walkitout (walkitout) wrote,

Why I Don't Like Economic Arguments

This sounds kinda funny, probably, given how I've gone on and on about (a) gas prices (b) the housing market and (c) DVC/timeshares.

In any event.

What set me off this time was an unusually inane argument against locavores in the NYT:


There are elements of this argument with merit, but overall, a lot of it is based on some fairly stupid stuff and leaves out what I would consider to be the really good arguments for growing your own food/making your own stuff/DIY in general.

There are two major problems. The first is the comparison of novice/learning/practice product to expert product. If the person who does it the fastest/cheapest/most efficient is the ONLY person who should be engaging in a particular activity, there's really no reason for any of the rest of us to, say, eat: someone out there can eat faster, cheaper, more efficiently than me, therefore, they should do all my eating for me. So that's just a dumb argument in the extreme form. It's also a dumb argument in the typical case, in that virtually every activity has a learning curve -- you'd be better off comparing my production at competence to someone else's production at competence, NOT my production at competence to someone else's production first-time-trying. It's also a dumb argument in the general time != money sense.

Most economic arguments run afoul of this particular argument, and it's a dangerous one because it leads us straight back to the evil days of the 19th century with people working themselves to death at piecework rates. While I might well get paid (I don't) for writing code several hours a day at some sort of weekly or whatever salary, the rest of my time should not be costed at my writing-code rate. Any more than the time of someone who doesn't get paid for anything should be treated as completely worthless.

The second major problem with the argument lies here:

"To eat locally grown food or, even better, food that you’ve grown yourself, seems as if it should be 1) more delicious; 2) more nutritious; 3) cheaper; and 4) better for the environment."

That's framing. Here's how I would frame growing food (or sewing, or figuring out my own health care to the extent possible, or snaking out a drain rather than calling a plumber, or whatever):

To DIY, it seems as if it should be (1) more rewarding than other currently available uses of your time/resources (2) increase your security by making you a wiser consumer in the market and buffering you against excessive swings in the market (3) result in a product you thoroughly understand.

It doesn't need to be a better product in any way shape or form to satisfy my criteria; in a lot of ways, it can be a worse/more expensive product. We don't buy insurance to save money now. We don't go to college because it's cheaper than working or more fun (generally).

What got lost? Well, I wonder if this guy basically looks at gardening and goes, holy crapping damn that looks like a ton of work I have no idea where to start other than by shopping (I mean _look_ at his list of what you have to have to start a vegetable garden!). How can I justify not doing this? Well, _that's_ easy enough. Just don't do it. Say, way too much work for me; I'll just go to the store. It seems clear to me that the subtler points of the ant/grasshopper fable evaded him entirely.

What gets lost in general in economic arguments? An economic argument, like any other (pseudo) science, starts with a framework (hypothesis + current generally received ideas in the field), and proceeds to look for measurable/predictable stuff that might support/reject the framework. A good economist (if there is such a thing) would, like a good scientist, always keep half an eye on that framework to make sure the qualitative structure for the quantitative activities makes sense. Most economists (and, I suspect, most scientists), don't. Foundation good, let's just go with it. Rather than dismissing this by saying, "gilding a turd", as tempting as that phrase is, I'm going to drill down here a bit.

Economic arguments (at least ones aimed at the general public) are generally chiseling arguments -- that is, they're looking to save a nickel here or a dime there for everyone so the population as a whole can save a whopping amount. You can see this in action with the fuel crisis, in that airplanes are lightweighting seats and drink carts and cleaning the planes more often, flying slower, etc. They're desperately trying to avoid what would _really_ save a lot of fuel, which is cutting the number of flights by 90%. Which of course, would wipe out the airline industry. Similarly, the auto industry would much rather swap a transmission in a truck than stop selling trucks, swap an SUV for a hybrid, rather than have you carpool, use public transportation or ride a bike, etc. Any non-obvious benefit from an activity that interferes with chiseling will just not enter into the discussion. No one will discuss risk associated with clearly unpredictable things (like %increase in your retirement fund, value of house, etc.) that you have to pick to model something. They'll just say, if you assume xx% increase over the next yy years, you'll be ahead of renting! Or able to retire at 12. Or whatever.

An example of a non-obvious benefit from an activity would be: if you garden, you might have food coming into your house some months in the future that you will not have to pay market prices for (and really, you _don't_ know what market prices will be, now, do you?) AND you can be pretty sure _your_ tomatos won't have salmonella. Just as a for instance.

Those are the two big problems (novice/expert production comparison, framing for measuring), but there's a third and more subtle problem here as well. Economics _as a whole_ is predicated on the idea of perfect information and perfect rationality. If all the participants in a market rely upon "experts" to produce goods to the point where they have no idea what is even happening in the productive activity, that's a huge violation of both assumptions simultaneously. I will almost certainly make worse produce buying decisions if I've never been on my knees in the dirt and read labels on the chemicals at the gardening store. I don't have to be a great gardener to understand the general principals, but I'd better at least recognize that bell peppers don't grow in styrofoam. This is a principle that applies to virtually everything, unfortunately, and ultimately helps explain why outsourcing all our production has resulting in such terrifying surprises.

What are _good_ economic arguments? I'm sorry to say that the longer I think about this, the more I understand why Adam Smith (the one a few centuries back) was such a long-winded writer (hint: it _wasn't_ bad editing per se, nor was it the cultural milieu). A good economic argument is going to walk through a lot of this kind of thing (well, how is it made, how else could it be made, who makes it, who else could make it, what kind of risks are associated with the activity, how might those risks be expected to change over time, etc.). It's going to go on and on and on and result in a conclusion that sounds, to put it charitably, like CYA. A bad argument says, here, we can write this equation and run the numbers and, hey! Yeah, we should _definitely_ give all of our soldiers headed off to a heinous and unfamiliar environment a bunch of shots all at once that have never been given all at once and then, when some of them react poorly, treat them like pariahs and have them live on the street for a couple decades before we even _think_ about treating what's wrong with them like a real medical problem. And oh, we won't _ever_ take responsibility for it.

Never mind the mercury in Rhogam.
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