Economic Creationism

Evolutionists have it easy. Sure, maybe half of the US disbelieves this solid scientific theory, which has zillions of weird implications many of which have been proven true and would be ridiculous things to explicitly design.

But I bet "half" pales in comparison to the number of people who believe in what I shall henceforth call "Economic Creationism": anything that contradicts old, well-established economic truths. Examples of Economic Creationism include the Broken Window Fallacy, confusing money and wealth[1], and protectionism (disproven by Ricardo's theory of comparative advantage). Often these fallacies come into play when thinking that a government intervention will somehow "Create" value out of nowhere.

These evolutionists think they know what it's like to have to deal with people holdin up crazy theories they disproved a hunnerd years ago? Look, while regular 'ol Creationism is uncool in most intellectual circles, Economic Creationism can be found in the hallowed pages of the New York Times. If done in an appropriately Bush or corporate-bashing way, it gets you respect - even though it's pure bullshit.

And evolutionists complain just because some wacky state like Kansas will occasionally try to legislate Creationism? Folks, almost every law in every state in the entire country is based on legislating Economic Creationism! There ain't hardly nothing else ever legislated!

Shit. Like I said, the evolutionists got it easy.

[1] Sadly, an example can be found in the wikipedia entry I just linked to for the BWF, where it says: "Another interpretation is that (in a more modern society) the money wouldn't go to the baker or the cobbler, if the shopkeeper was doing well enough for that money to go into a vault that wouldn't be used for a long time." The idea that removing money from the economy removes value from it is a classic confusion of the two. If all money disappeared, we'd still have all our stuff (which gives value), we'd just have to take a little time to reinvent money so we could easily trade stuff again.

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I believe inf free trade for

I believe inf free trade for moral and economic reason, but I don't think Ricardo's demonstration, by itself, "disproves" protectionism.
An import tax for example can give the consumers of a country a monopsony rent.(Sure there are many countries in the world, sure an import tax creates disinvestment, and so on, but this has to be measured, it cannot be assumed away from an armchair).
Again, I do not believe there's the slightest case for protectionism, on any ground, but Ricardo isn't enough.

Since we're talking about economic creationism, my girlfriend (who studies fashion design) is taking a liberal art course in macroeconomics. Every week she comes back with horror stories, such as

- Inflation is the result of full employment, we cannot have full employment without inflation.
- The Fed does not create inflation, but it fights it by lowering rates. (yes, you read it right: lowering)
- To counteract inflation, the government should use price controls

Wow...my experience in

Wow...my experience in undergrad level econ classes, particularly macro and money & banking, has been bumpy at times, but nothing quite so, to use Arnold Kling's term, folk Keynsian. eek. Bryan Caplan has a relevant essay somewhere on his website about how undergraduate level macro tends to be bunk. If my time wasn't so scarce, I'd go find it.

An import tax for example

An import tax for example can give the consumers of a country a monopsony rent.

How's that?

Country A produces a GPS

Country A produces a GPS system and starts selling devices that access the system. In a country B, the government taxes the purchase of the device and distribute the tax to the population. Since all the production costs for A are sunk, the supply is perfectly inelastic while the demand remains elastic. The tax is entirely supported by the producers in country A and distributed to the people of the country B. Point is, the tax somehow allows a form of price fixing among the consumers of the country.

Elasticity

Since all the production costs for A are sunk, the supply is perfectly inelastic while the demand remains elastic.

erm.. or they sell more to other countries. If the demand is elastic, the buyers in country B will buy less. Country B buys fewer GPS units, hurting themselves and also hurting the producer of the units unless they can make up the difference elsewhere.

Its just a tax on the unit. The fact that costs are sunk makes no difference. Any tax on a final product is the same-- costs are always "sunk" to the same extent.

Hum no, for many products

Hum no, for many products you can scale back production and limit costs. For a GPS, once the satellites are up there 99.99% of the cost has been incurred. The fact that there are other countries does not change anything, if they sell the device for even a very low price, it's better than not selling it.

Today's technology?

Are you talking about today's technology? Today, GPS device manufacturers piggyback for free on the US military GPS system, and still the units sell for a fair bit of money. If the cost excluding military satellite of the unit represents .01% of the total cost including military satellite, then the cost per unit of the GPS system including military satellite divided among units, must be on the order of a million dollars per unit sold. That is, suppose GPS units in today's market (with free access to military GPS satellites) sell for $100 (they sell for around that; generally for significantly more). This is the cost per unit excluding satellite cost. You seem to claim that this represents .01% of the total cost. If that's the case, then the cost per unit including satellite cost would (if it were not freely provided by the military but had to be bought by the GPS manufacturer) be a million dollars. That is, $100 * (100/.01).

I'm not sure this is accurate. Granted, maybe today's GPS system really is that outrageously expensive per unit and the cost is hidden in the military budget, but there are also entirely private communications satellites, and the service that they are used to help provide is easily affordable by the end users.

You are right. For the love

You are right. For the love of god, 99.99% was a figure of speech.

Best derogatory term of 2008

I hereby pledge to use "Economic Creationism" as a derogatory term in at least five articles.

Supernaturalism

What's weird is that you can believe any crazy shit you want and implement it, teach it in school, whatever, so long as you don't refer to a supernatural being. Such a belief doesn't have to actually be rational, so long as you claim that you arrived at it through purely rational means. Conversely, if you want to enact a sensible policy, but make your appeal to the people on the basis of traditional attachment to some supernatural entity, you are an enemy of the republic.

Here is great post on the phenomenon:
http://unqualified-reservations.blogspot.com/2007/05/our-planet-is-infested-with-pseudo.html
and my response:
http://manwhoisthursday.blogspot.com/2007/05/pseudo-atheists.html

problem is in definition

>But I bet "half" pales in comparison to the number of people who believe in what I shall henceforth call "Economic Creationism": anything that contradicts old, well-established economic truths.

As Creationists are people who think God poofed the universe into existence in 6 clock days as the Bible "says," then economic creationists are those who think that God specified gold and silver as the only "Biblical" medium of exchange as the Bible "says."

Goldbugs are crazy too

NT

Those who do, become

Those who do, become successful. Those who don't, teach. Economic Creationism is another one of the BS terms coined by "those who don't"

Yet you're governmental creationists.

That's right, markets are produced from the natural interaction of human beings but government was placed on earth by the old ones using eldritch magic. See, I can be absurdly pretentious too.

This post was ages ago, but

This post was ages ago, but I feel compelled to weigh in anyway.

I don't think the theory of comparative advantage really disproves protectionism, because it's based on the assumption that comparative advantage is produced by forces of nature outside economic study, when in fact "comparative advantage" is deeply determined by human decisions. For example, in the past 50 years, China has gone from being vastly inferior to the US in its industrial capacity to being vastly superior, largely by protectionism, which forced the citizens to buy more expensive domestically made goods and develop domestic manufacturing and expertise. Protectionism is effectively a goods tax invested in infrastructure development, and one made more efficient by never passing through government hands.

One could even go so far as to argue that economists commonly run across some action by which their wealthy patrons enrich themselves by hurting the public, and that the economists take pains not to face these problems, often by assuming that they are natural conditions outside human control. The case in point would be the excesses of social Darwinism a century ago, when economists assumed that poor people were less productive not because they were damaged by childhoods spent in ignorance and squalor, but simply because God or nature made them so. Today, perhaps we should ask if the US got bad at producing alarm clocks because God said so or because the wealthy ended protectionism so they could buy cheap foreign made goods.