Bryan Caplan
believes that scholars should be ashamed if they do not publicly bet
their views. In contrast I fear this requirement would become a tax
upon ideas.
My knee-jerk reaction is to say, “Yes, a tax upon false ideas.” My second thought is to say, “No, it’s also a tax upon thinking out loud.” My third thought is to say, “Not quite. It’s also a tax upon thinking out loud – and then refusing to back down when listeners offer constructive criticism.”
Tyler continues:
How would you feel about an obligation (if only a moral one) for
scholars and commentators to publicly reveal the content of their
investment portfolios? Those portfolios are their real bets.
Portfolios are “real bets” about a narrow range of tightly bundled questions. When I hold an index fund, for example, I am simultaneously betting on the quality of economic policy, the resilience of the economy, the average risk premium, etc., but only as they relate to the price of stocks. The beauty of the betting norm is that it opens up a much wider range of individually-wrapped questions.
Of course, if a scholar or commentator makes claims about what financial markets are going to do – or offers general advice about prudent investing – I think it’s entirely appropriate to ask them about the content of their investment portfolios. “But… that would be a tax upon hypocrisy!” Precisely.
READER COMMENTS
mgroves
Mar 14 2009 at 1:27pm
Or a tax on a form of hedging…if I say “X will happen”, but I bet on Y, then in either outcome I win publicly and lose privately, or lose publicly and win privately.
Greg
Mar 14 2009 at 3:05pm
It’s also a tax on opining on inherently uncertain topics. However, that’s just if the betting is uniformly enforced. Maybe the general idea of betting your ideas is just a good mechanism to force people to be less dogmatic / falsely certain in their predictions.
rhhardin
Mar 14 2009 at 4:58pm
Bets traditionally head off altercation.
I’d bring back altercation. Great TV.
Barkley Rosser
Mar 14 2009 at 11:06pm
Bryan,
So, if Mason lunch people want to bet with each other, fine. Also, sometimes there are clear bets, such as the famous one between Julian Simon and Paul Ehrlich over commodity prices, which Julian Simon one (and Ehrlich paid).
But sometimes this just becomes macho posturing used to shut down or distract from serious debate and discussion. Consider this new challenge from Mankiw to Krugman. So, yes, Krugman has been obnoxious towards Mankiw. But the basic issue has been whether or not the stimpack will “work.” Needless to say, it is very fuzzy as to what it will mean for it to “work” or not. Mankiw, however, has defined this as the stimpack matching or exceeding the probably overly optimistic forecast by the Obamoids. However, given the hard collapse going on in most of the world economy, Krugman could very reasonably argue that if the stimpack leads the economy to perform quite near to the Obama rate, but somewhat lower, would still mean that it “worked.” Hence, posing the issue that way and getting all these people to say that Krugman lacks “backbone” as one commenter said over on MR, is just silly. Mankiw is just distracting with a baloney proposal, and Krugman was perfectly reasonable to avoid playing such a silly game.
(I note that over on MR I stated that I am more or less in accord with Tyler and simply have never bet on any forecast about the economy, politics, or sport, although I am not averse to betting in a zero sum game of skill like poker. My reasons may be viewed as irrational, but I also note that some great world religions actually view betting as evil.)
Sam M
Mar 15 2009 at 12:06am
[Comment removed pending confirmation of email address and for rudeness. Email the webmaster@econlib.org to request restoring your comment privileges. A valid email address is required to post comments on EconLog.–Econlib Ed.]
Grant
Mar 15 2009 at 7:09am
Barkley,
Part of the betting process is arriving at a more reasonable metric to bet on. Like in any other negotiation, both sides tend to start with offers they think the other probably won’t accept. Mankiw started with Obama’s growth estimates, which most people think are very unlikely.
From your above paragraph, I’d say better has worked. Its told me that Mankiw isn’t very confident in his position, or he’d of chosen a better metric than the Obama growth projections. Note in most prediction markets, more neutral parties tend to choose the contract terms.
Of course if the two do arrive on something to bet on, then great. Not only do we get to see which is correct, but we see exactly where the disagreement lies. How often are we provided with such information on pundits?
Pietro Poggi-Corradini
Mar 15 2009 at 10:20am
I see these bets as reducing the amounts of rational irrationality that we don’t even know we have.
libfree
Mar 15 2009 at 11:01am
I think that the Mankiw bet was proper. Krugman was rude about Mankiw’s projection and suggested that the might be idly throwing ideas out to support a nefarious agenda. Mankiw’s defense is that he is willing to put his money where his mouth is.
Bob Montgomery
Mar 15 2009 at 3:41pm
That’s just false, though – Greg Mankiw’s original post wasn’t about the stimulus package at all, it was all about Obama’s growth projections. And Krugman’s response also didn’t mention the stimulus package. The entire exchange was about the growth projection.
Mankiw’s offer of a bet was entirely on-point.
Barkley Rosserac
Mar 15 2009 at 5:47pm
Grant,
Generally agree with your point. I think context and norm are very important. Thus, I gather that it is normal for some members of the Mason lunch crowd to do these sorts of bets. Very likely they follow your sorts of procedures, carefully setting the metric and negotiating in a friendly or reasonable manner. Great, no problem.
libfree,
Yes, Krugman was rude. However, I think your comment fits in with exactly what I see as often the problem here. Challenging someone to a bad bet becomes a substitute for actual discussion or debate, especially when the bet is one that is as badly formulated as the ridiculously half-baked one that Mankiw posed. This frankly looked exactly like the sort of “you wanna bet on it?!” sort of macho baloney that is designed to shut down debate (“I am a bigger he-man than him!”). Just plain stupid.
bob M.
I confess to not having read either of them in any detail, and while your links did not work, you could be well be right, although indeed the broader context has been an ongoing argument between them over spending-driven fiscal stimuli.
I am rather doubtful that Krugman was defending the Obama projections, although you may correct me if I am wrong. He has loudly declared that the Obama stimpack is insufficient and will not bring the economy up as much as it needs to be brought up. This suggests to me that even if somehow he said that things will be better than Mankiw says (and Mankiw has been touting some seriously silly nonsense about unit roots to support his especially pessimistic position), he is not at all going to be supporting or arguing for the Obama projections, which everybody knows are overoptimistic anyway for various reasons, even if one thinks the stimpack is “just right.”
The bottom line is that Mankiw posed a totally phoney and ridiculous bet to Krugman that the latter was fully justified in not even giving the time of day to.
Joshua Lyle
Mar 16 2009 at 9:56am
Barkley Rosserac,
I keep hearing that bets are macho posturing that reduces our supply of debate. You may be seeing a better class of debate than I am, but it seems like most public discourse is, in fact, macho posturing, or, to be more gender-neutral, a form of status-seeking. Bets, when done well, are at least a form of status-seeking with a cost for being wrong, and Bryan’s version of betting norms at least lets people admit that they were wrong and still save face, or even make a claim that they were still right in general and backing up the claim with another bet offer.
In any case, informative bet making is a valuable form of public discourse, and we may as well complain about Krugman clinging to conventional forms of discourse thus shutting down the informative betting negotiations that Mankiw began instead of countering him.
M1EK
Mar 16 2009 at 2:29pm
“then refusing to back down when listeners offer constructive criticism.”
Since Mankiw doesn’t even accept comments on his blog, how can one use this ‘bet’ against Krugman?
Jonathan
Mar 17 2009 at 2:31am
It seems to me that bets on testable predictions are inferior to rational debate, in which participants honestly present their beliefs and their reasons for their beliefs, and are willing to be persuaded by similar presentations from other participants. Rational debate ideally ends in agreement, or at least identification of fundamental disagreements that are hard to reason about. On the other hand, bets would be superior to obnoxious arguments, in which participants are dishonest and accuse each other of dishonesty.
The exchange between Krugman and Mankiw appears to be an example of obnoxious argument, as either Mankiw is dishonest or Krugman has falsely accused him of dishonesty, and so I would reject an argument against their making a bet because it would squash rational debate, because there is no rational debate to squash in this case. Negotiating a bet would at least focus their minds on making good predictions instead of rationalizing the predictions they want.
Mankiw has responded to accusations of dishonesty by declaring he is willing to bet on what he says he believes. It seems that Krugman should either accept the bet, propose a different bet that he can argue better reflects the beliefs Mankiw claims, or attempt to elevate the discourse to rational debate by apologizing for his accusations of dishonesty, and respecting Mankiw’s position as honestly held, to be evaluated on its own merits.
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