Thursday, July 23, 2009

Where's the construction?

This will be brief since I am on vacation. We drove roughly 1000 miles, mostly on interstates to get to our vacation destination. Road construction delays were virtually nonexistent. Where is the stimulus?

Is the "Recovery" Obama's 9-11?

Democrats often accused George W. Bush, with some justification, of using September 11 as a reason for any bill he wanted passed by Congress. September 11 was his trump card. It appears President Obama has his own trump card--the recovery. Any bill he wants passed is crucial for economic recovery. In today's papers there are articles about his push for passing health care legislation. (See here for an example.)

The current health care system in the country had nothing to do with the financial crisis that led to the recession. The health care plan may or may not be good for the country, but it has nothing to do with ending the recession. We had growth with the current system and can have growth again with it. It would be nice if policies were argued on their merits rather than by using fallacious arguments.

Thursday, July 9, 2009

Three Cheers for the G-8

G-8 leaders reached an accord on climate change. They agreed to cut emissions of heat-trapping gasses by 80% by 2050. They did not agree on any specific cuts for an earlier date. I plan on cutting my carbon footprint by 100% by 2050. That is, as long as the casket I am in then is sealed properly.

Sunday, July 5, 2009

Is Homer the Village Idiot?

Richard Thaler has a column in today's New York Times business section on "Mortgages Made Simpler."Thaler is co-author of a book, Nudge: Improving Decisions About Health, Wealth and Happiness. Thaler is a behavioral economist. In the article, he describes a traditional economist as someone who characterizes the economic agent as "Homo economicus" or "Econs". These are people who are self-interested, rational, forward looking and make decisions that are best for them given the constraints they face. Behavioral economists believe people are more like Homer Simpson--they fail to save for retirement, have troubel balancing their checkbook, and so on. So we have "Homer economicus" or "Humans." Thaler goes on to argue that regulations are needed to protect humans who do not engage in the careful rational calculations presumed by mainstream economics.

Both in the column and in his book, Thaler's examples tend to be mundane and not likely to cause a huge stir among people. However, I worry about the path it takes us down--a path towards increasing paternalism on the part of the government. While at LSU, I taught the economics of regulaton regularly. We would cover Consumer Product Safety Commission among other regulatory agencies. We also would examine some tort cases where sufficient warnings had not been provided about proper and improper use of a product. At one time, the law presumed a "reasonable man" approach--something had to be safe enough for a reasonable person to see the dangers of using the product wrongly. Later, according to one critic, things had to be made so the "village idiot" wouldn't get hurt. Is Thaler talking about a modification toward presuming most humans are actually village idiots? Are not regulators also human, subject to defects as any other human? Further, are not regulators often people who see themselves as superior to others, and knowing what is best for others?