Hayek On Urban Planning

Hayek in Individualism and Economic Order:

We need only turn to the problems which arise in connection with land, particularly with regard to urban land in modern large towns, in order to realize that a conception of property which is based on the assumption that the use of a particular item of property affects only the interests of its owner breaks down. There can be no doubt that a good many, at least, of the problems with which the modern town planner is concerned are genuine problems with which governments or local authorities are bound to concern themselves. Unless we can provide some guidance in fields like this about what are legitimate or necessary government activities and what are its limits, we must not complain if our views are not taken seriously when we oppose other kinds of less justified "planning."

Sometimes you find good sense in the most unlikely places.

Epimedium x warleyense

Epimedium x warleyense, originally uploaded by chrismealy.

Say's Law Definition

What's the definition of Say's Law?

Supply creates its own demand

If you believe that then you think demand can never be too low and that Keynes is all wet.

Like a lot of famous one-liners in economics, it turns out Say never actually said that. So what do people say that Say said? The great economist William Baumol (who has his own law, Baumol's disease) counted Say's (at least) eight laws (later he checked his list and only found seven). One of them is closest to contemporary definitions:

Any glut in the market for a good must involve relative underproduction of some other commodity, or commodities, and the mobility of capital out of the area with excess supply and into industries whose products are insufficient to meet demand will tend rapidly to eliminate the overproduction

I suppose "rapidly" is true if you're comparing markets to glaciers. But there's another problem: money. Going back as far as Mill people figured out that you could sell your goods, keep the cash, and not buy anything else. Further, Steve Keen observes that the entire point of being a capitalist isn't to consume your profits, but to accumulating more capital [pdf]. So unless you've got a barter economy, Say's Law doesn't really apply. Even then I imagine you could fill your root cellar with potatoes.

Whatever point you're trying to make it's probably best to leave Say out of it.

School of Athens

James Fallows is looking for art-historical connections to this photo:



It reminded me of the main part of "The School of Athens":




It's okay, but I think there's got to be a better match.

A Proposal to Make Politics More Concrete

An easy test: which major sports are these scores from?

7-3
24-17
95-83

If you're an American this is really obvious: baseball, football, and basketball. However, when it comes to the government people are completely in the dark. That’s how you get people saying we should slash foreign aid way down to a level that’s actually five times higher than it actually is.

Talk of taxes and spending being too high make no sense without numbers, but considering that 79% of Americans don't know what a trillion is, using absolute dollar numbers just makes it easier to confuse people. Besides, huge numbers are tough to work with. I know what a trillion is, but I can't divide 200 billion by 10 trillion without thinking more than I'd like. Better just to use % of GDP.

So I propose we start using a few stats with the way average sports fans use stats like RBI or ERA. A stat like federal revenue being 22% of gdp is easy to remember. "22% of GDP" isn't as punchy as batting average or OBP. It could be shortened to something like 22 %GDP or 22 pgdp or simply 22 PG. It looks dumb now but you'd get used to it. Instead of debating in deliberately vague terms like "more" or "less" taxes we could talk about 22 PG versus 20 PG. It turns out a lot of debates sound pretty small when put into real numbers.

This would especially help with historical comparisons. You often hear stuff like "the biggest tax hike in history" or "the most expensive war since WW2." Everything is going to be the biggest ever considering the growth of the economy and inflation. Using PG just cancels that out.

Most programs are less than 1%, so maybe you'd want something like basis points in finance (1/100 of a percent, or 1/10,000 of the total). Maybe call that pgp (lowercase to remind you that it's smaller than PG). As in, 1 PG = 100 pgp.

So 1 PG is:
$13 trillion / 100 = $130 billion

and 1 pgp is:
$13 trillion / 100 / 100 = $1.3 billion

For example, the defense budget is about $600 billion, so that's:
$600 billion / $13 trillion = 4.6 PG

while the Coast Guard budget is only $8 billion, so it's:
$8 billion / $13 trillion = 0.061 PG = 6.1 pgp

I'm totally serious about this. Now that people like Peter Orszag and Nate Silver are stars everybody's got to step up. It fits into 140 chars better anyway.