A long post, difficult to excerpt. A few snippets:

One of the things that I found jarring about The Rhetoric of Economics is that McCloskey argues, among other things, that appeals to authority are natural and necessary. That pointing out that an argument involves an appeal to authority does not invalidate that argument.

What I would say is that what people think of as scientific discourse does not rely so heavily on appeals to authority. At some point, you can say, “If you don’t believe in gravity, try an experiment yourself. Jump out of a 10-story window and see what happens.”

But when Olivier Blanchard tells you that every macro model includes an aggregate demand relation, a Phillips relation, and a monetary policy relation, he cannot issue an equivalent challenge. Instead, the literature emerged that way mostly because scholars published papers that borrowed from other published papers.

I would not argue that there is a scientific method that is so pure that it can be operated without any bias or other human characteristics. But clearly there are arguments that are more persuasive than others, and arguments that apply the scientific method can be more persuasive than arguments that rely primarily on authority.

For Smith, trade was never a mechanistic process. The act of offering payment is itself an act of persuasion.

I think this notion of the centrality of persuasion in human affairs, and in markets in particular, is what economics should strive to rebuild itself around. This does not mean that the insights from economists’ contributions up to this point should be discarded, just that we should seek to find their appropriate context.

It covers a number of themes recently discussed on this blog.

My sense is that the MIT-dominated profession has experienced a decline in critical thinking. Instead, once a modeling assumption has appeared often enough in the literature, it no longer is questioned. This creates an element of arbitrariness and path dependence to the professional consensus about the equations used to characterize the economy.

He writes,

Successful lives in the postwar era involved effectively navigating our large institutions and making the most of the benefits they offered. Success in the coming era will increasingly involve effectively navigating a profusion of smaller networks, and a government that wants to help people flourish will need to retool—focusing more on enabling bottom-up, incremental improvements and less on managing top-down, centralized systems. Both empowering individuals and offering them security will look rather different in this era.

Read the whole thing. Even by Yuval’s standards it is a very pointed, articulate post.

He is responding to Charles C.W. Cooke’s provocative case for conservatarianism. I have a few posts scheduled on that same topic. While recognizing differences, Yuval is focused on the affinity between conservatives and libertarians. So is Veronique de Rugy. (The high quality of commentary on Cooke’s work speaks well for the book itself, which I have not read.) My focus instead will be on the tension between the two.

On this post.

The question is why are people moving back into the cities, when real estate in the cities is so much more expensive, (i.e. despite the fact that the “rent is too damn high”), the appeal of city life is not noticeably greater than it was a decade or two ago, and the cost-differential is so high that it practically erases the compensation and lifestyle gains?

Read the whole comment.

I see gentrification occurring primarily because of the New Commanding Heights. Education and health care concentrate in cities, in part because of tax advantages. That in turn draws affluent professionals. With enough affluent professionals, you get young people wanting to live in cities to be around other affluent professionals, in order to perpetuate bifurcated family patterns.

Noah Smith offers this:

So how should we think about human capital? Here’s an analogy that I think works well. You agree that a chainsaw is capital, right? OK, now imagine a chainsaw that you graft permanently onto someone’s arm, like Bruce Campbell in the movie Evil Dead 2. It’s so thoroughly grafted on that you can’t remove it without making it permanently useless.

This chainsaw is very very much like human capital.

My prediction is that this metaphor will become increasingly apt, as implants, drugs, and genetic enhancements become a larger share of human capital. Today’s mouse capital is a preview.

Do you think I should submit this essay somewhere?

The central concept of the sociologists is privilege. Privilege is like status, except that it is based on membership in a group rather than in characteristics of the individual. One’s privilege is based on his her membership in a economic class, race, religious group, or sexual category. Rich people enjoy a lot of privilege, while poor people are underprivileged. In America, whites are privileged, while African-Americans and Hispanics are not. Similarly, Christians are privileged, and Muslims are not. Male heterosexuals are privileged, and people with other sexual orientations are not.

It goes on to claim that this is how the Obama Administration views terrorism. I actually don’t think I’m being uncharitable. I think I could pass an ideological Turing test as a sociologist or as a member of the Administration.

From an interview with Peter Diamandis.

By the 2020s, most diseases will go away as nanobots become smarter than current medical technology. Normal human eating can be replaced by nanosystems. The Turing test begins to be passable. Self-driving cars begin to take over the roads, and people won’t be allowed to drive on highways.

By the 2030s, virtual reality will begin to feel 100% real. We will be able to upload our mind/consciousness by the end of the decade.

By the 2040s, non-biological intelligence will be a billion times more capable than biological intelligence (a.k.a. us). Nanotech foglets will be able to make food out of thin air and create any object in physical world at a whim.

Similar to mine (which reflect Kurzweil’s influence), but different timelines.

The title is not a typo. Brad DeLong reproduces a list of papers that ten years ago he thought were on the frontier of macroeconomics. Pointer from Mark Thoma. My take on the list is that there is a strong negative correlation between the probability that the ideas are correct and the probability that they are relevant.

Some random thoughts about the state of macroeconomics:

1. Any post that contains a sentence “This chart proves that. . .” doesn’t.

2. Macroeconomists should be much more daunted by measurement issues than they are. I think that we have reasonably good ways of counting the number of people who do paid market work. But that is a far cry from knowing “labor input,” because (a) skills are very heterogeneous and (b) as Garett Jones famously tweeted, most workers are not making widgets but instead are building organizational capital. Output has become increasingly difficult to measure. In the case of goods, quality change has sped up, putting more pressure on statisticians to rely on imputations. And in the case of important services, including education, finance, and medical services, we have almost no conceptual idea for measuring output. We do not know how to factor into our statistics the increased diversity in consumption baskets across individuals. All this casts doubt on our measures of inflation, productivity, and real wages.

3. As of the early 1930s, many economists and commentators thought that the capitalist system had broken down. They saw the decentralized market process as no long working effectively to organize economic activity. See Katznelson, or even better read chapter two of Leuchtenburg’s The FDR years. The biggest intellectual influence at the time was nostalgia for the government planning that took over when the U.S. entered the first World War.

In contrast, Keynes blamed the Depression on what he called a drop in aggregate demand, and Milton Friedman blamed it on a contraction of the money supply. In fact, Keynes and Friedman led the profession down a false path. The pre-Keynesian diagnosis was more apt. I just disagree that central planning was the best solution, although I think it is fair to concede that when you have unemployment rates over 15 percent you are giving central planners a decent shot at doing something right.

4. The Monetary Walrasians (Patinkin and everything that followed) wasted our time. Money does not determine nominal aggregates. It does not determine transactions. The causality runs from the desire to undertake transactions to financial institutions/technology to what people use as money.

5. Money does not determine the price level. Habits determine the price level. Consider the amnesia experiment. If everyone developed amnesia about what money prices were yesterday, then Monetary Walrasianism predicts that today prices would soon find an equilibrium determined by the quantity of money. In fact, my best guess is that people would find money to be worthless in such a setting, and they would resort to barter until a new standard of value emerged.

6. The theory of rational expectations is a waste of time. The simple model of employment fluctuations as arising from errors in aggregate expectations is wrong. And the underlying principle of rational expectations, that everyone as the identical information, is anti-Hayekian, and not in a good way.

In short, almost nothing that gets taught in undergraduate macro is correct. And graduate macro is worse.

1. There is little else to write about today.

2. It was a Seinfeld election. Mitch McConnell said that he did not want to tip his hand before the election by articulating an agenda. Does anyone think he has a hand to tip? The only reason he runs for the Senate is because he loves hanging out there.

3. Conventional wisdom is that, relatively speaking, Democrats have a structural advantage in Presidential elections, because those elections attract more turnout. In other words, they do much better among disengaged voters. One could spin this positively for the Democrats, saying that they get support from the weaker segments of society. One could spin this negatively and say that they rely on a segment of the electorate that is poorly informed and easily bamboozled, which I believe is the case. The counter to that would be that Republicans also rely on a segment of the electorate that is poorly informed and easily bamboozled, which I also believe is the case. I really do not understand why people think that democracy is so great. Its chief advantage is that it provides for peaceful transitions of power. I continue to believe that markets, imperfect as they often are, produce better outcomes than voting.

4. One problem with the Democratic “brand” at the moment is that it is associated with incompetence. How will they remedy that in 2016? Would nominating Cuomo do the trick?

5. Another problem is that in the ethnic/gender wars, the Democrats came off as more strident than the Republicans in 2014. They may have reached the point where their tactics are alienating more voters (many white males and also some white females) than they are attracting. Of course, such tactics may be better suited to a Presidential election with more turnout.

In your three-languages model of politics, it is usually the conservatives using the barbarism-civilization axis, and the progressives using the oppression-oppressed axis.

But given the recent murder of Sotloff by Islamic State terrorists, the vocabulary being used highly progressive sources to describe the event are very conservative sounding. Just today I heard President Obama, Secretary Kerry, reporters and commentators on NPR and C-SPAN have all talked about the event specifically using the words, “uncivilized”, “barbaric”, “savages”, “fiends”, “monstrous”, “beastly”, and so on.

It seems that they are being quite genuine in using these words as their honest appraisals and not paying lip service to the concepts.

So, what do you make of all that?

I have not been following these statements. Do they apply to the act or to the group? If you call an act barbaric without calling a group barbaric, then you are not really using the civilization-barbarism axis. If the progressives are calling ISIS as a whole barbaric, then that would represent a shift toward using conservative’s rhetoric. I have not seen a similar shift in rhetoric on Hamas–I do not know of any progressives who have described Hamas’ tactics as barbaric. I have not seen progressive use the word “barbarism” in describing Rotterham (Indeed, that story has been easy to miss if you only follow liberal media. The Washington Post put in the “religion” section quoted a member of a Muslim youth group as saying that the police “failed us,” so that the story fits the oppressor-oppressed axis). So on the whole–and again, I have not been following the statements on ISIS–I do not get the sense that progressives have undergone a major shift in their outlook.