Monday, November 17, 2008

See a Penny, Pick it Up and Other Fallacies


If you see a free dollar in a competitive market, do you pick it up or do you say to yourself, "This is too good to be true, there must be a catch"?

Have a look at Mankiw's chart-grab du jour.

According to this chart, unexplained as it is, you'd expect that the UAW would have no trouble organizing workers in foreign manufacturer's plants (God knows, they've tried). What employee wouldn't want very nearly to double their income, their hourly wage?

Since we know that unionization is not spreading quite like that, do you swallow this chart, or ask, "Hey, this can't be true" or "there must be more to the story"?

If you dig into the data, you find out that the author of this chart is intentionally comparing a fully loaded cost with one that isn't (and based on an estimate by Daimler). The comparable wage rate appears to be $47.50 for 2006...

Can I pick on Greg Mankiw for this? He is a well established and deservedly respected economist, who is known for his acumen and thoroughness (that I admire), both of which will endure a pundit on this mini-blog, right?

So here is a query, that I've had in the back of my mind:

When he wrote his letter to POTUS, he advised the new President to keep his economic advisers close, that no one party has "a monopoly" on the truth.

What does that mean, more precisely? Does that mean that Dr. Mankiw believes that he is wrong, 'doesn't have the truth', half the time? I doubt it.

Does it mean that economists use statistics to make "lies of omission", like this chart above, sans explanation? I don't know.

I hope he just means that economists are sometimes prone to offering one side of the story, for the best of motives, so that there is a positive value to having economists with alternative viewpoints "work a problem". But, then, there is this chart above ... hummm.

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