Category Archives: books and book reviews

Perspectives on Jordan Peterson

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1. By Jordan Greenhall.

It might very well be the case that 2018 will be known as the “Year of Jordan Peterson”.

. . .Sovereignty is the capacity to take responsibility. It is the ability to be present to the world and to respond to the world — rather than to be overwhelmed or merely reactive. Sovereignty is to be a conscious agent.

2. Russ Roberts writes,

Peterson reminded me that civilization is fragile.

…Because of Peterson, I read The Brothers Karamazov, a big hole in my reading history. What an extraordinary book. Part of me is amazed and ashamed that I’d never read it. The other part of me is thrilled. I don’t think it would have nearly the impact on me in my teens and twenties as it did reading it now. Deeply thought-provoking on questions of good and evil and theodicy, on the dark side of human nature and on the potential for goodness to be redemptive despite that dark side. I’m thinking of inviting Peterson back to EconTalk just to discuss The Brothers K.

Scott Alexander writes,

The non-point-missing description of Jordan Peterson is that he’s a prophet.

. . .prophets are neither new nor controversial. To a first approximation, they only ever say three things:

First, good and evil are definitely real. You know they’re real. You can talk in philosophy class about how subtle and complicated they are, but this is bullshit and you know it. Good and evil are the realest and most obvious things you will ever see, and you recognize them on sight.

Second, you are kind of crap. You know what good is, but you don’t do it. You know what evil is, but you do it anyway. You avoid the straight and narrow path in favor of the easy and comfortable one. You make excuses for yourself and you blame your problems on other people. You can say otherwise, and maybe other people will believe you, but you and I both know you’re lying.

Third, it’s not too late to change. You say you’re too far gone, but that’s another lie you tell yourself. If you repented, you would be forgiven. If you take one step towards God, He will take twenty toward you. Though your sins be like scarlet, they shall be white as snow.

My own thoughts:

For those of us who gaze at college campuses and see students being taught to conform and to bully rather than to think, Peterson offers a rallying point.

He does have some ideas that are intellectually provocative. Scott Alexander points to the theme of chaos and order, which is important in Peterson’s thinking. Russ Roberts points to Peterson’s ability to derive insights from classics in literature.

I still think that he is better as a performer than as a writer. I am inclined to recommend binge-watching him on YouTube over reading his books.

This will be posted in the middle of Passover (note that, as usual, I schedule my posts in advance). The substance of the holiday is progressive, celebrating freedom from slavery. But the form of the holiday is order–doing things in a traditional way. The very word “seder” can be translated as “order.” One could have a discussion at the seder table that takes off from Peterson’s view of the need to preserve order while exploring chaos.

Essays of Israel Kirzner

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They have been collected in a new volume. It prompted my latest essay, but I would not call it a review. Kirzner addresses many difficult issues. For example, I write,

Those of us who wish to defend both methodological individualism and markets are faced with a paradox. When we say that the economy works well, we are claiming to speak for the entire society. But as individualists, we would say that there is no such moral entity as “society.”

Would you buy this book?

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The title is Predicting the Markets: A Professional Autobiography. It has many favorable reviews on Amazon, but they seem to pre-date the official release of the book, which makes one suspicious. Maybe you will download the Kindle sample and leave your comments here.

1. I was aware of Yardeni back in my days at the Fed, when he was a leading Wall Street forecasting guru. In fact, I was surprised to find out he is still active–I would have assumed he had aged out of the profession or died, given how well established he was by 1980, when I started at the Fed. But he had only graduated with his Yale Ph.D four years prior to that.

2. Many of the names and events that he recalls from the 1960s, 1970s, and 1980s are familiar to me. I vividly remember that he coined the term “bond market vigilantes.” It served to emphasize that the financial markets do not necessarily strictly respond to the short-term interest rate that the Fed can control. When bond market investors were really inflation-phobic, they kept long-term rates higher than the Fed wanted. More recently, between 2003 and 2006, the bond market did the opposite–keeping long-term rates low even when the Fed was tightening. This is what made the Bernank mutter about a “global savings glut.”

3. I preach, “stare at the world, not at your models,” and Yardeni adopted that in practice as soon as he left Yale. He says that around 1988 he converted from being a macroeconomist to a microeconomist. He writes, “I have become increasingly convinced that most of the more interesting and relevant influences on the outlook for the global economy have occurred at the microeconomic level.”

4. In a chapter (still part of the Kindle sample) on economic history, he credits the decision taken in June of 1938 to suspend mark-to-market accounting for banks as helping to end the Roosevelt recession that hit in 1937. My first exposure to the accounting issue was in the 1980s, when book-value accounting allowed many under-water savings and loan associations to remain in business, and that was not a good thing–it made the inevitable bailout more expensive. The problem is that not marking assets to market makes the institution less transparent to regulators. So I was long in favor of market-value accounting.

But I have since come to hold a different view of financial intermediation, in which full transparency could be a bug, not a feature. The function of banks and other financial intermediaries is to hold risky, long-term assets while issuing low-risk, short-term liabilities. This permits households and nonfinancial firms to do the opposite. This is somewhat magical, as long as it is not carried to excess. Market-value accounting takes away some of the magic, and it has the property of turning liquidity crises into solvency crises. I still think that when government is backing deposits (and going beyond that with its de facto commitment to prop up big banks) the regulators need market-value accounting. In 2008, instead of advocating getting rid of market-value accounting, the approach that I advocating for keeping banks from all dumping assets at the same time would have been to temporarily relax capital requirements.

5. I have doubts that I would enjoy the whole book. Yardeni’s life represents a “road not taken” by me, and nothing I’ve read so far gives me regrets. I regard my own experiences as more interesting than his. Tyler Cowen says he would like to see more memoirs. I wonder if he could get through this one.

Kling on Niall Ferguson’s latest

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My review of The Square and the Tower.

I think it is very difficult to show that a particular technology favors peer relationships over hierarchical relationships.

I think that many of us made this mistake when we projected the social consequences of the Internet. Because the Internet is obviously a peer-to-peer network, we assumed that it would break down hierarchies. But the social world is its own sphere, and it does not necessarily mirror the technical world. Groups that are peer-oriented can use the Internet, but so can hierarchies. Perhaps some of the social changes that have taken place in recent decades disrupt hierarchies, including changes that were facilitated by the Internet. However, it is a fallacy to insist that just because the Internet is peer-to-peer, human groups necessarily must array themselves in that fashion in order to be successful in the current technological setting.

This is Nassim Taleb Week

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Russ Roberts does a podcast Nassim Nicholas Taleb on Skin in the Game. Listen to the whole thing or read the transcript. One random excerpt:

Crossing the street reduces your life expectancy by 1 in 47,000 years. It’s not a big deal. So, the–crossing the street basically is close to zero risk for me, because my life expectancy is not infinite. But if you made humanity cross the street, that would be a problem, because it would reduce life expectancy commensurably.

So, the problem of these analyses that people throw around is that they ignore the value from life expectancy of whatever you are threatening.

Taleb on challenging orthodoxy

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He has a chapter that speaks to the topic of my recent essay on when to defy orthodoxy. His answer depends on whether you have skin in the game, meaning that there are personal adverse consequences if you are wrong.

If you have skin in the game, then Taleb would say that you are entitled to challenge orthodoxy, and indeed you should. People with skin in the game who defy orthodoxy are free. People with skin in the game who do not defy orthodoxy are slaves. So working for a large corporation makes you a slave.

Without skin in the game, you cannot be a good person no matter what you do. If you do not defy orthodoxy, you are a toady, trying to get ahead by going along. You are a journalist or academic who repeats what other journalists or academics are saying. If you defy orthodoxy you are dangerous, because without skin in the game you are risking other people’s lives and other people’s money but not your own. You are a banker taking in huge bonuses from bets that pay off in the short term, and when the bets turn sour you are long gone.

At least, that is how I read what he is saying.

Me vs. Nassim Taleb

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As Tyler Cowen noted, Taleb takes on some of his reviewers. In a comment, I took on Taleb when he wrote

the variance within forecasters is smaller than that between forecasts and out of sample realizations.

He saw it as a sign of forecasters copying other forecasters. I do not think that this is necessary as an explanation. Unless you are adding noise to your forecast, your forecast should always have less variance than what you are trying to forecast. And it would not surprise me to see a range of forecasts show less variance than the range of subsequent outcomes. I wrote,

That is what you could expect. Suppose that the variable you are trying to forecast, Y, has a set of known determinants, X’s, and a set of random determinants, e’s. People should forecast conditional on the X’s, and the range of forecasts should be narrow. But the range of outcomes relative to forecasts depends on the e’s, and so the out of sample realizations could (and often should) have a wider variance

As usual, in your comments, please avoid making generalizations about either Taleb or me. Speak only to the specific issue that I raised.

Mis-measurement and Mis-leadership

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My latest Medium essay, called Mis-Leadership and Metrics. An excerpt:

Instead of holding teachers accountable to a centralized statistical office, I believe that teacher evaluation should be undertaken by peers, principals, and parents. Test scores can be unreliable indicators for many reasons. Parents can readily assess whether a teacher is working conscientiously and effectively.

I have only started reading Nassim Taleb’s latest book, Skin in the Game. But I gather that he would make the point that when it comes to children’s education, parents have real skin in the game. If I allow my child to try to learn from a bad teacher, I suffer from that. If a bureaucratic system fails to remove a bad teacher, the designer of the system does not suffer consequences.

And of course I mention Jerry Muller’s book.

Nassim Taleb’s latest

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I have just started reading Skin in the Game. Not far enough into it to have much to say.

A couple years ago, I had lunch with a friend, and somehow the subject came up of what I thought were my weaknesses. I think that I am not good at what people call “networking,” or cultivating useful contacts and taking advantage of them. I said that the one period in my life I did that well was when I started my Internet business. My friend asked why I was able to do it then.

I replied that I was motivated. In Taleb’s terms, I had skin in the game. It wasn’t just money. I had something to prove to former colleagues who said, “Kling has ideas, but he doesn’t know how to implement.”

I made a conscious decision to network. But I did not say to myself, “You are bad at networking. You need to work on it.” I just knew that it was something I had to do, so I just went ahead and did it as if it were a natural skill.

Both before and since, networking has not been a necessity in my life, and I have not done it. I can see now that some of the things that I tell myself I want, such as more speaking opportunities or wider influence, would be enhanced if I did more networking. But I am not sufficiently motivated to really change.