While reading Pete lay out the fundamental question of political economy (how do we get the benefits of protective governance without the losses of the redistributive state) on The Austrian Economists over the last few days, I followed a link to Robert Higgs upcoming Journal of Libertarian Studies piece “If Men Were Angels.” Higgs hits the nail so on the head I thought about packing up my office and calling it a victory on the side of liberty. Read this piece now!

I read the Sunstein and Thaler paper on libertarian paternalism for Mario Rizzo’s ethics and economics class this past semester. I hated it. They describe libertarian peternalism where someone has the potential to make changes that (presumably) improve social welfare without inhibiting anyone’s liberty. The example they use is a cafeteria where people buy dessert rather than fruit or vice versa depending on the layout of the food. When dessert is put first in the line no one buys fruit. To curb the problems of over eating or eating unhealthy food, the owner of the cafeteria manipulates the food layout to get preferable food eating habits.

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To be honest I could have sworn that I had blogged about this already, but I did a search and couldn’t find anything.
I want to write an empirical paper that compares the quality of firemen in Manhattan before and after 9-11. My theory is that the abilities or quality of the average fireman after 9-11 declined compared to before. “Well that’s because we lost some of our best and brightest,” you might say. My theory is that the decline is due to the increased non-monetary rewards of approbation after the attacks. In other words, firemen receive both a financial salary plus whatever sort of honors and prestige come with the position. After 9-11, my guess is that the approbation rewards for firemen shot through the roof but the monetary wages remained relatively the same. In this new pay out structure there is less control over the particular incentives that induce quality. Even bad firemen (I need some proxy variable for quality: results on tests, response time, etc) get high approbation rewards. When the slacker fireman or the guy who just isn’t pulling his weight lately shows up at a cocktail party and people find out he’s a fireman they still ooh and ahhh at his bravery right along side the top performers.
Maybe there are even some implications about the cultural identity of firemen. My guess is that most fireman’s opportunity costs of becoming a fireman is some other line of blue collar labor. Where as given higher approbation pay scales, people with higher opportunity costs join the field. Maybe before 9-11 most firemen joined the team to make a living and provide for their families, whereas after the attacks the applicant pools were filled with thrill seekers and spectators.

My new paper, The Internet and the Structure of Discourse: The Websites of Economists at Harvard and George Mason co-authored with Dan Klein is now published online at Econ Journal Watch. Here is the abstract:
We investigate the websites of economists at Harvard University and George Mason University. We draw a contrast between the two departments by using Robert Nelson’s distinction between the “scholastic” and the “pietistic” approaches to knowledge and discourse. Scholasticism is hierarchical in structure and tends to produce work that is inaccessible to lay readers. Pietism is “flat” in structure and strives to communicate directly with lay readers. The Internet enables economic discourse in the “pietistic” vein, notably direct communication with the “laity” and other forms of public discourse. From the economists’ material found online, we count and compare publications of various types and the online availability of listed works. The data help to characterize Harvard as relatively scholastic and GMU as relatively pietistic. Our intention is not to criticize Harvard for being too scholastic, nor to celebrate George Mason (our home institution) for being pietistic. Our motivations are simply to advance some ideas about how the Internet might affect economic discourse and to suggest that the extent and forms of web utilization serve as a kind of metric on the scholastic-pietistic continuum.

I’m trying to wrap up my first semester of teaching intermediate macro. After surveying all of the major schools of thought I’m concluding with discussions about spontaneous order and some Austrian business cycle theory.
One of my students has brought up, what I have come to realize is a brilliant question:
What if the knowledge benefits of a new technology produced during the boom outweigh the physical capital losses of the bust?
If they do then new money is less disruptive to the economy when it is spent on R & D development. But the question could be a moot point if empirically R & D is not responsive to changes in interest rates. I would assume that this data is easily available, but if anyone knows specifically where I could track it down or knows of anyone writing on similar topics I’d appreciate a note.
PS–Hat tip to Adam Martin for the helpful discussion.

This past weekend was the annual Austrian Scholar’s Conference held in Auburn Alabama at the Mises Institute. It was a great event. I thought I would write a follow up to the brief talk I gave discussing graduate school. My discussion was limited to general suggestions about what types of research to do (economic history) but young students have almost no specific information on how to prepare for graduate school. So here it goes…

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I can’t wait to show this to my intermediate macro class. We’ve been discussing the implications that Keynes’ empirical starting point of depression era unemployment had on his models and policy implications. This may do a good job of easing the transition to our next set of theories. My, how the world changes.
Thanks to Russell Roberts at Cafe Hayek for the link.

Friday would have been the 81st birthday for Murray Rothbard. Aside from celebrating, I decided to devote my class lecture (intermediate macro) to Rothbard on Keynes. The first thing I found was Murray’s “Keynes the Man” article. I read this article again trying to decide if it was appropriate to give my class. As fascinated as I was to hear about how Keynes was a member of secret societies with strange moral beliefs, I don’t think my undergrads would’ve gotten much out of it. Then I searched through Rothbard’s Man Economy and State and found the section on “Hording and the Keynesian System.”

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Venkatesh’s new book is a fun and interesting read (Cowen’s comments, and Slate’s review). In case you don’t know Venkatesh is the guy who wrote the drugs chapter in Levitt’s Freakonomics. The new book goes further into the urban underground with ethnography. Basically he just moved into the hood, and observed the world around him through the lenses of social science and economics.
What better a lense than Austrian economics? If you’re like me and you believe that Austrians have a unique and powerful ability to explain why things happen the way they do, then this would seem like a great method to link up with Austrian theory. Here are a brief list of research projects I’d love to see performed with a similar Venkatesh, “just do it,” ethnographic approach:

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