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You know the story: Xi and his San tribe are “living well off the land.” They are happy because of their belief that the gods have provided plenty of everything, and no one among them has any wants. One day, a Coca-Cola bottle is thrown out of an airplane and falls to Earth unbroken. But the bottle eventually causes unhappiness within the tribe, leading the elders to believe it’s an “evil thing” which the gods were “absent-minded” to send them. Xi then travels to  the edge of the world and throws the bottle off the cliff. He then returns to his tribe and receives a warm welcome from his family.

I wonder if Paul Krugman expects to receive a warm welcome from the economics family after throwing the prediction bottle over the cliff.

Hardly anyone predicted the 2008 crisis, but that in itself is arguably excusable in a complicated world. More damning was the widespread conviction among economists that such a crisis couldn’t happen. Underlying this complacency was the dominance of an idealized vision of capitalism, in which individuals are always rational and markets always function perfectly.

I actually agree with Krugman on this point. Economic prediction is, in fact, impossible and the really crazy feature of mainstream economic models is the fact that endogenous crises simply can’t occur. Exogenous factors, sure, but nothing internal to the models can lead to a crash. Their idealized vision of capitalism, absent an external event (such as a credit crunch or an increase in the price of oil), simply leads to a full-employment, price-stable equilibrium.

But, wait, doesn’t the entire edifice fall when—on its own terms—the ability to correct predict is dispensed with? The whole rationale of giving up realistic assumptions about the economic system has been the ability to accurately and correctly predict the movements of the economy. That’s the mantle of predictive science that has been used, since at least the mid-1950s, to expunge all other economic theories and approaches from the discipline.

Mainstream economists can’t have it both ways: to celebrate their models for their predictive ability and then to dispense with prediction when, as in 2007-08 (just as in 1929), their models clearly failed. We need something better.

As for their track record since the crisis broke out, well, they haven’t fared much better—at least to judge by where we stand right now. Krugman, for his part, wants to stick with the hydraulic mechanisms of the textbook economic models, which “did a pretty good job of predicting how things would play out in the aftermath,” and declare that “too many influential” economists must be crazy.


Special mention



Americans, as we know, work many more hours than people in other advanced countries. As it turns out, they also work many more strange hours: on weekends and at night.

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According to a new study by Daniel S. Hamermesh and Elena Stancanelli, “Long Workweeks and Strange Hours” [pdf], the United States has the highest incidence of people reporting any paid weekend work. Twenty-nine percent of Americans reported performing such work in the American Time Use Survey, more than three times the rate among Spanish workers. And twenty-seven percent of American workers report working nights, which the study defines rather strictly as any work performed between 10 PM and 6 AM.

American workers appear to be performing more work at less desirable times as well as working longer hours than their counterparts in other wealthy countries.

The authors also find that

only a small part of the relatively high incidence of such work in the U.S. is due to Americans’ long work weeks. The large majority of the differences between the U.S. and other countries appears to result from differences in the way that work is structured in America.

The conclusion: Americans are being forced to have the freedom to work both more and stranger hours in this increasingly strange land.


Special mention

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I had never heard of the Rashi Fein, who died last week, until today. Apparently, he developed ideas for Medicare legislation in the 1960s and criticized the nation’s inability to create a federal single-payer system for healthcare.

He was also a critic of the language of commodities (in a piece that appeared in 1982 in The New England Journal of Medicine):

A new language is infecting the culture of American medicine. It is the language of the marketplace, of the tradesman, and of the cost accountant. It is a language that depersonalizes both patients and physicians and describes medical care as just another commodity. It is a language that is dangerous. . .

In speaking the new language, doctors have adopted the attitudes and methodology of economics — a narrow economics that emphasizes efficiency more than equity. Everything is to be evaluated in terms of benefit-cost relations, and cynicism has become apparent in the discussion. . .

In no small measure, physician-administrators speak the language that they speak because they reflect the world in which they live and the system in which they function. If society wants them to use different words, it must create conditions that encourage them to do so. . .

A decent medical-care system that helps all the people cannot be built without the language of equity and care. If this language is permitted to die and is completely replaced by the language of efficiency and cost control, all of us — including physicians — will lose something precious.

I cannot guarantee that we will structure the system in a way that will emphasize compassion and human values. I do believe, however, that these values cannot be nurtured in a cultural soil in which patients are described as teaching material, a medical practice is described as a business, delivering medical care is described as producing a product, and human interactions are increasingly described in terms of financial transactions.

Chart of the day

Posted: 14 September 2014 in Uncategorized
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Americans, as we know, are forced to have the freedom to labor more hours than do workers in other advanced countries.


Special mention

cantorCOL McCain and Graham