A Forgotten Austrian: Jack Wiseman

Jack Wiseman is a great writer. He was often thought of by many as a radical right wing person and thus, many dismissed what he had to say. Though I would question his ‘radical right wing’ label because relative to other Austrians, especially the anarchists, he was not that radical.

Wiseman’s way of thinking is almost from a radical subjectivist perspective, and he talks more about policy than economic theory (as opposed to Lachmann or Shackle who preferred to talk about theory). He might of also been thought of radical because of his distaste for neoclassical economics and he extends his criticism towards neoclassical economics to policy making. What he states insightful passages and why he isn’t recognized by other economist, especially Austrians, is unknown to me. On a side note, some Austrians that do know who he is would just call him a fellow traveller, but I do think that is highly debatable.

Uncertainty

(the article I quote from Wiseman’s on uncertainty is one called Costs and Decisions though there are plenty of articles by Wiseman to chose from. This is simply my favorite on uncertainty )

My favorite contribution has to be what he writes in concerns about uncertainty. He seems to come very close to my overall interpretation of what uncertainty implies, though not quite. He also notes that his idea of uncertainty comes in part from Shackle, even though for most of his career he was always participating in Austrian circles.

Uncertainty is here because people do not know the future. But this idea of uncertainty is applied to everything, thus we can have the same analysis when looking at markets and policies.

At the time, the equilibrium theorists during his time (search theorists, temporary equilibrium theorists, the ‘new’ new welfare economics theorists based on information theory) were theorists who went beyond the ‘Walrasian god’ of conditions of general equilibrium, but nevertheless were still ignorant of the unknown future. The future may not be predetermined in the same sense as earlier theories, but it is still known. These theories incorporate probabilities and risk attitudes, or equilibrium is a condition were individual ‘theories’ and policies with emerging outcomes are conformed.

Decision makers are ‘clockwork Bayesians’ programmed to respond to changes in conditions but in preordained ways and within a defined system. This of course ignores or puts aside the fact that decision makers may experience surprise or experience new opportunities not anticipated as possibilities in the model, they can ‘learn’ but only in a restricted sense. In other words, this is a nice stable system choosing to assume away reality because of instability. He went on to consider this vision of uncertainty as the “new uncertainty school”, which he would of course categorize Shackle as one of his members and presumably, Lachmann.

But of course it was his view of uncertainty which was the main bait for critics. If I was to summarize the main argument against Wiseman, it would be, “Well, can you do better?” Wiseman’s answer is along the lines of, “Well to say this is to imply that you reject the evolutionary aspect of economics. There is no argument of principle against such an evolution.” The italicized part are his words, quite wonderfully said. What of arguments that reject this notion of uncertainty and fail to apply its implications but yet argue “current theory is the best we got”?

One of my favorite passages by Wiseman is when he draws two points about uncertainty and economics:

I shall content myself with two [inferences] by way of illustration, one positive, one negative. The positive one is that ‘higgledy-piggledy growth’ is a natural consequence. The past (recorded) performance of decision makers does not provide a simple guide to their likely future performance, and… ‘learning’ can never provide a more sophisticated fully trustworthy ‘investment rule’. The negative proposition is perhaps more disturbing: what becomes of positive economics once it is recognized that the basic econometric data (recorded prices etc) is, and always going to be, the outcome of mistaken predictions?

It’s note mentioning that even by friend and early mentor at LSE, Lord Robbins,
states that he shouldn’t overestimate the influence of uncertainty upon the thinking of future compatriots.

One thing that I do find fault in Wiseman’s talks on uncertainty is changing of institutions may indeed reduce or eliminate uncertainty. Though he does only say this once and quite vaguely, I still am at awe of the fact that he says this and yet also questions the state of positive economics.

At least though, he acknowledges the idea that we may never find a formal analysis embodying the unexpected. We need to get out of the “this is the best we can do” mentality for this only seems to appeal to elegance not relevance.

I always keep in back of my mind that we may never satisfy a clear theory of Economics with uncertainty but I do not let that dominate my overall thoughts. Economics is an evolutionary science, and this leaves room for optimism, this is to say, a feeling that we may find a satisfying theory of economics and uncertainty.

Group Behavior and Action

Another major contribution has to do with his research on group behavior. While still having a view of methodological individualism, he acknowledge that groups may act too. But because groups are composed of individuals, and thus with different ends and means, groups are often not just perusing one goal and quite often, groups are constantly fighting in trying to ‘change the rules of the game’ for their favor. By this in mind, we should imply that treating firms with a tendency of an extension of the lone entrepreneur is faulty. The mainstream treatment of firms is dealing with things one thing at a time with assumed profit constraints and no quarreling. This also may question some government policies like subsidies. To Wiseman, having a vast amount of subsidies in various countries led him to believe that there is more to subsidy policies than just economic reasons. Of course when talking about things abstract to the mainstream, like various ends and different means for individuals, we can now see that there can be some policies simply to ‘favor’ a particular thing and allow the changing of the rules for individuals. See his article Some Reflections on the Economics of Group Behavior for more info.

I will conclude by quoting a passage of Wiseman’s in which he concluded one of his articles on uncertainty:

I hope that I have persuaded you that there is here something more than a straw man: those of us who are interested in the study of a truly uncertain world could do with some help.

My Views on Government

I have received a couple emails from different people criticizing me, for lack of a better term, because I fail to give a nice clean version of what I think Government should do as far as policy is concerned. Do I believe in small government, big, free trade or protectionism, do I believe in social programs etc. Let me first start by saying that I have not really blogged about this kind of stuff because explaining government policy is not my main concern as a studying economics student. At the moment, I am much more interested in ‘how’ to think about economics than ‘what’ to think, this is to say, I am interested in methodological issues at the moment and I want to expand those ideas to critique more of the neoclassical economics that we see today. Another reason why I have refrained from explicitly expressing my views on the topic is that I only generally know what I think government should do. I really do not have an ideal amount of government I want, and ideally, what programs I see my ideal government having. But because I have been asked to say something about my thoughts on government, I will express my general views on government.

First off, I believe a government is necessary. I am not an anarchist or an anti-statist and I do think it is really hard to justify that position.  Sure, they can point to certain points in history of societies where they thought it was anarchist with some capitalistic aspects (and we can see some of the failures, even in their own literature (look at the conclusion of ‘Not So Wild Wild West‘)) , but what of modern times where we have complex financial systems? It seems like these anarcho types ignore this capitalistic aspect of the economy when theorizing their anarcho society. I leave what I have to say about anarcho types at this, for it is not the purpose of this post to critique anarcho types.

So what policies do I believe a government should pursue? I do agree that in a recession, a government needs to spend and decrease taxes. How much or how little of each, I do not know. At the same time though, I do think in all times, whether recession or  not, to cut inefficient government programs. I believe in this because I do not believe in creating programs because the program in itself creates jobs, I believe in programs because of the possibility that it will benefit society.

For example, one of my greatest influences is my grandfather, who worked for social security for decades. During the Clinton administration, there was some type of bill that basically forced government programs to hire certain unemployed people, like low income people or former Armed Forces people. Well many of those new people he hired made his social security office more inefficient because most of these people did not do anything, and my grandpa, as a head, couldn’t fire these people, as it was very difficult to fire people that got jobs because of this bill. The only thing he could do was to tell these people to stay out of the way and stay in their cubicle. So while we did increase employment here, these newly employed made the office less efficient and the end result was a waste of government money because they were paying these people for doing nothing! This is wrong, in my opinion and we cannot just increase the size of social programs because we need to increase employment.

Another example of absurd social program polices is section 8 housing, especially in Dallas, which is where I am from. I was raised in what I consider lower middle class. I lived ok but I lived in a one bedroom/one study apartment with my mother in Dallas. I really cannot say we lived paycheck to paycheck, since we had some money to spare for some entertainment on occasions, but we lived close to it. What always angered me though were the section 8 houses a few blocks down.  Most, if not all, these places had relatively new renovations and the spaces were huge (in Dallas there are several two story houses/town homes that are part of section 8). This to me, is absurd. Here is my mother and me, both working and me going to school too, and not part of social programs where the government paid certain stuff for us (aside for my Pell Grant), and we lived in a one bedroom apartment, while there are people across the street that may not have jobs (highly possible actually), are not tax payers, and just brings property value  down and crime up and at the same time, get nice housing paid for by government.

I am not saying I consider these programs to be illegitimate, but that there needs to be some restructuring in these programs. Take the section 8 housing for example,… do these people really need two story houses and newly renovated equipment, or just a basic place to live? Benefits shouldn’t increase because of lack of responsibility, this is to say for example, one should receive a bigger home or more money because they up’d their family size by one. Housing provided by the government is not so poor people can live in luxury, it is so they can have basic shelter.

How big would I like to see government? I don’t know. I generally see myself as a classical liberal, thus implying that I believe in a limited government but how limited, I do not know. Obviously, I do not want a government so limited that it cannot engage in policies to help in recession or the marketplace. That said though, I put the same amount  of uncertainty to the government as I do in markets. Post keynesians, at least most of them, agree that governments reduce uncertainty, but I do not see that as true, at least in a theoretical perspective. If we look at the markets, we both can agree that there is ontological uncertainty and is non-ergodic. But to me anyway, this applies to governments as well, thus they both have similar problems because of reality. And thus, I do not see how governments limit uncertainty, especially in a world of change. The post Keynesians essentially fall into the same trap as (some) Austrians when they claim that increase of knowledge = less uncertainty. (more on this by a ‘post’ austrian, here and here )

One thing I completely agree with libertarians is how government should treat social issues. Stuff like marriage, what kind of dog breed you can own, what you can or cannot see on the internet, abortions, requirements for adoptions, etc. are stuff that government shouldn’t get involved in. And if there are things that people do not like about the government, they should have the right to protest about it and practice civil disobedience (though there can be limits on civil disobedience. )

So hopefully by this, at least some of you will get where I am coming from. Again, I tried not to put too much detail into this because I do not really have a set in stone ideal picture of government, nor is it currently something that I am putting a lot of time into because as I said, I want to discuss methodological issues than policies, this of course is not to say that I wont do research on policies, it is just that I wont do it at this time.

-Isaac Marmolejo

Government Working Around It’s Own System

Not too long ago, the Department of Justice (DoJ) sued a 90+ year old lady for failing to report the sale of a product (in this case suicide kits) in her taxes. Keep in mind the DoJ has made it clear that they are not suing her because of the sale of the suicide kits. But I think it is clear that the main reason that the DoJ sued this lady is because she is selling something that the government feels wrong to sell. The police department in San Diego know of at least four people in the last year that have committed suicide using these kits and one of them happens to be a 19 year old kid. This at least provides the incentive for government officials to get this product off the streets, even though it is not illegal to sell suicide kits.

But then one might say to me so far, “Well you are just being suspicious of the government. Clearly, she has done something wrong (not reporting the sales in her taxes) and she has to pay for it. The government just wants the taxes, nothing more, nothing less.” And I would agree with this criticism, maybe the government only wants the tax money and could care less about the product she is selling, if it wasn’t for the court’s ruling on this case. The court’s ruling states that she has to work for the IRS to pay back her debt, and she has to agree that she would not sell these suicide kits again. The first part of the ruling is pretty common in cases like these, ‘ You fail to pay your taxes, so you have to work to pay back the debt you owe us,’ but the second part is clearly not, ‘You failed to report the sale of suicide kits in your taxes, so you must agree to never sell these suicide kits ever again!’ Clearly the government wanted these suicide kits off the streets, and since there is no law restricting people to sell such objects, they have to work around the system. Wow, the system working around its own system, how ironic.

This is even more absurd if we were to substitute other objects instead of suicide kits For example:

  • ‘You failed to report the sale of used televisions in your store, therefore you must pay back your debt, and agree to never sell used televisions again’
  • You failed to report the sale of homemade candles at this swap meet, therefore you must pay back your debt, and agree to never sell your candles again!’

This is an obvious case of the government breaking its own laws. Don’t get me wrong, I want a government, I believe that in order to have a stable decent society, the society must have a government (which I know my ideas of the government differs from those of other libertarians, maybe it is more correct to call me a classical liberal), but I want a government that knows its laws and is consistent in how it looks after its society.

– Isaac Marmolejo

To Hell With Habeas Corpus In Certain Situations

“The Constitution’s guarantee of due process is ironclad, and it is essential, but … it does not require judicial approval before the president may use force abroad against a senior operational leader of a foreign terrorist organization with which the United States is at war, even if that individual happens to be a U.S. citizen,” – Eric Holder

Stossel -v- Typical Republican

I feel bad for Stossel because for some reason he gets a harsh wrap in some libertarian circles, but I never really understood why. Many believe he is some Fox News puppet, pretending to be libertarian in order to bring libertarian viewers to Fox. But I do not this is the case for a couple reasons: 1: He is  very critical of the Republican establishment, just watch his show, 2: There is no evidence to support this claim, and 3: He is an open agnostic. But what I want to talk about in this post is the point of being critical of the Republican establishment, and this is quite clear if we look at the Drug War debate he had with Ann Coulter.

Clearly Stossel exposes Republican irrationality in this debate. Coulter’s basic premise of ‘we need to control what people do because we live in a welfare state’ is insane because this extends to what we can do in our daily lives, and not just what drugs we may consume in our own homes. But also her facts are all wrong. Coulter claims that death rates decreased during the times when alcohol was illegal because it reduced alcohol related deaths, and that murder decreased but as Stossel showed, murder rose during times of Prohibition. And what is the typical Republican response when facts contradict their beliefs : I don’t believe that!

But let me get back to Coulter’s premise – we need to control people because we live in a welfare state. She further justifies this position by saying because she is a tax payer of the welfare state that she has a right to control the lives of what people are doing because she assumes that people that takes drugs will lead to a higher dependence of public services. I do not know if this is necessarily true, as a lot of successful people have taken drugs before (and since she is the one making the claim, I would love to see evidence of this claim), but legalizing or at least decriminalizing drugs would reduce the amount of money we spend in prisons, that I can say for sure. They would reduce the policy programs that target solely drug users. The United States currently puts a lot of money into funding prisons and police drug programs and this would surely decrease if drugs were legal.

Also, in an economics perspective, according to Milton Friedman, an economist that is supposedly praised to the right wingers, criminalizing drugs generally brings drug users that use mild drugs to more heavy drugs. For example, in the case for weed,  where it is a bulky substance, thus relatively easier to detect, thus increasing the cost for it, has led people drugs like cocaine where it is less bulky. Also on top of that, making the drug costs more, leads people to create more harmful versions of hard drugs. For example, Friedman points out that one of the reasons for the creation for crack was because cocaine was too expensive.

In conclusion, it is going to be nearly impossible to convince the typical Republican on the issue on drugs, simply because they have this predetermined idea of their ‘perfect’ conservative society….sick and Coulter is the one calling us kooky, can you say ironic?

-Isaac Marmolejo

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