Against Lin Hsuan-chu (林軒竹)

Alright so when I said on Tuesday that I was hoping for rain this week, I didn't mean for it to just drizzle away unabated all week long. I was going to go to Chiayi again today to photograph one or two things I missed last time*, but with the weather being what it is I thought better of it; the humidity is still quite strong. In the meantime, I seem to be getting "requests" for a response to an editorial that was published in the Taipei Times at the beginning of this month ("Economics Is A Social Science, Not Just Theory"). I read it the day it was published, but didn't respond as I'm feeling like King Canute these days (trying to command the tides of stupidity not to rise). However since I'm stuck for the moment in my reservoir research...

The editorial was written by Lin Hsuan-chu (林軒竹) who is apparently an associate professor at National Cheng Kung University’s department of accountancy, just five minutes down the road from me (that place is ranked as one of Taiwan's top few universities). The editorial begins with reference to the KMT government's recent post-election decision to allow two oil-importing, State-owned utilities (Taipower and CPC) to raise their prices significantly:

"Recently, fuel, electricity and general price rises have been a source of much public discontent. In the face of this public anger, several senior government officials have gone out of their way to defend the government’s economic policy, coming out with a whole range of interpretations of market mechanisms that stretch credulity."

Personally, I met the decision with a shrug of the shoulders not because it isn't going to hurt me too (price rises for many everyday items shot up almost immediately after the decision, in some cases by 20% or more), but because, like the economists, I understood that the previous fuel and electricity prices were distorted through subsidies. The fact that the government no longer wishes to maintain those subsidies did not cause "discontent" in me, because my view is that the State should not be in the business of subsidizing energy production to begin with - irrespective of whether that energy is produced from fossil fuels or renewable sources.

Yet rather than criticize the government's decision, or the likely nose-in-the-trough corruption at the State-owned utilities, the editorial seques into an attack on free-market economic theory.

"At the same time, President Ma Ying-jeou (馬英九) has been complaining that the public do not understand economics. I have strong feelings about what he says, not least because it reminds me of two episodes that occurred during the years I was studying in the US."

President Ma is right: the public do not understand economics (then again - neither does he!), but "the public" is a contradiction in terms: there are only different people and not everyone is the same (for example, some of us are less wrong in our understanding of economics than others). One reason why many people don't understand economics is that the subject is insufficiently debated in public forums; for example, if I were to send this, or some other more formal rebuttal article to the Taipei Times, they likely wouldn't publish it. They will of course publish attacks on free-market economics though...

"The first was my discussion with an economist who holds a doctorate from the University of Chicago on healthcare policy. During our discussion, this well-educated academic took me quite by surprise by claiming that it was wrong for physicians to obtain licenses in order to practice medicine, because it completely violates the free-market mechanism."

No it doesn't, and I suspect the academic may be being misrepresented here. The free-market argument here is not that physicians should not obtain licenses, but that State governed licensing systems, in conjunction with complementary regulations on the establishment of clinics or the employment of physicians, instantiates a racket - i.e. an artificial bottleneck on the supply of professionally educated and skilled physicians. Without the onerous State imperative that only physicians licensed by the State-backed monopolist organization can be employed, clinics and hospitals would have the freedom to make their own decisions on who to hire and fire. The notion that customers are safer because their physicians are licensed by a State-backed monopolist is one which persists due to the psychology of confirmation bias.

"He believed that, through a process of elimination and equilibrium, as patients made the wrong choices, that the market itself would regulate the situation, retaining the good doctors and eliminating the bad ones. He backed up his argument with graphs and illustrations.

A little taken aback, I asked him: “How about human lives? What if someone dies?”

His answer was that a few lives do not matter and that the promotion of market efficiency is far more important."

Oh really? I suspect it's far more likely that the professor presented a utilitarian claim that the number of lives saved over time would be greater in a free market system, not that a "few lives don't matter" - which I strongly suspect is nothing but a convenient misrepresentation to make the professor seem like a Nazi. Taken on its own though, the claim that a few lives might be lost in a free market system due to the errors of under-qualified physicians is unwarranted because it is based on the erroneous assumption that such errors do not occur now, when in fact they do. It doesn't matter though does it? People think in little stories, and the currently fashionable story, updated from caveman times, is that the free-market is the chief cause of all evil and calumny in the world.

"The second episode took place in a macroeconomics policy class. The professor asked one of the students in the class to imagine for a minute that he were the government finance minister. He handed him some unemployment figures and asked him to interpret them.

The student proceeded to talk at length about the figures, comparing them with those of the previous year. He then went on to discuss changes in structural and non-structural unemployment in terms of the figures. When he was finished, the student was fully expecting the professor to offer praise for his brilliant analysis. His classmates were certainly suitably impressed.

To my surprise, the professor said that, when discussing the unemployment rate, a finance minister should first offer sympathy to the tens of thousands of people who have lost their jobs and dignity, and are struggling to make ends meet, then explain what he was going to do to get the rate down."

The cynicism is amusing only because Lin Hsuan-chu was surprised at it. Only under an openly fascist or communist, non-democratic government would the finance minister not be expected to do what the professor said. And only under a libertarian society would there be no finance minister to promise to get the unemployment rate down.

"Economics is a social science and as such it has to start from the welfare of the general public. If it does not, it is little more than dry theories and formulae and those who implement policy are mere bureaucrats and bean counters."

So there we have it: the premise from which Lin Hsuan-chu starts out is a non-sequitur: it simply does not follow from the fact that economics is a social science that it must be "concerned" with the welfare of the general public. Look: if economics is a science then it should be concerned with the truth and nothing else, just like other sciences - it certainly should not be concerned with "the welfare of the general public" because, as stated earlier, "the public" is a misnomer: people are different, and as such they have different values and interests. When the government pursues any given course of action, such as say, road-building (which is only one of many obvious candidates for an example of the "welfare of the general public" in that almost everybody uses roads), it is nonetheless always true that this action will cause greater injury, expense or inconvenience to some people than to others - for example, think of the property owners whose lands will be "expropriated" by the government to make way for the new road if they do not agree to sell-up. It is easy for other people who do not own property along the planned route of the new road to be dismissive: they can still sit back and enjoy their property elsewhere whilst talking about the "public interest".

After all, a few State violated property owners do not matter and the State-backed promotion of the "public interest" is far more important, isn't it?

"Ma and senior government officials are supposed to be highly educated and should know what they are talking about. If they ignore what people are going through and even go as far as to complain that they do not understand economics, it is time they go back to school and learn what economics is really about."

Aye. The call for "re-education" camps, not in principle unlike Mao's "back to the countryside" slogans during the cultural revolution.

Commies.

*One question I am currently vexed by is what was Lantan reservoir's primary source (i.e. after its construction in 1944) prior to the construction of Renyitan reservoir (in the mid-1980s)? I cannot yet find the historical information, but for reasons of economy it must surely have been the Bazhang river (八掌溪) which lies to the south. But I didn't see any signs of an historical inlet or pumping system to the south of the reservoir, so it does occur to me to wonder whether it was not in fact, the Puzih river to the north? Lantan reservoir tapers into a squiggle at its north-eastern end before disappearing into woodland. There are a series of small artificial ponds just somewhat to the north between Lantan's north-eastern end point and a bend in the Puzih river about two kilometers away which seems to have the remains of a now defunct weir.