prior probability

Alternate title: Dierdre McCloskey’s list of 108 fictional market failures

Are “market failures” real? Or are they make-believe entities (like the aether in physics) invented by economists to justify their preferred public policies and all manner of nefarious and ultimately counter-productive regulations?

As it happens, I recently discovered this long and rambling but devastating takedown of economics authored by the legendary Dierdre N. McCloskey (ungated version here). Among other things, Professor McCloskey not only rattles off a comprehensive and chronological list of 108 alleged market failures that economists have identified or invented in order to justify public regulation of economic activity, beginning with Thomas Malthus’s now-debunked population theory and concluding with Thomas Piketty’s jury-rigged world inequality database; she also shows how these putative or fictional market failures are essentially the equivalent of intellectual moral panics among the economists who peddle them.

For my part, while I agree with the spirit, if not the letter, of McCloskey’s scathing critique of contemporary economics, I have but one quibble with her list of imaginary market failures: “the failure to define property rights …” (See Item #53 on page 12 of the ungated version.) Properly speaking, from my law professor perspective, the failure to define property rights is what I like to call a “legal failure” — a shortcoming of the legal system that makes it much harder for people to truck, barter, and trade. I first presented my theory of legal failure in my contribution to the 2014 book Economics of the Undead (see here), and more recently, I applied my theory to outer space (here).

What a glorious time to be alive! Another book that caught my attention during the “Faculty Authors’ Celebration” at my home institution last week was A Republic of Scoundrels: The Schemers, Intriguers, and Adventurers Who Created a New American Nation, which was co-edited by historians David Head and Timothy Hemmis. (Professor Head teaches history at my home institution, the University of Central Florida.) Perhaps a new Lin-Manuel Miranda musical is in the works?

Earlier this week, my home institution, the University of Central Florida (UCF), hosted its fourth biennial “Faculty Authors’ Celebration” to honor professors who have published literary works in the previous two years, and among my favorite works to be showcased at this wonderful event was the beautiful book Smothered and Covered: Waffle House and the Southern Imaginary by my colleague and new friend Ty Matejowsky, who teaches anthropology at UCF. (Check out his bio here.)

Note: I will feature a few other works that caught my attention in the next day or two, before I begin my promised review (see here) of Everyday Freedom: Designing the Framework for a Flourishing Society by Philip K. Howard.

“Adam Smith wrote and lectured on a wide variety of topics during his lifetime—astronomy, jurisprudence, moral philosophy, the origins of languages, and, of course, political economy, just to name a few—but what does Smith have to say, if anything, about the relationship between law and liberty? As it happens, law professor Robin Paul Malloy and political theorist Paul Sagar both address this key question in their respective works, Law and the Invisible Hand (Cambridge University Press, 2022) and Adam Smith Reconsidered (Princeton University Press, 2022)”. Thus begins my joint book review of Malloy and Sagar’s works!

I have three updates to report:

1. My work on “Outer Space Auctions” was recently featured on my university’s main website earlier this week! Check it out here.
2. I also presented my work at the annual Huber Hurst Research Seminar at the University of Florida (UF) last month (19-20 Jan.), where I received excellent feedback from my colleague and friend Justin Evans, who teaches business law and ethics at Georgia Southern University. (I will describe and discuss the main points raised by Professor Evans in a future post.)
3. Lastly (for now), I discovered on SSRN (where else?) an excellent survey article on “Matching, Auctions, and Market Design” by Matthew O. Jackson, who teaches economics at Stanford University. (I am writing up a new paper describing my proposed auction mechanism in greater detail than before, and my new draft will incorporate some of the insights in Jackson’s survey article as well as the points made by Professor Evans.)

See here: https://en.wikipedia.org/wiki/Law_of_the_Horse

Via tumblr, I am sharing the full video of Tracy Chapman and Luke Combs singing “Fast Car” at the Grammys before this clip gets taken down by our evil copyright overlords; see here and here, for example. Hat tip: Kottke

The update is that I have made three significant additions/revisions to my truth market proposal:

1. New subsections. I added to my paper a new subsection titled “A.I. to the Rescue?” (see Part IV of the paper, pp. 12-13) and streamlined the subsection titled “Objections to Retrodiction Markets” (Part III, pp. 10-11).
2. New addendum. I added an addendum to my paper describing how the design of my retrodiction market model has evolved since I first came up with this crazy idea in 2021.
3. New title. “Retrodiction Markets“.

Note: I will further describe and explain each of these changes in upcoming posts later this week.