Later On

A blog written for those whose interests more or less match mine.

Krugman being forceful in the face of idiocy

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Steve Levitt has altogether too high a regard for himself, one who mistakes confidence for content. Krugman sets him straight:

Noah Smith isn’t very happy with Steve Levitt, who thinks he was being smart by telling David Cameron that he should scrap the NHS and let the magic of the marketplace deal with health care. Strangely, Cameron wasn’t impressed.

I think there are actually several things going on here. One is a Levitt-specific, or maybe Freakonomics-specific, effect: the belief that a smart guy can waltz into any subject and that his shoot-from-the-hip assertions are as good as the experts’. Remember, Levitt did this on climate in his last book, delivering such brilliant judgements as the assertion that because solar panels are black (which they actually aren’t), they’ll absorb heat and make global warming worse. So it’s true to form that he would consider it unnecessary to pay attention to the work of lots of health economists, or for that matter the insights of Ken Arrow, and assert that hey, I don’t see any reason not to trust markets here.

There’s also the resurgence of faith-based free-market fundamentalism. I’ll write more on this soon, but I’m seeing on multiple fronts signs of an attempt to wave away everything that happened to the world these past seven years and go back to the notion that the market always knows best. Hey, it’s always about allocating scarce resources (never mind all those unemployed workers and zero interest rates), and why would you ever imagine that market prices are wrong (don’t mention the bubble).

And underlying all of this is a problem of methodology.

How should you use the perfectly competitive model, so beloved of economists? It is, of course, only a model, and we know that its underlying assumptions are untrue. There’s the Friedman dictum that this doesn’t matter as long as the model makes good predictions; that’s actually quite problematic, and there are good reasons to argue that the realism of the assumptions matters too.

But one thing you surely shouldn’t do — one thing that even Friedman would or at least should have said you shouldn’t do — is . . .

Continue reading.

And do click the link in Krugman’s post and read that. Levitt is the epitome of unwarranted self-esteem.

And the comments to Krugman’s column (at the time I write) are interesting.

Written by Leisureguy

16 May 2014 at 1:00 pm

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