Steve Horwitz on “The Graduate Student Disease”

On Sunday the world lost a great teacher, economist, and all-around fantastic person in Steve Horwitz. If you don’t know about Steve, I recommend reading the tributes from Pete Boettke and Art Carden.

Pete and Art speak to Steve’s overall legacy and greatness. But I will tell you about a very specific piece of advice that Steve gave me about teaching undergrads.

Steve called it “the graduate student disease.” By this he meant the tendency of newly minted PhD economists to teach undergraduate courses as if they were mini versions of graduate courses. Steve insisted this was the wrong approach.

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1970’s SNL on the Problem of Inflation

Any student of economics knows that inflation emerged as a big issue in the late 1970’s, first under the presidency of Jimmy Carter. The newly minted Saturday Night Live rose to the occasion. First, Dan Akroyd as Jimmy Carter proposed that that every American take 8 per cent of his or her money and burn it (Season 3, Episode 17, 4/15/1978), to reduce the money supply.

The President demonstrated leadership here by burning 8% of the $12.50 in his daughter’s little peanut bank:

A few months later (Season 4, Episode 4, 11/4/1978), the President changed his mind. Since austerity did not seem to be working, he offered a new approach – –  “Inflation is our friend”:

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DIY and The Limits of Comparative Advantage

I’ve been thinking a lot lately about the perils of over fetishizing comparative advantage and outsourcing in our personal lives, which is a long way of saying I bought a Sodastream.

Like many economists, I am wary of self-congratulations for doing something yourself. Don’t get me wrong, hobbies are good, but we shouldn’t suffer the delusion that making a table yourself is a particularly good use of your time. And, so help me god, if I hear you diminish the merits of any restaurant offering because “you could make for yourself for half the price” I will slap the menu out of your hands, hand you a crisp ten dollar bill, and send you home to make your own damn meal.

My loyalty to economics thus declared, I must say there is a case to be made for making exactly the thing you want. Ricardian comparative advantage- I make my low opportunity cost item, you make yours, we trade, everyone wins, it’s important at the micro and macro of our lives, but the bulk of rewards to purchasing private goods in the market instead of producing them yourselves is from the comparative advantage derived from specialization, capital, and scale. It would take me hours to make a batch of homemade Oreo-style cookies, but it’s pretty silly when you consider there are billions of dollars in technology, capital, and expertise dedicated to making just those specific cookies. Unless I were to get some sort of meditative three-steps-of-self-actualization-on-the-path-to-nirvana value out of the process of making those cookies, I’m far better off just grabbing a couple stacks at the grocery store and paying a professional to help me process the shame.

But what if I don’t want exactly the product being offered? Everything comes with a cost, and that includes scale of production. Nabisco sells $550M of just Oreos every year, but they don’t do that by trying to sell them to everyone. It might seem that way, but they really don’t. Yes, I know they have 25 flavors now, so yes, they having expanded into narrower niches since their single-flavor days, but their target remains the 4.29 million Americans consumed 8 or more packages in 2020. If you want to sell a half-billion dollars worth of cookies, you need to sell them cheap, and that means you need to sell a lot of them. You don’t sell a lot of cookies going door to door asking people what they want and then giving it to all of them. You sell a lot of cookies by hunting for the middle of the distribution. Observed used to call the implied bullseye here the lowest common denominator, but now that we are fully-evolved humans who don’t need to sneer at what most people want, we can simply say that sellers are looking for a part of the distribution of preferences with enough mass to support your business.

In soda-land, that means you are definitively not selling to me. Coca-Cola is a literal miracle product, but its also obesity-in-a-can for 43-year-old dudes who count walking somewhere as exercise. I enjoyed the “TEN” calorie product series, but those lasted less than 3 months on the market and probably ended the careers of no fewer than a two dozen career soda executives. At the other end of the sugar spectrum, I don’t like a lot of the Lacroix flavors and they tend to be over-carbonated for my precious bubble-specific sensitivities. Where is the perfect soda for those of us who want 1 to 3 grams of fructose from real fruit juice suspended in a matrix of lightly-bubbled seltzer water?

Where it’s not is the marketplace. That’s fine, the world doesn’t owe me exactly my preferred bundle of product dimensions in everything I consume. I wouldn’t want them to either. Like most people, if the market did ever produce a good just for me, I couldn’t afford it. We need the scale that comes from meeting lots of wants all at once, even when those wants don’t perfectly match my own.

And that’s why we buy Sodastreams. And woodworking tools. And sewing machines. And pizza ovens. Sometimes we go DIY not because we’re denying the merits of comparative advantage, but rather because we’re accepting that there of some products where second-best market solution just won’t cut it.

Which, by the way, is one of the great ironies of modern life in a developed economy. We’re so rich, we can absorb the opportunity cost of our hobbies and weird DIY hyper-niche consumption preferences. We can make our own stupid mole-cherry-lime soda at home because that’s what we want. Because in the modern world, the greatest bourgeois luxury isn’t the stuff you buy, it’s the stuff you make yourself.

Philosopher dude, c. 1770

This joke is relevant to the recent discussions within the economics profession about rigor in research. It’s also just funny and shouldn’t be lost, as so many memes quickly are.

The worst philosopher dude offender is Rousseau. Rousseau is cringe.

Here are his misleading thoughts from the bath about primitive humans, “The produce of the earth furnished [man] with all he needed, and instinct told him how to use it.”

A quick search about primitive humans brings up this from Psychology Today:

The caveman diet is a great diet if you want to live to be 30 or 35 years old. That was the adult life expectancy until very, very recently (indeed, it wasn’t until well after the advent of agriculture that life expectancies began to rise—in agricultural communities!). We know this from skeletal evidence.

The data is very sketchy on primitive life. However, there is no reading of the available evidence that makes it sound like people were well-provisioned to care for themselves and their children. This BBC article provides more sources on life expectancy throughout history.  

Sympathy and Predicting Behavior

Part One of The Theory of Moral Sentiments by Adam Smith is called “Of the Propriety of Action”.  Smith argues that we naturally share the emotions and to a certain extent the physical sensations that we witness in others. “Sympathy” is a term Smith used for the feeling of moral sentiments.

In Section One, Chapter Five, Smith writes

In all such cases, that there may be some correspondence of sentiments between the spectator and the person principally concerned, the spectator must, first of all, endeavour … to put himself in the situation of the other, and to bring home to himself every little circumstance of distress which can possibly occur to the sufferer. He must adopt the whole case of his companion with all its minutest incidents; and strive to render as perfect as possible, that imaginary change of situation upon which his sympathy is founded.

After all this, however, the emotions of the spectator will still be very apt to fall short of the violence of what is felt by the sufferer. Mankind, though naturally sympathetic, never conceive, for what has befallen another… That imaginary change of situation, upon which their sympathy is founded, is but momentary. The thought of their own safety… continually intrudes itself upon them…  

The modern word “empathy” is the capacity to step into the shoes of another person and feel their pain or joy from within the other person’s frame of reference.

Adam Smith suggests that if we hear a neighbor just experienced the death of a loved one, then we can briefly experience some sadness on their account. The more we put ourselves in their shoes, the more sadness we can experience on their behalf.

We usually think of it as a nice thing to have empathy for others. It can also be instrumental to be able to think through the perspective of another person, in order to predict what they will do next. In practical dealings, it is an economic advantage to make accurate predictions about future behavior.

If I work backward through my 2020 paper “My Reference Point, Not Yours”, then I can start by saying that people can sometimes predict what others will do.

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Predicting the NYC Mayoral Race

Yesterday, co-blogger Jeremy asked “Should Andrew Yang Wait To Concede?” in the New York City mayoral race. He argued that while Yang finished 4th in 1st-place primary votes, the new Ranked Choice Voting system meant he could still win. This is of course true in theory- but today I argue it is very unlikely in practice.

I say this not because I have scrutinized all the polls to predict the exact distribution of 2nd- and 3rd-place votes, or because I think I know more than Jeremy about political science or New York. Instead, any time I’m wondering about whether something will happen and I don’t have a strong opinion based on my own knowledge, I simply check what markets have to say. In this case, there are prediction markets bearing on this exact issue. The odds from PredictIt, shown below, have Adams (who finished with the most 1st-place votes, 32%) as the heavy favorite, with Yang reduced to an approximately 1% chance of winning.

But Jeremy is right to highlight that the Ranked-Choice system makes it less obvious who will win. You can see PredictIt traders still think that Garcia, who finished with 19% of 1st-place votes, is substantially more likely to win than Wiley, who finished with 22% (though the new system didn’t matter in the Republican primary, where Sliwa won with a clear majority of 1st-place votes).

Crypto-based betting platform Polymarket has actually closed their market for Yang already, declaring that he lost, though they agree with PredictIt that the overall election isn’t over and that Garcia still has a real chance despite coming in 3rd for 1st-place votes.

Of course, prediction markets aren’t perfect- they are certainly less accurate (easier to beat) than the stock market, as my track record of betting in both shows. But they make for a great first approximation on subjects you don’t know well, and if you think you do know better, they offer you the chance to make money and to make the odds more accurate. If you think Yang will still win, you can go bet on PredictIt and potentially 100x your money. Or if you think this ranked choice stuff is nonsense and Adams obviously won, you can pick up an easy 10% return. Or if you’re like me in this case, you can stay out of it, take a quick glance at the markets, and get a good idea of what is likely to happen without having to read the news or the pundits.

Should Andrew Yang Wait to Concede?

Yesterday New York City held their mayoral primary elections. This was an exciting event for election system nerds (political scientists and public choice economists) because NYC is now using a form of ranked choice voting to determine the winner.

While this is not the first place in the US to use RCV (Maine, Alaska, and a handful of cities use it), it is still notable for a few reasons. First, this is America’s largest city. Second, there are a lot of viable candidates, which makes RCV especially interesting and useful.

Specifically, NYC is using a form of voting called instant runoff. There are currently 13 candidates, and voters indicate their top 5 in order. If no one has a majority (>50%) of the votes, then the rankings entered by voters come into play. And indeed that is what happened yesterday.

On the first round, only counting first place votes, Andrew Yang came in 4th with just under 12% of the votes. So last night he conceded.

But should Yang have conceded? Maybe not! Let’s explore how instant runoff works.

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Rudyard Kipling As Macroeconomic Commentator

In a random article I read on investing the author cited (in defense of commonsense finance versus novel economic flimflam) the following passage by Rudyard Kipling:

And that after this is accomplished, and the brave new world begins

When all men are paid for existing and no man must pay for his sins,

As surely as Water will wet us, as surely as Fire will burn,

The Gods of the Copybook Headings with terror and slaughter return!

I was vaguely familiar with Kipling as an author of children’s stories like The Jungle Book and for writing poems celebrating British imperialism, but this seemed like some sort of macroeconomic commentary. “All men are paid for existing” sounds very much like Universal Basic Income, and “no man must pay for his sins” is consistent with a culture of blame-shifting. I was not aware of Kipling-as-economist, so I looked up the reference here.

This verse is the closing stanza of Kipling’s “The Gods of the Copybook Headings”. He penned this in 1919, as an expression of concern over trends in post-WWI Anglo-European society. “Copybook Headings” were maxims which appeared at the top of schoolchildrens’ copybooks in nineteenth-century Britain and America; the pupils would learn penmanship, vocabulary, spelling, and hopefully socially-useful values by copying these sayings over and over down the page. These maxims were based on traditional morals or on Bible sayings, like “A stitch in time saves nine” or “If a man will not work, let him not eat”.

I found that other investing advisers, such as John Bogle, also cited this poem in support of value-oriented financial strategies and claimed that it “beautifully captur[ed] the thinking of Schumpeter and Keynes”. Kipling felt that the old time-tested values were being replaced by trendy, flashy fads, but society would come to grief by rejecting the old common-sense virtues.  Eventually the “Gods of the [innovative] Market” would tumble, their “smooth-tongued wizards” would be silenced, and the public would realize that it is still the case that “Two and Two make Four.”

Without further ado, here is the complete poem:

The Gods of the Copybook Headings

AS I PASS through my incarnations in every age and race,

I make my proper prostrations to the Gods of the Market Place.

Peering through reverent fingers I watch them flourish and fall,

And the Gods of the Copybook Headings, I notice, outlast them all.


We were living in trees when they met us. They showed us each in turn

That Water would certainly wet us, as Fire would certainly burn:

But we found them lacking in Uplift, Vision and Breadth of Mind,

So we left them to teach the Gorillas while we followed the March of Mankind.


We moved as the Spirit listed. They never altered their pace,

Being neither cloud nor wind-borne like the Gods of the Market Place,

But they always caught up with our progress, and presently word would come

That a tribe had been wiped off its icefield, or the lights had gone out in Rome.


With the Hopes that our World is built on they were utterly out of touch,

They denied that the Moon was Stilton; they denied she was even Dutch;

They denied that Wishes were Horses; they denied that a Pig had Wings;

So we worshipped the Gods of the Market Who promised these beautiful things.


When the Cambrian measures were forming, They promised perpetual peace.

They swore, if we gave them our weapons, that the wars of the tribes would cease.

But when we disarmed They sold us and delivered us bound to our foe,

And the Gods of the Copybook Headings said: “Stick to the Devil you know.”


On the first Feminian Sandstones we were promised the Fuller Life

(Which started by loving our neighbour and ended by loving his wife)

Till our women had no more children and the men lost reason and faith,

And the Gods of the Copybook Headings said: “The Wages of Sin is Death.”


In the Carboniferous Epoch we were promised abundance for all,

By robbing selected Peter to pay for collective Paul;

But, though we had plenty of money, there was nothing our money could buy,

And the Gods of the Copybook Headings said: “If you don’t work you die.”


Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew

And the hearts of the meanest were humbled and began to believe it was true

That All is not Gold that Glitters, and Two and Two make Four

And the Gods of the Copybook Headings limped up to explain it once more.


As it will be in the future, it was at the birth of Man

There are only four things certain since Social Progress began.

That the Dog returns to his Vomit and the Sow returns to her Mire,

And the burnt Fool’s bandaged finger goes wabbling back to the Fire;


And that after this is accomplished, and the brave new world begins

When all men are paid for existing and no man must pay for his sins,

As surely as Water will wet us, as surely as Fire will burn,

The Gods of the Copybook Headings with terror and slaughter return!


This poem made little sense to me until I read some commentary by the Kipling Society. I’ll reproduce just a few excerpts here. Everything below is taken verbatim from that commentary except a couple of my side comments in square brackets:


Against the fundamental, unchanging values of life – the “Copybook Headings” which a child was expected to imbibe while learning to write – Kipling sets the transient, fashionable “Gods of the Market-Place”, which can be taken to refer to both trendy attitudes and the public figures associated with them.

Kipling argues that throughout the ages mankind has always been jostled between wisdom and foolishness. The references to past periods of time appear to reinforce the air of an historical survey, but the geological terms are fake, and Kipling’s concern is not with the past, but with post-war Britain. In the final two stanzas of the poem, the knockabout satire is replaced by a sterner prophetic tone:

As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!

Notes on the text
[Verse 2]

living in trees Kipling starts his story with the first human ancestors.

Uplift, Vision and Breadth of Mind the capitals emphasize the trendy empty terms used by the Gods of the Market-Place [as evolving human society tries to transcend the elementary facts of nature such as water wets and fire burns, which even the gorillas honor].

[Verse 3]

word would come That a tribe had been wiped off its icefield When the Gods of the Copybook Headings are ignored, retribution follows, whether among savage tribes or in the heart of civilisation

[Verse 4]

Wishes were Horses ‘If wishes were horses, beggars would ride’ and a Pig had Wings ‘If a pig had wings it would fly’. Both these traditional sayings pour scorn on wishful thinking.

[Verse 5]

Cambrian a real geological period. Here, as Keating points out, it stands for the Welshman Lloyd George, who was Prime-Minister for much of the Great War. (Cambria is the Latin name for Wales). Lloyd George was the chief British negotiator for the Treaty of Versailes in 1919 which officially ended the War. This disarmed Germany but pledged all the Great Powers to disarm themselves progressively. Kipling strongly disapproved of Lloyd George, the Liberals, and the Treaty.

‘Stick to the Devil you know.’ The usual form of this saying is ‘better the Devil you know than the one you don’t.’ Here it means that being prepared for war is better than being disarmed and defenceless.

[Verse 6]

Feminian a made-up term which sounds suitably geological. It refers to the emancipation of women, a lively issue at the time [and perhaps to the new morality which increasingly separated sexual activity from committed marriage; the result being a decrease in child-bearing and an increase in infidelity].

‘The Wages of Sin is Death.’ See Paul’s Epistle to the Romans 6,23.

[Verse 7]

Carboniferous Another genuine geological period, in which coal measures were formed. Here it stands for the increasing power of trade unions, particularly the coal-miners.

robbing selected Peter to pay for collective Paul ‘Robbing Peter to pay Paul’ is a traditional phrase, usually meaning borrowing money to pay off debt. Here it means taxing the productive part of the population to support the idle. [This is a live issue in 2021…]

Information Deserts

I am a tenured professor at an R1 research department who gets to work every day with scholars at universities all over the world. In 2002, when I applied to get my PhD at a local school, I did not know how grad school, academia, or research worked. More importantly, I didn’t know that I didn’t know, so I didn’t try to find out. I tell you this only to illustrate, via personal example, the depth of ignorance that is possible among exactly the people who, in theory, should be be the most informed, or at least trying the hardest to become informed. 1

When you spend enough time with the same group of people, there is a tendency to treat shared in-group knowledge as universally common knowledge. I don’t think this tendency is unique, or even especially strong, among academics, but it is something I am acutely aware of when discussions turn to higher education. The paper linked to in the tweet below reports the results of a field experiment where subjects in the treatment group received a packet of information regarding the availability of financial support to attend the University of Michigan for qualified applicants. It was impeccably designed and well-funded, and included the composition of informational materials rivaling any educational marketing I have ever seen. Go read the paper yourself, but the punchline is that the exogenous shock of information mattered, significantly increasing applications and subsequent matriculation to the University by students from economically disadvantaged backgrounds.

The results did not surprise me in the slightest (that is not a dig at the paper, which is tremendous). What surprised me when I saw the paper presented was the shock expressed by so many fellow members in the audience, who simply could not reconcile the implication that students (and their families) were unaware that college education was accessible to them. How did they not know? How could they not know? The information was everywhere.

Ivory tower academics live in bubble, yeah yeah. Shrug. I don’t think this is an ivory tower phenomenon, to be honest. This is, instead, a story about information deserts. Food deserts, yeah they’re not real. But information deserts, in my carefully cultivated opinion very much are. Academics expressing shock that people don’t know how much financial aid is available, that Harvard of all places is entirely “need-blind” in their application process (and to be clear, every university with a multi-billion endowment should be ashamed to not be need-blind in their application process). It’s easy to forget that the majority of people don’t get an undergraduate degree. They don’t interact with the aid process, it’s not something that people discuss with their neighbors. I don’t buy a lot “economic class as causal mechanism” theorizing, but there is something to be said for the fact that, culturally, we don’t discuss money with our friends. We don’t talk about our salaries and loans, how we are paying for education or how your kid might be able to pay for theirs. It’s simply not the kind of information that fills the air, doubly so in communities where most of the parents never attended college. Compounded the with greater urgency of day-to-day living for poor families, there just aren’t a lot of channels through which students can get a first moment’s traction to start asking the question about how they can go to college, let alone arrive at answers.

When smart and good technocrats like me are looking for policies that can stand up to the rigors of cost-benefit analysis from skeptics, information campaigns manage to be some of the very worst and very best ideas out there. When they’re bad, they talk down to disadvantaged communities with condescending messages filled with information they already have (crack is bad!), common sense everyone has (guns are dangerous!), or the kind of avuncular suburban conservative wisdom that leaves no one an ounce more informed.

But, when they’re good, they’re great. Information campaigns scale, with manageable marginal costs and often zero downside risk. They provide a very specific kind of information– information you didn’t even know you were missing, often answers to questions you didn’t know you should be asking. Did you know there was a Hepatitis vaccine? Did you know that you can save for our kid’s college education tax free? Did you know you qualify for the EITC and if you file your taxes you’ll get a check for $4,600? Did you know the flagship university of the state, one of the very best in the world, guarantees sufficient financial support to allow 100% of admitted students to attend without being financially crippled for life?

Rather than focus on what you think people know and don’t know, just start from the basics. What is the information that you relied on when making the biggest decisions in your life? Do other people have that information?

Are you sure?

1 I’ll abstain from telling the long version here, but I had absolutely no clue how graduate school and academia worked when I applied to a PhD program. I was a public high school teacher, I thought I’d work hard, write a dissertation, and make 50k a year teaching in a local community college. It’s funny in hindsight because what was then an ocean of unknowns is now the entirety of our academic working lives. Being told that families don’t know how college works is can feel like being told people don’t know the water we live in is wet.

Fertility and Choices

James blogged this week about fertility in rich countries. I’m presenting an anecdote that was interesting to me in light of the data he presented on college. He presented a “J-curve” demonstrating that the highest fertility rate (2.2 children per woman) occurs among women who did not complete high school in the US. Women who had 4 years of college are collectively at below-replacement fertility. Women with more than 16 years of school, meaning they have an advanced degree, are closer to having 2 children on average, although still below replacement.

According to Hazan and Zoabi (2015), “By substituting their own time for market services to raise children and run their households, highly educated women are able to have more children and work longer hours.” At least some of that J-curve can be explained by the fact that the most highly educated women have more money than the woman who are at only 15 years of schooling. So, the highly educated woman can buy childcare for multiple children in the US. (Having two kids in full-time daycare usually costs more than $20,000 per year).

I saw a discussion on Twitter this week that made me think about the marginal choice to have children and how that relates to education. A journalist who lives in New York City tweeted that, “there is literally nothing encouraging me to have a kid right now in the US even though I am a prime candidate on paper”. Another woman replied that she, similarly, feels like she could have a child right now but is leaning toward not doing it. She explained, “I’m torn because part of me believes in helping raise the next generation to be conscious citizens and all that, but another part of me thinks climate change has already claimed our future and it’s futile?!” 

This sounds like the position of a college-educated “global citizen”. The way I relate it to James’s post is that I think someone who never went to college is less likely to hold her normative view of parenting.

I’m reading the Theory of Moral Sentiments. Here is what Adam Smith wrote about about global citizens mindset or what he called “universal benevolence”.

This universal benevolence, how noble and generous soever, can be the source of no solid happiness to any man who is not thoroughly convinced that all the inhabitants of the universe… are under the immediate care and protection of that great… all-wise Being… To this universal benevolence, on the contrary, the very suspicion of a fatherless world, must be the most melancholy of all reflections…