J.

Jim Grant Smashes an Apologist for Negative Interest Rates

What a zinger. Jim Grant obliterates Ken Rogoff’s lousy case for negative interest rates. Grant writes of Rogeff:

As for the campaign for zero cash in the service of negative interest rates, Mr. Rogoff’s brief is best seen not as detached scientific analysis but as a kind of left-wing crotchet. Strip away the technical pretense and what you have is politics. The author wants the government to control your money. It’s as simple as that.

Here’s another great quote:

A positive integer would almost seem inherent in the idea of interest. When most of us want something, we want it now. And if we don’t have the money to buy it now, we borrow. “Present goods are, as a rule, worth more than future goods of like kind and number,” posited the eminent 19th-century Austrian theorist Eugen von Böhm-Bawerk. He called this behavioral truism the core of his theory of interest.

Interest rates are prices. They impart information. They tell a business person whether or not to undertake a certain capital investment. They measure financial risk. They translate the value of future cash flows into present-day dollars. Manipulate those prices—as central banks the world over compulsively do—and you distort information, therefore perception and judgment.

A.

Alex Epstein Obliterates George Clooney

Alex Epstein, who wrote this book (which I need to read– as this post reminded me), issued a response to the following George Clooney statement on climate change:

Well it’s just a stupid argument. If you have 99 percent of doctors who tell you ‘you are sick’ and 1 percent that says ‘you’re fine,’ you probably want to hang out with, check it up with the 99. You know what I mean? The idea that we ignore that we are in some way involved in climate change is ridiculous. What’s the worst thing that happens? We clean up the earth a little bit?

The-Moral-Case-for-Fossil-Fuels
The Moral Case for Fossil Fuels, Written by Alex Epstein

Epstein writes:

I am something close to terrified about Clooney’s comment: “What’s the worst thing that happens? We clean up the earth a little bit?”

Clooney is talking about the idea that we should “do something about climate change.” For Clooney’s environmentalist allies, that typically translates into: globally outlaw 80-95 percent of future fossil fuel use and force us to try to subsist on expensive, unreliable solar and wind energy.

And again:

For someone who understands that affordable energy is a life and death issue, this does not translate into “clean up the earth a little bit,” it translates into “making life on earth hellish for billions.” It would mean that the 1.4 billion people around the world who lack electricity—and thus have a life expectancy of 48—would not be lifted out of poverty, but would be joined by billions more.

It would mean a far dirtier environment—only high-energy, highly-developed countries have clean environments. And it would mean a far more dangerous climate. While Clooney makes time to publicly declare his solidarity with the victims, he should take some time to think about what would have actually protected them: industrial development powered by affordable, reliable energy.

R.

Robert Higgs on Minimum Wage Studies

From his Facebook page:

Suppose you wanted to know how many of the soldiers who served in World War II were killed in that war. So you sent inquiries to a random sample of veterans of that war, asking: were you killed in the war? I presume that all of those who responded to the survey would reply, no. Having conducted your scientific poll, you could then conclude that none of the soldiers who participated in World War II were killed.

The mistake you would have made in this case is known as the result of survivorship bias. It affects many sorts of studies, including many where the study design is not so obviously stupid as in my foregoing example. Surveys have sought, for example, to determine how an increase in the legal minimum wage affected employers’ amount of.employment. Such a forced wage increase, especially if it were a large one, might well cause some firms to go out of business. They would then be unavailable to respond to a poll or other survey to indicate that the increased minimum wage had caused them to reduce their employment to zero, wiping out however many jobs they had previously maintained.

You might think that any well-trained economist would be aware of survivorship bias and would not draw unwarranted conclusions by failing to take it into account in designing or conducting a study. But if you thought so, you’d be wrong. Mainstream economists, including super-duper econometricians, not uncommonly make this freshman mistake.