Friday, May 29, 2009

Blogging Again?

Hi Josh - and whoever - I have decided to try to get back to being smart by blogging again. I put up a few old posts from the week after school. My economics class in Rome has been fantastically interesting so far for a variety of reasons (mostly my interest in how Economics is taught), but look for a series of those as I observe differences in the teaching of Econ in Europe vs. the USA.

Oh, and LET'S GO PENS!

The Italian Economy: Day 2

So, on day two of class in Rome, the professor says "meet me outside the Tomb of the Unknown Soldier in the center of the city." So I drag myself out of bed and get there... what an awesome experience. He had started to explain the structure of Italian government in class and then we went and saw each building, to get a different flavor. It would be *fantastic* to have a Mason professor walk a group around DC and say, okay, this is the White House, this is the Treasury, and point out all the different things, though of course it is impossible with classes of hundreds of students.

Walking around Rome is great, of course, because every couple blocks you see something really really old. Every street goes either up or down - I don't think there's anywhere flat in the entire city. But still, it's great to get to the top of some flight of stairs, look out and see the Vatican. Or to walk around a street corner and say "oh hey, there's the Trevi Fountain," like I did today.

Most interesting aspect of class today? Patnia explaining things about government to us, such as "there are two police forces, the Polizia and the Cabinieri, that do the exact same thing. One reports to the Minister of Interior, the other to Minister of Defense. The two were created as a check against one another to prevent a coup, but of course today this is completely unnecessary. It's a huge waste of money but nobody wants to give up the power of controlling a police force."

The explanation itself isn't fascinating - it's easy to point out waste in government - but the tone, which was very nonchalant, interested me. Picture him delivering this in a monotone and then shrugging at the end. In the US, I can imagine a discussion would have two sides, each equally passionate: "We need the two police forces to check each other! It's not wasteful!!" vs. "Just another example of too much government spending - abolish them both!!" Each side of the debate in America would have talking heads and I can't imagine a professor teaching it without showing some passion. Patania simply admits it's wasteful and shrugs.

Same reaction when discussing provincial government - think county-level of government in America. He said, "this is the most worthless branch of government, but too many people are connected to abolish it." And again, kind of a shrug. He needs to put an "oh well" at the end of each sentence because that's exactly how it's delivered.

This type of discussion is really fascinating to me. I'm not sure if it says something about Patania vs. every other professor I've had, but I'm inclined to believe that's how Italians view this sort of thing. They just don't get worked up, as long as they have their afternoons off (future post). It's completely wild and I really love it.

Thursday, May 28, 2009

The Italian Economy: Day 1

My professor seems like a hell of a guy - In day one of class, he introduced himself to the six of us (that's it! it's fantastic!) and then got into the course.

Most interesting part of today? He outlined very distinct differences between communism and socialism. They do not seem "correct" to me, at least in my Masonomics paradigm - but I can't put my finger on why. Please help! Write out your definitions of each before you read these...

Communism: A system where the state owns and operates everything - all businesses, etc.

Socialism: A system where there is some state involvement in the economy, but also a good amount of private interactions as well.

To me, his definition of socialism is more of a definition of a mixed economy. He drew the number line, from total free market to no free market, and I was glad he noted that although the US is held as the beacon of market economy, it truly has plenty of gov't involvement. Italy, according to Patania, is moving towards a more market-oriented economy... I believe that.

Am I wrong to be confused by his definitions?

Sunday, May 17, 2009

Economics in The Onion

Thanks to Nick DiPillo for the link.

Thursday, May 14, 2009

Sunk Costs are Sunk

Last night, while watching TV in the basement, I wanted a little midnight snack. I ventured up into the kitchen to grab some cereal - chose Reese's Puffs and brought the box, a bowl and spoon, and milk downstairs. Perhaps this was a premonition: at the bottom of the stairs I stopped and realized I would've prefered Frosted Flakes. I decided against another trip upstairs and ended up stuck with the Puffs, which were stale (hence I believe it was a premonition).

"Sunk costs are sunk" - is this idiom practiced or only preached? Was my case the opportunity cost of walking up the stairs too great (seeing as I already had a substitute) or was I making my decision based on sunk costs?

The Paradox of Aid

Why do we send food to people in starving countries? And why is it that they continue to starve?

Cheap/free food keeps poor countries poor, because the workers there all want to start with agriculture. Of course, the availability of cheap/free food prevents them from ever getting started, because there simply is no market for their goods. Thus, aid keeps poor countries poor. So why is it championed as such a great thing?

I've tried to have this discussion with some government/non-Econ majors and they seem to be reasonably accepting of the idea. Nonetheless, American imperialism of food aid continues unabated. What will it take to stop it?

Ishmael (Daniel Quinn)

As I read books, I am going to try to blog about them. Ishmael was an easy read - took me only a day - here are some quotes I found interesting along with the reasons I found them interesting. Highly recommend the book itself because it is such an easy read. As I continue to read books this summer I will try to maintain this as a sort of note-taking for myself. If there's a better way to organize it or make it more interesting, let me know!


(page 80) "Only one thing can save us. We have to increase our mastery of the world. All this damage has come about through our conquest of the world, but we have to go on conquering it until our rule is absolute. Then, when we're in complete control, everything will be fine."

The idea of spontaneous order simply permeates throughout this book. The parallels between the above quote - discussing human control over nature - and every class I've taken - complaining about human control over politics and government - just shock me.


(page 25) "You're captives of a civilizational system system that more or less compels you to go on destroying the world in order to live."

This casts the whole study of economics in an interesting light. I tell a lot of people that economics is the study of human behavior and the way things are - we try to explain why some countries are rich while others are poor, or why government projects for the "public good" tend to do a worse job of promoting the general welfare than private ones "for profit." And yet, this is saying, our starting point is wrong. So although we propose modest reforms to the financial system, or to the current interactions between the government and the market, what we really need to do is propose to scrap everything and begin again.

The most interesting thing about these two quotes, in my opinion, is the combination of hopefulness and hopelessness that they represent. On the one hand, Quinn suggests that the whole system is flawed and we're destroying the world. Later, though, he talks about the spontaneous order of the world, and I see him utilizing tools of economics. Our science is the most versatile of disciplines - it is so widely applicable and I think that might be its greatest strength.


(page 90) "With nothing but this wretched story to enact, it's no wonder so many of you spend your lives stoned on drugs or booze or television."

Notice anything odd about that sentence? I see television discussed as a sister of drugs and alcohol. As an aside, it's silly to separate drugs and alcohol in the first place, but we do because our legal system does. But more to the point - do you really think television belongs in that same realm? After two years of being nearly to TV-free at school (minus the time at home when I am a TV junkie), I think I would say yes.


(page 126) "They (man) exterminate their competitors, which is something that never happens in the wild."

Anytime I hear "the wild" in this book, I think immediately of "the market." And this brings me to a discussion from a macro class last semester. There was a rumor that Pepsi came into possession of the secret formula to create Coca-Cola recently. However, Pepsi simply returned the formula. Why?

Well, Pepsi could go about taking the formula to try to make Coke, but what good would that do? It already has a perfectly successful product, and even with the formula, it would be costly to begin to properly make Coke. Wouldn't it make more sense to simply make the formula public?

Yes, this makes sense - then anyone could make Coke. A dozen brands would pop up within the year and the price of Coke would be driven down to almost nothing!! But wait - how much brand loyalty do you think there is between Coke and Pepsi drinkers? I'm guessing that loyalty won't last long if a can of Pepsi costs 10x what a can of Coke costs. So the price of Pepsi would actually be driven down as the cost of a substitute (Coke) decreases.

Given the chance, in "the wild" world of the free market, Pepsi wouldn't try to exterminate Coke. In fact, it would return the secret formula and allow business as usual to continue.

--> Monopolistic tendencies are the result of government action only? What do you think of this statement?


(page 138)

A discussion on famine has me thinking a lot about aid and the cycle of free food keeping poor countries poor by preventing them from ever getting agriculture started.

But I wonder how well the price system, if allowed to TRULY FUNCTION FREELY, (which it never has been allowed to do in the course of human history), would regulate population and keep us in balance with nature.


The last 20 pages (120-140) have talked up diversity a lot. Does free market economics promote diversity? How so? Do its opposites prevent diversity? How so?


(page 167-168) I can't even pick a quote but there's a whole section about choice. Choice is the fundamental underpinnings of a true free market system - you can choose what to do, how to do it - hell, you can choose how others do it based on who you buy from and who you do not buy from. Economics and ecology are not nearly as separated as they are made out to be.

Compared with the totality of knowledge which is continually utilized in the evolution of a dynamic civilization, the difference between the knowledge that the wisest and that which the most ignorant individual can deliberately employ is comparatively insignificant. ~Fredrich Hayek in The Constitution of Liberty