My guest this week is Rajiv Sethi, professor of economics at Barnard and Columbia. We’ve collaborated on papers and pedagogical projects, we’ve criticized each other’s work, and we’ve remained remained friends for decades now. In this conversation, we run the gamut, from Israel-Palestine to free speech to some fairly technical economics talk to, what else, my memoir,
Charles Plott’s distinguished guest lecture at the Southern Economics Journal published in the first issue of volume 67 in the year 2000 on markets as an information gathering tool is relevant for the discussion on using a market to predict election outcomes. The basic idea is from Hayek’s paper The Use of Knowledge in Society.
Yes, I now remember I looked at that paper shortly before I retired. I may have been wrong, but I thought you misunderstood Hayek. I don’t believe you considered his book, I think called Prices and Production, in which he explores how the price system might move the economy away from an efficient allocation of resources. In his model the recession part of a business cycle (the part in which output is declining) is the result of the price system causing a misallocation of resources during periods when monetary policy or simply bank behavior during periods of easy credit causes interest rates to be too low. These low interest rates cause firms to invest in production processes that are relatively too long to be profitable when real interest rates return to normal. The other place you neglected was his work on the socialist calculation problem which is concerned with whether it is possible to make correct calculations for investment decisions without market prices. That is, is it possible for a socialist system to allocate resources in any halfway reasonable manner without the use of markets? I read this stuff now 50 years ago, and it is very complicated (at least to me), so my recollections could be somewhat deficient. Be that as it may, you clearly are a much better social scientist than me.
Just to steelman the "loyalty argument" (a position I do NOT take).
IF we assume that a significant motive for having guests on your show is to give them a forum AND
IF you exhibit a significant bias in your choice of guests, THEN
one could reasonably infer your position on a topic AND that might dissuade some listeners.
I think the assumption of motive is reasonable. But I do not think you show significant bias in selection of guests - other than they be intelligent and have something interesting to say :-)
A substantive discussion, but at points lacked clarity for me. I think Professor Sethi overestimates the continuing influence of the Ivy League in our political outcomes.
Charles Plott’s distinguished guest lecture at the Southern Economics Journal published in the first issue of volume 67 in the year 2000 on markets as an information gathering tool is relevant for the discussion on using a market to predict election outcomes. The basic idea is from Hayek’s paper The Use of Knowledge in Society.
In case you're interested, a paper on Hayek from a few years ago:
https://www.aeaweb.org/articles?id=10.1257/jep.31.3.215
Yes, I now remember I looked at that paper shortly before I retired. I may have been wrong, but I thought you misunderstood Hayek. I don’t believe you considered his book, I think called Prices and Production, in which he explores how the price system might move the economy away from an efficient allocation of resources. In his model the recession part of a business cycle (the part in which output is declining) is the result of the price system causing a misallocation of resources during periods when monetary policy or simply bank behavior during periods of easy credit causes interest rates to be too low. These low interest rates cause firms to invest in production processes that are relatively too long to be profitable when real interest rates return to normal. The other place you neglected was his work on the socialist calculation problem which is concerned with whether it is possible to make correct calculations for investment decisions without market prices. That is, is it possible for a socialist system to allocate resources in any halfway reasonable manner without the use of markets? I read this stuff now 50 years ago, and it is very complicated (at least to me), so my recollections could be somewhat deficient. Be that as it may, you clearly are a much better social scientist than me.
Just to steelman the "loyalty argument" (a position I do NOT take).
IF we assume that a significant motive for having guests on your show is to give them a forum AND
IF you exhibit a significant bias in your choice of guests, THEN
one could reasonably infer your position on a topic AND that might dissuade some listeners.
I think the assumption of motive is reasonable. But I do not think you show significant bias in selection of guests - other than they be intelligent and have something interesting to say :-)
Does the lack of comments underscore my “clarity “ remark ?
A blurb by Mark Lilla was an inspired idea…
Thanks for having me back Glenn! Such and interesting and enjoyable conversation.
A substantive discussion, but at points lacked clarity for me. I think Professor Sethi overestimates the continuing influence of the Ivy League in our political outcomes.
Thomas I don't recall saying anything about the influence of Ivy League schools on political outcomes, which segment are you referring to?
Agree that I should speak more slowly and clearly, will work on it.
I ‘m going to listen to entire discussion a second time which was excellent. The misunderstanding is probably mine.