Friends have inside jokes. When an outsider or newcomer asks “What’s so funny?” sometimes the only serviceable response is “You had to be there” or “You just don’t get it.”
But the truth is, that’s not true. You could explain the inside joke so that any outsider could understand it. What’s much harder is explaining it so that the outsider feels it. This is a common insight when it comes to jokes. Explanations of jokes are like dissections of lab animals: In order to demonstrate how they work, you have to kill them.
Jonah Goldberg, The Goldberg File newsletter, 2016-10-21.
August 16, 2018
QotD: Anatomy of a joke
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August 15, 2018
QotD: State economic intervention in theory and practice
The economic theory: the state intervenes in the economy in order to prevent free-riding – in order to internalize externalities – in order to better ensure that all private parties pay the full marginal costs of their activities, and that all private parties reap the full marginal benefits of their activities – in order to promote competition – in order to protect the weak from the strong.
The political reality: the state intervenes in the economy in order to promote free-riding – in order to externalize costs and benefits that the market has reasonably internalized – in order to better ensure that politically powerful private parties escape the full marginal costs of their activities, and that politically disfavored groups be stripped of much of the marginal benefits of their activities – in order to promote monopoly – in order to render some people weak who are then pillaged by the strong.
Don Boudreaux, “Economists’ Normative Case for Government Intervention is a Very Poor Positive Theory of that Intervention”, Café Hayek, 2016-09-26.
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August 14, 2018
QotD: The money pump
I would like to introduce you to the idea of a money pump. A money pump is a person whose irrationalities can be systematically exploited for financial gain. The simplest money pump is a person who prefers an apple to a doughnut, prefers a doughnut to a chocolate bar, and prefers a chocolate bar to an apple. Just offer them an apple in exchange for their doughnut plus a penny. They will accept. Then offer them a chocolate bar for their apple plus a penny. Then offer them a doughnut for their chocolate bar plus a penny. They end up with their original doughnut and are three pence poorer. Repeat for ever.
Money-pump arguments are sometimes deployed to object that people cannot be irrational, otherwise they would be bankrupted by money pumping. But economists are increasingly coming to realise that, instead, we should be looking for money pumping in action.
Given our anxiety about small risks, what would the money pumping look like? It would be an insurance policy focused on the narrowest possible slice of risk. It would be sold alongside another product or service, often at the last moment. It would be marketed by creating anxiety and then offering the product to make the anxiety go away. In short, it would look like the collision damage waiver, the extended warranty, and PPI [payment protection insurance]. These bespoke slices of insurance are among the largest money-pumping projects in the modern economy. No wonder the banks abandoned their principles to join in.
Tim Harford, “How insurers keep the money-pump flowing”, TimHarford.com, 2016-09-21.
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August 13, 2018
August 12, 2018
QotD: Journalism
Journalism is about covering important stories. With a pillow, until they stop moving.
David Burge (@iowahawkblog), Twitter, 2013-05-09.
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August 11, 2018
QotD: Reductio ad Hitlerum
The poverty of peoples’ collective memory and imagination is such that the first minute any politician strays from the path of universalism, commentators reach for the most shocking (and only) historical comparison they can think of.
Ed West, “It’s absurd to compare Amber Rudd’s immigration speech to Mein Kampf”, The Spectator, 2016-11-07.
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August 10, 2018
QotD: Demands for “fair” trade
Whenever you hear someone demand that trade be made “fair” – whenever you hear someone plead for trade to be conducted on a “level playing field” – you can bet your pension that you are hearing a domestic producer, or its spokesperson, soliciting the state for protection from competition. You are hearing sweet words mask a sour plea for monopoly power. You are hearing a greedy corporation or other politically powerful producer group appeal to those who hold power that that power be wielded against fellow citizens who dare to spend their own money in ways that promote their and their families’ best interests rather than in ways that promote the interests of the greedy corporation or other politically powerful producer group.
You are hearing, in short, a seeker of unfair privilege – a demander that the playing field be tilted against consumers’ and society’s broad interests and toward its own narrow interests.
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-11-01.
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August 9, 2018
QotD: Gandhi the man
Gandhi rose early, usually at three-thirty, and before his first bowel movement (during which he received visitors, although possibly not Margaret Bourke-White) he spent two hours in meditation, listening to his “inner voice.” Now Gandhi was an extremely vocal individual, and in addition to spending an hour each day in vigorous walking, another hour spinning at his primitive spinning wheel, another hour at further prayers, another hour being massaged nude by teenage girls, and many hours deciding such things as affairs of state, he produced a quite unconscionable number of articles and speeches and wrote an average of sixty letters a day. All considered, it is not really surprising that his inner voice said different things to him at different times. Despising consistency and never checking his earlier statements, and yet inhumanly obstinate about his position at any given moment, Gandhi is thought by some Indians today (according to V.S. Naipaul) to have been so erratic and unpredictable that he may have delayed Indian independence for twenty-five years.
For Gandhi was an extremely difficult man to work with. He had no partners, only disciples. For members of his ashrams, he dictated every minute of their days, and not only every morsel of food they should eat but when they should eat it. Without ever having heard of a protein or a vitamin, he considered himself an expert on diet, as on most things, and was constantly experimenting. Once when he fell ill, he was found to have been living on a diet of ground-nut butter and lemon juice; British doctors called it malnutrition. And Gandhi had even greater confidence in his abilities as a “nature doctor,” prescribing obligatory cures for his ashramites, such as dried cow-dung powder and various concoctions containing cow dung (the cow, of course, being sacred to the Hindu). And to those he really loved he gave enemas — but again, alas, not to Margaret Bourke-White. Which is too bad, really. For admiring Candice Bergen’s work as I do, I would have been most interested in seeing how she would have experienced this beatitude. The scene might have lived in film history.
There are 400 biographies of Gandhi, and his writings run to 80 volumes, and since he lived to be seventy-nine, and rarely fell silent, there are, as I have indicated, quite a few inconsistencies. The authors of the present movie even acknowledge in a little-noticed opening title that they have made a film only true to Gandhi’s “spirit.” For my part, I do not intend to pick through Gandhi’s writings to make him look like Attila the Hun (although the thought is tempting), but to give a fair, weighted balance of his views, laying stress above all on his actions, and on what he told other men to do when the time for action had come.
Richard Grenier, “The Gandhi Nobody Knows”, Commentary, 1983-03-01.
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August 8, 2018
QotD: Bad books
The art of not reading is a very important one. It consists in not taking an interest in whatever may be engaging the attention of the general public at any particular time. When some political or ecclesiastical pamphlet, or novel, or poem is making a great commotion, you should remember that he who writes for fools always finds a large public. A precondition for reading good books is not reading bad ones: for life is short.
Arthur Schopenhauer, Essays and Aphorisms, 1851.
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August 7, 2018
QotD: Sailing past Byzantium
To those who know nothing about the mediaeval, “byzantine” East of Christendom (and what do I know about anything?) a book by the respectable Oxford scholar, Averil Cameron, is worth mentioning. It is a short survey of developments in her academic field, entitled, Byzantine Matters (2014). It poses five basic questions on which our common assumptions are mostly wrong, and provides succinct directions for thinking again.
Mediaeval Greece, the Byzantine dynasties, and Orthodox Christianity: these are far from interchangeable concepts. Moreover, “Byzantine art” — the focus of enthusiasm in the anglosphere through the last century or so — is misunderstood. The term “Byzantine” itself — conceived from late antiquity as a deprecation — persists in the academy as an intelligence neutralizer. The vanity of “the West” gets in the way of appreciating a parallel Christian realm, which flourished for more than a thousand years, and never succumbed to the Arabs. (It finally succumbed to the Turks.) We disdain what amounts to an alternative universe of Christian witness and high culture, of great variety and depth, even more obtusely than we disdain our own Middle Ages.
We are narrowed and prejudiced by the attitudinizing of Edward Gibbon, and the inheritance (or disinheritance) of our Western “Enlightenment,” to view as backward a civilization in most ways superior to our “modern” own, from pride in the tinsel of technology. From AD 330 (the founding of Constantine’s capital) to 1453 (when it fell into Ottoman hands), we see only a continuous story of “decline.” But there were many declines over this vast period, and in the intervals between them, many recoveries.
David Warren, “Sailing past Byzantium”, Essays in Idleness, 2016-11-07.
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August 6, 2018
QotD: Voting
Most people vote in elections for the candidate they dislike the least, and perhaps this is as it should be: positive enthusiasm for candidates and politicians in general is likely to give them an inflated idea of their own importance and thereby promote the politicization of life.
Theodore Dalrymple, “Self-Anointed v. Resentful: A view from across the Atlantic”, City Journal, 2016-11-08.
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August 5, 2018
QotD: Risk aversion
… let’s step back and ask ourselves what insurance is for. Classical economics has an answer: people are risk-averse, which means that they will pay good money to reduce the variability of outcomes they face. If home insurance guards against the loss of a million pounds when my house burns down, I’m happy to buy the insurance even though the insurance company expects to make a profit from it.
But this risk aversion emerges from the fact that money is worth more to poor people than to rich people. Gaining a million pounds would make me rich but losing a million pounds would make me poor. I should not gamble a million pounds on the toss of a coin, because the million pounds I might lose is more precious to me than the million pounds I might gain.
As so often with classical economics, this is an excellent description of how we should behave. It is not such an excellent description of how we actually do behave. Risk aversion can only explain why we insure large risks. It cannot explain why we insure small ones. This is because risk aversion turns on the idea that an extra pound is worth more if you are poor than if you are rich. But having to replace a phone is not going to make the difference between poverty and wealth.
In one of my favourite economics articles, written in 2001, the behavioural economists Richard Thaler and Matthew Rabin point out that anyone who rejects a 50/50 gamble to win £10.10 or lose £10 — apparently a reasonable enough taste for caution — cannot possibly be doing so because of risk aversion. (The degree of risk aversion necessary would mean that the same individual wouldn’t risk £1,000 on the toss of a coin for all the money in the world.) Risk aversion simply cannot explain why anyone would turn down that fractionally favourable gamble. And it cannot explain why anyone would insure a mobile phone.
A better explanation is that we tend to view risks in isolation. Rather than telling ourselves “a lost mobile phone would lower my lifetime wealth by 0.005 per cent”, we tell ourselves “it would be so annoying to have to pay for a new mobile phone”. Isolating and obsessing about risks in this way is arbitrary and illogical. But that does not mean we don’t do it.
Tim Harford, “How insurers keep the money-pump flowing”, TimHarford.com, 2016-09-21.
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August 4, 2018
QotD: Supply and demand
… that terribly simplistic stuff about supply and demand in those econ 101 classes is actually true. Prices are not some arbitrary numbers thrown at something by the capitalist neoliberals in order to do down the proletariat. They’re vital and essential information about who wants what and who is willing to produce what. Where the supply and demand curves meet is where the market will clear and the market price will be the market clearing price. The meaning of this is that when you decide to arbitrarily throw a price at something you’re going to up set that balance. And if you tell producers that the price will be lower than the market one then they will produce less. And as demand curves slope downwards so will consumers desire more at that lower price. Thus price fixing below the market price produces a shortage, a dearth.
This is not some optional feature, it’s an essential fact about our universe. It is the explanation for those food shortages that Venezuela has been having. More than that it’s the only explanation we need or desire. Fix prices below the market price and you will have shortages. Stop fixing prices and you will stop having shortages.
So, well done to Venezuela for giving in to reality there. And this is something that we need to take on board too. Rent controls which fix the price of housing below the market price will lead to a shortage of housing. And the opposite applies too – fix the price of labour above that market price with a minimum wage and you’ll have an excess supply of labour. Or, as we usually call that, an excess of unemployment.
The price of something simply is the price of something and don’t ever forget it.
Tim Worstall, “Congratulations To Bolivarian Socialism – Finally A Sensible Economic Policy In Venezuela”, Forbes, 2016-10-15.
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August 3, 2018
QotD: The lost kingdom of Pontus
Pontus is that country, within modern Turkey, that follows the south-east Black Sea shore, and inland is enclosed as by an amphitheatre of mountains. It is the more interesting, archaeologically, for having been often by-passed, in the movements of conquering nomads and armies, from Hittites and Hurrians to Arabs and Turks. The Greeks took it, because they came by sea. They kept it, till late in the day; so that even after Constantinople fell to our short-sighted Franks (in 1204), the Empire of Trebizond immediately formed, and Byzantium persisted in Pontus, as in Crimea and elsewhere, until it could be restored at its centre.
David Warren, “A wonderworker”, Essays in Idleness, 2016-11-17.
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August 2, 2018
QotD: Economic complexity
“Progressives” mistake as “science” their habit of lumping countless idiosyncratic individuals and things, each always in an ever-changing set of deeply nuanced circumstances, into catch-all categories (such as “consumers,” “labor,” “government,” “the environment,” “the health-care sector,” “the money supply,” “the unemployment rate,” “the capital stock,” and “imports”) and then theorizing about how these big blobs of people and things interact with each other, and how these interactions can be “improved” by an apolitical, loving, intelligent, ever-diligent scientific guiding hand. That professors and their graduate students can assemble data on each of these big blobs of people and things, can write intricate equations describing mathematically how the professors and their graduate students imagine these blobs interacting with each other, and use the gathered data and sophisticated software to “test” the equation-ladened “models” seems oh-so-objective and truly scientific.
Yet most such exercises are b.s. Far too many of these exercises, when done by economists, are done in utter disregard of the meaningful, if impossible to observe from afar, differences that separate from each other each of the individuals and things that comprise each constructed blob. Far too many of these exercise are done by people whose impressive, deep, and vast knowledge of econometric techniques does not begin to compensate for their innocence of price theory, of history, and of formal and informal institutions.
Correctly taught and understood, economics reveals that reality is vastly more complex than the economically untutored mind realizes. Yet this message of complexity is unwelcome by those who want to rule and command. The reason is that to understand the reality of reality’s complexities is to understand that ruling and commanding – the actions of the “man of system” – can only worsen most individuals’ lives. Ruling and commanding of the sort that “men – and women – of system” itch to do can only disrupt for the worse, and not improve for the better, the spontaneous forces of society.
Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-09-20.
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