Cafe Hayek - Latest Comments in The Society of Real Economists

Re: The Society of Real Economists

Bill Drissel — Sat, 28 Oct 2006 18:25:24 -0000

I'm an engineer who subscribes to your three principles. I'd like to join SORE. I'd like your permission to make myself a membership certificate.

Regards,

Bill Drissel

Grand Prairie, TX

Re: The Society of Real Economists

hayesy316 — Thu, 26 Oct 2006 17:29:37 -0000

Alex;

"Look at very inelastic goods like gasoline and drugs needed to keep you alive, and tell me that people simply refuse to fill up at the pump, or get that drug perscription that prevents them from getting an heart attack."

For a relatively small price rise in inelastic goods such as petroleum/medication to produce the effects you're describing, the good would be exhibiting the behavior of an almost perfectly elastic good, which is self-contradictory. I prefer to leave such arguments to the co-signers of this petition.

Consumers of inelastically priced goods will curtail their MARGINAL use and/or transfer their spending from the consumption of less valued marginal goods or to newly preferred marginal substitutes, the degree to which the latter occurs relative to the former being inversely proportional to the elasticity. What Dewey said; marginal, marginal, marginal.

FINALLY, an economic think-tank I can actually respect. I haven't quite finished my degree yet, but my neo-Keynesian macroeconomics professor hates me for arguing with him all the time. Do I qualify?

Re: The Society of Real Economists

Angelo — Thu, 26 Oct 2006 08:29:20 -0000

I think we can respond in kind by proposing an increase in the minimum wage to $100 an hour. Or, propose that we stop cutting into the wages of employees by raising the prices of all goods in industries that employ minimum wage workers. Let's see what people have to say about that!

Re: The Society of Real Economists

Walt — Thu, 19 Oct 2006 12:06:56 -0000

This is the funniest thread in the history of the internet. I'm thinking about cutting back on my weblog usage, so I think this is an excellent way to go out.

I mean, Ken Arrow, what does _he_ know about economics. Robert Solow, what did he ever do? How can either of them complete with the gigantic contribution of to the world of ideas made by Russell Roberts?

Re: The Society of Real Economists

Smitty — Thu, 19 Oct 2006 12:06:35 -0000

So is there another list of the same 650 "economists" advocating we restrict immigration for the same reasons?

Re: The Society of Real Economists

Malcolm Kirkpatrick — Wed, 18 Oct 2006 18:35:49 -0000

I'm in, if I get to assert that prices adjust to changes in supply. Now let's discuss immigration (again).

Re: The Society of Real Economists

Russ Roberts — Mon, 16 Oct 2006 16:43:02 -0000

pgl,

Correct. A zero elasticity of demand means that demand doesn't slope downward. It's vertical. Vertical. No slope. Straight up and down. Zero elasticity. Zero economics.

Re: The Society of Real Economists

pgl — Mon, 16 Oct 2006 13:00:34 -0000

Russ - so they did NOT say employment would increase. Little = low. Zero elasticity - yep, VERY low.

Re: The Society of Real Economists

Russ Roberts — Mon, 16 Oct 2006 12:56:10 -0000

pgl,

Read the letter they signed.

"Little or no effect on employment."

No effect means a vertical demand curve for labor. Not a low elasticity but a ZERO elasticity.

Re: The Society of Real Economists

pgl — Mon, 16 Oct 2006 11:47:12 -0000

As I said over at Max Sawicky's place, you have confused a low elasticity with a flipped sign. I doubt a single one of these 650 economist are arguing that demand curves slope up, but many might argue that this demand curve has a low elasticity.

Re: The Society of Real Economists

JohnDewey — Sun, 15 Oct 2006 15:37:01 -0000

alex: "downward demand curve ...doesn't always work in the real world ... tell me that people simply refuse to fill up at the pump"

SOME consumers will continue to use just as much gasoline even if the price doubles. But that doesn't mean the total demand for gasoline in inelastic. Sharp price increases last year did immediately reduce gasoline demand below long term seasonal trends.

Consumers have short-term and long-term responses to changes in gasoline prices, and these responses are not the same. For that reason, the short term and long term demand curves for motor fuels differ.

Employers have both short and long term responses for low-skilled labor prices as well. IMO, in the long term, labor demand in many industries is extremely inelastic. Firms will move facilities offshore, they'll automate, and they'll reduce the non-wage portion of compensation (increase health care copayments, for example.)

Re: The Society of Real Economists

alex — Sun, 15 Oct 2006 13:53:47 -0000

Several problems with the basis for SORE. The first principle is a downward demand curve, where people buy less of something when it gets more expensive. This doesn't always work in the real world. Look at very inelastic goods like gasoline and drugs needed to keep you alive, and tell me that people simply refuse to fill up at the pump, or get that drug perscription that prevents them from getting an heart attack.

Second principle, on prices adjusting to market forces, is questionable. For instance, the US dollar has lost a lotof value over the past several years, equivalent to about a 5% increase in prices of certain imported goods. The cost to consumers? Under .1%, because sellers ate the loss. If this was purely a matter of market forces, than consumers would have been forced to pay 5% more. You are also forgetting about productivity levels, which are not directly connected to market forces, but which have a lot of influence on prices, because they allow producers to swallow losses due to inflation for certain periods of time in exchange for higher sales over the long term. On motives and intentions not mattering, but results do, this also has flaws. If you are a classical economist, they are really similar in economics. How? Well, if I am a company, and my intention is to make profits, and its my motivation as well, I will follow results that make me money. My motives and intentions actually go along with my results. There isn't much of a difference, as its allow about optimizing profits.

Re: The Society of Real Economists

Russell Nelson — Sat, 14 Oct 2006 22:32:32 -0000

I am an autodidact economist. Or, to put it another way, I haven't let my schooling get in the way of my education, or my education get in the way of my learning. Or to put it another way, a degree in economics is just a piece of paper if you don't actually understand and practice real economics. As this guy wrote in this book "Ye shall know them by their fruits." I don't see how Randy can make a perfectly fine economic argument and then claim not to be an economist. Those who can, do; those who can't, get a PhD. (Sorry Dr. Russ, but you're an economist because you're a Real Economist(tm), not because of your sheepskin.)

Re: The Society of Real Economists

triticale — Sat, 14 Oct 2006 16:29:59 -0000

One thing overlooked in all this discussion of the minimum wage is that raising it puts upward pressure on all wages. My understanding is that some labor contracts are directly tied to it by a multiplier or adder, but the rest are also, less formally, by market pressure.

Re: The Society of Real Economists

Ryan Fuller — Sat, 14 Oct 2006 15:58:47 -0000

I think it would be impossible to distinguish the effects of a minimum wage from the sea of other constantly-changing variables.

Minimum wage is best disproven by drawing a supply and demand curve with a horizontal line at some point above equilibrium. Move the line up or down to show the relationship between price floors and surpluses. Looking for empirical results when there are so many variables at work is pointless.

Re: The Society of Real Economists

Nathan — Sat, 14 Oct 2006 13:29:28 -0000

I would love to be signed up by this. But I am not an economist. I've personally developed my argument against minimum wage by reading hazlitt. Plus, I also believe that we should simply look at the results of minimum wage than simply the motive of it. Ask yourself this:

1.Has minimum wage made workers better off?

2.Has it had any effects on the economy..positive or negative?

3. Has it benefitted EVERYONE?

And by everyone, I mean business owners as well.

Re: The Society of Real Economists

Michael F. Cannon — Sat, 14 Oct 2006 11:41:25 -0000

Maybe we could require economists to be licensed by the state.

Re: The Society of Real Economists

AskMom — Sat, 14 Oct 2006 08:44:18 -0000

I've got an economics degree but more to the point I believe your principles are the ones that work. My evidence: beautiful women have always been in demand. As there are more free markets in the world, there are more beautiful women. When all the world has free open markets, the world will be full of beautiful women.

Sign me up.

Re: The Society of Real Economists

James Wells — Fri, 13 Oct 2006 22:21:43 -0000

^^

Have you read 'The Coming Generational Storm'? That book's authors run a scenario that the US is going to hell in a handbasket but only present the results of one set of vars for their model (ie a discount rate that is probably great for their conclusions as well as productivity growth rate, etc). It is a doomsday work and if you check out amazon.com it gets wonderful reviews.

The book has serious flaws but the one that most bothers me is that you are referred to their website...which sells their financial planning software. The basic strategy is to dump 401ks invest in houses and gold in the anticipation that tax rates will jump 70 percent. There are a number of 'assertions' that certainly have room for changes and the fifty year forecast is prone to error....which is why alt results were left out presumably. Anyway the book is decent but painful and the authors definately are making money after scaring the hell out of people (tax planning software plus the book).

Yes, I have a problem with such people offering financial advice (specific advice) when they are essentially fortune tellers or even less transparent than S.S. 'trustees' in that the latter actually presents alternative outcomes while the authors do not.

The profession is corrupted. I find myself quite discouraged by it and as a result I am prone to write rambling responses in threads such as these where I make glaring errors...such as lumping Krugman in with the Laureates when the John Clarke medal was what I meant to insert (and I do think it is of some value, at the time Krugman was doing decent work).

Re: The Society of Real Economists

James Wells — Fri, 13 Oct 2006 22:13:45 -0000

Swimmy,

My mistake. I had meant to say he won the John Clarke medal (best/most promising economist under 40). He would have had a decent chance for the Nobel had he not abandoned is professional duties...like actually teaching.

I lumped Krugman into the Laureate category mainly because I was thinking of Arrow, Solow, etc. I am mildly discouraged that people who win a Nobel or a John Clarke award can actually sign on to such policies.

Incidentally I do view the John Clarke medal as having greater merit than the Nobel. That doesn't mean a tremendous amount but still.

Sorry for the error. Next time I start typing paragraph upon paragraph I will be sure to actually examine what I write before I post.

Re: The Society of Real Economists

Adam — Fri, 13 Oct 2006 22:12:44 -0000

The few studies I read several years ago on minimum wage all came to the conclusion that the effect of minimum wage increases in terms of total earnings by those effected by the increase was essentially zero. The position being taken by these 650 wannabe economists is that greater income inequality among low-skill workers is a good thing. But supporters of minimum wage legislation are typically individuals who support greater income equality. The simple-minded nature of these economists leads them to neglect the fact that the monetary wage is only a component of an employment compensation package. Employers who do not cut jobs as a result of higher wages will:

- earn less, whether it be entrepeneurs or, in the case of corporations, anybody who owns a stock mutual fund

OR

- raise prices on goods purchased by rich and poor alike

OR

- cut non-pecuniary benefits such as heating, air conditioning, and employee discounts

or some combination thereof. The point is these individuals are not economists, they ate moral philosophers who know a lot of math.

Re: The Society of Real Economists

anon — Fri, 13 Oct 2006 19:21:31 -0000

^sadly, economists have agendas too. they probably collect nice "consulting fees" from the DNC for spreading their insane propaganda. im sure krugman, sachs, etc, wouldn't get so much NYT/MSM coverage if they told the truth. and let's not forget book deals (which prey on the same ignorant people who don't understand economics). i'd guess half of the fake economists don't know (there are lots of stupid people out there!) and half don't care.

Re: The Society of Real Economists

blink — Fri, 13 Oct 2006 18:31:43 -0000

I wonder whether the 650 signatories really believe the statement on the minimum wage. What are the incentives? The cost, it appears, is to look foolish to a small number of intellectuals who know better. The benefit is to be lionized by supporters of the minimum wage (and perhaps some political connections as well). A test: would these economists make a wager about “little or no effect”? A betting market could elicit the real opinions of economists.

Re: The Society of Real Economists

anon — Fri, 13 Oct 2006 17:33:24 -0000

"I suppose the first requirement to become a government-certified economist would be holding the belief that certification is a bad idea. How delightfully ironic."

lol

the real problem is the stupid audience of the NYT etc don't know real economics from junk, and will accept that someone like krugman is an economist just because the NYT says so. instead of the SORE society i'd rather see mandatory high school econ 101, including reading Wealth of Nations, in our public schools. economics should be studied by everyone and by no one!

Re: The Society of Real Economists

Chris Meisenzahl — Fri, 13 Oct 2006 17:11:28 -0000

In addition to the obvious economic reasons to dislike a min. wage, I'm also against it because it violates freedom of contract between two parties.