Friday, September 30, 2011

A crisis for whom or what?

As much of the developed world, particularly the US and the eurozone, struggle with prolonged economic stagnation (and looming worse), who or what is this a crisis of or for?

Not capitalism as such. This is not remotely the worst "crises of capitalism". Indeed, in much of the world, capitalism is doing just fine, thanks very much. People are continuing to move out of poverty at record rates (pdf). Even within the OECD, some countries are doing just fine.

So, not a crisis of capitalism but a crisis for some (important) capitalist economies.

It is a crises of cheap credit (or, more precisely under-priced and over-extended credit). Nothing particularly unusual in that, had them in the past. The perennial issue of appropriate prudential regulation thereby yet again becomes salient. With, as is normal, issues specific to this particular credit bust (notably land rationing encouraging housing booms which busted).

It is a crises of bad monetary policy. Also had them in the past, but the similarity between current failures by the Fed and the ECB and past failures by the Fed and the Bank of France raise issues about institutional incentives and corporate memory for central banks.

Which leads into the crises for macroeconomics. Macroeconomists have not collectively shone: those with public profiles have shown a marked tendency to lapse into political partisanship. The discipline clearly lacks analytical resilience. Too much fairly basic stuff is simply not agreed upon.

It is a crisis for the EU (or at least for the European Monetary Union): the euro has failed for much the reasons that Milton Friedman predicted it would in 2000 (pdf):
… the various countries in the euro are not a natural currency trading group. They are not a currency area. There is very little mobility of people among the countries. They have extensive controls and regulations and rules, and so they need some kind of an adjustment mechanism to adjust to asynchronous shocks—and the floating exchange rate gave them one. They have no mechanism now.
If we look back at recent history, they’ve tried in the past to have rigid exchange rates, and each time it has broken down. 1992, 1993, you had the crises. Before that, Europe had the snake, and then it broke down into something else. So the verdict isn’t in on the euro. It’s only a year old. Give it time to develop its troubles.
To the extent that it is a crisis of public debt, it is also a crisis for poorly managed social democracy/welfare states. With Greece as the cautionary worst case.

So, a crisis of poor or problematic public policy and its mainstream analytical support. But not of capitalism, as such.

Thursday, September 29, 2011

A seriously bad idea

This expands significantly on a comment I made here.

The Obama Administration's American Jobs Act has a seriously bad idea of the type that one might expect from an Administration headed by a Chicago corporatist who was a humanities academic and "community organiser". The notion is to allow unemployed people to sue employers who fail to hire them for discrimination. This despite the fact that very few US job ads say unemployed need not apply. Econblogger Tyler Cowen has already suggested it may be one of the worst (economic policy) ideas ever.

Let us apply some elementary economic reasoning. The more unemployment there is, the lower the cost of discrimination. So, if you wish to lessen discrimination, aim for full employment. Since the "allow suits for discrimination" proposal will increase risks in, and costs of, hiring, it will discourage hiring, meaning unemployment will be higher than it otherwise would be. So, the net effect is likely to be to increase the overall level of discrimination.

It will also encourage more hiring to be "within networks", as they provide implicit "guarantors" and more sources of information. Marginal workers are less likely to be plugged into such networks.

So, a bad idea even in terms of lessening discrimination and improving the position of marginal workers.

But it sadly fits in with the Obama Administration's track record: we are suffering from serious economic stagnation, so let's stuff up the supply-side of the economy even more! Alas, the evidence is mounting that President Obama seriously does not understand economics.

Tuesday, September 27, 2011

Climate change, Social change 2

In my previous post, I outlined the apparent underlying strategy of the Gillard Government's Carbon Tax proposal and expressed scepticism that it was likely to work.

A recent piece by Henry Ergas suggests that my scepticism was premature. As he points out, the Government's proposal includes the creation of new property rights:
START with what is uncontested. First, once carbon emitters are issued permits, those permits will be property they own, so any government that abolishes them will have to pay compensation, possibly in the billions of dollars.
Second, entitlements created by statute may be found by the High Court to be property even if that is not specified in the legislation creating them. But specifying it in the legislation, as the government intends, makes that outcome, and the need to pay compensation, far more certain.
Third, a future government could not get around the need to pay compensation simply by mandating a zero carbon price.
Under provision 51 (xxxi) of the Australian Constitution, property can only be acquired by the Commonwealth under "just terms", which the High Court has ruled effectively means market price and includes regulatory changes which destroy property value.

So the policy of moving Australian public policy against comparative advantage and creating a whole new structure of interests dependent on that may be much harder to overturn than it first appeared. Indeed, the entire strategy seems to be to ensure no future Government can overturn it, except at huge expense:
In short, a new government would be comprehensively locked in. But that, Mark Dreyfus, the Parliamentary Secretary for Climate Change, assures us (The Australian, September 22), is not the legislation's intention. Rather, its aim is merely to provide certainty.
Dreyfus does not explain why certainty should be provided here but not for water entitlements, taxi licences, fishing quotas or development approvals.
The short answer would be--because they are not attempts to entrench a whole new set of political interests.

As part of the strategy a move very familiar from past Australian policy history is being undertaken:
As a result, when the Gillard government promises investors in "green" activities certainty, it is not eliminating risk: it is merely shifting it from those investors on to taxpayers and the community, magnifying its cost along the way. And while private investors get a choice about whether to bear risk and are compensated accordingly, the victims of this risk transfer do not.
To add insult to injury, the victims are not even being told how big the resulting loss could be.
The “Deakinite Settlement” (pdf) of White Australia, Wage Arbitration, Trade Protection, State Paternalism, Imperial Benevolence represented just such a shifting of risks to the taxpayer. It was a system that made Australia's economy more susceptible to economic shocks and depressed economic growth.

That environmentalism is a substitute for the failure of socialism has long been clear. But it seems it can also be a vehicle for substantially reversing 30 years of successful economic reform. And just as commodity prices, which have given us historically high ratio of export prices to import prices (i.e. our terms of trade, the value of what we sell compared to the value of what we buy), are declining (which has been their long term trend).

The struggle and debate over the Carbon Tax suggests that Vaclav Klaus is correct: climate change has become a defining socio-economic issue of our time, and not in a good way.

Monday, September 19, 2011

Climate change, social change

Walking through Footscray, I passed a poster that advertised for “an activists conference” under the title Climate change, Social change. I am old enough to remember when the standard radical left critique of environmentalism was that it was bourgeois sentimentality that diverted folk from the true revolutionary struggle. But then folk worked out the great revolutionary advantage of trees and animals over the proletariat: they don’t answer back, they do not suffer “embourgeoisment”, they do not vote the “wrong way”.

It turns out that workers—and queers, blacks, women, etc—do not want to overthrow Western capitalism, they wish to be get better access to its goodies (plus not be treated like crap anymore, thanks). This makes them rather unsatisfactory vehicles for radical social change.

Not so beasts, plants, land- and seascapes. As any action that affects them can be deemed noxious, so Western capitalism can be declared to be radically illegitimate to a far greater extent that any championing of marginalised humans. The very thing that makes Western capitalism so attractive to people—its productiveness and freedom—is the very thing that makes it profoundly illegitimate in “deep green” terms. Western capitalism’s greatest strength is turned into its profound and irredeemable “original sin”.

Hence environmentalism has become a prominent response to the failure of socialism. The collapse of traditional religious belief is, as Michael Lind notes, also a factor:
The religious vacuum to the left of center in the U.S. and Britain, where liberal Protestantism has undergone a similar collapse, has been filled with three new creeds. The first is radical environmentalism, which is best understood as a kind of nature-worshipping pantheism.
A recent post by Skepticlawyer on the resurgence of “paganism” suggests that there may be considerable room for environmentalism-as-religious-impulse. It has already become the de facto “religion” of public (and much elite private) schooling.

Part of the reason why the poster caught my eye is that last week I went to a talk on the economics and politics of the Gillard Government’s proposed Carbon Tax. It is clear enough that the tax will have no measurable effect on the climate, since what Australia does is completely irrelevant: we are simply not big enough in economic and environmental impacts to matter. The claim that we will provide an “example to the world” is arrogant nonsense: various successful Australian policies have notably not been adopted by other countries. This is despite Australia avoiding both the Global Financial Crisis and Great Recession. Again, we simply do not matter enough, even without considering the fact that the US and EU both have much bigger concerns at present, which is making climate change increasingly politically unimportant.

Both of these considerations lead to the conclusion that Australia’s response to climate change should be adaptation, not mitigation. Meanwhile, the Carbon Tax itself is unpopular and contributing to the diabolically low poll standing of the PM and the Government. Which raises the question: why go there?

The answer “to keep her coalition partners The Greens happy” hardly seems a satisfactory answer on its own. Which is where the presentation last Wednesday was so helpful. (It was Chatham House Rule, so nothing will be attributed.) For the carbon tax is much more than a tax: it is a vast and complex package which goes far beyond its redistributive compensation. Though that clearly has policy appeal in its own right.

What it represents, as was put to us, is a profound reversal of the basis of Australia’s considerable public policy achievements of the last 30 years. If there was one principle underlying that it was: allowing Australia to use comparative advantage more effectively.

The Carbon Tax and associated policies represents a thorough reversal of that principle. Which is the genius of the thing: for it thereby creates a plethora of “green” interests which are absolutely reliant on state action. This is a major exercise in social change, in institutional reconstruction. (There was a lot more detail, but that is the core thesis.) The activists at that conference advertised in the aforementioned poster have got their slogan spot on.

So, the question becomes, will it work? I am sceptical, and on two grounds. First, operating against comparative advantage like that will depress economic activity. A policy whose abolition opens up extra resources for politicians to offer is not a stable policy regime unless it provides other compensations to a stable electoral majority, such as the risk suppression provided by the “Deakinite Settlement” (pdf) of White Australia, Wage Arbitration, Trade Protection, State Paternalism, Imperial Benevolence. Achieving such a stable set of benefits seems unlikely. Particularly given that the problem with environmental benefits is, even if they are real, animals and plants do not vote: which is why environmental amenity has been increasing—that is where environmental management (or its lack) does affect people.

On the contrary, it seems much more likely that those adversely affected by the proposed policy principle will tend to form an electoral majority.

Secondly, I am sceptical how much environmentalist politics can “slip into” non-monotheist spirituality. The fundamental problem is children: the logic of "deep Green" environmentalism is against them. Yet a key way for burgeoning religions and quasi-religions to spread is via families. If having children is antipathetic to voting Green (as it currently strongly is), then there is a clear natural limit to the potential “Green” vote: Labor Senator John Black summarises the in-depth polling data:
… if a woman has two children or three children or more, they simply don't vote Green. They tend to have less disposable income and they tend to vote Labor, until they're in their 40s and then sort of drift off to the Coalition, which is sort of a pattern that's been going on since about 1900, so that's pretty much written in stone.
But if they have no kids, their support for the Greens remains strong right up until their 60s. If they have one, their support for the Greens doesn't start until their late 30s, but if they've had two they're lost to the Greens. So the Greens are a party of the inner city, of the professionals, of the higher incomes, and that's all a function of basically no kids. If you have kids, as a female professional you don't get the job opportunities, you don't get promoted, that's the cruel fact of life.
Unless the Greens can overcome their parent-vote deficit, they are doomed to third Party status.

All of which suggests that the Carbon Tax is not likely to transform Australian public policy in the intended way: but the ambition to do so does much to explain its appeal.

Thursday, September 15, 2011

Goal displacement in monetary policy

This based on a comment I made here.

Here are, as commenter Mark A Sadowski suggests, some "words to live by":
Moral: Inflation is not the greatest economic evil, and absolute price stability is not the greatest economic good.
In considering money and monetary policy, one should always remember to ask the question: what is money for?

The short answer is: to make transactions easier, to reduce transaction costs (for both on-the-spot and across-time transactions). The notion that "price stability" at the cost of pushing transactions seriously below trend is some advance is a classic piece of goal displacement.

This is what makes targeting money GDP/Py make so much sense (the goal of the "Market Monetarists" as Lars Christensen names the new macroeconomics school in his useful summary paper [pdf] and which I have argued for on expectations grounds). It is the monetary authority aiming to optimise money's performance of its central purpose--to lubricate transactions: both immediate and cross-temporal transactions. Even better, it is using a goal which provides a clear empirical evidence about whether it is doing that or not (and so, as Joshua Hendrickson points out, making the central bank far more accountable).

Lowering inflation from 13% to 4% in the "Volcker Transition" is one thing. Lowering it from 3% to 0% while pushing transactions seriously below trend and creating a much worse economic downturn is quite another. What do the people who preside over such an outcome think money is for? What do they think they are for?

Wednesday, September 14, 2011

The misbegotten European Union

This is based on a comment I made here.

Commenter Tomasz Wegrzanowski made the comment that:
ECB [European Central Bank] is officially supposed to care only about inflation. It’s a retarded design of a central bank, so [ECB President] Trichet doing retarded things and bragging about them is by design.
As is normal when it comes to EU dysfunction, the problem is not a bug but a feature. Being the most inflation-pure Central Bank was the “winning” strategy on which to make the euro credible, so that was taken.

One has to understand that the EU is misbegotten at its core. Its core idea is that nationalism was the great sin of European history, that nationalism is a popular sentiment, so inappropriate popular sentiments are the great danger. The so-called “democratic deficit” is the original EU-not-a-bug-but-a-feature. All based on the idea that the EU elite can steer the benighted masses into a new world of harmony. Plato’s Republic Bureaucratised. (Or is that Eurocratised? Possibly Brusselscratised?)

Actually, the great problem of European history was irresponsible power, and creating a new regime of irresponsible power is a “cure” which is just more of the disease.

A badly designed European Central Bank focused on what the elite thinks is a mark of “true” credibility is just par for the course.

Tuesday, September 13, 2011

Put not your faith in labels

Any time there is a serious economic downturn, mainstream economics drops in popular and intellectual esteem, even though mainstream economics generally does not pretend to have abolished the business cycle while it explains why reliable, systematic prediction of future economic conditions is impossible.

However, serious economic downturns are almost invariably the result of bad policy, and economists and economics will be berated for failing to give successful advice. (Indeed, one view is that serious downturns can be manifestations of market predictions of bad policy.)

This loss of esteem is generally unfair about microeconomics. In the words of former head of the Department of Prime Minister and Cabinet, Dr Michael Keating, microeconomics is successful at “producing robust predictions of general tendency”. It is rather less unfair about macroeconomics, which has failed to achieve even a common analytical language.

Of course, some folk can be correct in predicting some particular event or trend, but it will generally not be continually the same folk. Outlier predictors are, of course, a statistical possibility—consider having a large number of people predicting heads or tails: some folk will continue to get it right though fewer and fewer as more throws are made, but that is a result of that a particular sequence will occur and, with enough varied predictors, some people will pick that sequence; it is not that they have some insight into “heads or tails”.

That said, economics also creates rods for its own back, and it does so by some poor naming of major ideas. Typically, such names misleadingly over-claim and either provoke hostile responses from the unsympathetic or encourage poor thinking or both.

Information and expectations

Consider 'rational expectations': it should really be labelled consistent expectations since the fundamental notion is that expectations of agents in the model of the economy should be consistent with the model. That is, you should not base any economic model on the mere presumption that the modeller has significantly and persistently better insight into the operation of the economy than the (other) agents in the economy. It is fundamentally a principle of analytical humility but, unless one can provide reasons why the modeller would have—in a systematic and continuing way—better information than people for whom a great deal is at stake, it is a sensible analytical principle.

The principle is a formal expression of the reality that people react to information about the economy: which includes (implicit or explicit) models of the economy. But labelling the principle ‘rational expectations’ is misleading and invites misreading as putting some very high value on the “quality” of expectations rather than their common cross-agent limitations. (Yes, the notion is that agents are rational in their use of information but rationality is a general economic principle: the principle involved here is specifically about analytical consistency in application of information.)

Then there is ‘the efficient market hypothesis (EMH)’: which should be labelled the informed market hypothesis, since the notion is that prices will reflect information available to agents. The problem with terming it the efficient market hypothesis is that it then looks like a principle of market perfection, which it is not. (There is a strong version[, a semi-strong] and a weak version: I am talking here of the weak version.) The weak version does imply that open markets will the best way of pricing assets, but that does not entail that markets are perfect: merely there is no systematically better mechanism for pricing assets. It does not even imply that information is transferred instantaneously.

Nor does EMH imply that asset price bubbles are impossible: on the contrary, it is precisely because we cannot predict new information that we cannot predict turning points, so asset price bubbles become possible (since if we could reliably and systematically predict turning points, prices would not rise to a level for people to be caught by them when the bubble bursts) while expectations of capital gain both motivate agents and are part of the information feeding into prices. Asset bubbles are clear enough in hindsight, when we have the information about how they ended: specific information not available to the participants in the bubble (hence there are always folk denying that any bubble exists: and if income on said assets rises to “catch up with” the expected capital gains, they will be correct).

If EMH was labelled the ‘informed market hypothesis’ it would be less misleadingly named and less of an affront to folk not enamoured of markets. (And yes, EMH is about the efficiency implications of use of information but, again efficiency—or its lack—is a general feature of economic mechanisms; EMH is specifically about markets and information.)

Putting consistent expectations and informed markets together—the alert reader will have noticed that they both enjoin the analyst to take information flows seriously and not presume one is a privileged observer—suggests that considerable scepticism about regulation is appropriate. (Particularly discretionary regulation, where the approval of officials is required.) As there is no reason to think regulators will be systematically better informed than economic agents in general. (Noting that regulation is based on some implicit or explicit model of behaviour.) Indeed, there is good reason to think that discretionary regulation will make markets more chaotic, rather than less, by narrowing the use of information and generating perverse incentives: an expectation that has considerable empirical support (pdf), particularly in the experience of command economies.

There is a large debate about central banking in particular around the discretionary/rule/open markets possibilities (central bankers should have discretion; they should operate according to some policy rule; they should be abolished). Hence Swedish economist Lars Svensson’s suggestion to target the forecast; so policy action and market information work together.

Note: I am using “layperson friendly” characterisations of both “rational expectations” and EMH: for much more sophisticated discussion of both and critiques thereof, see Stephen Williamson’s review essay(pdf) on John Quiggin’s Zombie Economics.


Another case of poor labelling is the Austrian economics concept of 'malinvestment'. What is or is not a good investment significantly depends on larger economic conditions. What is a great idea in New York may be a really dumb one in Port-au-Prince. The notion of malinvestment is that unwarranted monetary expansion misleads folk about the future path of economic activity. As conditions change, investments based on such unwarranted expectations are "exposed" and need to be liquidated to free resources to go to more valuable uses.

But the label implies (in compete contradiction of Austrian value subjectivism) that being a malinvestment is an intrinsic quality of an investment. If so, the level of economic activity becomes irrelevant to the level of malinvestment. So, you can happily advocate any amount of restrictive "adjustment" because the level of "bad investments" wasting resources is set.

[Read the rest at Skepticlawyer or at Critical Thinking Applied.]

Friday, September 9, 2011

Against the notion that error has no rights

A comment I made here.

“Hate speech” laws are just modern blasphemy laws (as an historically literate lawyer points out here) and entitled to no more respect. If error has no rights, then that just means power is given to whoever gets to define “error”. Moreover, such laws are never operated evenhandedly. Neither in what counts as “hate speech” nor in which “hate speech” is prosecuted. Regarding the latter, everyone knows that, in jurisdictions with such laws, they are broken in various mosques every Friday and that such folk will rarely, if ever, be prosecuted.

Common law notion of incitement provides a well-attested mechanism against speech that actually seeks to break legal protections. It is as far as one needs to go.

Hate crimes are in a different category; first, because there are actual crimes involved. Secondly, because it is a criminal attempt to intimidate an entire category of people.

Speaking as a gay man, I particularly dislike the way “hate speech” prosecutions give conservative Christians a warm sense of victimhood.

Thursday, September 8, 2011

Slowly seeping through

The message about supply constraints on land/"house" prices (that quantity constraints have price effects) is steadily spreading. In the Oz blogosphere, the Unconventional Economist has been posting excellent posts, full of clear data and analysis.

In the US blogosphere, Matt Yglesias puts the problem with common framing of discussion of "house" prices well:
If I were to pick something to quibble with in Ryan Avent’s The Gated City it’s a perpetuation of the American habit of mixing up discussions of the price of houses with discussion of the price of land. … There are lots of perfectly ordinary reasons for land to go up or down in price. A house, by contrast, is a large decaying physical object.
In my experience, people living in rural areas are generally clear on the difference here both because land is put to more varied uses and perhaps because more people live in trailers—homes sold separately from land. But it’s just as true in a urban or suburban setting.
Ryan Avent agrees:
When broader shifts increase the economic potential of a place like Silicon Valley, land with easy access to that place also rises in value. The natural market response is to maximize the return on valuable landholdings by using them to provide shelter to the many people who’d love to have access to the local job market.
Unfortunately, the response in many productive cities is to try to circumvent this response. Residents use lots of different tools to prevent landholders from providing the access to the local economy that the market demands. As a result, we fail to take full advantage of the productive city’s economic potential, jobs in productive industries that would otherwise be created are not, and the economy as a whole is worse off.
When you see rapidly rising home prices in a rich city, that’s the process you should be imagining to yourself; it’s lost economic growth and lost jobs made manifest.
(Both via).

Which is not quite how I would put it, given that restricting land use can greatly increase the value of land permitted to be used for housing (though not necessarily in a very stable way). Avent also fails to note the property-tax/political donation incentives acting on officials.

Still, it is very useful to have an uber-blogger such as Matt Yglesias make the misleading framing point--that the issue is land supply and prices, not "house" prices--so clearly.

Sunday, September 4, 2011

The argument from excluded diversity

A post at the excellent information source Box Turtle Bulletin has fun with what poster Rob Tisinai calls "the stoner argument against same-sex marriage". He is referring to a post by Prof. Robert John Araujo, SJ in which the good Professor opines:
[Tribe] also derides the use [of] arguments against same-sex marriage that rely on what he labels “pseudo-scientific claims.”
He does not identify the reasoning underlying these claims, but I wonder how he would consider this argument: Let us assume that two planets which have not yet been inhabited by humans are to be colonized by them; on Planet Alpha, heterosexual couples only are assigned; on Planet Beta, only homosexual couples. In one hundred years, will both islands be populated assuming that reproductive technologies are not available to either group? I suggest that Planet Alpha will be; but Planet Beta will not. Why? The basic answer is to be found in the biological complementarity of the heterosexual couple necessary for procreation that is absent in same-sex couple. This is a scientific argument, but perhaps it is, in Tribe’s estimation, counterfeit.
As Tisinai points out, there is no argument here. In Tisinai's words:
It’s just a long-winded way of saying two members of the same sex can’t conceive a child without outside help. That’s it. Granted, Araujo takes many words and a convoluted path to say it, but he never makes an argument of it — never links to it to a clear point. It’s a kind of pointless pseudo-profundity that reminds me of stoners smoking weed back in college …
Hence Tisinai's label, "the stoner argument against same-sex marriage", with funny dialogue added to demonstrate.

It is clear from what Prof. Araujo SJ writes that he is (as one would expect from a Catholic theologian) advancing a Thomist natural law position. This particular notion he advances in his non-argument is one that turns up quite a lot: best summarised as "but what if everyone acted like that?" I have seen, for example, in a debate on same-sex marriage, an elderly gentleman question the (gay) supporter of same-sex marriage in precisely those terms.

You can make the position into an argument by added an appropriate premise. Such as, for example,
No stable arrangement recognising sexual diversity is possible.
It would be an odd sort of premise, since it is clear enough that presuming opposite-sex attraction and bonding as the only acceptable option did not stop people from being sexually diverse. So it seems very odd to imply that, by including same-sex attraction and bonding within acceptable options, somehow opposite-sex attraction and bonding would be undermined.

But if one takes the view that one cannot broaden the nature of something, one can only change it, the notion makes more sense. That is, the possibility of x + y is excluded, it is only x or y. It is still a strange notion, but it is understandable in its strangeness. It becomes a case of “why does one think reality is like that?”, rather than merely “what a strange way to look at the universe!”.

The reason why comes from Aristotelian metaphysics: specifically, the four causes—in particular, the notion of final cause. The notion is that, just as the purpose of eyes is to see, the purpose of sexual organs is to procreate. So human nature has a single “proper” form—heterosexuality. From this teleological conception it follows that human nature does not have a diverse sexual form: it has a single sexual form, heterosexuality, with any divergence being improper—failing to conform to one’s proper form.

Such thinking tends to conflate causal role, biological (or other) function and sentient purpose as if they are the same sort of thing. But it also encourages an “either x or y not x and y” view of the world: that one can only have a different form with another, single defining purpose; not an expanded form.

The view not only rests on a notion of definitive form, it also rests on the notion that we have direct access to those forms. (So, in Thomism, that the form in nature and the form in our mind are the same form.) It permits the exclusion of contrary cases as “not proper” because we have direct knowledge of their defining purpose.

This is a version of the “no True Scotsman” fallacy, where the conclusion is permitted to set the ambit of its premises. So, evidence for same-sex activity, couples and parenting in nature are dismissed as “not true manifestations of sex, couple or parenting”.

Neither the claim of defining form (including purpose) nor the claim of direct understanding of that form (and so purpose) stand up to close examination. For example, the claim that the defining purpose of marriage is procreation: nonsense, the function of marriage is to allow people to build lives together. By creating that connection, marriage then becomes the prime social vehicle for raising children. But raising children does not define marriage: hence all those societies where infertility was not grounds for divorce or annulment, fertility was not a requirement for marriage and same-sex marriages have been recognised. This even without considering the very strange places such Thomist epistemic confidence led to or similar problems of natural law theory.

But, if you think in terms of definitions of “proper” form (with defining purposes) that actual instances can fall outside of, then it is not so hard to think in terms of “excluded diversity”. That the consequences of all marriages being same-sex is somehow an argument or counter-example against some marriages being same-sex.

Not that the good professor’s example works even in his own terms: it is perfectly possible to have same-sex couples “cross-pollinate” and raise children—there is even a film and a book trilogy using that premise. (It is also roughly what bonobos do).

Still, the "argument from excluded diversity" is a strange way to look at the world and that Thomist natural law thinking leads one to think in such terms is a sign that there is something wrong with it.