Transgressing the Boundaries: Towards a Transformative Hermeneutics of Curt Doolittle “I don’t remember who in the thread above wondered aloud whether something Curt Doolittle wrote was a joke or not. This is generally a problem with reading what Curt Doolittle writes. It is one of the reasons I recommend not trying to read him. He has been captured by a mania for categorization, and the schema of categorization which he has constructed is largely unintelligible to anyone else. It might be that by reading him with close attention, one could, over time, learn to make sense of his writings. I myself have no interest in pursuing that strategy and am happily willing to do without whatever benefits might be attendant on such a strategy.” — Jeff Riggenbach of the Mises Institute

“And now abideth faith, hope, clarity, these three; but the greatest of these is clarity.” — 1 Corinthians 13:13 (King James Version)

A few months ago I posted a video making fun of a few things internet philosopher Curt Doolittle said in an interview: Recently he seems to have uncovered the video and there was an exchange in the comments. He reposted one of his comments on his website. This will be a response to that post, although it’s really aimed at 3rd parties who may benefit from my attempt to make sense of what Doolittle is saying. Externalities There is an idea in economics, which derives from Hayek, that prices transmit information. Doolittle seems to reference this when he says: I work with INFORMATION in total, not with PRICES alone. And I extend economic models to include INFORMATION of all kinds, and the consequences of changes in information.

Let me try to translate this: there is some overall amount of “information” in society of which prices, interpreted as signals, form only a part of. Doolittle goes on: In the context of my talk, and in the context of my arguments, there is no difference between the increases or decreases in capital, and the voluntary or involuntary transfers of that capital, by INFORMATION rather than that SUBSET of information that we call PRICES.

In other words, the general rule describing the externalities of prices is but a subset of the general rule describing the externalities of all information. And unintended consequences are a question of scope of INTENTION, not a question of the scope of the consequences of INFORMATION.

Let me again try to interpret this. In the beginning of the post Doolittle defines an externality as “any benefit or loss not included in the price of the exchange.” This is sort of but not entirely accurate. A better definition is this. For a particular decision-maker, a negative externality is that part of marginal social cost not included in marginal private cost; a positive externality is that part of marginal social benefit not included in marginal private benefit. Of course when exchange actually occurs, if there are no taxes or subsidies, only private costs and benefits manifest in prices, so Doolittle’s definition is effectively correct. If the price system is interpreted as an information channel, with prices as the signals, uncorrected externalities mean that some information about the social costs and benefits is not included in the signal. When Doolittle talks about the “externalities of all information” he is speaking generally of the idea of missing information in a signal, rather than confining the concept to price signals. This is my most charitable attempt to interpret some very obscure sentences. But if this is really what he meant, one wonders a few things: (1) why he is unable to state it clearly, (2) why he has to hijack the misleading word “externality” rather than use something clearer like “missing information”, and (3) what this has to do with a butterfly flapping its wings causing a tornado. Even if my interpretation is wrong, I still do not see any connection between the butterfly example and “information.” I couldn’t think of any sensible interpretation of Doolittle’s statements about “capital”, which is a concept with a thousand definitions. Capital could mean physical capital, either fixed or circulating. It could include human capital and “knowledge” capital. “Capital” is also used to refer to the capitalised value of these assets. Maybe he is mixing “knowledge capital” and prices into one big vague basket of things he calls “information.” But this would be conceptually unhelpful since the rôle of prices is to aggregate and transmit knowledge, they are not included in the total stock of knowledge itself. Doolittle concludes: if you understand this I don’t really require an apology because I realize this is non-trivial material. I make very few errors. But I am always constrained by the limits of time and circumstance and I cannot explain every concept that I rely upon in every utterance I make. It’s just not possible.

Keynesianism

Doolittle then moves on to the subject of Keynesianism. Quick howlers to begin with: Doolittle refers to Keynesianism as “freshwater” when he ought to say “saltwater”, and, although I am not an expert on this topic, his use of the “axiom of choice” bears no relationship to the definition to be found on Wikipedia or Wolfram. Doolittle then divides economists into 3 groups: Natural Law (Austrian)



Rule of Law (Chicago)



Discretionary (Keynesian)

Needless to say, it’s not really fair to categorise things this way. Remember that Keynesianism is a positive theory about the relationship between interest rates, investment, aggregate demand and employment in an economy. Doolittle construes it as being an overarching political philosophy. Similar statements can be made about the Austrian and Chicago schools, these schools do not necessitate overarching political philosophies. He then interprets each school as follows (I am of course de-vagueifying it): Austrians supposedly believe in laissez-faire, so think that government should leave prices unmanipulated.



Chicagoites want to correct externalities with government intervention, thereby making the prices “correct”.

Keynesians believe the misallocations caused by distorting prices are outweighed by some other gains. If this is what he means by an “externality” then we have drifted pretty far from its canonical meaning. Remember, an externality is defined in relation to social and private costs and benefits. I have never seen anyone (except until now of course) refer to distortion of prices by government as an “externality.” Many old-style Keynesians would probably argue that prices are only “correct” at full employment; until we’re there, real world prices are not the ideal prices of general equilibrium theory. Government stimulus may lead to misallocations of resources, but if it leads to fewer underutilised resources then it may be a net gain. There is no sense in which Keynesians try to “escape full accounting” as Doolittle said in my video, unless you assume full employment which is precisely the thing you can’t assume in this context. Doolittle also states that the debate over macroeconomics has “calmed” since the 2008 crisis, something that is definitely untrue. That’s all I really wanted to say.