En su conferencia, Pablo habla de cómo podemos abandonar las ideas convencionales y pasar a tener iDeas, haciendo con este término una doble analogía. Primero, con el “I” (yo, en inglés) quiere decir ideas propias y a las que llegamos por nuestros propios medios. En segundo lugar, para ponerle un nombre al tipo de conocimiento que reúne un héroe de esos que cambian al mundo: lo que él llama la educación de un príncipe, que ocurre a través de conversaciones, discusiones con quienes conocen un tema y preguntas bien formuladas, más que respuestas previamente establecidas.

Les recomiendo su charla y se las pego a continuación.

The first book I finished this year was Hamlet, on Jan. 2, 2011, and it is also the play I liked the most, although I didn’t read much of that (Merchant of Venice, Murder in the Cathedral, and Prohibido suicidarse en primavera were the others).

The last book I’ve finished is Roberto Bolaño’s Llamadas Telefónicas, which is also my favorite short-story book I read this year. The short stories and those in Putas Asesinas appeared in English compiled as Last Evenings on Earth and The Return, translated by Chris Andrews.

I discovered quite a few new authors, probably due to the fact that I worked as a collection development officer at the library and that I took a course on literature the past semester. Probably because of that I read a lot more fiction than non-fiction.

Here’ the rest of favorites:

• Novel I didn’t read in its original language: Herman Hesse’s Steppenwolf.
• Novel I read in English: Krakauer’s Into the Wild.
• Novel I read in Spanish: Roberto Bolaño’s The Savage Detectives,
• Non fiction book: Theory and History by Ludwig von Mises.
• Book I learned the most from: Human Action, same guy.

Honorific Mentions:

• Italo Calvino’s The Invisible Cities is beautifully written
• I’m currently reading Juan Villoro’s El Testigo, which could compete for favorite novel in Spanish.

Les comparto su conferencia:

Yo tuve una experiencia parecida a la de Daniel cuando habla de la anécdota del primer día de clases y he pensado sobre estos temas anteriormente, particularmente en este post donde de hecho hago la misma cita que él en su conferencia.

En el mundo hay hambre, guerra, corrupción y pobreza, por comenzar una lista de problemas que podríamos seguir nombrando de aquí al final de la eternidad. Y es común escuchar discursos como que la juventud o la nueva generación está a cargo de resolver problemas que hemos heredado de otras personas.

En TEDxYouth@GuatemalaCity, el evento que organizamos con un grupo de amigos el 19 de noviembre pasado, Cristina López abrió el día de conferencia diciendo que acaso este mensaje se olvida no sólo de los detalles, sino quizá de lo más importante: que no alcanza con ser jóvenes para empezar a resolverlos. Por el contrario, hay que estar un poco loco para arriesgarse a hacer, no lo que se espera de nosotros, sino lo que juzgamos correcto a partir de nuestra preparación en ideas y principios.

En sus palabras:

Ser joven, ¡simplemente te pasa! Uno no lo escoje. Pero preparse sí es una elección consciente e individual.

En palabras de G.B. Shaw:

El hombre razonable se adapta al mundo. El loco, persiste en tratar de adaptar al mundo a sí mismo. Por lo tanto, todo progreso depende de los hombres que están locos.

Una de las razones fundamentales por las que quería que Cristina abriera este evento era que en su vida, ella une la locura de hacer cosas nuevas y diferentes, con la razón con la que elige sus principios y la consistencia con las que los defiende. Dos chicos de menos de diez años que se acercaron a mí después del evento hacían énfasis en el tema de la locura que se necesita para ser héroes de esos que no tienen una capa puesta, sino que se dedican a construir cosas nuevas en sus vidas, así sea con empresas, productos o ideas novedosas.

Seguiré publicando los videos en este blog, pero también pueden visitar las redes sociales de TEDxYouth@GuatemalaCity. También pueden seguir a Cristina en Twitter, en sus columnas Libremente del Cato Institute y en El Diario de Hoy, que se publican también en el blog The Imprenta.

Matt Ridley, author of The Rational Optimist, writes in a blog post that Capitalism represents the interests of the rich, whereas the market represents the interests of the poor. Let’s hear it for the market as the antidote to capitalism.

Ridley writes:

The market, when allowed to flourish, tears apart monopoly and generates freedom and fairness better than any other human institution. Today’s private sector, by contrast, is increasingly dominated by companies that are privileged by government through cosy contract, soft subsidy, convenient regulation and crony conversation. That is why it is producing such unfair outcomes.

[Read the whole thing]

With this, he obscures with the use of what Ayn Rand would call anticoncepts what would have otherwise been a decent article. What he is referring to as capitalism is actually cronyism or, as Michael Strong likes to call it, crapitalism.

Alternatively, he refers to the public and private sectors while creating a false dichotomy that should be reconsidered. The real divide is between voluntary relationships and coercive relationships. And when you bring capitalists closer to the political decision-making process, what you have is no longer the sort of voluntary exchanges in the realm of the market, but a guarantee to a businessman that would otherwise not survive while facing competition from other firms:

The monopoly problem mankind has to face today is not an outgrowth of the operation of the market economy. It is a product of purposive action on the part of governments. It is not one of the evils inherent in capitalism as the demagogues trumpet. (Mises, Human Action)

Markets are not enough for Capitalism

As Joyce Appleby, author of The Relentless Revolution, notes, “Capitalism is a cultural system, and not simply an economic one [...] it cannot be explained by material factors alone”. That’s precisely what Deirdre McCloskey is trying to tell us in her trilogy of books about the bourgeoisie (2 out of 3 published so far).

What Deirdre says is that there was a change in the minds of the people, in the way we thought about markets and commerce, and that this side of the story has been mostly ignored by the accounts of mere capital accumulation.

As she says:

Give the middle class dignity and liberty for the first time in human history and here’s what you get: the steam engine, the automatic textile loom, the assembly line, the symphony orches- tra, the railway, the corporation, abolitionism, the steam printing press, cheap paper, wide literacy, cheap steel, cheap plate glass, the modern university, the modern newspaper, clean water, reinforced concrete, the women’s movement, the electric light, the elevator, the automobile, petroleum, vacations in Yellowstone, plastics, half a million new English-language books a year, hybrid corn, penicillin, the airplane, clean urban air, civil rights, open-heart surgery, and the computer.

In short, if Ridley wants human flourishing via the markets, to have them operate without the “aid” of politicians and demagogues, he should advocate for Capitalism (with upper case, that’s right), and realize that despite that free markets have always aided people even when the former is absent, what we really need is to go back to valuing creative destruction, and to a proper understanding of the C word.

Hat Tips: Tom Palmer for his wonderful compilation in which Deirdre’s article is included / GIS for pointing to the article.

On a recent post, David Warsh, followed up by a more widely-read Paul Krugman, try to undermine the importance of Hayek as a macroeconomist, mainly by reducing his importance to his political thought and The Road to Serfdom.

Alex Tabarrok was quick to respond, quoting the following reasons that the Nobel Committee awarded him the Nobel Prize in 1974:

Hayek’s contributions in the fields of economic theory are both deep-probing and original. His scholarly books and articles during the 1920s and 30s sparked off an extremely lively debate. It was in particular his theory of business cycles and his conception of the effects of monetary and credit policy which aroused attention. He attempted to penetrate more deeply into cyclical interrelations than was usual during that period by bringing considerations of capital and structural theory into the analysis. Perhaps in part because of this deepening of business-cycle analysis, Hayek was one of the few economists who were able to foresee the risk of a major economic crisis in the 1920s, his warnings in fact being uttered well before the great collapse occurred in the autumn of 1929.

Two stages of his work

Russ Roberts followed up by saying that there are two sides to the macroeconomist role played by Hayek. The first one, a theorizing subject who wrote Prices and Production and, although dissatisfying in his own opinion, The Pure Theory of Capital.

Russ says:

My mental image of this period of Hayek’s life is that of a crowd of thousands surging out of an arena after a rally about the importance of government saving the economy and Hayek trying to make his way toward the arena saying, “Wait a minute! You’ve forgotten old truths!” No one listened to him.

The second phase is a more skeptic attitude as portrayed by his Nobel Prize lecture.

Hayek uses his microeconomic insights about complexity and emergence to argue that macroeconomic precision is beyond our abilities. Macroeconomics is not like physics. The lecture is a plea for humility, a plea for skepticism about what we can know and cannot know. It is an argument for embracing the limitations of reason and especially the limitations of experts in steering the economy

The chair of Adam Smith

Boettke adds:

Hayek’s influence in modern economics is ubiquitous, even if sadly modern economics is not as Hayekian as I would like it to be. Information economics, theories of dynamic competition, equilibrium theory of the business cycle, and complexity theory all owe a debt to Hayek’s economic contributions. The work on legal origins owes a debt to Hayek’s work on law and political-social philosophy as well. Hayek impacts the DNA of economics and political economy to such an extent that many are unaware of the pervasive influence.

He also calls Hayek one of the occupiers of Adam Smith’s chair in the 20th Century, a way to call him one of the main people defending the mainline of economics (which is not always the main-stream), with core propositions instead of going with the flow of what was fashionable in quantitative methods.

Cherry on top

Mario Rizzo puts it simply by explaining how Hayek’s work as a macroeconomist was to look for the micro foundations:

Hayek’s approach attacks, root-and-branch, the macroeconomic way of thinking. It is not simply a challenge to a particular theory of the determinants of mass unemployment, inflation, business cycles and the like. Hayek is not accepting the rules of the game or the parameters of the sub-discipline of modern macroeconomics. Hayek does not want to argue that the government expenditure multiplier is 0.5 instead of 2.0, for example. He does not want to discuss just how much fiscal stimulus should be undertaken and what form it should assume.

In short, he does not want to focus on aggregate spending and aggregate consequences. Hayek’s approach says: Let us pierce the veil of aggregates and look at the distortive effects on relative prices and relative output produced by boom-time credit expansions. Let us look at the distortive effects that booms leave us as we work our way through a recession. Let us concentrate on sustainable lines of expenditure both during the boom and during the road out from the bust.

Suffice it to say this greatly erodes the intellectual capital of a field of economics – although one not noted for its successes.

My take

If we are to judge Hayek, we can begin by saying that his contributions were not only to macroeconomics, but to many areas of knowledge, from psychology to political philosophy, from law to macroeconomics.

That being said, we have to think of nuance as a main element of academic discourse and both Warsh and Krugman are not making use of it. Hayek, however imperfect, was a great consciousness ariser to the profession. In the scope of his work we’re currently concerned with, namely the science of economics, he undermines the building constructed by Keynes and company by triggering a bomb at its basement.

Alex Tabarrok’s Launching The Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast is a sort of bright side to his co-blogger, Tyler Cowen’s The Great Stagnation. In a manner, they both address the issue of incentives to innovation but from a different standpoint. While Tyler’s argument is that we’ve reached a technological plateau and that we may face certain issues trying to surpass it, Alex is searching for the positive tools we can make use of to survive the hard times.

He goes through the main policies that are holding back innovation in the U.S., namely, the system of patents, the challenges posed by both the welfare and the warfare state and a path forward through the enlargement of the market (via immigration barrier reduction). That’s quite an unfair way to summarize his contributions, but suffice it to say that his proposal to reframe the intellectual property debate is very good and perhaps enough to make it worthwhile to read.

A key fragment is here, where he recognizes the incremental character of many discoveries:

Patent reform is about reducing the costs of innovating by increasing access to prior innovations. A patent system that reduces the cost of innovating is better for innovators and consumers.

Perhaps there are other places where his lessons on IP, school choice, immigration barriers and more, could be applied. Free cities anybody?

The abstract:

I consider whether entrepreneurship is a distinct category within economic theory. More generally, I consider the links between discussions of entrepreneurship and philosophic debates over the nature of the aesthetic. For instance, Kant’s attempt to elevate the category of the aesthetic has much in common with Kirzner’s attempt to elevate the concept of the entrepreneur. Shackle’s theory of choice refers very directly to the notion of the aesthetic. Theories of the aesthetic and theories of the entrepreneur have common strengths and weaknesses.

A rather interesting thing to read, specially if you think that entrepreneurship is the distinctive feature of austrians versus rational-man theories of, say, Becker and Stigler. Also, Peter Boettke has a set of 10 items to distinguish, like Horwitz says, what Austrian Economics is and what it is NOT.

“We desperately need a scientific theory of cities”, and West sets out to settle the foundations for it while basing on mathematical and statistical analysis of entropic systems (of which cities are a kind) and biological insights.

The main concepts are scalability and economy of scales, which allows for a kind of growth that begins very rapidly and then stabilizes and uses resources (energy in the case of animals, economic goods in the case of cities). The catch is that this process is like a threadmill, which requires us to run faster (that is, innovate) in a manner that we do not use up all resources and mantaining the pace without getting a heart attack.

This is a very interesting conference and there are two kinds of literature that I can think about:

First, about the nature of cities: Glaeser and Jane Jacobs for example. Second, about the perils of innovation processes, and I cannot stop recommending Cowen, Tabarrok and Harford, each with a different perspective on the same topic.

The following is Alex Tabarrok’s correct analysis of the resolution regarding the bone marrow transplant plaintiff made by the Institute of Justice to the Supreme Court of the United States:

I was shocked by the utter boneheadedness of one of the government’s arguments:

…the government argues that because it is much harder to find a match for patients who need bone marrow transplants than for patients who need blood transfusions, exploitative market forces could be triggered if bone marrow could be bought.

In other words, markets are forbidden just when they are most useful. It was in fact the patients with rare matches who brought this case. As the court noted:

…a physician and medical school professor…says that at least one out of five of his patients dies because no matching bone marrow donor can be found, and many others have complications when scarcity of matching donors compels him to use imperfectly matched donors. One plaintiff is a parent of mixed race children, for whom sufficiently matched donors are especially scarce, because mixed race persons typically have the rarest marrow cell types.

I can only remember James Stacey Taylor’s argument in favor of a free market in organs that I saw during a seminar I attended in California last year. If you want to get rid of the scarcity of donations, allow for a sale to happen. His evidence was collected in his book, Stakes and kidneys : why markets in human body parts are morally imperative, in which he also goes through the main moral arguments against the motion: commodification, altruism, market versus regulation, etc.

Ultimately, you’re the sole owner of your body and you should be allowed to do with it as you please, without specific prohibitions or nonsense paternalist measures that begin with the premise that people is incompetent to deal with freedom.

I also recommend Virginia Postrel’s article on the subject, by which I got notice of what was going on, only to learn later during the day that a positive resolution by the court had been reached.