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    Maxine's Essays

    • 21st Century Regress
      Sometimes it seems like the world is going to hell and there's absolutely nothing a girl economist can do about it.
    • What Exactly Are We Crowding Out?
      The current economic downturn isn't a random draw of a black ball from an urn containing white balls and black balls. There's no sampling distribution. Very specific policies and actions landed us here. Now we must decide not only what policies need to be put in place to prevent it happening again, but also what policies would best drive us out of the ditch faster and sustainably.
    • I Wish It Were Only Butter
      We should be giving up some butter if we must. We should not give up education or health investment (or infrastructure or the environment (hello, BP). They may be the only legacies of any value that we pass on to our children and grandchildren.
    • Rational Health Investment?
      The obvious "market solution" is to improve the long run return on investments in health among the disadvantaged through meaningful and effective publicly funded education. The obvious short run "market solution" is to reduce the costs of investment and the shadow price of health for the disadvantaged by providing health insurance cover and reduced out-of-pocket costs.
    • The Socrates Parameter
      To the extent that our limbic systems respond to such engineering by over-riding the judgment of our frontal lobe and to the extent that our frontal lobe is deprived of the information it requires to make a rationally self-interested judgment, we are not only pigs and fools, we are slaves.
    • The Economic Rewards of Virtue
      If individual virtue tempers our "piggy" desires and conditions our choices to something that is both individually and socially better, then the economic rewards of virtue as embodied in and promoted by societal norms and institutions are far greater than we have ever suspected. As economists, we would do well to recognize this when we teach U max.
    • The Market for Morals
      Markets then are places where more is exchanged than goods and services, labor and product, credit, and interest. They are places where we also develop the personal virtues of temperance and prudence and the social virtues of benevolence and justice. When they function well, they produce trust, loyalty, and sympathy among those who trade there.
    • Post-Modern Applied Economics: It’s the Error Term, Stupid
      Maxine believes it’s time to refocus attention and discussion on the error term. It is often where much of the action is in our models. It is where unexpectedly catastrophic events dwell resulting in fat tails. It is where our animal spirits manifest and cause us to do the right thing or the wrong thing or the thing everyone else is doing rather than the self-interested, fully-informed rational thing. It is where God and miracles and chance dwell.
    • Intergenerational Win-Win: Health Insurance, Education, Environment, Infrastructure
      So when we’re talking about fiscal stimulus packages and we’re borrowing from our grandchildren to finance them, we should be thinking about how to use stimulus monies to create value for those grandchildren AND stimulate our economy.
    • Short-term Private Payoffs, Long-term Social Costs
      The real health reform discussion, the one we should be having, is “What must we do to create a health system that is both efficient and fair?” The answer will almost certainly include relegating the private sector to markets where market forces or regulation are effective at aligning short-term private incentives and goals with long-term societal interests. If such markets are scarce or non-existent in health, then the private health sector will be of limited value.
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    03/21/2010

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    a tangential thought: two winters ago i did a 36 hour DVD course on the neuroanatomy of the brain…(i was weird for a while: walked around for a couple weeks imagining how each of my thoughts and actions might be occurring in whatever specific area of the brain controlled that function)…its pretty humbling when you realize your loftiest thoughts can be reduced to thousands of simultaneous electrochemical molecular discharges at neural synapses…

    but my greatest takeaway from that course was that those areas where our executive functions – moral and rational thought - are observed to occur are always proceeded by activity in the emotional areas; that in fact our rational thinking is driven by our feelings and emotions, and thus ultimately from our adaption based on our past experiences…

    ...so everyone has their own individual “morality” and “rationality”…what you or i might think is rational or moral is not the same as what another might think…that makes it clear why some people dont “just listen to reason” cause my “reason” is not based on the same set of learned experiences that another persons “reason” is…and why no matter how logical you might think you are being, you just cant win an argument…

    I think your point about slaves is well taken, and the heart of the matter. But it’s not just the balance between impulse and deliberation. It seems to me that the imperative of the system that we have is to turn society into an ant farm. Is the economy the servant or the master?

    This might be a good time for me to ask a question that I have always wanted to ask of an economist: How does advertising play into the theory of rational markets? Does it get treated as any other input, or does it get special treatment as a sort of "theta blocker"?

    Setting aside my own interest for the moment, another interesting question might be: How does theta affect my perception of your interests (or the Greeks, to pick entirely at random), or the sense of consequence associated with those interests?

    rjs, I think my blog came across as an argument for a dualistic view of the human psyche, which was not my intent. I was actually seeking to provide a means for unifying it. The problem (for the seminar speaker) was that he can only observe behavior, not the inner workings of survey respondent's minds. I was just trying to come up with a useful way of conceptualizing what was going on in the brain/psyche so that it could be linked to observed behavioral responses. As I wrote the blog, the Socrates weight seemed to have broader implications.

    As I write this, I'm wondering if it was such a good idea since everyone seems now to think I view us all as dueling brain parts. :-)

    I also wonder: even if all executive functions are preceded by activity in emotional brain centers, does it necessarily follow that reason cannot be purged of passion?

    And, finally, is it really possible that all morality is subjective? Is it the underlying premise(s) that are subjective or is it the logic itself that is (subjectively) flawed? Or does the subjectivity arise because emotions cause us to reject or accept moral conclusions that we "like" rather than those that are logical or reasonable?

    You raise questions to which I am ill-equipped to respond without further reflection and, perhaps, cannot ever answer. This should teach me not to stray from my narrow corner of econ. :-)

    As always, thanks for your comments.

    Peter, as I indicated in my reply to rjs, I'm feeling way over my head here, especially the questions in your last paragraph.

    Advertising can be thought of as a demand shifter, the content of which may or may not convey objectively true things about the product. I would guess that to the extent the info conveyed diverges from objective truth or engages emotions and limbic responses, it could be viewed as a "theta blocker." If it conveyed reliable info, like how a product improved child health by being more nutritious (assuming the product is more nutritious), it could be viewed as a theta enhancer. I'm not familiar enough with the lit in this area to know how it has been treated either in theory or in practice.

    I like your question: is the economy the master or the servant? I would say "servant," but you can tell from other things I've written that I think we have lost sight of its proper social role. I think the question warrants much more thought than any of us give it.

    Thanks, Peter. :-)

    maxine, i wasnt really reponding to anything specifically that you wrote, i was just free associating after reading it...im always out of my "narrow corner" of expertise...i dont even know where my narrow corner is!

    as far as the dualistic view of the human psyche goes, that is pretty much a western cultural interpretation, and thinking about it again, maybe thats why i got that understanding out the course...i dont think hindus or buddhists would have the same problem...

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