I have long admired Leland B. Yeager, economist and social philosopher. But I really don't know much about him, despite having met him once. I'll have to go back to this article, The Yeager mystique: The polymath as teacher, scholar and colleague, to learn more.

When I have time.

But it doesn't look long, does it?

Hours ago I wrote about the maleficiaries* of minimum wage laws. I looked for secondary effects, on track of values forgone.

This kind of reasoning applies to price rises of any basic good, really, any good that people tend to treat as a necessity. Take gas price increases. If one finds oneself paying more for gas, one can decrease driving. But most won't decrease driving down to nothing. It's other purchases they will forgo. Gas prices rise? Then maybe it's pizzas that won't be bought, or . . .

Health insurance.

Everyone values present goods over future goods to some degree. It's only with increased wealth that one can afford to sock a little away for the future and for eventualities. So of course buying health insurance is lower on the list than feeding yourself or going to work, or even keeping one's spirits up with the occasional movie or whore.

So, ever wonder why so many people don't buy health insurnace for themselves? Because prices of other things are rising . . . in part because government

1. regulated goods to increase prices and




2. encourages a policy of inflation in the banking and monetary system.

Want people to buy health insurance? Well, be more wary supporting government policy that raises prices in general, usually in the name of helping this person here and that person there.

The ones most hurt by price rises are the poor and the retired.

* I didn't spend a lot of time looking this word up. I hope it means a recipient of action or intention that is harmful. A beneficiary gets good things; a maleficiary gets bad things. No?

Everyone knows, or should, that the primary losers of a minimum wage raise are the poor who lose their jobs because they have been priced out of the market, the poor who won't get hired in the future for the same reason, and those who move from full or over-time work to part-time work, because their employers are trying to cut costs, costs imposed by minimum wage laws.

But the secondary losers are harder to keep track of. For example, in the nearby town, let's say that demand for fast-food product remains high, because, well, everybody has to eat, and this is a handy way to do so. So, stretch one's imagination a bit and say no one gets fired, at least not immediately, and no one loses hours, either. McDonald's just raised their prices, to compensate for the losses. And because dining at fast food is inelastic compared to other purchases, people continue to flock to McDonald's.

What happens then?

Forget unemployment. Think indirectly competitive businesses. In the town nearby, the business hurt most may be the CD music store. The businessman there has no employees. But the poorer people who shop at his store will have less to spend every month; they've spent that extra at McDonald's. They may very well choose to cut down on recorded music purchases.

So, the chief secondary loser from minimum wage laws is very likely the businessman who can't afford to hire anyone in the first place!

The Naked Economist clothes his agenda in a mildly clever way:

When I was a kid, I remember being captivated by The Book of Lists. The title was appropriate, because it was, well, a book of lists — the American presidents, the world's longest rivers, the oldest living humans, and so on. It was a fun book, and even instructive in some ways.

Since I occasionally get queries from people looking for more information on economics, I thought it would be interesting to create my own list for economics.

He is right. His list is interesting. But I take his list and offer my own, here:

• My Favorite Economist: Gary Becker . . . Carl Menger. Wheelan gives some good reasons to admire Becker, but I can't help but put Menger on the top of the heap. Carl Menger's careful analysis allowed me to understand the leading economic concepts. Without Menger, I would not have quite grasped marginal utility. And Menger did this without using the term marginal utility! The term, after all, is a translation of Grenznutzen, coined by Menger's follower Friedrich Freiherr von Wieser.

Further, Menger placed economics in a broad context, and did not narrow it down. Wheelan admires Becker for taking economics out for a spin, applying it to families and crime and racial discrimination. Menger provided just a basic analysis, and put that rather Aristotelian analysis in the context of an evolutionary framework. Further, his leading conceptions, such as his marginalism, were not tightly wedded to unrealistic assumptions, such as perfect knowledge. Most of the great mistakes of 20th century economics he thus bypassed; many of the neceessary innovations of 20th century economics (such as monopolistic competition) appear, in a Mengerian context, to be half-steps back to his fine first course. That is, they are corrections that only go halfway to solving the problems caused by the undue influence of Marshall and Walras (especially the latter).

Many admirers of Menger prefer Ludwig von Mises. I do not. Mises strikes me as having added an unnecessary rigid element to the theory of human choice and action. Menger had a more fluid approach . . . or, at least, a more fluid approach is compatible with his explanations.

Menger's writings were not perfect. And they did not go as far as some of his competitors' and followers' work. But, as far as they went, they started the reader on the right track, and ushered the reader to fewer dead ends than any of the other marginalist revolutionaries.

• The Best Economics Writer: Milton Friedman . . . David D. Friedman. As an admirer of Milton Friedman's writings about economics and policy, and public advocacy, the idea of striking him off the list does seem strange. Stranger yet may be choosing his son, David, as a replacement. David is nowhere near as famous. But since reading his charming and provocative little book Machinery of Freedom, I've been a fan. His subsequent books are even better.

There could be many alternatives. I greatly admire Thomas Sowell, and have learned a lot from him. But I disagree with him enough, especially in his columns — particularly regarding foreign policy, in which he usually impresses me as something of a simpleton — to take away the prize.

The authors of Freakonomics are popular these days, as are some of their imitators. Apparently, the popularity of this book has overshadowed its precursors. We should remember, this sort of book is quite old hat in the field. I have in my collection an earlier attempt to popularize economics this way: Abortion, Baseball, and Weed. There are many others. David Friedman's The Hidden Order is the best example, and much better than Freakonomics.

Going back over the years, a number of writers like Wicksteed and William Smart come to mind as very good writers on economic theory, who were also, mainly, popularizers.

But, here I am, choosing David Friedman over the towering giant in the field, Frédéric Bastiat! What can I say about that?

As Stigler and Becker might respond: De gustibus non est disputandum.

• My Greatest Economics Frustration: The tendency to swim in schools. I confess, freely, that my favorite economists tend to be of the so-called Austrian variety, so called because of the origin of their school in Vienna. But a lot of good work has been done in the main stream of the science, that the tendency of Austrians to reject huge rivers of thought, out of hand, vexes me.

The narrowness of the Austrian stream is particularly frustrating. Almost no good work has been done within the school on the subject of externalities. Menger did not extend his theoretics of the general theory of the good to public goods, and the Austrians are belatedly trying to catch up, now. Unfortunately, reverence for Mises strikes me as stumbling block. Mises was just simply wrongheaded on this theory, and Austrians need to go back to Menger and develop a refined, process-oriented version of externality theory.

Unfortunately, this is not the only area where Austrian theory is deficient.

Worse yet, the habits of economists in the main stream are as blind to their own faults as Austrians are bigoted towards theirs.

• My Favorite Economics Blogger: Gregory Mankiw . . . Bryan Caplan. He's a non-Austrian who argues with Austrians as well as pushes the envelope of theory and explanation. EconLog, which Caplan shares with Arnold Kling (whom I also much admire), is a great blog.

• My Favorite Obscure Economics Concept: Seignorage . . . This is a toughy, since my favorite economic concepts are pretty obvious and central. My favorite obscure economics term is marginal vendibility (or marginal marketability), but that's just simply the demand/supply schedule repackaged by F. W. Taussig . . . a terminological coinage that never caught on. I like it because, with it, you can explain the formation of prices so much easier, as flowing from individual valuations.

So, today I'll go for another Taussig term: the penumbra. In his fine, and, alas, neglected essay, Is Market Price Determinate?, Taussig took on the standard, neoclassical equilibrium theory of price and compared it actual prices in actual markets, which seem much more fluid and chaotic. He suggested that price determination, because of incomplete and dispersed information and the fallibility of human expectations, did not fix on any one price in real-world markets. To the extent that we can talk about determination, all that can be determined is a range of prices.

I'm actually not stating his position with complete accuracy. Hey: this is a blog. If you want Taussig's essay, ask me; I might be able to send you a copy.

I find the Taussig Penumbra fascinating because it is an alternative way of looking at the most basic theory set of economics: supply, demand, and price formation. Rather than abandon determination theory entirely, in favor of a more Austrian formation approach, Taussig suggested thinking in terms of ranges instead of points. And, the more you think about it, the more economic theory veers into fuzzy logic and vague sets and the like.

This is not necessarily a bad thing. Economics may shine a great deal of light on our world, but that doesn't mean there aren't shadows. The very light itself casts shadows.

• My Favorite Economics Book: The Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers" by Robert Heilbroner . . . can I just say that I am utterly dumbfounded by Wheelan's choice, here? Heilbroner? Really? Egads.

My favorite economics book? Well, I should choose one by Menger or Friedman, no? Otherwise my whole selection would seem contradictory, a good example of preference falsification, no? (Preference falsification would be another candidate for obscure economic concept, though I'm not at all sure how obscure it is.)

But obviously, in lists such as these, one goes for variety. I won't.

• The Biggest Economics Charlatans: The supply-siders . . . advocates of the expansive welfare state. Let's get real, here. I've never seen a decent economic justification for taking money from the bulk of the population, sending it through state and federal capitals to be strained by politicians and bureaucrats and others of the functionary class, and then given back to the people in trickles. Welfare state advocates are among the least honest and most dense theorists I know. Repeatedly they attack free-market policies and low-tax regimens as trickle-down economics, and yet they're the ones who are most addicted to trickle effects. They want to put as much of the population on a trickle diet, from the state, which they then direct.

It just don't see the sense of it.

Marxists used to be the most obnoxious economics charlatans. But Marxism is dead, except on college campuses. The welfare state, on the other hand, is very much alive in govenment and politics around the globe, as well as in the economics profession. Supply siders? Sure, they're wrong, usually. But they've done far less harm than the advocates of unrestrained spending on social programs and pork.

The economists who align themselves with the Democratic Party are especially pushing charlatanism. Rather than insist on a few limited social programs, they give aid and comfort to unlimited spending. That's just simply what they do, because that's what Democratic politicians want, and a huge chunk of modern constituencies think they want, given their political options (which have been rigged for them).

It's disgusting in its dishonesty.

I'm not saying their economics work proper is dishonest. i'm saying their economic policy work is, to some degree. I could be wrong. But I doubt it.

• The Greatest Economic Challenge of Our Time: Reconciling the tradeoff between a decent safety net and the bad incentives that it creates. . . . Getting politicians and voters to confront the danger of just this tradeoff. The political system is rigged to encourage ever-increasing amounts of government intervention in the lives of its citizens. At its very best, the two-party system perennially frames the choice as a trade-off between one set of interventions and another. But neither set makes much sense, the whole system is rigged to . . . well, you get my drift. Somehow, we've got to get to a more constitutional outlook, where basic limits to political machinations get asserted, and trade-offs become a matter for private citizens as actors in communities and markets rather than as rent-seeking grifters in the political realm.

So that's my list.

Has Thomas Sowell's awesome (terrible?) mind gone to waste? Has he written too many columns? Should he have spent more time on On Classical Economics?

I think so. It's a fine book, in its way, and includes a lot of great material. But still, his fascination with Marx doesn't impress me any longer, and the great chapter on Sismondi could have been mirrored by great chapters on Say, Malthus, and Nassau Senior.

Oh, well. I shouldn't complain. I always find something of huge value in a Sowell book. In this case, his reinterpretation of Mill's On Liberty. Which now I have to read again.

I'm in a strange position. I admire his first book, Say's Law, far more than anything else I've read by him. The much-ballyhooed Knowledge and Decisions struck me as too popular. Sowell is smart enough, surely, to have done greater work. Instead, like Mill and Keynes, he's spent too much time thinking about the issues of the day and not enough about economics.

Peter T. Leeson gives what I am sure is very good advice to young Austrian school economists on a blog I'd never noticed before, titled (appropriately) The Austrian Economists. Here I'll take each point and replace his elaborative comment with my comment in response:

1. Stop block quoting Mises and Hayek.

Good idea. Too often such extended quotations strike non-Austrian economists (and even those sympathetic non-economists, like me) as appeals to authority. Like something Rand did with John Galt. Mises and Hayek actually existed, but they aren't the only economists to so exist. If you single these two for extended quotation, you sound like Johnny Two-Note. And for most of the Two Vons' notions there exist both earlier and later economists also worthy of citation. But mainly, keep your references to Mises and Hayek as citations, footnotes, not as huge chunks of reverently quoted material.

2. No more attempts at rewriting "capital theory."

This is sad news. I like capital theory. Standard capital discussion is often silly, useless, or at the very least misguided. But, that being said, this is probably good advice. Arguing about capital theory is like pushing a rock up a mountain in Hades: it's gonna come crashing down on you. I've talked with a number of economists over the years, and when I (a non-economist) mention capital theory, they usually just wave their hands and mention Irving Fisher. Ye gods, what a mess.

Work out your capital theory in fear and trembling. Then, in other work, if the occasion comes to bring it up, do it in the world's best constructed paragraph.

3. Work on topics other than history of thought.

Unless your contribution is going to be an economic alternative to evolutionary epistemology and the sociology of knowledge . . . and even then, do something new and exciting and bring this other in if you have to. Leeson's added advice is not only sound but funny: Set a limit for yourself--say, 1 history of thought paper for every 5 non-history of thought papers.

4. No more discussions about the calculation debate.

Great advice. I was tired of this by the early '90s. And then Don Lavoie's and David Ramsay Steele's books came out, and I thought, OK, stop talking about the calculation debate NOW.

5. Get over the "subjectivism stuff."

Leave it for those of us on the outside of the Academy, who bring it up in part to stick it to capital-O Objectivists.

6. Do not confuse "correctness" for "goodness" in economics and vice versa.

Hmmm. This is probably right. An economist is good who can expand knowledge; an economist who is correct may know nothing more than a few true basics. My interpretation of this rule? The hidden norm in academic life is progress. Nice to know.

7. You are not going to write a treatise that revolutionizes economics.

Well, this is an odd thing for an economist to write. It's not hedged. What he should have written is this: Given the odds, you are not likely to write that revolutionary treatise. So do something useful instead of try. The economists who do revolutionize will do so either (a) inadvertantly, in the course of other work, or (b) will not listen to good advice anyway. There are always exceptions in these things, and every good statistician knows this. (Of course, the correct statistician can make the statement and likely be right, depending on the size of his readership pool.)

8. Do not engage (i.e., make the focus of your research) work that is more than 25 years old.

The problem with this advice is that a few of the deep and abiding problems of Austrian economics are a century out of date! Take public goods. The Austrians got behind on this, and the work trying to catch up is still not there yet, from what I can tell. Give Austrians another five years. After they catch up to work done 90 years ago, then maybe we can nudge them to set their sites even nearer.

9. Don't tell us what Mises, Hayek, Rothbard, etc. "really meant."

This is another issue that reminds even non-economists too much of theology and literature and philosophy. Stick to economics. Leave hermeneutics to French Theorists and Continental theologians.

10. Stick a fork in the "philosophy talk."

This is something that Mises himself should have done more often, too. Though I was deeply impressed with his Ultimate Foundation of Economic Science when I read it at age 20 — and even though, in a pecular way it even changed my life! — I didn't buy his argument that he wasn't doing philosophy, and I didn't buy huge chunks of said philosophy. What he (almost inadvertantly) helped me to understood was the significance of subjective value. But that was almost an extraneous point. His main argument struck me at the time as dubious, and strikes me as more dubious now. Most of his subsequent defenders and friendly interpreters regarding method seem to demonstrate less than half the sophistication they pretend to possess. The whole Austrian school often comes out looking bad for this obsession.

And yes, I say these things even though I am sympathetic to most Austrian positions, even the ones I disagree with.

Of course, it's easy to dismiss me; I'm not, after all, an economist.

Final point: the reason young economists in the Austrian school should avoid these vices is that, in doing so, they will get ahead. They can leave these vices, listed above, to those of us outside the academic world and can't be harmed much by them. No one really cares what we do, or if we come off looking a bit nuts!

It is often mentioned, and treated as argument, that allowing same-sex (homosexual) marriage would lead to a decrease in heterosexual marriages. I've often wondered how. I mean, I can't imagine the spectacle of gay people marrying affecting my judgment as to marry.

But, as has been argued before, that's not the proper way to approach the question. It's not most people's values that matter, or those of normal people, or even abnormals: it's marginal couples we have to worry about. That is, those people (perhaps not identified in our current thought on the pool of potential and actual marrieds) who are iffy on marriage in ways not before seen, in the new context.

On the other hand, there's Sarah Silverman and Jimmy Kimmel. Kimmel has stated that Sarah won't marry him until same-sex marriage is allowed! Typical Silverman reversal. (Or is that a Kimmel Original?) And yet, I wouldn't be surprised were this kind of protest to become more common among the young and aging and trendy. Many may use it as an excuse not to engage in a practice that seems square or inhibiting.

My perspective is similar to that of economist Gary Becker.

I go further: marriage should not be primarily a state-regulated institution. Like most regulated institutions, it's suffered at the hands of the state. Marriage as an institution needn't be one thing. Instead of something requiring a license, it should be a contract best engaged in with the help of lawyers. Or clergy, if you want. (I'd rather pay a lawyer.) The law's basic perspective would be to make sure the rights of contracters get defended, and also (and certainly not secondarily) those of the marriage's non-contracters be respected, that is, chiefly, the rights of the children.

For that reason, a default contract would likely be necessary. One is not considered married by license, but married by action (demonstrating agreement, whether spoken or not). If a couple lives together, and begets or adopts children, the rights of the children might trump liberty rights of the parents. And those rights should be clearly specified in law. Other than that, of course, there's no reason why marriage contracts couldn't specify a multiplicity of ways to relate a couple financially, and over time.

I take a hard-nosed stance: A couple that declares monogamy in wedding vows must be held to that; a couple that does not, should not.

No contract should be signed that is publicly falsified in ceremony.

An honest ceremony must include the central provisions of the contract. No death do us part if there are easy escape clauses in the contract.

I wonder what Sarah and Jimmy would say to that? (Something funny, I assume.)

Culture matters. A culture is the style of human interaction. We often learn the ways and byways of society by its style, or feel, not only by explicit instruction. And the feel of culture in Europe slows it down. Europe lags economically behind America because European culture has veered away from practical, individualist roots, at least according to a fascinating Wall Street Journal thinkpiece by Nobel Laureate Edmund S. Phelps. This economist asserts that the virtues of dynamism, of actually taking charge and doing something, do not prevail in Italy, France, and Germany (The Big Three European countries) as much as they do in the U.S. and Canada:

There is evidence from University of Michigan "values surveys" that working-age people in the Continent's Big Three differ somewhat from those in the U.S. and the other comparator countries in the number of them expressing various "values" in the workplace.

The values that might impact dynamism are of special interest here. Relatively few in the Big Three report that they want jobs offering opportunities for achievement (42% in France and 54% in Italy, versus an average of 73% in Canada and the U.S.); chances for initiative in the job (38% in France and 47% in Italy, as against an average of 53% in Canada and the U.S.), and even interesting work (59% in France and Italy, versus an average of 71.5% in Canada and the U.K). Relatively few are keen on taking responsibility, or freedom (57% in Germany and 58% in France as against 61% in the U.S. and 65% in Canada), and relatively few are happy about taking orders (Italy 1.03, of a possible 3.0, and Germany 1.13, as against 1.34 in Canada and 1.47 in the U.S.).

Phelps concludes with a historical perspective:

It was a mistake of the Continental Europeans to think that they expressed the right values--right for them. These values led them to evolve economic models bringing in train a level of economic performance with which most working-age people are now discontented. Perhaps the way out--to go from unsatisfactory performance to high performance--will require not only reform of institutions but also a cultural shift that returns Europe to the philosophical roots that put it on the map to begin with.

It seems to me that Social Security reform can go nowhere until there's debate. And debate doesn't mean much until there are options on the table. Were I in Congress, I'd set up three commissions, each to propose a different solution to Social Security's financial instability. Then I'd go back to my constituents and demand that they choose. Demand that they debate.

Here are three proposals, for your consideration:

1. Privatization: Figure out a way to privatize the whole kit and kaboodle. I'm afraid this would have to be a multi-staged, and therefore a very complex proposal.




2. Fiddle with the demographics: Increase the retirement age by at least five years. After all, the original system was designed when people lived not nearly so long. It was designed like a tontine, in a sense, a key feature of which is that a huge percentage of contributors were expected to die before they could collect on their pensions. Return to that model. For further kick to the system, open up the borders to all able-bodied English-speaking people under thirty. Make them pay into the system even if they do not seek citizenship.




3. Tontinize: Set up government-supervised tontines and retirement insurance, and force every person over 23 to participate (or some other low age; basically, young people have to spend their money in education, so they need to be given a reprieve before they start the retirement racket). The tontines should be a minimum of 40-year plans (50 years would probably make more sense for the very young, after transition), and the insurance packages should also target generations, peer groups, not the individual as such, regardless of age.

The key to all these proposals is actuarial soundness.

You should be able to tell whether your disputant is arguing responsibly or not by his (or her) understanding of actuarial tables and the nature of risk and uncertainty.

Almost certainly freedom not to participate in a chosen program could not be optional, in the current context. People are too afraid of their neighbors' folly to allow for a full freedom. Too bad.

But really, the most important thing is to show the people real options. There should be a four-year national debate. Using realistic options. At the end of the period, a special constitional convention (not Congress!) should finalize a mostly-settled-on proposal and offer it to Congress.

Of course, to do this we really would have to revise Article Five of the U.S. Constitution, on the manner of setting up a Constitution Convention. Would Congress go along with a more democratic system? Probably not.

Congress also probably has no interest in a real national debate on this issue.

Neither would Congress likely be amenable to offering citizens a choice, as ongoing policy. I can imagine the Constitutional Convention coming up with a packet for anyone to choose. Tontine? Or simple privatized investments? One or ther other would be mandatory, to an amount specified by Congress.

But that kind of freedom seems unlikely: Modern politics is geared towards one-size-fits-all approaches, more fool modern man.

I spent a lot of wasted time today at the Census Bureau site trying to discover the statistical reality of family planning. Apparently, the question I want answered isn't interesting to mainline statisticians.

I found a lot of information on poverty relating to children, but most of it looked at the subject I am interested in from the opposite direction. And I want to know about children not in poverty, too! Mainly, I want to know fertility rates per income quintile. I don't feel like taking those statistical conclusions and extrapolating the information I need. Surely a decent statistician has already done this for me!

I did several Google searches and came up empty-handed, too.

But there has to be a lot of information out there, and I bet I'm just missing it because I'm doing the searches incorrectly, using the wrong keywords, etc.

Here's what I'd like to see: the statistics on women who have children. How many children women give birth to, according to household income, and nature of household (living with husband, not living with husband, single, living with non-married sexual partner, living with friends, living with sibling(s), living with parent(s), living alone or with strangers, living on government assistance, etc. Abortion rates, adopting-out rates, and child confiscation rates, per income and household, would be great, too.

If any of my readers know something, a good site, please advise! I'm very curious about the facts here. The facts would be, perhaps, more interest in the theories I've developed from reading material that could be decades out of date.

In another life, I could have happily studied to be a population economist. It would be a useful vein of study. And fun to debate.

Surely, the history of population theory after Malthus is fascinating. My favorite post-Malthusian population studies were by Nassau Senior and Herbert Spencer.

Unfortunately, until I wrote what I wrote the other day (see below), I had not studied population theory and statistics for years.

Oskari Juurikkala has an interesting article posted to Mises.org, Making Kids Worthless: Social Security's Contribution to the Fertility Crisis. He revives a thesis that many common-sense people have advanced. In fact, R.W. Bradford's mother had explained it to her son when he was growing up. Social Security will destroy the family, she argued. Families stick together because they get help from one another. Take away the need, out goes the bond that holds us together. (Not an exact quote.) It is no great wonder that Bradford grew up to become a libertarian.

This alleged effect of Social Security wouldn't be so bad were what replaced the family better than the family itself. But fluid tribes of friends aren't very stable institutions. And the limits to neighborliness have a notoriety all their own.

The families and clans, on the other hand, are amazingly effective social institutions. The family's dissolution has already led to horrendous problems, especially among the not-so-bright (who become easily tempted with drugs, indolence, and crime).

Trouble is, Juurikkala's article does not consider the other causes of decreasing fertility. For instance, fecundity is highest (not lowest) in that portion of society that most relies upon Social Security for retirement. The richer sector, which could probably survive not getting any Social Security benefits, has a far lower fertility rate.

This seems to be the biggest counter-indicator of Juurikkala's thesis.

Why would this be the case?

For the reasons that economists associated with the Chicago school have given: people, the richer they become, tend to switch from investing in quantity of children to quality of children. This means that they increase investments in their children's educations, and this added cost (which does not diminish in terms of rate with each added child) thus increases the disincentive to produce large families.

It's in the middle class — that is, in the middle income group of higher wage workers and the self-employed — that we might see the effect Juurikkala identifies most clearly.

Still, the absence of a long-run incentive for children doesn't seem as strong as evidently operative near-term incentives and costs.

I think it is more reasonable to regard the family retirement plan of tradition as an unintended effect of having large numbers of children. Similarly, children are itself, for many throughout history, something like an unintended effect of engaging in sexual intercourse. The latter is fun; the children, less so. But the burden of children is reduced by familiar bonds, and the retirement effect.

Socialized retirement schemes do reduce one incentive to hold families together.

But increased availability of contraceptives allow most people to engage in family planning, reducing the birthrate, offsetting Juurikkala's effect.

Further, progress in medicine and agriculture and housing has increased the rate at which children who are conceived actually survive into adulthood, making the probability of conception from sexual intercourse (without contraception) more likely. All this increases the element of rationality, of actual choice and planning, in the production of children. Previously, when most children died before adulthood, and when contraception was very, very unreliable, the possibility of planning was much more chaotic.

Is it any wonder, then, why social mores in the past were so family-centered? It was a way to constrain behavior, and actually nurture the children that were produced. The chaotic element in the production of children had to be controlled. (And societies that didn't have a good way of doing this did not replicate themselves; they died out, so to speak.)

Now families are maintained largely by contract, not tradition and taboo.

Except for one major factor: the welfare state.

Not socialized retirement, but socialized child-rearing and livelihood. The number of women who produce children without any contracted means of supporting them is amazingly high in our society. Why? These mothers have a safety net, and a diminished taboo against bastardy (we can almost say: no taboo against bastardy). If a woman produces a child without being married, and has no means of supporting her child, there are all sorts of government programs there to help her.

The costs of child-rearing have gone down. Until recently, with workfare, one could argue that the costs were negative: a child conceived and raised out of wedlock gave an excuse for the state (taxpayers) to support the woman and her child. Thus producing children became a job, in effect. A low-paying job, but a job nonetheless. The state paid single women to conceive and produce children. And the cost of educating these children was borne almost entirely by the state, through the public education system.

The near-term incentive to engage in sexual intercourse is as great, or greater, than it ever was. Sexual activity is pleasurable, and now nearly everyone knows how pleasurable it can be (the nature of female orgasm, once a guarded secret in many Christian societies — and a thing actually feared in Islamic societies — is now regularly portrayed on TV and popular music, informing all of the possibilities of pleasure through sex).

The near-term disincentives to produce children — the fact that they are expensive to maintain (feeding, clothing, housing, medicating, and educating) — have been greatly reduced by the welfare state.

So of course, with the near-term costs and benefits skewed towards the production of children,some people will increase the quantity of children!

And this is the case in the lower classes, who produce children at higher rates than the wealthy and middle class (not surprisingly, there are more exceptions to this in the middle class than amongst the very wealthy; it should go without saying that all the discussion here assumes the reader can understand generalities and probabilities, without taking offense at any implied particular example or counter-example).

These effects tend not to play as much the wealthier one gets because the amount of money and quality of life amongst the poor is quite low. Anyone who aspires to greater wealth would find these incentives much less weighty. In fact, they can hardly even imagine that they could be effective at all.

Hence the continued unreserved support for them amongst many wealthy persons, utterly clueless about how actual impoverished humanity values and chooses. The rich and the professionals in our society possess radically different value scales because of increased income and wealth levels. They can foresee a future, and they can see the dead-endedness of the life offered by the state. And yet they continue to support these programs — and even argue for their increase — because they impute to the poor a status of victimhood, rarely muddied with an understanding of reflexive behaviors and values.

As pointed out in The Bell Curve, class lines in America are heavily determined by intelligence. The less smart one is, the harder it is to conceive of a longer time horizon, and of a multiplicity of effects of any one act. So, for less smart people, even the disincentive of costs of raising children can seem mistily distant, of lower probability than they care to worry about.

So, they fuck and they produce offspring.

Everyone has some trouble maintaining an extended time horizon, of thinking about the future. But the less the intelligence, the harder this becomes. So of course, just on this basis alone, we would expect lower rates of birth amongst the intelligent. And higher incomes, too.

The nature of schooling is important, also.

For wealthier, more intelligent individuals and couples, an education is something that requires work and investment. It doesn't stop at grade 12, and it is something that students are expected to work at. (Somehwat. Your family's mileage may vary.)

But for poorer, generally less intelligent people, schooling tends to reduce to something to be endured (for students) and something to be used as a babysitter (for parents). K-12 schooling is subsidized in America, and poorer people treat this as no expense at all, as a cost savings.

But education for smarter people (of whatever level of income) seems much more like an investment in the future, with parents willing to spend time and money home-schooling, supervising public education, paying for private lessons and even schools, and saving for college. Completely different attitudes towards education, thus increasing the likelihood of the production of larger numbers of children amongst the poor and decreasing this production amongst the better off.

The question becomes: why isn't there a birth explosion among the lower classes, far beyond current rates?

I can think of a number of factors, with the top two pretty obvious, if not alone persuasive:

1. The ready availability of contraception. Even the dumbest sexually active people use this in a helter-skelter way.




2. The widespread use of abortion to kill conceived fetuses. This has surely put a halt to a huge population explosion. (Though I haven't reviewed which segment of the population uses it most, I suspect this would be most widely used by lower-middle class women and pregnant teens.)

I might add drug use to this. Amazingly high numbers of what becomes the lower classes engage in drug activity that might decrease sexual drive and fertility (certainly the health of meth-addicted mothers). These people are run through a strange mill of welfare and imprisonment, and the latter, at least, tends to upset the ability of people to procreate. (The growing ranks of meth addicts consigned to prisons is amazing, at least in the Western states.)

Can we assign the main reason for decreased productivity to opportunity cost? Sexual activity is as fun as it ever was. And the costs for engaging in it have gone down. Contraception and abortion, especially, have led to a decreased number of babies in production. But surely it is important to us that we live in a wealthy society with many things to do. Music, movies, TV, sports-watching, what-have-you; these compete for the attention of all us away from sexual activity. Further, the growth of the pornography industry has made the old standby alternative to coition, masturbation, much easier. For increasing numbers of Americans and civilized people, sexual activity is becoming a lot like sports: more and more people engage in less and less socially active sex and sport, and instead watch the professionals do it on TV. So this tends to blunt the production of children, too.

There's a lot of fun things to do in society. Drug use may alleviate the vacuity of the lives of hordes of careless people, but art and industry and even work and religion do much the same for more careful folk. And all these things take our attention away from the immediate gratification of sexual intercourse.

Children have always been, to some extent, the joint product of sexual activity. But they are also desired, of course, as ends in themselves (I'll discuss this in a future post). And as hedges against the future, as Juurikkala argues. But when looking to explain the production, distribution, and consumption of children, I tend to look to more immediate effects than to the long-term incentives and disincentives, especially amongst the not-so-brights. Conceiving of the long term is much more difficult, for these people, than engaging in a bit o' fun that conceives a child.

O, for a one-armed economist! Which politician was it who decried the on the other hand rhetoric of his economic advisors? Doesn't matter. He just wanted an answer, and the economists he consulted kept on adding complexities.

It's no wonder. The world's a complex place. And economics has to accommodate and explain that complexity.

Milton Friedman insisted that prediction was the hallmark of science, and therefore economics. But Oscar Morgenstern noted the problem with this, long before Friedman: Any prediction of social events which is a causal factor for the predicted effects must necessarily go wrong. Willi Meyer, in Beyond Choice (Subjectivism, Intelligibility, and Economic Understanding, Israel Kirzner, ed.), correctly denies this Strong Impossibility Theorem a logical certainty, but gives it its due as a synthetic statement. It is, well, almost common sense.

Say an economist studies the development of an industry. He comes to the conclusion that investors have overvalued stock in several major corporations in said industry. He predicts that, down the road, this will lead to a major bubble burst.

The article gets published, and is picked up by financial journalists. And the stock goes into an immediate dive.

The prediction has influenced the outcome, speeding up the process of stock devaluation. And, perhaps, by doing so, has prevented a major bubble by pricking the bubble early on.

That shows an influence that prediction has, and that must be modified in the predictions.

Trouble is, it's hard to predict what will be made of any one prediction: nothing? what the predictor thinks savvy? or too much?

This last leads to a factor far more troublesome than the Strong Impossibility Theorem. It is the possibility of the self-fulfilling prophecy. One makes a prediction in order to influence events, perhaps to increase one's own reputation as a predictor.

This make economic prediction a form of wizardry. An art, perhaps, not unlike that of a confindence game. (And, after listening to the former head of the Federal Reserve, one might very well come to believe this was economics' very method.)

This shows the inherent limits that social sciences have at the predictive level, the level of exact predictions.

Hayek suggested that economics should be, instead, about the making of pattern predictions, and that gets it closer, but still, the problems of interference with the result by the very act of prediction remain a big problem.

This is the result of the key feature of human action: human ends change to adapt to information about possible goals and means, and predictions affect the relationship between various goals and means; so people choose differently based on predictions.

And this can lead to an amazing degree of complexity, far beyond the complexity of the statics that economists have traditionally theorized about. Predictions can be made that

• intentionally affect the outcome to prove the prediction (self-fulfilling prophecy as wizardry)
• intentionally affect the outcome contrary to the apparent content of the prediction (sly manipulation)
• unintentionally affect the outcome in a way that favors the prediction (self-fulfilling prophecy by means of Thomas Theorem factors)
• unintentionally affect the outcome to muddy or disprove the prediction (impossibility theorem)

These factors turn the nature of economics as a social science away from any simple predictive science. It turns the science into a critique of simple-minded scientism, doesn't it? A more dialectical enterprise, perhaps. I don't see how the science can be looked upon as a science in quite the same way physics is. The very nature of the science as influencing its observation may seem like just a macro instance of the Heisenberg Uncertainty Principle in quantum mechanics. But the problem is much larger, and on every level of economics.

Perhaps this makes economics more like evolutionary biology. Or ecology. There's a place for prediction, but a limited place.

Even meteorology and climatology have to incorporate human influences. But they can do so in pretty simple modelling. Trouble is, in economics, human influence is at the discipline's heart, and susceptibility to influence from predictions and the science itself can change outcomes in unforeseeable ways, due not only to complexity but to the very structure of the central events: the human choices and actions.

Funny, though, I've never heard anyone suggest that the proper way to conduct economic research would be in guild secrecy. One could only test predictions that are never allowed to reach the populace!

Perhaps one reason I've never heard of this is not merely the trouble with keeping secrets. It's the problem that any observation and prediction that an economist can make can be made by actors in society itself. After all, some investors are extremely sophisticated. They have every reason to be.

These thoughts come to mind as I break open a book that just arrived in the mail, Fooled by Randomness: The Hidden Life of Chance in Life and in the Markets, by Nassim Nicholas Taleb. I'll see what new levels of complexity become apparent by reading this much-praised work.

After writing the above, I came across this, by Nicolai Foss:

While we can all agree that ideas matter, how much do they matter? Is much, and perhaps most, of social reality essentially bootstrap phenomena in which the Thomas Theorem (i.e., the the situations that men define as true, become true for them) holds true? Do the social sciences bootstrap much of social reality in the sense that social science decisively affects the agents that social scientists study? Or, are there constants, stable mechanisms, etc. that exist and work regardless of what social scientists believe about them (as, I suppose, many economists would hold)?

The idea that theorizing affects the objects of theorizing — that is, the notion of “reflexivity” — has been an important one in sociology for a long time (Thomas wrote about it in the 1920s; Merton in the 1940s). It has become a Leitmotiv in the sociology of knowledge. It has also been a recurring theme in economics (in connection with predictions and the modeling of expectations; e.g., the debate surrounding the Lucas critique), and it has been treated by philosophers as well (e.g. Popper). However, this literature has not discussed the extent to which reflexivity (in the above sense) obtains.

The issue is obviously very difficult to get a hold on. However, I also believe it is a crucial one, particularly in management where we have recently witnessed people essentially arguing that economics-as-applied to management is (nothing but?) a self-fulfilling prophecy (i.e., this paper). So, do any of our readers know of literature that can help to frame and answer the questions with which this bleg began?

Ah, another call for help. I just asked for such citations on two email discussion groups.

But, as I try to indicate in my post above, the Thomas Theorem is not the whole of the problem. It's not even the half of it. It's about the quarter of it. At most. The Thomas Theorem does not really take in the possibility of a intentional influence of a prediction, nor the unintended process of a prediction unintentionally influencing reality so as to seemingly falsify the prediction.

But then, Foss was mainly talking about reflexivity, reciprocal influence and all that, and used the Thomas Theorem as if in synecdochic relationship to reflexivity.

The blog I quote from, by the way, looks fantastic. Organizations and Markets: great title for a very large endeavor with a wide perspective. I had not seen it before. I've now bookmarked it as a savvy source for new and old ideas.