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Friday, March 11, 2005

Do Dead Parrots Read ?

I should have known that the answer is no. I might even have guessed that, were a dead parrot to blog, the dead parrot would repeat things without thinking. Now I know.

Victor , an actuary in Arkansas, stubbornly insists on misconstruing this post of mine. His version of my claim is clearly inconsistent with what I wrote. This has been pointed out very clearly both by me and by PGL, another commenter.

I should point out that I wrote this angry post, in part, because I thought that Victor had repeated his silly claim in a new post
at 01:27 PM on Mar 8 about what I claimed, after his error had been pointed out by me at 05:14 PM on Mar 8 and another commenter. PGL at 03:43 PM on Mar 9. After careful checking I note that 01:27 PM Mar 8 comes before and not after
05:14 PM Mar 8 and 03:43 PM Mar 9. Still Victor has not retracted his mistaken claim.

Now, I admit, that I overlooked the same error apparently briefly made by PGL at Angry bear (who, as noted above, has since corrected Victor and, perhaps, himself) . But I mean, really, if you had to choose between challenging a dead parrot and challenging an angry bear, what would you do ?

Victor's version

DeLong also refers to this post by Robert Waldmann that papers over the important distinction between stocks and flows.

In sum, Waldmann's argument is that the interest rate is the inverse of the price of tomorrow's consumption; as with any price change, there is the possibility that there will be offsetting income and substitution effects. Therefore, if privatization boosts the rate of return on your wealth, tomorrow's consumption is now cheaper.

A sentence in my original post
In the case of social security reform, there is no substitution effect.
Now I think it is clear to anyone who can read that "there will be offsetting income and substitution effects. " is not consistent with "there is no substitution effect."

Once the error is pointed out, there is no need for discussion. I think a correction is in order.

I wrote an over long comment on Victor's post which began

Robert Waldmann writes ...

You clearly did not read my post. I did not say that the effects of personal accounts is ambiguous because of income and substitution effects. I said the effect is an unambiguous reduction in national savings.

I quote myself [OK here I am quoting myself quoting myself clearly falling into a metadox]

"In the case of social security reform, there is no substitution effect. The proposal is to replace one form of forced savings with another. Contributions are FICA which is fixed by law and not voluntary. However if, as claimed by Bush and the Cs, private accounts are a better deal, then there should be an income effect causing increased consumption."

See isn't that simple. I did not write that the sign was ambiguous. I did not write that the income effect *might* be larger than the substitution effect. I argued that, in this case, the substitution effect is exactly zero. I actually thought the point was too obvious to labor." [long snip]
Posted by Robert Waldmann at 05:14 PM Mar 8

PGL put it better

pgl writes ...

Victor - Robert repeats NO substitution effect. And where did Barro and Becker say people will delude themselves? They did not. What they said is that people's opportunity sets do not change at all. Same thing Robert said. And a FAR cry from what you are suggesting. Please READ more carefully.

Posted by pgl at 03:43 PM Mar 9

In a later post Victor writes at some length about me, but does not correct his totally incorrect summary of my post.


To clarify: my position is that there isn't any expected benefit vis a vis future consumption. That's what I said in my original post on this subject, although we can hope for better. Waldmann, however, WAS arguing that there would be an improved rate of return (indeed, without a change in the rate of return, there is no income/substitution effect to analyze). I therefore challenged Waldmann's argument on his own turf, and this apparently confused PGL. Therefore, PGL should be criticizing Waldmann, not me.

Sometimes when you see a bad argument (Waldmann's), there are a lot of ways to break it down. Maybe I should have tried PGL's defense (that Waldmann's premise was misguided), but instead I showed that he was either (a) arguing in favor of privatization or (b) arguing for a virtual impossibility. My approach was more robust to optimism with private accounts, PGL's was more succinct."

PGL's in an intellectual box on this issue, since he had previously sourced that exact same Waldmann argument with apparent approval.

In fact this later post adds another gross error. In my original post, I did not say that private accounts would provide better returns than guaranteec benefits. This is why PGL did not recognise any inconsistency between my position and his. To quote my post below

"Now I think that Brad may be right that private accounts are likely to be a wash as far as national savings go, but you should point out that you only think that because you assume that Bush, the Cato institute and the CEA are full of it.

They all claim that private savings accounts are a better deal than traditional social security. They even claim that young people will be better off with the reform in spite of price indexing and the 3% offset rate. That is, they claim that the reform will reduce national savings."

Notice the pronoun "They". I wrote that "they" make this claim. I did not make that claim. Third person plural not first person singular. Victor uses the name "Waldmann" to refer to the entity that made a claim. I used the phrase "Bush, the Cato institute and the CEA". They are not equivalent.

Still quoting myself

"This is simple. If the reform means that people are better off, then the reform should make people consume more and save less. [snip] However if, as claimed by Bush and the Cs, private accounts are a better deal, then there should be an income effect causing increased consumption.

[paragraph on other components of national savings deleted]

To argue that social security reform will increase national savings one must argue that it will make participants poorer or will make the accumulation of national debt more terrifying. The President is effectively saying -- trust me don't worry, I'm obviously lying."

The references to higher returns are both proceded by the word "if". I did not claim that there would be higher returns, I discussed what would happen if there were. The qualification "as claimed by Bush and the Cs" makes it clear to any functionally literate person that I do not consider the claim my own.

Notice that Victor has neglected the obvious fact that I was very careful not to claim that private accounts would offer better returns when writing "a bad argument (Waldmann's)," and claiming that PGL had misunderstood me when PGL gave the impression that he and I agree (as we clearly do).

Still I find some of Victor's prose good enough to steal in a manner which I freely concede is not a quotation, summary or accurate paraphrase

"Sometimes when you see a bad argument" (Victor's), "there are a lot of ways to break it down. Maybe I should have tried PGL's defense" My approach was boring "PGL's was more succinct."

I still love the Dead Parrot's Society Slogan

"four out of six of us agree:a mighty slogan will go up here"

Update: I have found a more incoherant summary of my post here. Hat to to the General.

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