RoR: Forum

Post 0

Saturday, January 4, 2014 - 5:48pm

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If Peltzman were such a 'genius', then his Peltzman Effect would have been confiirmed as empirically valid. But it's empirically wrong: that wearing seat belts may or may not increase 'risk' is only a mental state that's based upon the (data-unsupported) feeling of safety.

But measured evidence shows that seat belts do, indeed, reduce the severity of accidents. By far, the leading cause of increasing accidents is an increasing over-abundance of cars in a given time/place coordinate.

Lucas, another Chicago School professor, cited in his Nobel address the motto that hangs on the wall of the Econ department: 'Nothing without measurement'. Perhaps Tibor's 'genius', then, should become less intuitively brilliant and more attentive?

Krugman, for his 'idiotic' part. at least meaures. That means we can debate the significance of concepts based upon quantities. For example, his Nobel laureate work was on the cost-benefits of trade.

Also, does any empirical data demonstrate that debt to GDP ratio has a tipping point of automatic default? During a recession, what's the success rate of climb-out with respect to either austerity or deficit spending? Presumably, Krugman is an 'idiot' for simply having made these into empirical questions?

Einstein, an avowed socialist who would have easily gotten the deportative heave-ho had it not been for his enormous status, is hardly the poster-boy to attack progressive-collective politics. Unless it's from the left, which, in fact he frequently did.

Re bank 'regulation': until now, I never thought the term begged for disambiguation. This is because in the lingua franca of The Economist, et al, it simply refers to the legislative firewalling of investments...the Glass Steagall stuff.

In this sense, what The Economist was simply saying is that large banks 'grow' by becomming mixed entities who might then surmount banking firewalls because they're no longer a 'bank'. This plays back into the Peltzman Effect: regulations provoke risk..etc...genius that he was.

Although this genre of just-so tale is hardly unique to America, it's only here that all folk wisdom attains the virtue of philosohic profundity. For example, the French story goes that the mayor of Marseilles tried to exterminate rats by offering a franc reward for each rat tail--only to find that this encouraged the breeding of rats.

The Hungarian version--at least the one told by dad (born Matecz)-- comes as a joke regarding national character: So what's the difference between a Russian and an American? Well, both will sell you their mother for the right price, but only the American will deliver.

So it goes.

EM

(Edited by Matthews on 1/04, 8:18pm)

Post 1

Sunday, January 5, 2014 - 3:52am

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Matthews, thanks again. I appreciate the opportunity to learn. Empirical studies do support the Peltzman Effect. Other studies fail to find it. I looked at automobile accidents, skydiving, and professional American football versus European soccer and rugby. The general statement is easy to accept. It seems harder to measure. I think that Kahneman made the point about behaviors generally regressing to the mean, so we misjudge small changes as large trends.

If Peltzman were such a 'genius', then his Peltzman Effect would have been confiirmed as empirically valid. But it's empirically wrong: that wearing seat belts may or may not increase 'risk' is only a mental state that's based upon the (data-unsupported) feeling of safety.

I agree with your nod to measurement. As a technical writer, I plead for hiring managers to actually rely on the only metric: Readability found on Microsoft Word under Tools/Grammar and Spelling. No one does. Speaking to a meeting of software developers I demonstrated that writing you can measure is writing that you can improve.

That said, academic economics often "measures" in the same sense that astrologers do. Astrologers and astronomers make the same measurements, speak the same language when referring to the observed positions of planets. It is an easy fact that GDP (or GNI) is bogus. Government unemployment figures are too pitiful to be laughable.

Austrian economics generally eschews measurement. For one thing (just one) past prices are not predictors of future prices. That is why we have futures markets.

Consider the fact that standard academic economics places price on the ordinate and supplies and demands on the abscissa. But what is the independent variable, the thing you can control? Government economists attempt to control demand and supply.

Supply and Demand as taught in school have a deeper conceptual problem.
http://necessaryfacts.blogspot.com/2011/11/supplies-and-demands.html
People continue to demand and supply all along the curve. Thus, we have convenience stores and wholesale clubs.

Moreover, I point out that with any REAL subject, such as human health or mechanical engineering, you can go to a trade school, community college, or university and have a certificate or a doctorate and find work at that level. You cannot do that with economics. No one hires economic technicians to maintain their economies. The entire subject begs validation. The Austrians made the best start at a solid foundation.

(Edited by Michael E. Marotta on 1/05, 3:59am)

Post 2

Sunday, January 5, 2014 - 8:41am

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Marotta,

My point is that the Peltzman Effect is a just-so tale which may or may not apply as a heuristic to any particular situation. It's not science because it's neither universally applicable (think of gravity) nor measurably consistent.

This is important to the extent that his own school--'Chicago' by name-- prides itself on measurement. To pursue the speech of Lucas, once again: neither Keynes nor Austrian stuff is relevant.

Prices are the bottom-line raw material of economic observation. As such, they're only outcomes, or extended tautologies, as it were. They are what we commonly use as value-indicators, assuming 'value' were the question.

Indeed, the same might be said of Newtonisn Physics until the 1900 discovery of the quanta. For 200 years the left-side 'E' remained only the effect of what right-side MA does.

Enter the argument of science as always been an issue of measured 'capacities'...see Nancy Cartwright for more on this history...

So yes, to a farmer whose working, social knowledge relies on zodiac and lunar phases, astrology is real to the extent that it offers reliable keys to plant, prune, harvest, etc.

Mises and Marx offer competing explanations as to what prices represent in terms of epistemically real value. Indeed, their debate is of little interest within academia which does, btw, send out degree-certified 'economists into the real world.

To this end, kindly start an Austrian school thread for discussion and I'll be happy to participate.

That present prices anchor future price outcomes is the lynchpin of all risk meaurement and expectation. Without, one finds oneself on the bottom end of a Kahnemanesque curve of irrational gambling.

Traditionally, reward-assesment was based on 'log-normality' (Gauss), in which an investor would posit most outcomes as taking place under the proverbial bell. But no more.

'Flight of the albatross', Levi-based expectations are now both taught and used, in which an abnormal event --crash!-- is seen as predictable. At this point, liabilities exceed assets to such a great extent that the entire system fails. This was the result of 1987, not the present-day 2008 crash.

Smply having no viable assets, the stock market was broke. Enter the government...like it or not.

EM