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Epistemic overture

By Karl Smith

Sarah Palin looks to be on the losing end of a brawl with the Wall Street Journal. Yet, as my co-guest blogger Mike Konczal notes:

Palin is a savvy reader of where the grass-roots conservative mind is going, so if she is starting to move the goalposts on attacking Bernanke, there's probably a larger move going on. And I'm curious to watch this battle unfold between the far right and the center right.

In some ways the past two decades in economic research has been a summer time for the left. New research suggests the minimum wage isn’t as bad as suspected. Supply Side economics has been abandoned by its founders. Behavioral economics presented evidence that people could be better off with a more tightly designed safety net, as opposed to a simple negative income tax.
 
However, you shouldn’t forget how easy it is to dismiss the experts when they say things that contradict your core convictions. Economists still remain united that outsourcing of U.S. jobs is a net good. We see rent control as detrimental to the interests of the poor and think growing economies by buying local is a fool’s errand.
 
After hearing those statements it’s easy to think that these are the musings of detached academics who don’t know what it’s like for real people out there. In other words, to start echoing the far right wing, that wants to End the Fed.
 
The solution in all cases is to keep the conversation going. We’ll convince Tea Partiers that the gold standard is bad in the same way that we’ll convince locavores that Chilean grapes are good: logic, evidence and a dogged insistence on keeping the lines of communication open.
 
I can already hear some snickering at my naivety and blind faith in persuasion. It’s not that I think persuasion can do anything; it’s that I think closure can accomplish almost nothing.

Karl Smith is an assistant professor of economics and government at the University of North Carolina and a blogger at ModeledBehavior.com.

By Karl Smith  | November 10, 2010; 2:23 PM ET
 
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Comments

Karl, that's a well-thought out and well-written piece. I'm not exactly a locavore, but I'm sympathetic to their arguments about buying local due to the carbon footprint of distantly produced food. Can you give me a response as to why the Chilean grapes are still preferable?

Posted by: MosBen | November 10, 2010 2:42 PM | Report abuse

"I can already hear some snickering at my naivety and blind faith in persuasion."

That's not a snicker. That's full-bore laughter while fighting off tears.

Posted by: AZProgressive | November 10, 2010 2:55 PM | Report abuse


mosben:

It's not a carbon argument, but how about so the Chileans don't need to come here for work!.

Posted by: 54465446 | November 10, 2010 3:44 PM | Report abuse

I'm mostly with you. But I have a real problem with Chilean grapes. Wheat and grains - fine. If the price of oil goes sky high, you can go back to sail power. But what happens if we've paved over all the good vineyards because Chilean grapes were so cheap? Grapes will be up there with caviar. Yes, you can rebuild topsoil, but it takes 5 to 10 years of pure investment.

(I also have a personal problem with outsourcing, because my income has dropped by 80% since my job was outsourced 8 years ago. Starting over after 50 ain't easy.)

Posted by: GBMcM | November 10, 2010 4:13 PM | Report abuse

Karl writes:

"However, you shouldn’t forget how easy it is to dismiss the experts when they say things that contradict your core convictions."

This is actually starting to look at a big idea that is worth keeping the conversation open on. Here is a starter link for anyone interested:

Cultural Cognition of Risk:
http://www.schneier.com/blog/archives/2010/09/cultural_cognit.html

Posted by: AgaBey | November 10, 2010 4:44 PM | Report abuse

"New research suggests the minimum wage isn’t as bad as suspected."

The teenage employment to population ratio is at a record low going back over 60 years, and far worse than in the early 1980s, when overall unemployment was higher than today.

As I see it, the minimum wage is combining with a large immigrant population to lock many teens out of work (skilled legal immigrants can do more for the same wage, unskilled illegal immigrants can underbid U.S. teens).

http://www.cis.org/teen-unemployment

The article notes that immigration reduces wages and that teens might have high reservation wages, though whether or not the minimum wage price floor on U.S. teen labor is playing a role goes unexplored. Given that many teens hold jobs in order to pay for discretionary spending, I'm not sure reservation wages are the issue here.

This hurts those locked out of the labor market over their entire lives, particularly minorities.

http://www.nber.org/papers/w10656

Even if we grant that the labor effects are small, you are effectively raising many individuals' wages at the expense of cutting several other individuals' wages to zero. That seems perverse from a Rawlsian perspective of justice (not to mention a natural rights based perspective).

"Behavioral economics presented evidence that people could be better off with a more tightly designed safety net, as opposed to a simple negative income tax."

Do you have any links to take a look at?

From a behavioral perspective, I note you miss a large number of people when you have too many programs as people either don't know they exist or otherwise fail to sign up:

http://www.seattlepi.com/local/216691_refundingthepoor19.html

http://content.healthaffairs.org/cgi/content/full/26/5/w560

Or the particular program doesn't provide enough:

http://www.spotlightonpoverty.org/OutOfTheSpotlight.aspx?id=6275fe72-5013-4add-84ed-69796224bb4d

The benefit of a basic income / negative income tax is that it is one easy to understand program that pretty much everyone would know about, and it could be paired with tax reform for a far more efficient tax system.

Posted by: justin84 | November 10, 2010 11:56 PM | Report abuse

"Supply Side economics has been abandoned by its founders."

Well, the crazier claims anyways. I believe that Bruce Bartlett would claim that the important contributions of supply side economics have already been adopted into the mainstream (e.g. tax changes have behavioral effects).

In the link below, Scott Sumner describes the effect of taxes on work effort, and has some interesting data on work effort between the US, Singapore, Germany and France.

http://www.themoneyillusion.com/?p=4692

Similar discussion from Arnold Kling (see myth #4), though only between the U.S. and Europe, in which Kling argues that a significant jump in taxes is likely to push U.S. labor effort towards European levels over time, partially offsetting any tax revenue gains from higher rates:

http://mercatus.org/publication/truth-about-entitlements

Posted by: justin84 | November 10, 2010 11:57 PM | Report abuse

Chilean grapes are good, well as good as Californian grapes. We don't grow many here in North Carolina. But during tomato season both Chilean and Californian tomatoes suck compared to locally farm grown (organic or non-organic) tomatoes. Local farm eggs are also clearly better. Its a difference you can taste.

With regard to getting people to beleive scientific evidence. "The solution in all cases is to keep the conversation going." I have my doubts conversions don't happen when one side has it fingers in it's ears shouting "Ma Ma Ma Ma Ma"

Posted by: BottyGuy | November 11, 2010 8:49 AM | Report abuse

Have you read John Quigan's "Zombie Ideas"
yet? His point is that dead ideas sill walk among us. Supply side tax cuts,
for example, played a prominent role in the last Congressional elction cycle. Tax cuts pay for themselves...didn't you know?

Posted by: malcolmrobinson | November 11, 2010 9:05 AM | Report abuse

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