29 Jun 2016

Schumpeter Is Insensitive

Humor 1 Comment

I’m working on lectures for my History of Economic Thought courses for Tom Woods’ Liberty Classroom (I will blast out the details once they’re all up–very soon now!), and this passage from Schumpeter cracked me up:

I do not think that Ricardo ever did much historical reading. But this is not what I mean [in the text above]. The trouble with him is akin to the trouble I have, in this respect, with my American students, who have plenty of historical material pushed down their throats. But it is to no purpose. They lack the historical sense that no amount of factual study can give. This is why it is so much easier to make theorists of them than economists. [Italics original.]

— Joseph Schumpeter, History of Economic Analysis, p. 472, footnote 2.

29 Jun 2016


Brexit, Lara-Murphy Show, Potpourri, Scott Sumner, Trump 6 Comments

==> Carlos and I discuss the mechanics of whole life insurance policy loans, and in particular some of the intricacies in how Nelson Nash describes being an “honest banker” with your IBC system.

==> In 1958 Mises gave lectures in Argentina. This one concerns migration barriers and the flow of capital. Very relevant.

==> I can’t even remember what led me to this, but check out my tips for activism in the age of the Internet, a piece that I wrote for LewRockwell.com back in the day. This was a stage in my life where I still tried to be eloquent, as well as educational.

==> Joe Salerno corrects today’s Keynesians who try to use Wicksell for their nefarious projects. For shame!

==> Bernanke is against Brexit (duh), but he adopts an interesting way of doing the costs and benefits: He says UK will be poorer because of trade barriers, and then says they won’t gain from reduced regulations since EU will insist on retaining the regs in order to get access to markets. Well, OK, it *could* turn out like that, but he gives us no argument why it should be so. Especially when you factor in that trade barriers make EU countries poorer, it’s not obvious why UK would lose that bargain.

(Make sure you get what I’m saying: Bernanke is saying Brexit is going to hurt, since EU will retaliate with high trade barriers. But then he throws out the one possible economic benefit–namely, freedom to ignore EU regulations on business–by saying UK will have no choice but to accept those regulations, in order to maintain access to EU markets. See the balancing act for that stance?)

==> Speaking of Brexit, here’s me speaking of Brexit (radio interview last Friday).

==> Von Pepe sent this ZeroHedge article which charts the S&P index against the Fed’s balance sheet. Hmm that sounds vaguely familiar…

==> Sumner responds to my review of his book. If you first read my review, then Scott’s reply, is there anything left for me to discuss? I’m happy to continue the discussion but only if you think it’s worthwhile.

==> I know some of you like it when I brawl with random people in the comments at other blogs, kinda like Jordan walking by an outdoor basketball court and being challenged by some punk. Well, here ya go. And if you want an example of what I meant when I said Scott has been nodding and winking thatTrump was Hitler, here’s an example. (However Scott tells me that was a joke, and I believe him. So Scott’s nuanced position is that Trump has traits like the German dictator, but is not by himself that kind of a threat because–Scott says–Trump is not competent enough to do that much damage.)

28 Jun 2016

AWESOME Speech by Nigel Farage on Brexit

Brexit 11 Comments

It’s partly just because I love their accents, but check this out. The lady behind him starts cracking up even though she’s trying to hate him.

27 Jun 2016

The Lara-Murphy Show, Episode 19: How Policy Loans Work

Lara-Murphy Show No Comments

For those interested in Nelson Nash’s IBC, Carlos and I get under the hood and discuss his discussion of policy loans and grocery store analogy.

27 Jun 2016

Turning Men’s Evil Intentions to Good Outcomes

Religious 4 Comments

One of the most beautiful passages in Scripture is an adult Joseph forgiving his brothers (who, when he was a teenager, had literally sold him into slavery because they were jealous of him):

15When Joseph’s brothers saw that their father was dead, they said, “What if Joseph holds a grudge against us and pays us back for all the wrongs we did to him?” 16So they sent word to Joseph, saying, “Your father left these instructions before he died: 17‘This is what you are to say to Joseph: I ask you to forgive your brothers the sins and the wrongs they committed in treating you so badly.’ Now please forgive the sins of the servants of the God of your father.” When their message came to him, Joseph wept.

18His brothers then came and threw themselves down before him. “We are your slaves,” they said.

19But Joseph said to them, “Don’t be afraid. Am I in the place of God? 20You intended to harm me, but God intended it for good to accomplish what is now being done, the saving of many lives. 21So then, don’t be afraid. I will provide for you and your children.” And he reassured them and spoke kindly to them.

I added the bold. That should help you forgive others and move on with your life.

Then in the book of Exodus, we see the same thing: Pharaoh orders that all the Israelite male newborns should be killed–which of course is a horrible thing–but God ultimately uses that to allow Moses to be raised in the Pharaoh’s court and become the man he needed to be.

Incidentally, as my study partner and I worked through Exodus, I noticed something that I hadn’t caught before. First the context: In Exodus 3 God tells Moses that he is going to deliver the message to Pharaoh, and rescue his people out of bondage. Then this is Exodus 4, where Moses has his doubts:

1Moses answered, “What if they do not believe me or listen to me and say, ‘The Lord did not appear to you’?”

2Then the Lord said to him, “What is that in your hand?”

“A staff,” he replied.

3The Lord said, “Throw it on the ground.”

Moses threw it on the ground and it became a snake, and he ran from it. 4Then the Lord said to him, “Reach out your hand and take it by the tail.” So Moses reached out and took hold of the snake and it turned back into a staff in his hand. 5“This,” said the Lord, “is so that they may believe that the Lord, the God of their fathers—the God of Abraham, the God of Isaac and the God of Jacob—has appeared to you.”

6Then the Lord said, “Put your hand inside your cloak.” So Moses put his hand into his cloak, and when he took it out, the skin was leprousa —it had become as white as snow.

7“Now put it back into your cloak,” he said. So Moses put his hand back into his cloak, and when he took it out, it was restored, like the rest of his flesh.

8Then the Lord said, “If they do not believe you or pay attention to the first sign, they may believe the second. 9But if they do not believe these two signs or listen to you, take some water from the Nile and pour it on the dry ground. The water you take from the river will become blood on the ground.”

10Moses said to the Lord, “Pardon your servant, Lord. I have never been eloquent, neither in the past nor since you have spoken to your servant. I am slow of speech and tongue.”

11The Lord said to him, “Who gave human beings their mouths? Who makes them deaf or mute? Who gives them sight or makes them blind? Is it not I, the Lord? 12Now go; I will help you speak and will teach you what to say.”

13But Moses said, “Pardon your servant, Lord. Please send someone else.”

14Then the Lord’s anger burned against Moses and he said, “What about your brother, Aaron the Levite? I know he can speak well. He is already on his way to meet you, and he will be glad to see you. 15You shall speak to him and put words in his mouth; I will help both of you speak and will teach you what to do. 16He will speak to the people for you, and it will be as if he were your mouth and as if you were God to him. 17But take this staff in your hand so you can perform the signs with it.”

Look at the part I put in bold. I had remembered Moses saying he wasn’t a good speaker, but I didn’t remember that he flat-out asked God to pick somebody else–and this was after God had performed three miracles (starting with the burning bush) in the previous 5 minutes. (!)

But what’s really interesting is that the Lord doesn’t say, “I’m going to pretend you didn’t just say that, get going.” No, He caters to Moses’ weakness by bringing Aaron into the equation.

*   *   *

I was listening to Tom Woods tell Isaac Morehouse some unpleasant details about his childhood, and it made me smile. First, because it sounds like Tom had a very similar experience as me, in junior high. Second, because that stuff needed to happen for Tom to become the Jedi Knight of Liberalism he is today.

God knows the whole scope of human history; He knew it before the first people existed. He knows your flaws but He also knows your potential. He has arranged everything–down to the last atom in a star billions of light-years away–so that His wonderful story will unfold just as He planned.

Was there any chance that on page 550 of Book 7 of the series, J.K. Rowling would realize she’d painted herself into a corner and that Harry Potter wouldn’t be able to defeat Voldemort? Yet even though we know that as outsiders, Harry was still anxious and doubtful throughout the whole series, because he didn’t realize he was the star in a novel written by an author with a good heart.

If you trust your life to the Lord, you will achieve a peace that surpasses all understanding. Paul was writing letters in prison and was full of joy.

25 Jun 2016

Those Silly Austrians Keep Making Econ 201 Errors

Scott Sumner 20 Comments

I can’t remember the course number for Intro to Micro, but I know I never actually taught “101” so maybe it was 201. Anyway, one of the points I would hammer home with the students was to distinguish between a movement in demand, versus moving along the demand curve. I would warn them not to say something dumb like, “The explosion in Libya reduced oil supply, causing the price to rise, which reduced demand, causing the price to fall.”

So, it’s frustrating when Scott writes stuff like this:

Instead, the view that Bullard attributes to monetarists is actually the Keynesian/Austrian view.  It’s Keynesians and Austrians who reason from a price change.  They are the ones who insist that low interest rates are expansionary.

OK, back in 1949 Mises published Human Action. It contained this passage (thanks to David Gordon for helping me find it):

It is necessary to stress this point because it explodes the customary methods according to which people distinguish between what they consider low and high rates of interest. It is usual to take into account merely the arithmetical height of the rates or the trend which appears in their movement. Public opinion has definite ideas about a “normal” rate, something between 3 and 5 per cent. When the market rate rises above this height or when the market rates–without regard to their arithmetical ratio–are rising above their previous height, people believe that they are right in speaking of high or rising interest rates. As against these errors, it is necessary to emphasize that under the conditions of a general rise in prices (drop in the monetary unit’s purchasing power) the gross market rate of interest can be considered as unchanged with regard to conditions of a period of a by and large unchanging purchasing power only if it includes a by and large adequate positive price premium. In this sense, the German Reichsbank’s discount rate of 90 per cent was, in the fall of 1923, a low rate–indeed a ridiculously low rate–as it considerably lagged behind the price premium and did not leave anything for the other components of the gross market rate of interest. Essentially the same phenomenon manifests itself in every instance of a prolonged credit expansion. Gross market rates of interest rise in the further course of every expansion, but they are nonetheless low as they do not correspond to the height required by the expected further general rise in prices. [Human Action, p. 549]

All right so Mises is certainly on to the general concept here (which I read back in high school), and this came out more than a decade before Friedman & Schwartz. It’s not the exact thing that Scott is talking about, but it’s the mirror image and it should certainly be evidence that Austrians aren’t complete idiots when it comes to interpreting monetary policy and interest rates.

(Further, the renewed interest in Wicksell’s “natural rate” is also not new to Austrians–Mises’ theory of the business cycle used this concept as one of its key building blocks.)

What’s super duper weird is the following:

==> Scott and I both agree that if the Fed were to raise its interest rate target by 25 basis points at the next meeting, it would signal a tightening of monetary policy. In contrast, if the Fed were to keep interest rates at their current level, this would be a looser stance of monetary policy compared to the alternative of raising rates a quarter point.

==> Scott and I both agree that the Fed has done things since 2008 that, if not handled correctly in the future, could lead to hyperinflation.

==> Scott and I both agree that if the Fed since 2008 had engaged in our preferred monetary regimes (meaning I think it would be true of my regime, and he thinks it would be true of his regime, but not that we think it would be of the other guy’s proposal), then the Fed right now would have a much smaller balance sheet, and interest rates would be higher than they are now. (See his point 2 here.)

CONCLUSION from the above points: Scott and I both agree that the Fed has done terrible things since 2008, which have made interest rates much lower than they would have been with a sensible policy, which risks hyperinflation, and that if the Fed were to raise rates this year, it would be tightening of monetary policy.

And yet, he continues to quote Milton Friedman and lecture people–including James Bullard if you click his post–on a very elementary point, that I for one first encountered as a senior in high school.

And the ultimate last point I’ll make: In other posts (e.g. here), Scott said that you shouldn’t trust his personal views on monetary theory, but instead you should take the view of the economics profession as a whole. And they right now don’t agree with most of Scott’s views. So…

P.S. I’m firing this off before I go to bed, and it’s hard to convey tone of voice over the Internet. If you read Scott, you know he often makes “jokes” that his commenters don’t get. The above should be taken in that light.

25 Jun 2016

Jobs That Murphy Doesn’t Want to Do Himself

Brexit 8 Comments

No, I’m not talking about open borders. Instead I’m talking about this absurd WaPo article on how dumb those British #Brexit supporters were. You’ll notice:

  1. They don’t try to show whether most of the Google searches could have been done by non-voters. (I’m not saying this is true; David R. Henderson has some thoughts.) But the WaPo piece didn’t bother to even establish that link in the argument.
  2. They don’t discuss the possibility that the Remain voters might be totally ignorant and doing the searches, even though they were 48% of the total voters.
  3. They cite ONE PERSON who says she regrets voting for exit.
  4. They pepper the article with links to related analyses, making sure you don’t think this outcome is in any way a validation of Trump.

So here’s what I’d like from you guys: See how many “ironic” Google search histories you can find, that would make the anti-Brexit people uncomfortable. For example, was there a surge in “Who is Barack Obama?” after he won the first election, or “Who is Hillary Clinton?” after she bragged about being the first female candidate in a major party, or “Who is Ali?” after he died, etc., or “What is Prop. ___?” for a state-level referendum that progressives loved the outcome of, etc.

But please also provide the screenshot of the Google spike (and a link) so I can mimic the people who are mocking those Neanderthal British voters. (I don’t see such an image in the WaPo article, but they are floating around Facebook.)

Whoever I deem as the best contributor to this post, I will PayPal you $25–You know, a little something for the effort.

Happy hunting!

P.S. If you guys find anything really funny, I will use it in one or more columns I’m writing on Brexit. But to warn you, depending on the outlet, it might not sound right for me to directly credit you.

25 Jun 2016

Mises Defeats the Robot Overlords

Economics, Shameless Self-Promotion 13 Comments

My latest FEE article responds to Scott Alexander’s intriguing (but baseless, I think) worries:

Yet these are mere quibbles. The real difficulty is that Alexander has implicitly assumed that the mines of iron ore (that’s how you make steel) are either unowned, or are owned by one of the two operations in the loop. There’s no danger of “out of control” robots creating trillions of copies of themselves without human approval, if the humans own the raw materials.

Finally, even if the robots could somehow multiply by only manipulating matter already within their legal control, the problem here would be one of ill-defined property rights. If it would bother humans to know that the solar system is filling up with robots, then assigning property rights to the various segments of space would be the solution.

In this context, Alexander’s worries about an “ascended economy” have nothing to do with private enterprise, and instead are analogous to someone worried about overgrazing cattle on public lands.