Saturday, 19 May 2012

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.


*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.


  1. The cynicism is amusing only because Lin Hsuan-chu was surprised at it.

    Cynicism? Where?

  2. Blob: the cynicism lies with the lesson that a finance minister should not be primarily concerned with understanding why the unemployment rate is relatively high, but only with taking action to make it lower, irrespective of causes.

    It's quite a deep cut: it reveals the potential conflict between the electoral mechanism's incentive value for politicians and the "public interest" or "general welfare" ends for which they supposedly act. So a finance minister might trade off taking certain actions which will relieve unemployment in the short term against the longer-term problems these same actions will generate.

  3. Right but wouldn't that be your cynicism in response to the anecdote? When you say "The cynicism is amusing only because Lin Hsuan-chu was surprised at it." exactly whose cynicism is Lin surprised at?

  4. Well, a cynic is someone who dismisses motives or causes with contempt, so I see what you mean (yes my comments are typically cynical), but no: the professor himself is cynical in as much as he insists a finance minister shouldn't give a shit what the causes of the unemployment rate are, but only that he should accept responsibility for them.

    What if there was nothing the finance minister could do about the unemployment rate? Doesn't matter: he should apologize and do something. That's the lesson, and it is utterly cynical.

  5. I don't think the professor in the story is cynical. At least, I doubt Lin means to portray the professor as being cynical.

    The way I see it, the professor here is playing the role of saintly guru preaching the virtue of empathy and the pedantic student is his foil. As the narrator, Lin thinks of himself as a newly enlightened bystander ("My work is to care for the people!") who should go on to enlighten others. Hence his decision to write this letter.

  6. "The way I see it, the professor here is playing the role of saintly guru preaching the virtue of empathy and the pedantic student is his foil."

    I read it that way too Blob; what I am saying is that the "saintly guru role" is deeply cynical.

    I cannot tell whether you disagree with this, or whether you misunderstand. :-/

  7. I don't deny the possibility of the professor giving that advice cynically. (But then again, I think it's just as likely that he truly believed what he was saying. Nowhere does Lin say that the professor said to "not give a shit about the causes. Lin himself doesn't say that either.)

    It's just that "The cynicism is amusing only because Lin Hsuan-chu was surprised at it." is bothering me because Lin doesn't think of the professor as being cynical, not the way he tells the story, and so what surprise could he have for any underlying cynicism?

  8. Oh I'm quite sure Lin wasn't surprised because the prof's remarks were cynical.

    "But then again, I think it's just as likely that he truly believed what he was saying..."

    I think it quite likely the prof did believe what he was saying - that doesn't mean it's not cynical: cynicism is not the same thing as insincerity.

    My point was not that what the prof said was insincere, but that it was cynical. Different thing.

  9. Fair enough, but taking cynic to mean "[one] who dismisses motives or causes with contempt" (keyword:contempt, right?) that still doesn't necessarily qualify the professor as a cynic, since it is perfectly possible to interpret the professor as simply saying that there are other important things to do in addition to analysis, and not that analysis is pointless. After all, the reasoning behind the student's "brilliant analysis" was probably taught by the professor himself, so it's doubtful that he's would dismiss it with contempt. He just had a different point to emphasize that time.

  10. "...since it is perfectly possible to interpret the professor as simply saying that there are other important things to do in addition to analysis, and not that analysis is pointless."

    But the point is that the finance minister's action is not to be dependent upon analysis. Whatever conclusions the analysis leads to, the imperative that the finance minister must do something about unemployment is already set. That is cynical.

  11. But where's the contempt/distrust/negative emotion/etc? So anytime B is set aside because A has higher priority is a example of cynicism? (The doctor says I should exercise more but my schedule is already fixed and it is imperative that I follow my schedule to the letter ... <-- cynicism?)

  12. "But where's the contempt/distrust/negative emotion/etc?"

    I didn't say the prof's remarks reflected his emotions, just that they relegate the understanding of unemployment to a subordinate function - subordinate to the imperative of government action. Whatever the analysis, the prof's opinion is that it is a foregone conclusion that the government must do something.

    "So anytime B is set aside because A has higher priority is a example of cynicism?"

    Not at all. Look: if I set aside going to the pub for a year because I prioritize paying for the welfare of the stray dogs, then I am merely acting with my own resources according to my own scale of values. To suggest there is anything cynical in that would be absurd.

    In the prof's case, there are vital differences which your abstraction lets fall, the most obvious of which is the act of prioritization itself. Why should government action to alleviate the unemployment rate have a higher priority than understanding why the unemployment has increased? It's simply taken for granted isn't it? And your abstraction merely presupposes that assumption.


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