophies imbedded in someones actions are fair game!  The fact Keynes is gay, was in the Bloomsbury group, and didn’t have kids are all relevant factors for trying to understand Keynes and the subjective assumptions he made when doing analysis!

I have simply lost all respect for Ferguson’s analysis because he has simply played the man and not the ball when doing this.  Any analyst, and especially any real historian, would given this real context in terms of where it actually matters.  Here let me explain.

Truly, the lessons we learnt from Keynes and can apply to our understanding of the economy and the management of currency (which are many) exist independent of our subjective belief about what the “right” rate of time preference is.  The debate about the correct rate of time preference hasn’t been set by any “ancient Keynesian tomb” and should be discussed directly – rather than abusing the notion of a man that can’t defend himself.

If Keynes had said “the discount factor is X” then someone may say “his subjective preferences due to his lifestyle had an impact on that, and I don’t think that is a fair interpretations of how we see things now – and the trade-offs we are willing to make”.

Instead, we see people come out feeling that the government is borrowing too much – and they decide to throw ad hominem attacks on a dead man.  Keynes as a man wasn’t even a supporter of large sustained deficits – he was simply a man trying to work out what the hell was going on during the Great Depression.  Something many modern analysts avoid by directly excluding that time period and just assuming it will never happen again.

Think about it for a second.  Economics involves many models trying to explain and add light to tendencies in the world.  During the largest slump in history and following on from a Great War and the collapse of democracy, would you expect the thinkers of the day to be focused on building and trying to understand models of 100 years in the future – or of trying to understand the extreme business cycle and institutional fluctuations of the day!  The term “the General Theory” may have been inappropriate and grandiose – but his work on business cycles was undeniably useful, especially when combined with the increasing formalisation of the discipline in the following decades.

If bagging someones entire process of thought because they were gay (in truth bisexual) is a legitimate expression of academia nowadays, it’s frankly embarrassing – and suggests that people should perhaps spend a little more time refining their understanding of philosophy before they open their mouth.  If we want to think of the type of standard that people discussing economic concepts should set (and the unfairly high standard I apply to economists I’m listening to), then we should go back to a quote by none other than Keynes, the first quote I popped up on this blog:

… the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher–in some degree.  He must understand symbols and speak in words.  He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought.  He must study the present in the light of the past for the purposes of the future.  No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician.

It was this quote that turned me to economics when I was 14, and it was attending classes with lecturers who felt this way about the subject that convinced me to give up on any other career or hobby and study economics.  So I guess I’m undoubtedly a little biased – perhaps that is colouring my defence, and I should be ignored for the man who is implicitly assuming that gay people, and people without children, effectively hate the rest of society ….

We are always repeating old debates

This is a neat history of deposit insurance in the US (via Economist’s View).  It is a clear indication that many of these debates have occurred in the past, and many of the ideas that float around nowadays are simply old ideas being given fresh life.

In 1829, Forman proposed an insurance fund capitalized by mandatory contributions from the state’s banks. Debate in the State Assembly was heated. Critics said failures could overwhelm the fund; they also argued that its very existence would reduce the “public scrutiny and watchfulness” that restrained bankers from reckless lending. This remains the intellectual argument against insurance today. But Forman’s plan was enacted, and subsequently five other states adopted plans.

All did not go smoothly. In the 1840s, during a national depression, 11 banks in New York State failed and the insurance fund — as prophesied — was threatened with insolvency. The state sold bonds to bail it out.

There has been a bit of discussion of these issues here.  The key thing is that we are working off a clear and concise trade-off, and description of reality, that has existed for a long time now.  Even with this knowledge and this clear framework, trying to figure out what is “right” is difficult, and often policy merely goes to where it is “convenient”.  Our biggest mistake would be to ignore the lessons of history, act like this time is truly different, and try to build our knowledge and understanding from scratch.

This is a broader principle for all debate in the social sciences.  Let’s not forget history, and let’s not forget that thinkers in the past were just as good at exciting thought experiments and “intuitive” forms of argument.