Hello, I'm a first best economist.
Actually, I’m not quite sure if I really am a first best economist. But I find it notable that so far no one has come forward and said “well, I’m one of them first best economists that you’ve been hearing about, what's going on here?”
Tyler Cowen has come the closest but even he thought it wise to hedge his bets (“better-than-first-best economist”). Rather the typical response has been “oh yeah, I’m definitely in the second-best camp, no question” and then “me too, I’m also with the sophisticated, nuanced, second besters!”. This of course brings out my natural contrariness and makes me want to be the first person to officially declare as a first best economist. The First First Best Economist. That way, when other first best economists come forward, if and whenever they deviate from the party line to, like, first-and-three-sevenths best economics, I will have the moral authority to give’em demerits. Of course it could just happen that I end up demeritting only myself.
As far as the substantial foundations for my claim I DO happen to think that if the world could be put on “autopilot” and the policymakers, the authorities, and the monkey that pulls the levers had to either automatically follow the directive:
a) "Do exactly what "Econ 101" tells you too!"
or the directive
b) "Assume all the potential market failures that could occur are in fact occurring! Implement Econ 340 solutions to all potential market failures immediately and simultaneously!"
I think we'd still wind up with a better world in a) than b). And that's assuming that the monkey doesn't have a lever, c), labeled "get more bananas for monkey while pretending to be doing b)" (an elaboration on Dani's third counter argument to second best economics). Which is I guess what makes me a first best economist.
Now of course economists of the >1 best school will counter that that's not a fair comparison. What they advocate is not mindless government regulation, micro overmanaging, problem fixing and excessive lever pulling. What they advocate is looking at each problem in detail and figuring things out on case by case basis, all carefully, reasonably and all. In other words that what I'm doing above is just ... GASP ... setting up a straw-man (a straw-man with perhaps a shade of truth to it. After all straw-men only work if they somewhat resemble actual humans)
Whatever could've suggested that course of action to me?
----
I think I like Michael Greinecker's classification system better (and I'm sorry to drag him into this):
I think one may be able to sort economists by how much they believe in the merits of both markets and governments.
Tyler Cowen - Believes in both markets and government.
David Friedman - Believes in markets but not in government.
Joseph Stigliz - Believes in government but not in markets.
John Roemer - Believes neither in government nor in markets.
It´s hard to find a ideological pattern here.
The last sentence is particularly true. Theoretically I think I most agree with John Roemer. But he's also the person on that list that I'm the farthest from politically. I probably agree the least-theoretically-but-most-politically with Tyler (given that these are correct summations of these fine folks' views).
-----
Other links:
Ezra Klein
Crooked Timber
and here's a guy who definitely beat me to it but telling you that at the beginning would've ruined the, uh, aesthetic point and I would've missed the opportunity to make that stupid demerit joke above.
This guy too (thanks to Robert for pointer)
Tyler Cowen has come the closest but even he thought it wise to hedge his bets (“better-than-first-best economist”). Rather the typical response has been “oh yeah, I’m definitely in the second-best camp, no question” and then “me too, I’m also with the sophisticated, nuanced, second besters!”. This of course brings out my natural contrariness and makes me want to be the first person to officially declare as a first best economist. The First First Best Economist. That way, when other first best economists come forward, if and whenever they deviate from the party line to, like, first-and-three-sevenths best economics, I will have the moral authority to give’em demerits. Of course it could just happen that I end up demeritting only myself.
As far as the substantial foundations for my claim I DO happen to think that if the world could be put on “autopilot” and the policymakers, the authorities, and the monkey that pulls the levers had to either automatically follow the directive:
a) "Do exactly what "Econ 101" tells you too!"
or the directive
b) "Assume all the potential market failures that could occur are in fact occurring! Implement Econ 340 solutions to all potential market failures immediately and simultaneously!"
I think we'd still wind up with a better world in a) than b). And that's assuming that the monkey doesn't have a lever, c), labeled "get more bananas for monkey while pretending to be doing b)" (an elaboration on Dani's third counter argument to second best economics). Which is I guess what makes me a first best economist.
Now of course economists of the >1 best school will counter that that's not a fair comparison. What they advocate is not mindless government regulation, micro overmanaging, problem fixing and excessive lever pulling. What they advocate is looking at each problem in detail and figuring things out on case by case basis, all carefully, reasonably and all. In other words that what I'm doing above is just ... GASP ... setting up a straw-man (a straw-man with perhaps a shade of truth to it. After all straw-men only work if they somewhat resemble actual humans)
Whatever could've suggested that course of action to me?
----
I think I like Michael Greinecker's classification system better (and I'm sorry to drag him into this):
I think one may be able to sort economists by how much they believe in the merits of both markets and governments.
Tyler Cowen - Believes in both markets and government.
David Friedman - Believes in markets but not in government.
Joseph Stigliz - Believes in government but not in markets.
John Roemer - Believes neither in government nor in markets.
It´s hard to find a ideological pattern here.
The last sentence is particularly true. Theoretically I think I most agree with John Roemer. But he's also the person on that list that I'm the farthest from politically. I probably agree the least-theoretically-but-most-politically with Tyler (given that these are correct summations of these fine folks' views).
-----
Other links:
Ezra Klein
Crooked Timber
and here's a guy who definitely beat me to it but telling you that at the beginning would've ruined the, uh, aesthetic point and I would've missed the opportunity to make that stupid demerit joke above.
This guy too (thanks to Robert for pointer)
posted by YouNotSneaky! at 6:41 PM
7 Comments:
My take on this is "Do not feed the trolls". Which used to be a great piece of Internet advice.
This is not the first post by Rodrik in which there's a type A vs. type B hilarious comparison. Type A like free markets and--dare I say it--free trade and are naive, while Type B like persecuted markets and persecuted trade.
What would the internet be without the trolls? Bunch of elves and fearies all agreeing with each other all the time. Ugh.
I actually think Dani Rodrik has a lot of license here. He IS one of the people that actually does serious research to establish exactly what kinds of second-best policies might help. Which is very much different from your typical advocate who is content to say "but people are not rational" or "markets are imperfect" and to take that as sufficient proof that their favorite ideologies are the best and only and everyone who disagrees must be an evil person.
It's also interesting that most econ bloggers tend to be macro type. I'm not sure why. For one, if I wanted to know what kind of "second best policies" are really second best and not just screwing around I'd go to the IO people. After all, it's pretty much their job to study market failure, all the ways that things can go wrong and so on. But still, I don't think the first-best/second-best division among them is any different than general (which maybe supports Dani's view that it's all about the priors). There are plenty of IO people who've devoted their careers to studying market failures but who are also very wary of government intervention. The classic example here is the double-marginalization problem - in a world where there's multiple upstream and downstream monopolies regulating one monopoly but leaving others untouched can get you a lot more inefficiency than you started out with. In fact I think that, implicitly, a good part of Tirole's book is about how in the presence of market distortions any kind of a change will always have very ambigous effects from a theory point of view. Krugman used to note this too at many points - don't break up a single monopoly into multiple monopolies because then you only end up getting screwed twice.
Anyway. The point about second best policies can be made for many different situations. It's not hard to show that regulating a monopoly or penalizing a polluting firm can lead to less than sub-optimal outcomes and that, given that first best is impossible to achieve, we should just let monopolies be and polluting firms pollute. The theoretical problem is essentially the same. But, as economists/advocates we can pick our fights. So why do we pick some and not others?
Let's be honest here. If we're in the second best world when it comes to trade, and some kind of protectionist policies could improve a developing country's outcome, then we're also probably in the second best world when it comes to monopolies, externalities and all the rest. Maybe we should subsidize pollution? I'm being stupid at this point but that is exactly what second-best thinking CAN entail if taken at face value.
Which is, I guess, why I'm throwing my hat into the first-best ring and waiting for others.
Others have. A lot of Austrians, among others...
On the other hand, it's a bit like minorities taking offensive labels and recycling them as their own. It might be best to reject this black&white, ideologies vs. informed specialists distinction from the onset. It's stupid, IMHO.
Rodrik's latest post/paper is more proof that he thinks that if you think differently, you must be an ideologue. Yeah, right.
I tend to agree, associating myself more with the first best camp but unwilling to commit myself to an absolute. It's easy to jump into the second best camp because it includes such a wide spectrum of desired government involvement.
Rodrik's categorization sounds awfully similar to Thomas Sowell in "A Conflict of Visions."
what a hilarious post. gotta check this blog out more often!
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