Matt Nolan

Neuroscience, determinism, and free will

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The title sounds serious, but I am (sadly) not capable of steering into too much detail in this subject matter.  However, given that I have a rising interest in neuroeconomics I felt I should type something out about this quote (ht Andrew Sullivan):

Dualists about the mind and brain – those who hold that there are thinking substances like souls in the world as well as all the ordinary physical stuff – say that the mind sees and thinks and wants and calculates. Contemporary neuroscience dismisses this as crude, but Hacker argues that it just ends up swapping the mind with the brain, saying that the brain sees and thinks and wants and calculates. He says, “Merely replacing Cartesian ethereal stuff with glutinous grey matter and leaving everything else the same will not solve any problems. On the current neuroscientist’s view, it’s the brain that thinks and reasons and calculates and believes and fears and hopes. In fact, it’s human beings who do all these things, not their brains and not their minds. I don’t think it makes any sense to talk about the brain engaging in psychological or mental operations.”

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Matt Nolan

How many economists see government

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I have seen economists termed “growth fatalists” for the fact that we don’t believe that there is much government can do to change underlying economic fortunes.  Greg Mankiw posted a quote that summed up the position well:

Politicians are in charge of the modern economy in much the same way as a sailor is in charge of a small boat in a storm. The consequences of their losing control completely may be catastrophic (as civil war and hyperinflation in parts of the former Soviet empire have recently reminded us), but even while they keep afloat, their influence over the course of events is tiny in comparison with that of the storm around them. We who are their passengers may focus our hopes and fears upon them, and express profound gratitude toward them if we reach harbor safely, but that is chiefly because it seems pointless to thank the storm.

If I’m honest, I think that the belief that government can create growth magically stems from the fact that people want to feel like they have control of things – economic growth is something that impacts upon our daily lives that we have no control over, but if we can tell ourselves we have control it is easier to live our lives.

In the same way our forefathers would worship the sun, or a “god of the harvest” our modern society worships government policies that “will provide economic growth”.

Discuss 😉

Matt Nolan

Economist’s pledge

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Primum non nocere, first do no harm.  This is a good pledge for a medical professional, and would be a great pledge for a policy analyst, but it doesn’t make much sense as a pledge from an economist – as we don’t actually make decisions, we frame situations and describe trade-offs.

However, this does not mean that economists do not have some sort of moral obligation associated with their analysis.  In order to cover this off Robin Hanson discusses the “efficiency economist pledge” (ht Robbie A). :

I pledge to be an efficient economist, who helps clients find win-win deals to resolve social conflicts.

Reading the full pledge, it seems that the goal is to use economic advice to provide the client with the knowledge and tools they need to get what they are after.

This is as opposed to a moral principle I have heard discussed by Eric Crampton which pertains specifically to doing work for government.  Namely that when there is a difference between the social optimality of a policy and the policy that suit policy wonks, it is not right to provide advice that specifically benefits your client at a cost to broader society. [Do I have this right Eric?] Update:  Eric lays out his view more fully here.

If I have described Eric’s additional moral requirement appropriately, then my main counter to this has always been “it isn’t the economists fault that they are taking the incentives involved, it is just an illustration of government failure”.  The illustration should be made more apparent IMO, but I do not blame analysts for acting in their self interest.

Matt Nolan

Maths and economics

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There has been a lot of negative talk about the maths in economics – like a huge amount.  Just look at these links, some of them are poor and reactionary, but some of them are excellent and the last two are my favourite (*, *, *,*,*,*).

Now although I believe much of this attack is excessive, and I believe the role of maths in economics is very very important, like all protestations there is a grain of truth to be found.

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Matt Nolan

What happened to the term monetarism?

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Given the sudden rapid attack on New Zealand monetary policy from various segments I’ve begun to notice a few more things crawling around in political language that confuse me.

For example, the term monetarist.  In a discussion with my sister and on this post from the DimPost the term “monetarist” was used to describe a relatively right wing outlook about political issues and policy in general.  However, this confuses me.  My impression was that monetarists at their most narrow are people that believe money supply growth = inflation completely.  While more generally a monetarist is someone that believes money supply growth is in some way related to higher long run inflation.

In this sense, even some of the most left-wing economists have a touch of monetarist in them.  Monetarism is a set of beliefs about how changes in the money supply influence inflation – not a set of beliefs regarding the appropriateness of “economic freedom” or “government intervention”.

When replying to my sister I said:

Monetarism is simply people saying, if we print a whole bunch of money it will end up increasing prices. Evidence and logic add some credence to this view, and so even very left wing economists are in some sense monetarists.

However, an early monetarist was Friedman. He also wrote heaps on “economic freedom”, which is viewed as quite right wing a lot of the time. As a result, people have said Friedman=monetarist and have associated that word with political views that have nothing to do with it.

I think what they mean is “capitalism based on the idea that individual freedom almost always leads to the best outcomes for society” instead of “capitalism based on monetarist theory” – as the second statement doesn’t actually make any sense to me.

Update:  Paul Walker blogs Milton Friedman’s own views on what monetarism is.

goonix

Chelsea’s transfer ban and the potential for player hold-up

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FIFA have punished Chelsea by banning them from the signing new players in the next two transfer windows after they were found guilty of inducing Gael Kakuta, a France youth international, to breach his contract with Lens in 2007. The decision means that Chelsea will not be able to add to their squad until January 2011.

Fifa’s regulations on the status and transfer of players state in Article 17, paragraph 4: “It shall be presumed, unless established to the contrary, that any club signing a professional who has terminated his contract without just cause has induced that professional to commit a breach. The club shall be banned from registering any new players, either nationally or internationally, for two registration periods.”

How will this ban affect the incentives of current players registered with Chelsea? The club, being unable to sign new players, will be desperate to hold on to what they already have. The current players, knowing that the club cannot look elsewhere to replace them, will be in the driving seat when it comes to contract negotiation as they can effectively ‘hold-up’ the club to meet their demands.

The precedent for such bans being enforced is not strong, however, with Roma having their ban reduced to one summer transfer window (arguably the less important transfer window in a season) and Swiss club Sion currently appealing their two window ban.