Trees good, parking bad

I live within the boundaries of Maribyrnong Council in an area that fulfils my definition of "inner city" (it has back alleys and many houses don't have driveways). So, parking is a bit of an issue, while a certain queueing politeness is needed while driving--quite a lot of the streets only allow one car to pass at a time.

The Council has clearly decided we need more trees, less parking and more traffic hazards, installing concreted squares with planted saplings on lots of the local back streets.

Traffic hazards with helpful light reflectors added (picture taken on a weekday).

So, things will be greener, but more frustrating.

Goals, rules and time-horizons

A perennial discussion in monetary policy is rules versus discretion. Should the central bank be constrained to follow a policy rule or should it have policy discretion?

I find this debate generally muddled both in the means-versus-ends question and what is the proper underlying concern. Is the concern bad policy or unclear policy? With constraining the central bank from acting badly or with effective management of expectations? To bind the central bank to a rule, such as the Taylor Rule, is also to put great confidence that you have the correct rule. I prefer to think of the proper concern for central bank policy as a matter of having an appropriate goal and having a clear goal rather than having policy uncertainty.

As for means versus ends, take expectations seriously and clarity of purpose dominates constraining of action (provided actions are credibly connected to said purpose, the purpose is credible given available actions and the central bank is credibly committed to the purpose). After all, if actions are too constrained then that can generate very unfortunate expectations, particularly in crisis or abnormal conditions. Clear expectations also allow the central bank to achieve its goals much more expeditiously through the Chuck Norris Effect or central banking as Jedi Mind Trick.


If we go for a clear goal (understood as a policy target), then the time-horizon of the goal matters. The narrower the time-horizon, the greater the inflexibility and the more likely perverse outcomes are (such as following economic activity downwards, intensifying the spending crash). The time-horizon has to be constraining enough to give content to the goal but not so constraining as to lead to perverse rigidity. If macro-economic stability is the goal, then the time horizon should be the business cycle so as to minimise the danger that the central bank will intensify, rather than smooth, the business cycle.

We can thus expect that an inflation-targeting regime which has the business cycle as its time-horizon would function better than one with a narrower time-horizon. This is certainly the Australian experience, with the Reserve Bank of Australia's over-the-business-cycle inflation targeting goal. Australia is now 21 years without a recession, which may well be a world record. (This is in dramatic contrast to certain other inflation-targeting central banks one might mention.)

If clarity of central bank goal is the best way to manage expectations, and if the business cycle is the appropriate time-horizon of said goal, then what should be the goal? A straightforward way to look at that is whether the goal encompasses the key functions of money. Money exists to facilitate transactions. It does this more efficiently if its value is sufficiently stable over time. So, the goal of price stability is appropriate, but not at the cost of serious and sustained impeding of its use in transactions; the basic purpose that price stability is desirable for.

Giving the central bank a goal with a time-horizon across the business cycle naturally ties together price stability and use in transactions, since the level of transactions on output will affect price stability. So would a stable spending-on-output-goal, or NGDP targeting.

Thus, central banks should have a clear goal; either price stability over the business cycle or a clear spending-on-output path. (I.e, if the economy wanders off the path, extra steps are taken to get it back on.)

What central banks shouldn't have is an unclear policy goal that makes mismanaging of expectations easy or a policy goal whose time-horizon is so narrow it can make the business cycle more intense or a policy goal which seriously subordinates the facilitation of transactions-on-output to price stability. Rather, the goal should incorporate acceptance that some trade-offs will be required from time to time; though much less if expectations are properly managed, if the policy target has an appropriate time-horizon, if the goal targets spending-on-output directly.

The right goal, the correct time-horizon and effective management of expectations can be a beautiful thing. Screw those things up, and it can get very ugly and stay that way for a remarkably long time.


ADDENDA This paper (pdf), by a former member of the Bank of England's Monetary Policy Committee, refers to a two-year time frame for monetary policy. Why two years?  Why not 23 months or 21 months or 57 weeks or whatever? This is a numerological constraint with no inherent connection to economic conditions, unlike the over-the-business-cycle time frame that the Reserve Bank of Australia operates on.



[Cross-posted at Skepticlawyer and at Critical Thinking Applied.]

What can the price of beer tell us?

What can the price of beer tell us? Quite a lot according to this amusing piece (via).

Here is a chart of beer prices in various Eurozone countries since 1996.

Greece (blue), Italy (orange), Spain (red), Ireland (green), Germany (black)

Prices in Germany have remained pretty steady, with the price of beer rising about 1% a year. The price of beer in Greece has surged upwards (lots of inflation). Italy and Spain have also had a fair bit of inflation.  Beer prices surged in Ireland until 2003, flattened off, boomed in 2008 and are now dropping to the point where their beer prices have the same total growth over the period as Germany. In the words of the piece:

So really the beer chart says it all: Greece: a wreck. Germany: calm. Spain and Italy: in trouble, and Ireland making a comeback.

The Eurozone crisis in one graph.*


*Actually no, since it completely ignores monetary policy and the ECB. But it makes a good story and graph.

[Cross-posted at Skepticlawyer and at Critical Thinking Applied.]

Power and purity

Taboos are a major part of religious practice, across a very wide range of religious traditions. Taboos about what people can eat, wear, act, associate with, believe; the entire range of human behaviour.  Religious taboos are nicely defined as:

a vehement prohibition of an action based on the belief that such behavior is either too sacred or too accursed for ordinary individuals to undertake, under threat of supernatural punishment.

Such taboos both signal one's membership of a particular religious community and one's acceptance of the authority at the centre of that religious community.

Monotheism tends to have very strong taboos--about belief, food, clothing, gender roles and sexuality. Kosher and halal are a series of food taboos, for example.

The Old Testament is full of taboos. Such as Deuteronomy 13's taboo about worshipping other gods. Or Deuteronomy 22:5's taboo against cross-dressing. Leviticus is a book of taboos mixed in with more common legal prohibitions (critical scholarship identifies a subset of Leviticus as the Holiness Code); and if folk pick and choose among the provisions in Leviticus, then their authority is not Leviticus but whatever they are using to pick and choose. The punishment for breaking these taboos is, at the minimum, shunning and, at the worst, death. Indeed, Deuteronomy 13 requires siblings to kill their brother or sister if they become apostates.

Taboos work on what social psychologist Jonathan Haidt labels the sanctity/degradation moral foundation, which he describes as being:

shaped by the psychology of disgust and contamination. It underlies religious notions of striving to live in an elevated, less carnal, more noble way. It underlies the widespread idea that the body is a temple which can be desecrated by immoral activities and contaminants (an idea not unique to religious traditions).

Haidt has a useful website on research on disgust. But taboos also manifest, in their social operation, what Haidt calls the authority/subversion foundation;

shaped by our long primate history of hierarchical social interactions. It underlies virtues of leadership and followership, including deference to legitimate authority and respect for traditions.

Taboos extend the alleged ambit of morality from constraining our behaviour towards each other (both in the sense of not trespassing and in the sense of actively helping or cooperating) to much wider realms of behaviour and identity. One of the reasons squick is such a useful word is it breaks that connection between disgust and moral claims.

Signaling authorityThere is a long tradition of social scientists attempting to rationalise taboos. But taboos are so many and varied, that rationalising their content is likely to be often a pointless exercise. Their social role, however, is probably highly rational. Both in the aforementioned signaling role--yes, I am a member of our community; yes I accept the authority that binds us together; yes, you can have certain expectations about me--and in their role as an exercise of authority.

The easiest path to power and authority for priests and clerics is as gatekeepers of righteousness. In monotheism, that means offering and withholding God. Offering God as the loving universal Parent and path to salvation and withholding Him from those who do not walk the designated "path of righteousness".

Taboos are enormously useful for setting out the requirements of righteousness. Their very contingency, their very arbitrariness, makes them that much more distinctive and distinguishing, and so effective as social signals. But their contingency, their arbitrariness also makes them more effective as vehicles of priestly and clerical power; the people who can tell you what is righteous, and what is not.

If God just wants us to be nice to each other, that is something any of us can work out, either singly or together. But if God has a whole list of very specific injunctions, those a priest or cleric has to tell you about. Moral simplicity is empowering to people in general, moral complexity to those with specialised knowledge and "understanding". (A point that applies more generally: unions and employer organisations loved the rule-complexity of Australia's arbitration systems as the more complex the rules, the more workers and employers needed agents--unions and employer organisations--to manage the complexity of the system for them.)

Morality v taboosThis tension between morality and taboos runs through the Bible. In the Old Testament, it is the tension between the very Priestly Leviticus and Deuteronomy--with their prohibitions and concern for ritual and priestly authority--and the charismatic prophets with their overriding moral concerns and direction connection to God. The Jeremiah who denounces the "lying pens of scribes" expresses this prophetic and charismatic anticlericalism with particular intensity.

The Christ who spends so much time denouncing misuse of religious authority, advocating concern for the spirit not the letter of the law, and defines His teaching as love God and love thy neighbour as thyself is very much on the Jeremiah end of the spectrum. The conjunction of Christ's two principles can be reasonably summarised as you are not allowed to use God against your fellow children of God (epitomised in "let he who is without sin cast the first stone"). Even the Temple riot which precipitated Jesus's trial and execution was a revolt against profiteering from the priestly monopoly of ritual access to God.

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

Networked zealotry

A feature of the internet has been the growth of networked zealotry; where intensely held attitudes are expressed in overheated rhetoric and ad hominem abuse, not as solitary aberrations (though that also happens), but in self-reinforcing internet coteries.

This has fed off, and possibly intensified, the bitter "culture wars" of the US; the intensification of political rhetoric and a more intense partisanship in politics. The last, particularly in Federal politics, has likely been fed by a change in living arrangements among Senators and Congresspersons whereby they spend much less time socialising with people of the other political Party.

There is some penchant--depending on political preferences--for blaming one side of politics or the culture wars more than the other. Since the phenomena in question occur across the political spectrum, this is not likely to be an analytical fruitful exercise, as distinct from another manifestation of the same patterns.

Drowning not waving
Looking at deeper structural changes, we are living in information-saturated societies. A natural response to such an assault of information is to retreat into simplifying and emotionally satisfying narratives. And what is more simplifying and emotionally satisfying than a Manichean story of good and evil, where you and those who think like you are the "good guys" and them over there are there are the bad guys, who clearly only believe what they do because they are evil, wicked, malicious and stupid (while you and yours believe as you do because you are moral, clever, smart and informed).

The dramatic drop in communication costs, and explosion in ability to connect, that the information technology revolution represents means that the like-minded can associate together far more easily. This can be liberating and reassuring. It can also lead to intensification of beliefs as people reinforce each other and divergent information is excluded or discredited. An ironic effect of massively increased access to information is to make the crippled epistemology (pdf) which is so much a part of zealotry and fanaticism easier to maintain.

Established groupthink
The established information institutions have (more than) done their bit to create the basis for these patterns. While critical thinking is allegedly an ideal of post-Enlightenment education (particularly universities), what educations systems have generally actually been teaching and practising (particularly universities) has been groupthink. (Scott Sumner, for example, regularly bewails the current groupthink among macroeconomists--all the more remarkable since it fails to conform to previous accepted analysis.)


Moreover, teacher and academics may have been better at teaching the habits of groupthink than their specific groupthinking. Particularly if alienation from the offered groupthink leads, not to open-mindedness, but the search for more congenial groupthink. A sense of status, worthiness and morally-charged meaning are powerful passions; and if the real "lessons" have been that that is what information and analysis is "for", then people will go off and search for it. And, thanks to the information technology revolution, very easily find it.


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

Unintended consequences

Over the years, various reforms have been introduced in attempts to make American politics be more democratic. For example, primary voting was introduced during the Progressive Era as a way of broadening popular participation in the election process by registered voters selecting their Party's candidate. The unintended effect was to increase the expense of running for office, increasing the demand for political donations.

There have been a series of reforms and attempted reforms to regulate political donations. One mechanism has been to limit the size of donations; lots of small donations being held to be less susceptible to undue influence than fewer, larger donations.

This has also had unintended consequences (via).

Putting Presidents on the rubber chicken treadmill

The time spent by Presidents raking in all those small donations is escalating. 

Which fundraiser is this again?

Turning the US President into an ever greater prisoner of the fundraising circuit is perhaps not clever.

None so blind

In the course of exploring the history and dynamics of bigotry, of moral exclusion, and the history of money (particularly the similarities between the goldzone Great Depression and the Eurozone Great Recesssion), it has become clear to me how very poor conservatives tend to be at learning from history. Which is not, of course, how conservatives typically see themselves. On the contrary, they usually regard themselves as respecting the lessons of history.

Alas, this is not often not true. What one sees instead is a repeat of past mistakes.  So, just as during the Great Depression, we now get "hard money" conservatives worrying about the prospect of inflation even as inflation expectations are low and falling. The same people economist R. G. Hawtrey characterised in the 1930s as shouting "fire!, fire!" in Noah's flood. They cling to what gives them a sense of order, what dangers resonate for them, rather than seeing clearly what is before them.

Been here, done that
Similarly, the current debates over queer* emancipation are literally a re-run of past debates over Jewish emancipation--right down to exactly the same accusations being made against queers as were previously made against Jews (being an offence against God, being against the Christian basis of Western civilisation, that they corrupt everything they touch, that they prey on children, that they spread disease, etc etc). Ever since the Enlightenment, and particularly the Industrial Revolution, the opponents of equal protection of the law have always, in the end, lost. Yet here conservatives are, mounting the same barricades all over again in a cause it is clear they will and are losing.

Upon examining these recurring patterns, you build up a checklist of the standard evasions. For example, Rafe Champion's recent comment that:

That is why I have so much contempt for the Same Sex Marriage brigade. Nobody is suffering for want of same sex marriage. Get  your freaking priorities in order and do something to help people in genuine need.

Anyone familiar with the history of unequal legal standing recognises this one: it is the "wait your turn" response. And, strangely, it turns out never to be "your turn", there are always more urgent matters.  It is, of course, a nonsense view of social action, as if there is a single set of priorities that everyone must follow and things can only be changed or approved in a single sequential order. It is a way of dismissing the group seeking equal treatment as "clearly" morally deficient because they do not have "proper" moral priorities.

It also shows a deep failure to engage in that act of moral imagination that Adam Smith called sympathy and put at the heart of his moral analysis in The Theory of the Moral Sentiments. Of being apparently unable to project from the importance marriage has in one's own life, and the life of those around one, to others.

SF writer John Scalzi has expressed how unequal standing in society works quite nicely with his recent post on different levels of social difficulty. (With follow-up posts here and here while fantasy author Jim Hines has one here.)


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

Shoggoth lives!

On Murano, the glass island, they have glass sculptures.

They tended to be rather starkly modern, but I was taken with this one (possibly for somewhat Lovecraftian reasons). OK, it does not actually look much like a Shoggoth but that is where my mind went. (I presume it is some sort of sea anemone.)

The insidious reach of error

I have become deeply interested in the origins of money, which means reading the work of various historical anthropologists. As is often the case when reading other social scientists on matters of economic significance, one comes across a fair bit of economist envy. Compared to other social science academics (and, for that matter, humanities academics), economists' skills are generally far more in demand outside academe; economists tend to get more, and more highly paid, consultancy work; they get to be talking heads commenting on events much more; and have more influence over public policy. What's not to envy?

Worse, economics keeps invading other disciplines. Run down the list of what people get Nobel memorial prizes in Economics for and there seems to be no part of the domain of social science that economics and economists are not willing to invade. Worse again, mainstream economics tends to be enamoured of markets and private property, they study wealth and tend to approve of use of market mechanisms in general. All realms most academics have little to do with, are not comfortable in and often resent.

All of which shows up in the politics and outlooks typical in much of academe--especially when (other) academics write about economics and economic issues. This is not helped by the fact that being self-consciously clever folk simply living in "capitalist" economies seems lead to the conclusion that academics understand "capitalism"; a conclusion which is regularly adhered to more strongly than is warranted.

I once asked an Israeli archaeologist why archaeologists (and historical anthropologists) seem to be so influenced by Karl Marx. He replied that it was because Marx talked about economic surplus and they study the products of economic surplus, which makes sense. Though the appeal of broadly Marxian ideas to humanities and social science academics generally is clearly strong; an understandable reaction to academics' circumstances and common resentments.

All of which has made it easier, alas, for one of Marx's more profound errors to become part of many people's common wisdom. An idea set out in the first chapter of Das Kapital:

…[commodities of equal value] must, as exchange values, be replaceable by each other, or equal to each other. Therefore, first: the valid exchange values of a given commodity express something equal; secondly, exchange value, generally, is only the mode of expression, the phenomenal form, of something contained in it, yet distinguishable from it.

The notion that exchange is a matter of matching equivalences keeps turning up in the writings of anthropologists on money. It is a deeply wrong-headed way to look at exchange. Trades, exchanges, happen at points of intersection, not points of equivalence. The supply-and-demand "scissors" economists are so fond of are a good way to express what is going on.

It also helps explain why trade-with-strangers is regarded in many cultures as a dubious process, one that merges into swindling.

Trade as swindle
Suppose we have two peoples who are in contact with each other, perhaps across a sea.  One, call them the Cols, have a river that runs with gold. You put a fleece in the river, leave it for a while, come back and lo!, it has flecks of gold all through it. You retrieve your now golden fleece, pick out the gold and repeat.  Gold is not such a big deal to the Cols, because it is so easy for them to get hold of it.

Then there is another people, call them the Crims, who have an easy salt mine in their territory. You take a pick, swing it a couple of times, and loosen as much salt as you can carry. Salt is not such a big deal to the Crims, because it is so easy for them to get hold of it.

Clearly, the Cols and the Crims will swap gold for salt. Clearly, the Cols value the salt they get more than the gold they trade away, while the Crims will value the gold they get more than the salt they trade away. Each will leave thinking they have got a really good deal. Indeed, it is likely they will think they have been clever in convincing the other mob to trade away something "clearly" worth less for something "clearly" much more valuable. Trade with strangers is obviously a matter of ripping off the strangers.

First, there is no "equivalence" here, merely a point of intersection.  Secondly, both groups will be quite correct in thinking they "ripped" off the other mob because, in terms of their own valuations, they did.  The trade occurred because they had different, but intersecting, valuations. Which allowed both sides to enjoy gains from trade; to be better off than they were before the trade.

If trade was a matter of swapping things of equivalent value to the participants, no one would bother. It is precisely the different valuations that makes trade worth doing. If you see exchange as swapping equivalences, you will miss its nature and point.

Finding what is not there
But it is worse than that. You will start looking for what intrinsic "thing" makes them equivalent--in the case of Marx, leading on to the labour theory of value. The statement from Marx quoted above is only one of three false claims he makes in his argument for the labour theory of value. It is the second such, the first being:

The utility of a thing makes it a use value. But this utility is not a thing of air. Being limited by the physical properties of the commodity, it has no existence apart from that commodity.

This is wrong, for utility is utility to someone. So, the utility of a thing does have existence apart from that commodity, it exists in the relation of the thing to the purposes of anyone who has a use for it. Having got utility and equivalence wrong, Marx then moves on to the third false claim:

… if then we leave out of consideration the use value of commodities, they have only one common property left, that of being products of labour.

Which is also not true. Commodities also have the qualities of being made of materials (what economists call ‘land’) and by tools (what economists call ‘capital’); labour on its own produces little or nothing.

Even more basically, to be exchanged, such things have to be controlled by someone. Locke’s metaphor that a person in the state of nature acquires something by “mixing his labour” with it is misleading: what they do is take control of it (and, more importantly, that control is acknowledged by others). Any contribution of labour to exchange—whether in production or the realisation of value in exchange—is framed by such control: as is also true of land and capital. Moreover, the control has to matter: the thing has to have sufficient scarcity and be sufficiently wanted by someone for such control to matter. We can control a twig, but who cares? (Acknowledged) control, scarcity and wanting are the bases of exchange.

The search for a "common property" in things exchanged is completely wrong-headed, because exchange is a matter of intersecting differences, not matching equivalences.  One can, of course, compare the currently operating intersections of supply and demand and decide that at $50 for a pair of shoes then "equals" 10 cups of coffee at $5 each. But that is still not matching equivalences, it is matching points of intersection. Which will change as supply and demand for shoes and coffee change.

Pointing out that, for example, allocation of labour tends to shift with price merely tells us that we allocate labour towards things we value. We do the same with land and capital, it is just that we can usually do so with labour quicker and easier.

All of which hardly exhausts how thinking of trade as matching equivalences will lead one astray. It will, for example, encourage a quite mechanistic approach to economic activity, as if economies can be planned so as to just turn out the right mix of equivalences. Ironically, the search for some underlying extrinsic value (even in labour) that explains said "equivalences" does not humanise economic activity, it dehumanises it because it completely abstracts away from the diversity of human valuations, the human purposes, that drive economic activity.

It will also devalue private transactions--capitalist acts between consenting adults--since that is just "swapping equivalences", not expressing preferences and improving utility. Which then undermines restraining state action, since "managing" swapping equivalences is rather a different thing than blocking mutually beneficial transactions. As the discovery role of private transactions is thereby also devalued ("equivalences" are "easily" knowable), the knowledge of officials is exaggerated, their ignorance minimised. It becomes that much easier to be dreadfully complacent about the problems in Seeing Like A State.

So, whenever you come across someone writing about exchange as "matching equivalences" you will be observing some who, in Keynes's words, is the slave of a defunct economist and who understands economic activity and commerce (and, for that matter "capitalism") a great deal less than they think they do.

[Cross-posted at Skepticlawyer and at Critical Thinking Applied.]