Blinder Expresses Why I Chose to Be a Doctor

Hard Heads, Soft Hearts was great. But this is just the problem in my opinion. There was a time where I thought it would be so cool to be a policy maker. Not necessarily to be a politician, but to work in politics in some capacity where I would develop policy. The idea seems appealing, you go around as a smart person and you read up on things and conduct research and you come up with answers as to what the best solution to a given problem is. The government implements the policy and wham-o, you have just helped the lives of millions of people.

Then I did the Washington, DC program. I got a taste of how policy was really crafted. It seemed to me that Murphy's Law of Economics is not just true of economics but everything. We actually know more about everything than it may seem. While social sciences are necessarily vague in their responses to the correct solutions to many problems, there are wide-reaching consensuses. For example, class size reduction does not improve educational experiences of students in any way that is proportional to its cost. It costs a lot and it does not do much, there are a lot of things we could do that would help students more for the money. Nevertheless, California, among other states, has state-mandated and funded class size reducation laws that take classes from numbers like 32 down to 24 or things like that. And that costs so much and really does very little.

This is just one example, and of course half of Blinder's book is filled with others. But Blinder, like many a liberal is too much of an optimist. Wake up Blinder... shall I dare say... remove your blinders! It is not just that economists are poor communicators. This is true of every field.

The policy wonks say that solution Y to problem X is the best answer. You put it in the magical political machine and bam, instead of solution Y, the political hacks turn it into solution Z, as various interest groups fight, scratch, and bite. This is what frustrates me about policy making. Hence... I will be a doctor.

Let's get strategic

I found Krugman's discussion of free trade, protectionism and strategic trade to be quite interesting, especially knowing now that he just won the Nobel prize for is work on the analysis of trade patterns and location of economic activity (aka economic geography). Just recently I've become and advocate of free trade (Thanks Professor Blomberg!) instead of fair trade, so reading this chapter first put me on the fence on what I truly believe in terms of trade because of his strategic trade and protectionism arguments. I found his strategic trade policy arguments interesting and somewhat convincing as I saw it being a middle of the road between free and fair trade. Strategic Trade Policy, however "is really an argument for a limited government industrial policy consisting of carefully targeted subsidies, not for tariffs and import quotas." That being said, it seems like a strategic trade policy is a lot of work and could greatly interfere with free market efficiency which is not worth it, especially if "there just isn't any evidence that an aggressive strategic trade policy can produce large gains." Overall, strategic trade may work and it may have to work given that other major players are resorting to this policy method. Free trade, although probably best for our nation, may not be feasible all the time given that "free trade becomes very difficult to sustain politically if there is a widespread and growing perception that one of the main players is following different rules." All countries need to be on the same page for trade, but when we're all trying to protect our own interests, sometimes at the expense of others, getting countries on the same page is a difficult task. Thus, it may be necessary to get strategic to benefit ourselves the most.

Also, unlike Erik, I really enjoyed Blinder's book. I really empathized with what he said and completely agreed with his hard head, soft heart approach to policy. I just wish that politics and party divides were a little less involved in our economic policy because this involvement makes it a bit more difficult to achieve this hard head, soft heart approach that Blinder discusses. What would our world be like if we tried to achieve this "happy blend" buy joining "the rational economic calculation of the conservative Republican to the compassion of the liberal Democrat"? I think we'd see efficiency and more happiness. I'm all about it.

I Love Democracy and America and Good

“People rarely speak of the ‘right’ to own an automobile or home that they want … why then should we assume that the right to pristine air and water is inalienable?” Blinder’s economic arguments are simple and often quite convincing. The pollution section is no exception. However, the statement above shows ignorance of the difference between public and private goods. Cos’s theorem does a great job of assigning costs, but only if ownership is established. I see a disconnect between Cos and goods such as the environment which one person or company cannot possibly claim title to. Does a democratic society give the government a right to dole out pollution credits, showing ownership through a sale? Perhaps, but I haven’t yet seen the argument spelled out convincingly in either class or a text.

In the spirit of critiquing economist’s writing styles, comparing selling businesses pollution credits to tennis clubs selling memberships is a hilarious sign of elitism.

“Some people argue that putting price tags on clean air and water ‘cheapens’ these things, that is, makes people think them less valuable. I don’t suppose they apply the same reasoning to mink coats or Rolls Royces.” Once again, Blinder is throwing out a contrived analogy to try to reduce the environmentalist’s argument to the absurd. In doing so, however, he mixes too many ideas to put across a clear point. Is Blinder suggesting that mink coats and Rolls Royces are more highly coveted because they cost more money? If so, he is rejecting the simplistic (and powerful) economic framework the book is meant to operate on. Is he is bringing in the idea of Giffen Goods, is he suggesting that as we make the environment more valuable, people will actually consume (pollute) more of it? No, this is clearly against his claim. Blinder makes a strong point about how to most efficiently reducing pollution – I remember hearing about a recently implemented national pollution credit system. He should leave the moral decisions on which the economic framework should be built to the philosophers, or perhaps democracy.

Hard Heads, Soft Hearts Makes Me Want to Throw Up

Ugh.  I mean every word of my title.

Blinder's book wouldn't have been half as bad if he had just been honest.  The goal of his book wasn't to find policies that incorporate both "hard headedness" (reliance on market structures) and "soft heartededness" (curbing inequality); rather, it was to bash Republicans and praise Democrats.  

I'm sure my liberal classmates (whom I love dearly!) loved this book.

On page 10, Blinder makes the laughable assertion that, "The many policy changes that I advocate in this book are not easily classified as 'conservative' or 'liberal,' as Democratic or Republican.  They derive... from a coherent underlying philosophy."  Nevermind that his philosophy is the philosophy of the Democratic Party.  [He was on Clinton's Council of Economic Advisors and an advisor to Kerry's campaign in 2004!!!  And this guy claims to be anti-partisan?!]

He makes his first error on page 24, stating that welfare is 'public generosity.'  He goes on and on about how Democrats and liberals care more about 'public charity' and 'public generosity' than conservatives and Republicans.  

But taxes and welfare spending are not charity or generosity.  I choose to give to charities; I am forced to pay taxes.  If I don't give money to Make A Wish Foundation, no one throws me in jail.  If I don't pay taxes, I end up in the slammer.  Are we beginning to see the difference?

Blinder also states that the free market produces winners and losers, as if every market transaction produced a loser.  (And as if only the rich win, another Democratic Party line.)  But in a free market, wouldn't we see almost all winners?  If I am (freely) engaging in a transaction, then I believe I am going to "win" and so does the person on the other end of the deal.  Only when coercion enters the system (through taxes, regulations, etc.) will there be a loser produced.  

Blinder is not wrong, however, to point out that the market produces inequalities.  Free markets might produce inequalities... but they also make the poor better off - and if we are really to have a "soft-heart" for the poor, then the most just thing to do would be to follow the free market and abandon Blinder's redistributive policies.