Wednesday, May 18, 2016

Prediction markets and understanding politics

A post in a closed group on Facebook suggested that we look to prediction markets for information on politics, and try to use the information they offer in the manner that business journalists use financial markets. 
     The trouble is that business journalists know as much about business as sportswriters know about sports and political journalists know about politics. Fortunately, students of politics have it easier than students of sports or business because politicians have to explain themselves to get what they want. If you want to understand Trump, the first step is to look to his own words, the second step to look to words of the politicians who are his allies, and the third to look to the words of the politicians who are his rivals and enemies.
     As for prediction markets, the efficient markets hypothesis says they integrate publicly available knowledge. That does not mean that they are accurate, just that anything more accurate is going to cost you.

     The odds on a Republican winning the Presidential election (getting a majority of the two-party vote) are about 1 in 3 at the Iowa Electronic Market .  If I know better, if I know that Trump is a virtual lock because he is the more centrist of the two candidates and because the country is generally perceived to be on the wrong track, it may be that that is because I have been studying politics for 30 years.
     Should you trust me? I have not, so far, put any money down on Trump at Iowa. But the people who bought Trump in the Republican convention market at IEM are doing well so far, as today's graph shows.

Are the prediction market odds a good guide to Trump's actual chances?  Were they a good guide to his chances the day after the Iowa caucuses?  All we can say with any degree of assurance is that they are a better guide than any other you can get for free.  
    Trusting me isn't free.

Friday, May 13, 2016

No, Trump is not a menace to the Constitution

Josh Blackman, a con law professor who supported Rand Paul and Ted Cruz, claims in the National Review that "Trump has already promised that he will knowingly break the law and violate the Constitution," because his views on constitutional matters are not exactly the same as Blackman's.  But one can be a perfectly good constitutionalist and hold the Times v. Sullivan is bad law (it is certainly inconsistent with the Founders' understanding of the relation between state libel laws and the First Amendment.) Likewise with Kelo, which simply means that judges should defer to the judgment of elected officials on what constitutes public use, And, finally on Japanese internment, to quote Judge Posner, "Korematsu was rightly decided."
      As for the rest of Blackman's complaints, no doubt President Trump will exercise his constitutional powers to try to move things his way, whether that is by executive action, speechifying, proposing legislation, or having the Trump Administration's lawyers make the appropriate arguments in the courts. Trump's promises on constitutional matters are best understood as statements of direction and principle rather than marching orders. That is how candidates in the US always talk, as if they are going to be able to by themselves what they have to move the whole apparatus of government and public opinion to accomplish.  

Wednesday, March 16, 2016

Wide-Awakes for Trump?

Back in the days of Lincoln when the Republican party was the party of freedom and devoted to a better life for ordinary Americans, Republicans organized a paramilitary organization called the Wide-Awakes. The mission statement of the Chicago branch of the Wide-Awakes:
1. To act as a political police.
2. To do escort duty to all prominent Republican speakers who visit our place to address our citizens.
3. To attend all public meetings in a body and see that order is kept and that the speaker and meeting is not disturbed.
4. To attend the polls and see that justice is done to every legal voter.
5. To conduct themselves in such a manner as to induce all Republicans to join them.
6. To be a body joined together in large numbers to work for the good of the Republican Ticket.
(Source: Wikipedia)

Tuesday, March 8, 2016

Is the American ideal "done"?



Kira Sirote asks: Is the American ideal of progress through liberty "done"? I feel like parts of American society are indeed more just and more righteous than they were 50 years ago, can that be clarified and then extended beyond its own borders?

In my view the ideal of progress is not "done" but it is in tatters.

In medicine Americans are no longer willing to pay for progress.

In race there has been steady regress since 1965.

The war on poverty made things for poor people worse.

The Universities are markedly worse at educating or encouraging freedom of research than they were in our day.

The internet mostly brings distraction.

Television (!) is the dominant medium not just of communication but of art, and for all the strengths of The Wire it is not Dostoevsky.

The US has too many rules which persuade too many people that nothing worth doing can be done anymore. The (pre-Trump) GOP was too focused on taxes, which matter little, and not focused enough on regulation, which is crushing. The Democrats think that the response to the failure of rules (i.e., the subprime crisis), is to add rules.

Friday, March 4, 2016

Trump, #NeverTrump, and 2014 might-have-beens

If the Republican House had impeached Obama over his refusal to enforce immigration law, and a majority of the Senate had voted to convict, we would at least know that the Republican establishment is on the the side of the law and the Constitution. Now what we know is they are committed to open borders and really hate Trump.

Tuesday, March 1, 2016

Why I am an immigration restrictionist and a trade protectionist

In a Facebook back and forth, Ashland University History Professor John Moser pointed me to this April 2015 NYTimes piece by Greg Mankiw arguing for the Trans-Pacific Partnership.

My father, Levis Kochin, is a Chicago School economist and so I grew up hearing this kind of argument.  I do not believe anymore that these arguments should persuade people who care about the well-being of their country.  Here is why:

The classical free trade/open borders arguments ignore
1) Distributional consequences, who gets what
2) People's risk preferences. I offered a room full of academic economists each a dollar to give up their tenure while retaining all the other parts of their contract. No takers.
3) fiscal consequences: classical mercantilism was intended to maximize net state revenue by routing trade through ports where customs could be conveniently levies. Nowhere in The Wealth of Nations does Smith mention this.
4) One argument Smith does mention and endorse:  "defense is more important than opulence" -- presumably this applies not just to defense of territory but defense of culture or our way of life.
5) classical economics treats labor as a cost and leisure as an unalloyed benefit. And yet I know academic economists who forfeit income in order to teach when they could collect more if they retired. In other words, this is bad psychology.

The most compelling case I know for a protectionist and restrictionist political economy is made by the German philosopher J. G. Fichte, in his short book The Closed Commercial State (originally published 1800).    Read it and decide for yourself.

Wednesday, February 24, 2016

The Future of the American Party System

Michigan State political scientist Ben Kleinerman wrote last night on his Facebook wall: "The parties are essential to the rational functioning of American government. Van Buren recognized a failure in the founders' system that he sought to correct through the party system. It elected Jackson while also controlling him. The two are not mutually exclusive."

But I say:

1. If parties like the ones we have now are essential (though Monroe, the most successful wielder of executive power between Washington and Lincoln governed without them) how is it that Congress and the executive branch have become more partisan and more dysfunctional?
2. Even if we need parties like the ones we have now that does not mean we need the party cleavage we have now. It has been Democrats and Republicans uninterrupted since 1868. But the Republican brand (and maybe the Democratic one as well, with the rise of Sanders) no longer recruit among the young. If the Republicans win as the Trump party, perhaps a new elite-cored anti-Trump party on the Whig model will arise? And what would be so bad about that?