The (Liberty) Detective

Economics, liberty, and the economics of liberty
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  • Garrett Petersen

Virginia Political Economy and Entrepreneurship with Diana Thomas Dec 31, 2018

In this episode, Diana Thomas discusses the relationship between the Virginia School of Political Economy and the Austrian School of Economics. Diana is an Associate Professor of Economics at the Heider College of Business at Creighton University. The Virginia School is a branch of public choice, the application of the tools and techniques of economics to the study of political actors. The Virginia School’s founders, James Buchanan and Gordon Tullock, were the first to systematically apply a rational choice framework to the study of politics in The Calculus of Consent. Two assumptions commonly made by neoclassical economists are the “benevolence...

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Price Theory and the Minimum Wage Dec 31, 2018

The minimum wage is a contentious issue among economists, and yet it enjoys near-universal support among the public. In my view, public views of the minimum wage are simply the result of a lack of careful thought by most people. Daniel Kahneman’s theory that people, when faced with a difficult question, substitute a simpler question that they can easily answer, applies particularly well in this case. People answer the question of whether they would like people to earn more when the real question is whether government should mandate higher wages (I first heard this argument from Bryan Caplan on EconLog)....

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Migration and Open Borders with Nathan Smith Dec 30, 2018

In this episode, Nathan Smith discusses the economics and history of migration and migration restrictions. Nathan is an Assistant Professor of Business Administration: Finance and Economics at Fresno Pacific University and regular blogger at Open Borders: The Case. We start the episode by discussing the economic impacts of Nathan’s own migration to Fresno. Students gain, as he adds to the supply of economics professors, other economists might lose from his competition in labour markets, people looking for parking near the University might lose, as he slightly reduces the supply of available parking spaces, and property owners gain from his demand...

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Vampires, Zombies, and the Dismal Science with Glen Whitman Dec 30, 2018

In this episode, Glen Whitman discusses Economics of the Undead: Vampires, Zombies, and the Dismal Science, a book he co-edited with James Dow. Glen is an economics professor at California State University and, unlike most academic economists, he moonlights as a TV writer. He first wrote for the TV show Fringe and now writes for the soccer spy drama, Matador. The book’s website provides the following description: “Whether preparing us for economic recovery after the zombie apocalypse, analyzing vampire investment strategies, or illuminating the market forces that affect vampire-human romances, Economics of the Undead: Zombies, Vampires, and the Dismal Science gives both...

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TruthCoin, Prediction Markets, and Anarchy with Zack Hess Dec 30, 2018

This episode of Economics Detective Radio features Zack Hess. Zack is working on a project called “TruthCoin,” a decentralized prediction market based on the technology behind bitcoin. Prediction markets are a highly effective way to bring together dispersed information and insight into prices that reflect the likelihood of any future event. However, recent attempts to create centralized prediction markets have been thwarted by governments under antiquarian anti-gambling laws. Enter TruthCoin. TruthCoin is a prediction market (currently in beta) that will not depend on any central server or organization. This online market will be dispersed among all the participants and thus...

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Jane Jacobs as Spontaneous Order Theorist with Pierre Desrochers Dec 30, 2018

This episode of Economics Detective Radio features Pierre Desrochers discussing the life and work of Jane Jacobs. Jacobs, born Jane Butzner, was a thinker and activist who wrote about cities. She spent her early career as a business journalist. When she started writing about urban renewal, she recognized the policy for the disaster it was. Jacobs became a voice for the general dissatisfaction with a policy that would bulldoze whole neighbourhoods, relocating the inhabitants into new buildings preferred by urban planning reformers and political elites. The editors of Fortune Magazine invited Jacobs to write a piece about downtowns. Her piece, “Downtown...

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Teaching Economics: Age of Empires and Central Planning Dec 30, 2018

When I was young, I played a lot of Age of Empires. For those who are unfamiliar with the series, they are games where the player must direct a tiny civilization’s development. He begins with one building and only a few villagers. By right clicking on a villager, then left clicking on a tree, stone mine, gold mine, or animal, the player can direct the villager to gather wood, stone, gold, or meat. He can also direct villagers to make buildings. And with buildings, he can recruit more villagers or soldiers. By directing every action of every person in his...

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Is a Small Amount of Money More Valuable to a Low Income Person than to a High Income Person? Dec 30, 2018

I answered this question over at Quora. Just about all the other answers were wrong, so I thought I’d set things straight. No. Value is not a quantity. It cannot be compared across individuals, so we cannot say that $50 is more valuable to person A than to person B. To understand value, you must understand action. To act is to select one thing and set aside another. Thus, an ability to evaluate one thing over another is a necessary prerequisite to action, one that all mentally functioning humans possess. Valuation is always a comparison between two alternatives. It is...

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Finance and the Austrian School with George Bragues Dec 30, 2018

This episode of Economics Detective Radio features George Bragues, professor of business at the University of Guelph-Humber, discussing his work developing a distinctly Austrian theory of finance. While there have been forays into finance by Austrians such as Mark Skousen and Peter Boettke, Austrians have not yet fully developed a complete and distinctly Austrian theory of finance. George names five pillars of modern finance theory: (1) The capital asset pricing model (CAPM), (2) the Black-Scholes option pricing model, (3) the efficient markets hypothesis (EMH), (4) behavioural finance, and (5) the Modigliani-Miller theorem. CAPM is a model that derives the value...

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Was Murray Rothbard a Good Economist? Dec 30, 2018

Someone on Quora was wondering whether Murray Rothbard was a good economist. I obliged with an answer: Yes. Murray Rothbard was a prolific thinker whose contributions to economics were numerous, original, and significant. His magnum opus, Man, Economy, and State, was the first complete treatise on economics in a half century. The book was originally meant to be a textbook version of Mises’ Human Action, but Rothbard built on Mises’ work to create a more complete body of thought. He contributed his own theory of production and supply, while critiquing Mises’ theory of monopoly as a static conception that did...

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The Bubble Films with Jimmy Morrison Dec 30, 2018

Jimmy Morrison is an independent filmmaker who is currently directing two films: The Housing Bubble and The Bigger Bubble. The Housing Bubble deals with the history of business cycles in America, spanning from the First World War to the 2008 crash. The Bigger Bubble deals with the aftermath of the 2008 crash. These films began as a single project, but Jimmy chose to split it into two films in order to tell the full story. The films’ website provides a synopsis: The Bubble is coming out at a crucial time in American history. Numerous films have blamed the free market...

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Experimental Economics, Norms, and Prosocial Behaviour with Erik Kimbrough Dec 30, 2018

Erik Kimbrough, assistant professor of economics at Simon Fraser University, is an experimental economist. In this episode, we discuss his paper, “Norms Make Preferences Social” which he coauthored with Alexander Vostroknutov. Experimental economics began with Vernon Smith’s double auction experiments in the 1950s. Smith wanted to test whether market participants could converge to the equilibrium prices and quantities predicted under neoclassical theory. He found that, indeed, the students in the lab did converge to the optimal prices and quantities, and experimental economics was born. In the late 1970s and 1980s, the practice of testing game theory models in the lab...

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Civil Asset Forfeiture with Don Boudreaux Dec 30, 2018

Don Boudreaux is a professor of economics at George Mason University. He blogs at Café Hayek. I invited him to discuss civil asset forfeiture on the podcast because of a conversation we had about it at a recent Mercatus Center colloquium. Civil asset forfeiture is the practice of the state taking someone’s property on suspicion that the property has been used for wrongdoing, without having to charge the owner with a crime. Civil asset forfeiture had its origins in British maritime law. The British had difficulties with pirates along the Barbary Coast. When the pirates were apprehended and their ships...

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The Prima Facie Case that Great Depression Policy was Really Really Bad Dec 30, 2018

As a Canadian, it’s very strange hearing Americans talk about the Great Depression. The American public education system apparently has a monolithic view on the subject. Based purely on my interactions with people who have passed through that system, I imagine their kindergarten classes must be something like this: TEACHER: Alright students, what’s 1 + 1? STUDENTS: 2! TEACHER: What’s 2 + 2? STUDENTS: 4! TEACHER: What do you call someone who doubts the efficacy of FDR’s policies in bringing an end to the Great Depression? STUDENTS: Insane! The Great Depression is a complex historical event, so the level of...

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Aladdin’s Biggest Anachronism isn’t Genie’s Jack Nicholson Impression… Dec 30, 2018

…it’s Aladdin’s attitude towards wealth and poverty. That’s what struck me while re-watching this thoroughly enjoyable movie. After being called a “street rat,” Aladdin tells Abu, “Someday, Abu, things are gonna change.  We’ll be rich, live in a palace, and never have any problems at all.” This is an extraordinary view for a peasant orphan in thirteenth century Arabia! It is a thoroughly modern view. Throughout most of history, if you were born into the lower classes, you lived in poverty. Your entire extended family lived in poverty. Everyone you knew, and all their ancestors stretching back as far as...

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It All Comes Back to the Minimum Wage Debate Dec 30, 2018

I shared Jeffrey Tucker’s article about Hillary Clinton, and pulled out this quote: Meanwhile, Hillary’s actual policies on women are a disaster waiting to happen. Consider her support for “equal pay for equal work.” What effect will this have on women in the workforce? It not only puts government in charge of micromanaging every aspect of payroll and personnel of every business in America. It also incentivizes managers to keep women in lower positions in a firm in order to comply with the wage mandates, and disincentivizes advancing women up the ladder by making the costs of ascending too high....

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The Meta-Economics of Mathiness Dec 30, 2018

The perennial debate about “mathiness” in economics has returned, this time sparked by a Paul Romer article in the AER P&P. The arguments largely focus around the usefulness of mathematics for various applications. These are the technical arguments of practitioners. I’d like to abstract from these arguments and look at the issue as an economist. The economics labour market is very competitive. Researchers need to demonstrate their quality to compete for the top academic jobs. Now, why should we expect this competition to produce anything besides the optimal research methods? Let’s apply some economics to this problem. (more…) The post...

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Economics and the Cognitive Minefield Dec 30, 2018

What sounds more difficult to you, figuring out supply and demand, or accurately measuring the Earth’s circumference? It must be supply and demand, because Eratosthenes figured out the other one two thousand years before anyone really managed any progress on that supply-and-demand stuff. So now that we’ve established that supply and demand is much harder than accurately measuring the Earth’s circumference, we should ask ourselves why it is so. If you don’t know how Eratosthenes managed it, try thinking for a moment about how you might go about accurately measuring the Earth’s circumference with only the tools available in Ancient...

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Income and Wealth Inequality with David R. Henderson Dec 30, 2018

…or How I Learned to Stop Worrying and Love Inequality. David R. Henderson is a research fellow at Stanford University’s Hoover Institution, and a professor of economics at the Graduate School of Business and Public Policy, Naval Postgraduate School, in Monterey, California. Thomas Piketty’s Capital in the 21st Century managed to do something unprecedented among equation-dense economic tomes, it became the #1 selling book on Amazon.com. The book tapped in to a hot topic among politicians and the general public: the high (and possibly rising) wealth and income shares of the top 1%. However, David points out that although the...

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The Trolley Car Approach to Public Policy Dec 30, 2018

Scott Alexander has an article at Slate Star Codex discussing the use of edge cases in moral philosophy: There’s a tradition at least as old as Kant of investigating philosophical dilemmas by appealing to our intuitions about extreme cases. Kant, remember, proposed that it was always wrong to lie. A contemporary of his, Benjamin Constant, made the following objection: suppose a murderer is at the door and wants to know where your friend is so he can murder her. If you say nothing, the murderer will get angry and kill you; if you tell the truth he will find and...

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