I think a bunch of stuff is still broken. But at least I exist!
ABSTRACT: I show that in a true Coasean world – a world with no transaction costs – there would be no disagreement on moral questions. There would be no disagreement on what the appropriate distribution of income should be. There would be no disagreement on the question of capital punishment or abortion. If the government tried to re-distribute income contrary to the no-transaction cost ideal, then in a Coasean world, the beneficiaries would return the money to those from whom it was taken by taxation. Empirical studies of a near-Coasean economy show this predicted return occurring. Thus disagreements on values are actually disagreements over facts. I shall argue that the Coase Theorem itself suggests a moral rule: act to minimize transaction costs.
I didn't read the paper, but the idea astonishes me! What can we say about the abstract? Well, to get the result, it seems you would need to stipulate something like homogeneity in motivation. Is heterogenous motivation a transaction cost? Well, what's the aim of the social transaction that is an argument or conversation? If agreement or truth is the aim, then motivations based in something other than a drive for agreement or truth would indeed be a transaction cost. But if there are different kinds of motivations for maintaining a position, such as social signaling, commitment to an identity, or sporting obstinateness, then you can't say agreement or truth is the point of the social transaction. And so you can't see motivation incompatible with convergence as a transactions cost. Which seems like another way of saying that disagreements over values (or agreement on fact-indifferent values) drives disagreement over both factual and moral questions.
The point that what counts as a transaction cost depends on what the transaction is deserves more attention. The fact that two people are talking to each other, or bargaining over a deal, needn't entail they are both up to the same thing. The fact that one party is aiming for ains from trade and the other party isn't may well forestall a deal. And from at least one side, it may look like there was a transaction cost. But one or both party's was simply mistaken about the meaning of the engagement. Transactions costs don't keep me from reaping more consumer surplus from stones. I would simply be mistaken to try to bargain with a stone. And if I am frustrated by my inability to come to some understanding with someone who is not committed to basic norms of rationality, it's not really their fault that they saw our intercourse as a different kind of transaction, with a different kind of point. Maybe they saw the game as “size each other up,” in which case, my frustrated agreement/truth-seeking would be seen as a perfectly satisfactory display of certain commitments of mine.
The Coase Theorem is supposed to be an impossibility theorem. The point is that there never is efficient allocation (the economists' ideal analogue to the social epistemologist's convergence on truth) since there always are transaction cost. And this does direct attention to the source of those costs, the so-called “institutions” or “rules of the game” underlying regularities of social interaction. Bad institutions can leave a lot of potential gains on the table. The theorem helps us see just how much institutions matter. But I think we should be careful not to assume too much when defining transactions costs. Gains from trade may go unrealized not because of transactions costs, but because of failure to coordinate on the purpose of interaction or the nature of the gains sought.
That said, I love the idea of reducing transactions costs as a moral imperative. Let's test it. Try to think of examples where reducing transactions costs leads to a morally inferior result. Go!
In this week's Free Will, I get Bernanke classmate and former Freddie Mac and Fed economist Arnold Kling to explain to me how the heck we got in this sorry situation. I learned a ton. Thanks to Arnold, I was able to sound like I knew what I was talking about at a party Saturday night. Now you can too!
[UPDATE: If you are looking at this on your feed reader and you see Jonah Goldberg and Peter Beinart above, I don't know why. It's correct on my blog. So click through to the actual post or to the BHTV page.]
Good Cato podcast on the politics of the bailout with my colleague John Samples.
My review of Nudge by Sunstein and Thaler, which appears in the October edition of Reason is finally online. Here's how it starts:
At first blush, “libertarian paternalism” seems a linguistic miscarriage, a self-crippling idea condemned to limp aimlessly in eternal darkness on the island of misfit creeds alongside “humanitarian sadism” and “color-blind racism.” But that hasn't stopped Richard Thaler and Cass Sunstein, law and economics superstars at the University of Chicago, from pushing the catchphrase and concept as a solution to the nation's problems for a half-decade now. And this year libertarian paternalism has achieved manifesto status with the new Thaler/Sunstein book,Nudge: Improving Decisions about Health, Wealth, and Happiness.
In Nudge, Thaler and Sunstein argue that new findings in psychology should be used to help people and thereby chart an exciting “third way” beyond the exhausted politics of left and right. The book offers a list of inventive policy tweaks, some with a welcome libertarian flavor. But the modesty of the proposals mocks the occasional grandeur of the rhetoric and should put to rest any hopes or fears that the authors' brand of applied “behavioral economics” will soon transform the ideological landscape. Remember when that dork chariot, the Segway, was supposed to utterly reshape transportation? Libertarian paternalism is a lot like that: an innovative but overhyped dud.
IOZ is a delight because his assessment of our presidential candidates is completely accurate:
Obama terrifies me: an intelligent, thoughtful, well-prepared, capably extemporaneous man ascribing a future holocaust to some sort of non-existent, fantastical, steroidal Iran; talking about unsanctioned cross-border incursions into Pakistan because we found bin Laden, or some such, and must “take him out”; warbling around about “main street” while, in a lawerly, circumlocutory way signaling that he's ultimately going to get behind hundred-billion-dollar cash bailouts to institutions that ought to be dismantled, destroyed, scattered to the wind. He wants GM to make electric cars. He wants the American people to know that he will appear before them to make extravagant xenophobic declarations in order to assuage their insecurity about the rise of other competing economies. He does this all in a calm, perfectly reasonable manner, with a convincing boardroom demeanor, and judging by the reactions of my liberal friends, with whom I listened, this was basically pleasing to them.
McCain is of course out of his mind: forgetful, vicious, reactionary. And his ideas are even crazier than BO's, but there's a certain comfort in the fact that their insanity is laid so plainly and mercilessly bare by the grinning psychopath's delivery. He provides no quarter for those who want to convince themselves that by Killing People for Their Own Good we are not actually killing them, or that by suborning corporate malfeasance we are combating it, or that by desperately seeking to maintain the geography of radial sprawl and the automobile we are seeking “energy independence.”
This is an outstanding articulation of some of the considerations behind the fact that “I prefer Obama over McCain in much the way I prefer rancid milk over rancid milk regurgitated by a cat.”
If we are the ones we've been waiting for, do we need a president?
Well, the polls say Obama won pretty decisively. It looks like this is because women don't cotton to McCain, which is reasonable enough. Walnuts! Anyway, once again it is demonstrated that cosmopolitan libertarian metrosexual econophilosopher bloggers may not be the most reliable barometers of the popular mood.
Winston was sleeping during the debate, but we left CNN on to soothe his nerves during his first night sleeping outside the bedroom. So he says he saw the debate highlights “like a million times.” Winston suggests that though McCain seemed to control the debate, his offensive style was actually indicative of a lower rank in the dominance hierarchy, while Obama's generous reserve made him look like the bigger dog. I still think McCain had the better of it, but Winston makes some good points.
Here is a picture of Winston contemplating the emptiness of consumerism:
This phrase presents something of a communication problem, especially with Kerry's androgynous name. “My girlfriend” sounds relatively frivolous, failing to convey the fact of cohabitation and level of commitment. “My live-in lady,” as was suggested to me by one DC-area native, is inconsistent with other evident markers of socio-economic status, and therefore conveys irony and/or a lack of respect. I happen to like “my partner” because Kerry and I are… partners. We are a team. Our lives are a life together — a joint endeavor. It's aggravating that the language has yet to offer terms that communicate this status other than spouse/husband/wife. So far, it's hard to beat POSSLQ. Here is Wikipedia:
POSSLQ (pronounced /ˈpɒsəlkjuː/) is abbreviation (or acronym) for “Persons of Opposite Sex Sharing Living Quarters,” a term coined in the late 1970s by the United States Census Bureau as part of an effort to more accurately gauge the prevalence of cohabitation in American households.
- There's nothing that I wouldn't do
- If you would be my POSSLQ
- You live with me and I with you,
- And you will be my POSSLQ.
- I'll be your friend and so much more;
That's what a POSSLQ is for.
Sadly, if you insist on talking about “my POSSLQ” it will sounds like you're talking about a passel of possums and a pool cue, or something.
I cannot find any liveblogging that isn't stupidly partisan. So here I go. My impression is that McCain is winning this debate. In my snarky piece today for Culture11 [scroll down], I said Obama needs to show his superior grasp of policy details, especially on economic policy. He seems to me to have completely muffed that chance by wandering aimlessly in generalities. McCain made the financial collapse a morality play, somehow related to earmarks, but Obama had nothing better, nothing illuminatingly specific, which is what he needed. And now McCain is schooling him by showing his grasp of the specifics of defense and foreign policy. I am more in agreement with Obama on almost every foreign policy particular, but he seems to me to have spent almost the entire debate in a defensive posture. McCain exudes firm, experienced, competent, principled leadership. Obama seems like a gracious intelligent guy who is very ambitiously running for a very high office. That's really bad for him.
I had really thought Obama was capable of spanking McCain, who is performing exactly as I thought he would — as a “straight-talking,” pugnacious man of valor and experience. Either I was mistaken about Obama's ability to explain and motivate policy with Bill Clinton-like lucidity, or he was just poorly coached merely to hit platitudinous talking points, especially in the opening economics portion of the debate. I guess his lackadaisacal debating style in the primaries wasn't a way of making Hillary look desperately strenuous in comparison. It just turns out that he's not really a very good debater.
Love his voice, though. If this is a contest to determine who we'd rather listen to the next four years, and I promise never to overestimate the American voter, Obama can hardly lose, no matter who “wins” the debate as a matter of forensic art.
Now, on the issue of “meeting without preconditions” issue, Obama seems to be getting a bit stronger. But he's still a bit halting, and strangely seems to be groping for words rather more than the Jurassic Senator.
[UPDATE: I think Obama warmed up toward the end, and certainly “held his own,” as many are saying in the autopsy. But how good is that when you've got the substantively more compelling position? It seems like a kind way of saying “was not humiliated,” which is not a way of saying “won” — unless you had low expectations for Obama. I had high expectations, which is why I'm calling it for McCain.]
“So you're Mormon, then?”
“Well, not exactly. I'm in the Reorganized Church of Jesus Christ of Latter Day Saints.”
“You see, when Joseph Smith, the founder of both churches, was murdered…”
This exchange was an intermittent refrain of my wonder years. I was always having it — at six, ten, seventeen. When the question was put to me, Mormon tended to get a superfluous and probably unintended emphasis, lending the usually innocent query a tone of minor accusation, of a probe for shame at my inexplicable oddness. I actually relished the small correction, highlighting my truly supererogatory deviance by introducing and embracing a minor subcategory of strange. I got pretty good at it.
“We stayed in the Midwest, waiting for Joesph Smith's son to become a man, so he could take over from his dad. We didn't go to Utah with Brigham Young, who was very vulgar, by the way. We never practiced polygamy. We don't perform secret rites or wear funny underwear. We don't pester people at home. Our example is our testimony. We believe in the Book of Mormon, yeah, but I'm not really Mormon in the way everyone understands.”
I took comfort in both the fact that I was more exotic than a regular Mormon — “No, not 'reformed'… 'reorganized'” — but also less doctrinally weird, much more like a Presbyterian than the boy Deacons down at the Ward. But when I went to work for my church over my first two college summer terms — first in Nauvoo, then in Kirtland — and ended up learning too much of the truth, I came to wish, I guess a bit perversely, that I'd been a real Mormon all along.
To have once believed that Heavenly Father (and Mother!) lives on Kolob and that I too would be rewarded with dominion over a celestial realm of my own — that makes for a better story than having been part of the non-Polygamist, non-Exodusizing, non-eternally-marrying Mormons, even if Brigham Young really was a douche. At least I can say that as a lad I did believe the Navajo and Choctaw descended from Jews who came over the Atlantic in boats. That's something! But I was never really proud to not have ridiculous magical underwear. I wanted magical underwear. “Mormon” is something I sort of was, but not really. Something I both claim and reject. A leather-bound Book of Mormon embossed with my initials sits on my bookshelf. But my memory is dissapointingly ungirded.
[Up next in “What you're searching for”: “My partner,” “delibertate.com,” “sex,” and “political correctness.” Whoever wants “Gordon Tullock” needs to work harder.]