Kling clarifies for us.
Can we quantify institutions by channel flows? I think so, I think we are full blown Austrians. Take the CapnTrade vs VAT arbitrage I posted a few days ago. Or look at the flow of entitlement payments vs private sector wages. I think we can go right into the San Francisco city council and track the flow of labor favoritism vs transaction costs of regulated city contracts, look at pension payments vs business formation in small municipals and predict bankruptcy very accurately. Measuring a Krugman agglomeration around Washington DC we can predict state bankruptcies. Check out the research on city growth .
There is an implied game theory, Bootleggers and Baptists, Public Choice etc that is part of Austrians and channel analyis is going to crack those cases also.
Kling says we are just barely beyond freedom indices. I say we are closer than that.
We have one danger, I should point out. The ability to combine the new analysis with new information technology can easily predict a frightened national leader into war. North Korea comes to mind. The new econometrics must certainly frighten China's leaders, look at their struggles with Google.
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