Best Line I Have Read Today

I have long thought it troublesome that Alan Greenspan was a follower of Ayn Rand.

More here.

Are David Warsh's Remarks on Greg Mankiw Accurate?

Here is the latest from David Warsh:

And, unlike Feldstein, who taught Harvard’s principles course for twenty years before him, Mankiw’s posture as a leader in his field has come at the cost of a certain amount of obfuscation. It is not clear that his students (or even many of his colleagues) understand how completely left behind he has been by the events of the past twenty years. (Gary's emphasis) For example, he is still describing the lighthouse as a public good, even though the various mechanisms governing the potential excludability of its warning have turned out to be the key to this most familiar of all examples of a nonrival good.

And his most famous paper, “A Contribution to the Empirics of Economic Growth” of 1992, with David Romer, of the University of California at Berkeley, and David Weil, of Brown University, is generally considered to have failed in its defense of the “augmented Solow model,” meaning one in which human capital as well as capital and labor are sufficient to explain variations in growth.

What's going on here? Why Warsh's is so harsh on Greg, simply because of his denial of considering a job at NBER?

World Bank Chief Economist Justin Lin's Marshall Lecture

A lot of readers seem to be interested in the research work of incoming World Bank Chief Economist Justin Lin. Here is latest one, a draft paper prepared for Marshall lecture delivered late last year.

BTW, simply gauging from the choice of economists to lead World Bank's and IMF's research (Simon Johnson) effort, it seems economists whose research efforts focus on the primary role of institutions as a driver of economic growth have been well accepted by the profession, at least by the bosses of the international financial institutions any way.

More on World Bank's Chief Economist Justin Lin

Reader Kempton asked me if Justin did his thesis on China's agricultural reform. I believe he did. I think his 1992 AER piece was part of his dissertation. I believe that paper was also the first attempt to quantify the benefits of the introduction of the household responsibility system (聯產承包責任制) in China's country side.

Actually, in addition to Justin, I believe there are a couple of other Chinese graduates from Chicago who did choose China's agricultral reform as their thesis topic. They are James Wen (at Trinity), Dennis Yang (at CUHK) and Zhao Yaohui (at Beijing U)

Ronald Coase and Steven Cheung

Coase once remarked that “a theory serves as a base for thinking,” but he never explained explicitly what he meant or developed the idea. Cheung, a friend of Coase for several decades, has inadvertently taken up the task.

With his widely read literary economic essays, Cheung forcefully demonstrates the analytical power of economics and almost single-handedly launched a unique literary tradition in the Chinese-speaking world.

If the economist can help improve the efficiency of resource allocation by advising policy makers, then his helping the general public to acquire the economic way of thinking would have an even more profound impact. As such, Cheung’s endeavors are meaningful to both the profession and the development of economics.

More here.

蔣碩傑 S.C. Tsiang

It's indeed my greatest honour to have my 500th post devoted to one of the best economists in the 2oth century:

S. C. Tsiang or in Chinese 蔣碩傑

This is a brief story of him by the late John Fei posted on the Chinese Hayekian Soceity website.

蔣碩傑先生，湖北應城人。民國7年（1918）出生於上海。父蔣作賓曾任陸軍部次長、國民政府委員和軍事委員會委員、駐德國公使兼駐奧地利全權公使、駐日公使和大使、內政部部長、安徽省政府主席。民國10年開始與兄、姊共同受教於家庭教師朱子秋（留日）。15年插班進入姨母張默君創辦的神州女學附屬小學的四年級。17年轉學南洋中學附屬高小二年級，並於翌年進入南洋中學。22年11月赴日本。23年春進日本慶應義塾大學預科。26年4月續就讀於大學本科，7月因「蘆溝橋事變」發生而回國。在預科時曾修理則學，奠定思維方面不易犯理論上錯誤之基礎，日後並敢於指出一些經濟學名家之理論缺失。

民國31年秋，在經濟學大師海耶克（Friedrich A. von Hayek）的幫助下得到獎學金，因此重回劍橋，進入倫敦政經學院的研究所。撰文批駁凱因斯（Keynes）有關人口成長與就業關係的論文，刊登於當年11月份的Economica（英國著名的經濟學雜誌），此為首度正式發表的學術論文，心中甚喜。翌年又於Economica 上為文批判卡爾多（Nicholas Kaldor）的股票投機學說，從此致力於流動分析（flow approach）的理論發展。第三篇論文則批評了在劍橋大學三十餘年的資深教授庇古（A. C. Pigou），並蒙庇古覆文認錯，因此將其書《就業與均衡》修改了二章。34年，得博士學位，於劍橋首次見到張公權（嘉傲）和胡適，同時得到該校象徵最佳博士論文的「赫其森銀牌」（Hutchinson Silver Medal）。

PS. If anyone could locate a picture of professor Tsaing, please let me know.

Milton Friedman vs Paul Krugman

Paul Krugman is a respected trade theorist. But he does not speak authoritatively on subjects on which he has no expertise. Monetary economics is not his field of expertise. Krugman’s research background does not qualify him as an authority on Milton Friedman’s work.

Krugman’s scholarly publications rarely mentioned Friedman and,when they did,they acknowledged the contributions of Friedman and monetarism in a way that contradicts his (2007a) essay on Friedman. Friedman’s reputation is intact despite Krugman’s deplorable efforts to denigrate him and his contributions.

Damn, here's more from Anna Schwartz, a long time friend and co-author of Milton Friedman.

Here is the target of Anna Schwatz's attack, Paul Krugman's "Who was Milton Friedman?"

Winners Please....

The Nobel Prize in economics was awarded today to three Americans for their work in mechanism design theory, a branch of economics that looks at the design of institutions in situations where markets do not work properly.

Leonid Hurwicz of the University of Minnesota, Eric S. Maskin of the Institute for Advanced Study in Princeton, New Jersey, and Roger B. Myerson of the University of Chicago shared the award for “having laid the foundations of mechanism design theory,” the Royal Swedish Academy of Sciences said.

More from NYT.

Assorted links and comments from the blogsphere:

Freakonomics Blog; Marginal Revolution, more from the WSJ.

The Only Blog Post that You Must Read Today

No, no excluding this one of course. What it's about?

First Fundamental Theorem of Welfare Economics.

Any body worth his salt as an economist SHOULD read it.

David Laidler on Milton Friedman

Here is the abstract:

Milton Friedman is rivaled only by John Maynard Keynes as the most influentialpolitical economists of the 20th Century. His approach was that of a classical liberal, rather thana conservative, though this put him on the political right in the United States.

Friedman’s work demands to be evaluated all of a piece, but his outstandingly important technical contributions toeconomics influenced the development of the discipline in ways that extended far beyond thepurview of any particular political agenda.

Read more here.

The Regulation of Innovation and Economic Growth

The 1st George Mason University Law School and Microsoft Conference on the Law and Economics of Innovation is to be held this coming Friday, take a look at the heavyweights who will attend the conference here.

Papers are downloadable. The papers by Bob Cooter, Daniel Spulber and Joshua Wright are recommended.

Fable of the Keys

I have just started reading Diane Coyle's The Soulful Science: What Economists Really Do and Why It Matters, and I am already disappointed 60 some pages into the book.

In discussing the latest development in growth theory, Diane mentioned the idea of path dependency as if it is an idea that is widely accepted and non-controversial.

This is simply not true.

The common example used by many to explain the concept of path dependency is related to the keyboard arrangement of your computer(or what used to be typewriter). The arrangement that we have now is called the QWERTY system. Paul David, an economic historian at Standard, published a paper back in the mid-eighties arguing that the QWERTY arrangement is inefficient. The only purpose of that arrangement is to slow typist down in order to avoid the jamming of keys. However, with the passage of time, that jamming problem no longer is relevant. Yet, the QWERTY system persists even though better alternative exists. That alternative system is called Dvorak system. Hence, claimed David, the market fails to shift to a more efficient keyboard arrangement as if it is locked into a particular path of development. That is more or less how the concept of path dependency comes to be known among economists.

The idea is interesting, I have to admit. But is it correct, that is what really matters at the end of the day.

In early 1990s, using historical material recording results on typing contests involving the two keyboard arrangements, two economists (Stan Liebowitz and Stephen Margolis) find out that the claim that Dvorak is a better keyboard arrangemen than QWERTY is simply not substantiated by facts. The title of that paper is aptly called "The Fable of the Keys" and is publised in Journal of Law and Economics. Want to learn about the whole debate, read this book.

Of course, Diane is fully entitled to use David's work in her book. But I expect more even handed treatment. I wish she at least could have mentioned studies which seem to contradict David's claim. She didn't and I am disappointed.

Democracy and Growth

MIT's Daron Acemoglu and Harvard's Ed Glaeser blog about democracy and growth over at the WSJ blog, read more here.

Can Econometrics Trace the Roots of Autism

Economics professor Michael Waldman of Cornell said yes in an article featured in a WSJ story. Read more here.

Instrumental Variable is the key. Pros and cons of the technique are discussed in the story as well. As for me, I don't think I have anything more to add given my limited knowledge in econometrics. Comments are open though.

Frank Knight on Mr Keynes

"Knight scribbled “Nonsense” and sometimes even stronger comments throughout his copy of the General Theory (Patinkin 1981, 289). In his milder published review, Knight(1937, 122, n22) objected to the tone of the General Theory: “it has become quite the fashion to account for differences in intellectual positions by psycho-analysing, or somehow ‘explaining’ one’s opponent (and the example of following the fashion having in this case been set by Mr Keynes)”."

This is a segment from a very interesting paper by Bob Leeson, a researcher on Milton Friedman's work. Read more here.