Monday, February 09, 2009

The "John Galt Effect" [update 2]

Molecular biologist Arthur B. Robinson, who has obtained the signatures of more than 31,000 scientists to his 'Oregon Petition' opposing the theory of climate change, has identified what he calls a "John Galt Effect" at work in the US elections and "the national events that preceded them."
Named "in honor of Ayn Rand's famous character in Atlas Shrugged.... it is occurring to a very significant extent," he says. It is an "opportunity cost" about which economists are utterly ignorant, but shouldn't be. Read about it here [hat tip Ellen Stuttle].

UPDATE 1
: George Reisman reckons the Age of Show Trials, with Capitalist Defendants in Shackles is already imminient -- and the likes of New York Times columnist Maureen Down "will be there, perhaps with knitting needles, in the role of a modern-day Madame Defarge, the Dickens character who knitted while watching aristocrats being guillotined during the French Revolution."

UPDATE 2
: An economist (one of the good ones) smacks me down. Responds Eric Crampton,
Economists utterly ignorant of the John Galt effect? It's called the tax elasticity of labour supply. And, surprisingly enough, economists have studied it. In fact, the world's top expert in the effects of tax policy, Joel Slemrod, who visited Canterbury last year to give the Condliffe Memorial Lecture, edited a book on it, available at Amazon called "Does Atlas Shrug? The economic consequences of taxing the rich." There's also plenty of work that's been done showing the horrible consequences of the kinds of top marginal tax rates we had in the 50s-70s.
Read on here for more.

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14 Comments:

Blogger Crampton said...

Again with the anti-economist hyperbole, Peter. Economists utterly ignorant of the John Galt effect? It's called the tax elasticity of labour supply. And, surprisingly enough, economists have studied it. In fact, the world's top expert in the effects of tax policy, Joel Slemrod, who visited Canterbury last year to give the Condliffe Memorial Lecture, edited a book on it, available at Amazon called "Does Atlas Shrug? The economic consequences of taxing the rich." There's also plenty of work that's been done showing the horrible consequences of the kinds of top marginal tax rates we had in the 50s-70s.

Now, you might say that we should do more research on it, but we should be doing more research on all kinds of things. Utterly ignorant though? Come on. You can't keep setting up strawmen version of mainstream economics to make it look like Reisman's the only guy who's thought about things you think are interesting.

Ok, maybe the Atlas effect should be less seen in labour supply responses and more seen in measurable technological innovation. I can't think off the top of direct studies of that, but I have seen work on the reduction in the number of new patented drugs with increased difficulty of FDA regulation - so some evidence of an Atlas effect there. There's a bit prior to get over though to show a generalized Atlas effect: the 20th century saw the biggest technological advance, ever, and the biggest increase in the size of government relative to the overall economy, possibly ever. I completely agree with you that it would be ridiculous to argue that increased size of government caused or helped the increase in innovative activity, but it would be hard to make a convincing argument that matched actual data to show a real Atlas effect.

2/09/2009 01:51:00 pm  
Blogger Sean said...

Eric,

My good man, 1) this:

"You can't keep setting up strawmen version of mainstream economics to make it look like Reisman's the only guy who's thought about things you think are interesting"

Shows you do not understand the straw man fallacy. The stawman fallacy is only commited if A misrepresents B's position. Where B is an individual. The fallacy does not, has has never applied to generalized statements about groups (because there are always going to be endless differences amongst the group).

Ironically, that makes your charcterisation of PC's argument, as a strawman, a, well strawman.

2) PC isn't setting up Reisman vs everybody else in this post. And I can not fathom how you could think that. If he did it in previous posts, post your comment their, and not here.

3) I am aware if the limited research you site. But that stuff is not what is presented in your average text-boox when it is time to discuss taxation.

Sean.

2/09/2009 02:03:00 pm  
Blogger Crampton said...

Sean, let me pull the average textbook off my shelf. Hindriks and Myles, "Intermediate Public Economics", is about as mainstream a public econ text as you can get. 15.3 "Taxation and labor supply" goes through the theoretical models; 15.4 gives some empirics; 15.5 gives optimal tax theory (the standard mainstream result of which is that the top marginal tax rate is zero).

Saying economists are utterly ignorant about the tax elasticity of labour supply is a strawman. A fair number of folks have made their whole careers on studying it.

Now, I can certainly believe that you could wind up in an econ course in some backwater where a Marxist lecturer pretends that there's no labour supply response or fails to cover it. But that lecturer would not be faithfully presenting mainstream economic theory to his class. Even the oldest edition of Samuelson I have sitting on my shelf (10th ed, 1976) talks about the big deadweight losses you get with high marginal tax rates. He doesn't give it nearly as much attention as he ought to, but it is there.

2/09/2009 02:47:00 pm  
Blogger Sean said...

Eric,

And I can pull a text book off my shelf that is essentially blank on the. But we will get no where fast, so I will not. (And, btw, I am certainly unimpressed with the models you cite--but that is a whole other debate)

But you have ignored my main point. Indeed both points 1 & 2. Instead you hone in on point three, where I am mostly in agreement with you. That is not an honest engagment with my points.

Your continued misuse of the strawman fallacy confirms this. Honestly, maybe you should look it up.

2/09/2009 03:44:00 pm  
Blogger Crampton said...

Ok, Sean, here goes. "B" is the position of mainstream economics. True version of B: economists have actually thought a lot about the degree to which labour supply declines with increased marginal tax rates. Alternative version of B: economists are utterly ignorant that there might be such effect. What am I getting wrong here?

General form of argument:
1) Economists are utterly ignorant about X
2) Reisman shows the truth about X

When in fact
1) Economists have thought a lot about X
2) So has Reisman, but he's hardly the only one and his version of it isn't always consistent with mainstream thinking on it (for better or worse)

Not saying the mainstream's always right. But the general form makes it look like the only alternative is Reisman when there's actually a pretty well-developed body of thought on it.

I'd thought that I was showing that the mainstream is not "utterly ignorant", which is kinda important in showing that "it's utterly ignorant" is a strawman.

2/09/2009 04:10:00 pm  
Blogger Crampton said...

Just so's things are clear, Peter's update of the post fixes all as far as I'm concerned.

2/09/2009 04:46:00 pm  
Blogger Sean said...

Eric,

1)That is exactly why strawman is not applied to groups. Their are always going to be some subset that doesn't hold the more general belief. Finding examples of mainstream economists that are infavour of the John Galt effect doesn't make PC guilty of the fallacy.

2) Now, you go further and claim that PC has misread the mainstream zeaigeist (mainstream economist are actually besotted with the atlas shurugged affect). You may well be right. But that doesn't mean the fallacy has been commited.

The fallacy is commited when A (PC) misrepresents B's position. Since no indivdual is specified, their is no fallacy. But lets assume that B is mainstream economics. Has A (PC) misrepresented B's (MSEcon) arguments? No he hasn't. He never claims to represent their arguments!! Instead he makes a factual claim about a content of knowledge. A fact you have attempted to disaprove. But getting facts wrong doesn't make you guilty of the fallacy.

Your above formulation 1 & 2 shows, if correct, that PC's proposition is invalid. Not that he is guilty of the strawman.

3) I don't think labour analysis is sufficient. The John Galt effect refers to many things, such as technological advancement (as you mention) [which is actually mistreated by Samuelson btw], capital accumulation, time preference and entrpreneurship etc. While their is good stuff on these in msecon (well maybe not entrpreneurshpi), few put together the whole pacjage. But I don't want to get into a big discussion about this here. Though it would be great to chat about it at some stage.

2/09/2009 04:47:00 pm  
Blogger Paul Walker said...

Pete wrote "It is an "opportunity cost" about which economists are utterly ignorant, but shouldn't be." Now that does seem inclusive as far as economist are concerned. He does seem to be referring to economists as a whole, like they were an individual. He refers to economists, not some subset of the same. He also says utterly ignorant, which misrepresents the position of most economists. As Eric has pointed out with his labour supply example, such effects are studied.

2/09/2009 04:59:00 pm  
Blogger Sean said...

Paul,

You seem to be addressing me. But nothing in your post contradicts a thing I said. I suggest you re-read my posts.

Sean

2/09/2009 05:33:00 pm  
Blogger Crampton said...

Sean, big picture, you're right: a very reasonable interpretation is factual error, which is more than adequately corrected in the update. And, I of course agree that Atlas is about more than just a labour supply response. But surely if any kind of Atlas effect is going on, it'll show up in the GDP numbers one way or another (when Galt takes a job in a diner instead of building new engines, productivity doesn't grow as quickly as it otherwise would, for example). Whatever the mechanism, it'll show up in the aggregate figures.

I'll quibble by arguing that strawman is very coherent when talking about groups though. "Mainstream" economic theory has bits around the edges that folks argue about, but there's a solid core of propositions that form the basic consensus. Deadweight losses of taxes and the existence of tax elasticity of labour supply are part of that core. Mainstream economists will argue about whether income or substitution effects dominate (at some levels of income, you'll work harder with a wage cut because otherwise you starve and enjoy more leisure with a wage increase; at other levels of income, you'll work less with a pay cut because the cost of leisure has effectively dropped), but I'm pretty sure that an economist arguing that a substitution effect doesn't exist would be deemed outside of the mainstream just for that. I just don't see immediately why we can't use strawman to characterize arguments that present a weakened version of a core body of beliefs or knowledge held by an identifiable group. So, as an atheist, I'd be setting up a strawman by arguing that Christianity must be false because DNA tests on communion wafers prove only grain and no human content: lots of Christians believe in consubstantiation rather than transubstantiation. Why wouldn't that count as strawman?

As side note, I've seen Austrians quoted favorably here complaining about some other Austrians' tendencies of setting up strawmen versions of mainstream economics by attacking economics as it was done in the 50s rather than recognizing that the mainstream has moved on considerably since then and has different problems.

2/09/2009 11:56:00 pm  
Blogger Sean said...

Eric,

1) Assuming GDP is meaused in a rational fashion, sure.

2) Deadweight loss does not show the John Galt effect. It shows the loss of allocative efficiency in that market at that time, not the long run implications.

2)It is things like the income effect doctrine, presented alongside the substitution effect, that make me a little scepticle. While increased taxes may make me work harder (with associated social costs) to keep a certain standard of living, it changes my time-preference to be more present oriented. Thereby harming capital accumulation and future growth. Ultimately both effects harm growth, but this isn't how most text books present the issue.

3) On the example: I agree that you should be more clear about the group you are dealing with, but, clearly you are dealing with christians that believe in transubstantion. You are showing that christianity based on this notion is invalid. Presumumable you will reference Arch-Bisphop whats-his-name on the matter, like a good academic. If you acurately present his arguments, and skillfully demolish them, no fallacy is commited (if, however, you say something like the wafer = jesus at moment of manufacture then you have commited the fallacy).

Now the christians of the different strip can point out that they are unharmed by your withering analysis, but that doesn't then make christianaty based on transub right. It doesn't even make their version right. Of course, to fully refute religion you should be arguning at a higher level than this. But your poor angle of attack doesn' make for fallacy.

What you are implicitly suggesting is that if I don't deal with every single argument presented by every single christian, then all my arguments are false, because I have commited the strawman fallacy. That is a dishonest way to ignore the arguments of your oppenants. You are attempting to use logic to undercut rational discourse (not you personallly).

2/10/2009 09:46:00 am  
Anonymous Anonymous said...

Sean,

"The strawman fallacy is only commited if A misrepresents B's position. Where B is an individual."

If you mean "B is a *particular* individual" then I think what you're saying is false.

Straw Man arguments are usually not about misrepresenting the views of a specific real person. They're usually aimed at a mythic individual - an instantiation of an general group.

For example: "Climate change skeptics say that X" where X is some complete piffle that you can't actually find a reference to any particular real skeptic saying. That's not pretending some particular person else holds a position: it's inventing a fake opponent who you claim represents the group.

As a rhetorical technique you're much safer using a Straw Man argument this way. If I say "PC believes that....[insert lies]" then PC can simple reply "No I don't". But if I say "Libertarians believe that...[insert lies]" then for PC to reply effectively he has to argue that he represents mainstream Libertarian views and that those views are not what I say.

If you want to look this stuff up I'd suggest a book on rhetoric rather than logic: I taught this as one of the informal fallacies in my stage 1 logic class, but it's not really logic per se.

icehawk

2/13/2009 04:58:00 pm  
Blogger Jeff Perren said...

A summary or a few relevant quotes on Dr. Slemrod's work in this area would be hugely appreciated.

2/15/2009 06:58:00 am  
Blogger Sean said...

Icehawk,

Thanks for your post. But I am not convinced. Strawman is about misrepresenting arguments, not imaginary groups. We already have a word for that, fantasy.

Sean.

2/15/2009 07:15:00 am  

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