From Bernard Hickey in the Herald:
Floating an idea that you don’t really believe in is never a good idea.
This is a great quote, completely true.
I also think he makes good points discussing Goff’s chat on tax and inflation policy.
Update: Dim Post makes a good point on the “framing” of policies, and how justifications for policies can seem inconsistent. This is why economics is awesome in my opinion 😀
“Raquel Welch has blamed the contraceptive pill for the breakdown of sexual morality.”
That is the first sentence from this newspaper article. Now I have no doubt that the introduction of the pill led to a higher steady state level of promiscuity. Yet, there is an undercurrent of negativity in the article – suggesting that this is a bad thing. However, this is not necessarily the case.
This illustrates to me one of the issues that often makes explaining economics, or even trying to do analysis, difficult – moral relativism. In the current case, the existence of the institution of marriage and the idea of low numbers of sexual partners is seen – in of itself – as a good thing. People have followed a rule of thumb that the given set of outcomes in the social situation they are the best outcomes. Anything that in turn undermines those institutions is “bad”.
I use the term moral relativism because that sort of behaviour is indicative of it – what people view as the appropriate set of institutions is based on the set of institutions that are in place at the time. When we look back at what people believe is “morally right” we will often see rules based on the society they are in not some underlying true prior morality (although I believe that does exist to some degree as well). As a result, if we try to say that the underlying situation has changed (the pill has turned up) and these old institutions that were optimal are now suboptimal, people get annoyed.
Economics is a great social discipline, because it tries to side-step the issue of moral judgments (and thereby the issues associated with moral relativism) for as long as it can in the process of analysis. So following a “shock” an economist will try to describe the social elements, the trade-offs involved, the change in choices, how the corresponding change in institutions and choices impacts on future choices, and eventually where the social situation will settle. Once we understand how the “distribution/allocation” of things changes, we can mix in some value judgments and come to a conclusion.
In the case of the pill, it seems highly believable that the introduction of something that made sex with a lot of partners much less costly lead to a lot more sex – that is fine. However, we can’t conclude whether this is a good or a bad thing until we introduce value judgments to our analysis.
Those that are anti the pill will say that the introduction of the pill lead to greater promiscuity, but also made it more costly for people who didn’t want promiscuity to not be promiscuous – as a result, people who would have preferred a low sex but married social equilibrium may be worse off. This analysis is fine, but it does rely on a set of value judgments.
Personally, I think the final steady state from the introduction of the pill will end up with more mature and responsible discussion around sex and relationship. We can hardly say that the institutions of marriage and religion led to “magically optimal” outcomes in these matters – and people that bemoan the loss of such institutions are often looking through very rose tinted glasses. Social interactions between people are supposed to be difficult, and I am sure individuals and the institutions that surround them will evolve in interesting ways given the pill. However, my belief that the ultimate outcome will be better is again based on my set of value judgments.
On Saturday I had an article in the Dom ranting about how harm minimisation was a dumb goal – as there are benefits from the consumption of drugs. This argument has been on the internet a million times (see these two searches for example), so there is no need to rehash it here.
Originally, the article was a little different. It was a direct attack on the paternalism implicit in the policy making associated with the anti-drug crusade and the policy target of minimising harm. Fundamentally, this is a critique of what the Law Commission has done – they are an independent body that should critique how the law differs from the target of policy (which they do well IMO) AND critique where policy differs from its practical aim (something they haven’t done). Often the implementation of laws differs from policy because the policy is bad!
The last three paragraphs from this far more libertarian style article were:
However, why as a society are we determined to stop people hurting themselves? Part of life is learning to take responsibility when your own choices and actions hurt you – having a government act in a paternalistic way to stop this, and make it harder for people to learn about individual responsibility, seems dangerous to me.
Even if we do have sufficiently little faith in our fellow man, and believe that the government should act like our parents, is this type of policy intervention equivalent to good parenting? A good parent will set some boundaries, but also give a child the opportunity to learn from their mistakes, and will be there to help if things go wrong – only a bad parent would focus only on potential harm and ignore any benefit to the child when setting boundaries. In this sense, even the most paternalistic people must agree that solely focusing on harms from any action is a poor way to ensure that we have the happiest society possible.
Ultimately, I’m of the opinion that a truly civilised society must be based on compassion, not control – it should be based on people’s happiness and freedom, not the desire of some policy wonks to create their ideal world.
Comments and criticism of this view welcome.
Update: Relevant points from Eric Crampton (Uni of Canterbury/Offsetting Behaviour) and Luke Malpass (Centre for Independent Studies).
So it seems the ECB is going to go out and buy government bonds. I don’t quite agree with this description of what is happening to be honest:
“They are not cranking up the printing presses,” said James Nixon, co-chief European economist at Societe Generale SA in London. “This is a much more targeted, surgical approach. They buy the duff stuff that no one in the market will touch.”
The point is to buy stuff that would otherwise be good, but is only struggling because of the crisis – not to actually buy duff stuff. The intervention is supposed to prevent a run on good assets – not to keep bad assets in business. Of course, in practicality they will have to buy some duff stuff, but saying that this is the goal is an exaggeration.
Still, this isn’t my main point. My main point is that sovereign debt is a different beast to private debt. If the ECB starts buying up government bonds, and there is no plan to get government budgets under control in the medium term, then the result is high levels of inflation – and probably the collapse of the Euro Zone. The second point doesn’t concern me – the first point does.
With private debt we had a response when effective interest rates exploded upwards. Will we get the same response from domestic governments in Europe? I don’t know.
The EU has decided it arbitrarily needs to protect the value of the euro. Specifically:
We now see herd behavior in the markets that are really pack behavior, wolfpack behavior
Relevant picture:
My question as a New Zealander who has experience the vicious swings in currency myself – why protect the value of the euro? The euro is falling to help buffer the painful adjustment Europe is about to go through given their banking crisis, and they want to waste money trying to prevent this? I don’t understand. Note: Krugman seems to feel a similar way.
Some people hate me for this view, but TARP is looking better all the time.
I agree. This will be worth a post at some point – but not today 😀
People who have a free moment, feel free to discuss it in the comments 😉
