05 Mar 2011

Fed Guy Backs Off “Pinhead” Comment About Ron Paul

All Posts 41 Comments

[UPDATE below.]

Based on a reader tip (which I read on my Blackberry waiting for the beginning of the “Success Assembly” at my son’s school) I had intended to write a critique of the Fed guy who called Ron Paul a “pinhead,” but before I could Bob Wenzel had already hit the major points.

So maybe I will be the first Austrian economist (leaching from Daniel Kuehn’s blog) to report that the Fed guy has retracted his pinhead comment?

Last point: Everyone is just assuming this guy was saying Ron Paul was not sharp. But if you think about it, a pinhead is very sharp up top, and certainly isn’t someone to trifle with.

UPDATE: Here is the comment I left at his site, showing the one major point I don’t think others have made regarding the original pinhead piece:

Dr. Andolfatto, I was going to write a (calm) critique of your post, but others made most of the important points. One thing that struck me was an apparent contradiction in your position: On the one hand, you were saying money neutrality proves that nobody in the public is getting taken to the cleaners by inflation.

But then later in the article you admitted that the Fed/Treasury derive an income (admittedly not large compared to tax revenues) from seignorage. So how can that be?

In your tamer post, it would be great if you could clarify. Thanks.

41 Responses to “Fed Guy Backs Off “Pinhead” Comment About Ron Paul”

  1. Bob Roddis says:

    As tradition has it, any scholarly debate between the Austrians and the fiat money folks generally takes this form:

    http://www.flickr.com/photos/bob_roddis/4774791015/in/set-72157600951970959/

  2. Daniel Kuehn says:

    The fact that he felt he had to take that down (I don’t know what the comments were looking like) was absurd. I’ve never seen a group of people so enthralled by a politician before and so resistent to the expression of any criticism of a politician. And over what? “Pinhead”? Paul implies far worse of others than that they are “pinheads” in his own statements in Congress, and other libertarians express many times more demeaning sentiments towards others in their blog. The fact that people got worked up over Andolfatto’s post is amazing to me. “The guy can be a real pinhead sometimes”? Really? That’s what does it?

    These libertarians could never survive a verbal onslaught from other libertarians, if that’s what gets them mad.

    My position is that as long as it’s not gratuitous (i.e. – he’s a terrorist, a fascist, etc.) it’s never problematic to write a criical rebuke of a politician.

    • David R. Henderson says:

      Daniel,
      I think you’re missing an important consideration: he took it down of his own volition. I don’t know what some Ron Paul supporters said, and I’m certainly open to the idea that they said some pretty extreme things. So I’m not defending their statements without knowing what they said. But really, who’s the sensitive one here: the people who reply–and, as you know, we bloggers get a lot of weird replies–or the guy who couldn’t stand the heat and, by the way, didn’t answer Murphy’s very politely asked question?

      • bobmurphy says:

        David, in fairness, I just posted that comment (even as I write) about 90 minutes ago, on a Saturday morning. Andolfatto might still be on the conference call with the Lizard People getting marching orders for next week.

        • Daniel Kuehn says:

          Dude – they don’t need conference calls. I hear they’re into mind control, which means they probably communicate telepathically.

          • Brian N. says:

            It’s not the lizard people one needs to worry about – it’s the pigs and the ponies. The way their music works alone is damn frightening…

        • David R. Henderson says:

          But he purported to answer you, even mentioning you by name.

          • bobmurphy says:

            Oh sorry David I misunderstood you. I just saw that now. I thought you meant, “He is ignoring Bob’s comment altogether.”

      • Daniel Kuehn says:

        Oh, I’m not saying someone twisted his arm. I do find the offense that is taken by these sorts of (in my opinion, quite legitimate) critiques amazing. I don’t think he should have taken it down, but my understanding is his blog is usually technically focused. I suppose he didn’t want to attract that kind of attention. I would have just kept it up and closed the comments.

        Certainly Bob’s comment wasn’t overly sensitive.

    • bobmurphy says:

      To summarize:

      (1) A guy with a PhD says Ron Paul sometimes exaggerates his claims for rhetorical effect, and in so doing calls Ron Paul a pinhead and (I would argue) overlooks a huge and obvious counterresponse, as well as possibly contradicting himself in the critique.

      (2) Ron Paul fans get upset and presumably send the guy angry emails, or (more likely) post comments.

      (3) The guy admits he was out of line and promises to re-do the post.

      (4) Daniel Kuehn says this proves how ill-behaved Ron Paul fans are.

      Actually you missed a trick last week, DK. Remember when Fox apologized for showing the wrong CPAC footage? Doesn’t that prove that Ron Paul fans are nutjobs? I mean, why would Fox have apologized otherwise?

      • Daniel Kuehn says:

        I don’t get your last question.

        Come on, Bob – give me a break. When Ron Paul gets called a “pinhead” people scream bloody murder. God forbid we call out one of the most rhetorically excessive politicians on Capitol Hill. That’s all I’m saying. These guys don’t bat an eye calling others fascists, but “pinhead” sends them swooning.

        Barak Obama’s first 100 days got an “Oh Fortuna” doomsday soundtrack on Fox, and you’re still concerned about a switch tape? I’m not saying libertarians are crazy. I’ve never said such a thing. I’m happy to say many (not all) have thin skin. And over a politician that’s been in office since before I was born. How ironic is that?

        • Dan says:

          Ah, the no biggie, Obama gets worse argument again.

          When Ron Paul is in charge of wars killing innocent women and children then I’ll take it seriously when you bring up Obama’s treatment in the media to contrast Ron Paul’s treatment.

          I don’t understand how democrats can hate Bush and like/love Obama. Are the wars and civil rights abuses suddenly not so bad with Obama in charge of the drone attacks?

          • Daniel Kuehn says:

            Dude, and you miss the point again. I don’t rush to Obama’s defense on a regular basis when he does get what is objectively unfair treatment. Go on my blog, do a search on “Obama” and see how often I get concerned about that. I don’t! I don’t have the sort of disposition that leaps in to defend politicians of all people.

            My point is that it’s amazing:

            1. How little it takes to send people in a flurry defending this politician’s honor.

            2. That the people that get most worked up about relatively minor things also say far less appropriate things about other poltiticians, and

            3. That libertarians still expect us to believe they’re suspicious of politics and politicians. They’re not! They worship politicians when they’re their own. You never see fawning over Democrats on my blog, Krugman’s blog, DeLong’s blog, etc. the way you see libertarians acting star struck over the Paul’s and the Tea Party.

            The Obama thing worries me from time to time because I could realistically see an assasination attempt in the future for a president like him. So no, of course I don’t like some of that rhetoric. But even given that concern, I never rush to defend him or promote him the way you guys do.

          • Dan says:

            I wouldn’t rush to defend Obama either. It would be like rushing to defend Bush.

            Why wouldn’t a libertarian support a politician that wants to get the government off our back and has the same principles we do? You would have a point if we were supporting Mitch Mcconnell or Newt Gingrich but supporting an anti government libertarian politician is exactly what I would expect libertarians to do.

            As far as fawning over the tea party, you must not read LRC. Here is this from their blog today.

            http://www.lewrockwell.com/blog/lewrw/archives/81562.html

            If Ron Paul started supporting the government I would abandon him tomorrow.

          • bobmurphy says:

            DK wrote:

            You never see fawning over Democrats on my blog, Krugman’s blog, DeLong’s blog, etc. the way you see libertarians acting star struck over the Paul’s and the Tea Party.

            First of all, Krugman fawns over Democrats. Didn’t you see my song parody? He said something like, “All hail Nancy Pelosi, the greatest speaker in all time” or something. It’s true it’s half snarky, but that’s because it’s Krugman. If the Lord returned tomorrow, Krugman would bend the knee but make a David Bowie reference or something while he did it.

          • bobmurphy says:

            Oh I forgot the second of all: Libertarians don’t worship the Tea Party. I can understand you saying Ron Paul. But the people who go nuts over Michelle Bachmann etc. aren’t libertarians I wouldn’t say. They are conservatives.

          • Daniel Kuehn says:

            re: “Why wouldn’t a libertarian support a politician that wants to get the government off our back and has the same principles we do? “

            Dan, I’m not saying don’t support Paul! By all means support him. I support Obama after all. Maybe I’m not communicating this well enough. Andolfatto seemed to make an awesome criticism and critics of Andolfatto seem too deferential to me.

          • Daniel Kuehn says:

            “Oh I forgot the second of all: Libertarians don’t worship the Tea Party. I can understand you saying Ron Paul. But the people who go nuts over Michelle Bachmann etc. aren’t libertarians I wouldn’t say.”

            Check out the ThinkMarkets blog. Check out Cafe Hayek. Check out Gary Gunnels in the comments on my blog. They don’t praise Bachmann, to be sure – but they’ve got the rosiest of rose colored glasses for the Tea Party.

          • Dan says:

            “I’m not saying don’t support Paul! By all means support him. I support Obama after all.”

            You said that because we support Ron Paul we are not suspicious of politicians or politics. Why is it inconsistent for a libertarian to support a politician that wants to dismantle the government?

            I imagine you hated Bush. How can you support Obama when he has expanded the so called war on terror and been just as bad on civil rights?

            “Andolfatto seemed to make an awesome criticism and critics of Andolfatto seem too deferential to me.”

            What was awesome about his post? He even admitted that creating money causes a transfer of wealth to those who get the new money first from those who get it last or not at all. If you lose your savings before your wages increase you are still getting ripped off by the devaluation of the dollar.

          • Daniel Kuehn says:

            re: “You said that because we support Ron Paul we are not suspicious of politicians or politics.

            You might want to reread what I wrote – I never said that. I should have said “some” rather than “they”, although I would hope that is understood (I can’t claim that ALL libertarians are any one thing). Some really aren’t suspicious of politicians in the way they suggest – only suspicious of those who disagree with them. I never said that they aren’t suspcious because they support Ron Paul. There are lots of libertarians that support Ron Paul but don’t take him or other politicians at face value. I support Obama but I’m gonna scrutinize the guy. I don’t understand why you are reading all this into what I said, Dan.

            re: “Why is it inconsistent for a libertarian to support a politician that wants to dismantle the government?”</i?

            Not sure I understand the question… who said this was inconsistent?

            re: “I imagine you hated Bush. How can you support Obama when he has expanded the so called war on terror and been just as bad on civil rights?”

            OK, you need to reel it back in Dan. I never “hated” Bush. I didn’t think he made a very good president, no. I have nothing wrong with the war on terror, although there are a few points where I would rather things were done differently. Same with civil rights – I’m not happy with everything, but I wouldn’t characterize Obama as “bad” on it. Why are you doing this? Why are you thinking I hate those guys or that I thoughtlessly approve of Obama? Do I ever write anything that gives you the impression I’m some kind of Obama lap-dog?

            As for Andolfatto – he called out an area where Paul is regularly deceptive (I can’t imagine Paul doesn’t understand what Andolfatto was talking about) and I think that’s a good thing.

          • Dan says:

            “Why are you doing this? Why are you thinking I hate those guys or that I thoughtlessly approve of Obama? Do I ever write anything that gives you the impression I’m some kind of Obama lap-dog?”

            I said you supported him and didn’t call you his lap-dog. Maybe you should reel it back. It makes since to me now, why you support Obama, if you have no problem with the war on terror other than how it would be managed. I guess I went too far assuming a democrat would hate Bush.

          • Daniel Kuehn says:

            Dan – you suggested I hated Bush and then that my support of Obama was somehow inconsistent with that. That kind of sounded like you thought I was making choices based on party rather than position – my mistake. I’m not a Democrat, either, by the way.

          • Dan says:

            Just out of curiosity, what are you political views?

          • Daniel Kuehn says:

            I call myself a moderate. I’ve been more sympathetic to Democrats lately, but I’ve voted for several Republicans. I’m market-oriented center left I guess you’d say.

        • Richard Moss says:

          ” When Ron Paul gets called a “pinhead” people scream bloody murder.”

          I don’t think it is as much what was said, but who said it.

          I think Dr. Andolfatto would certainly be in some hot water if had written this;

          “I can appreciate Obama’s progressive philosophy. And because this is so, it pains me all the more to say what I am about to say. The guy can be a real pinhead at times. And this is never so evident as in his persistent “attacks” against the Fed”

          It’s one thing for a private citizen to call a Congressmen or President a ‘pinhead’, or worse; but when a Fed official calls the head of the Fed Oversight Committee this, it’s a little different.

          • Desolation Jones says:

            “It’s one thing for a private citizen to call a Congressmen or President a ‘pinhead’, or worse; but when a Fed official calls the head of the Fed Oversight Committee this, it’s a little different.”

            I was siding with Kuehn here, but you make a good point. Although I still think pinhead is nothing to get worked up over, it actually is a bit unprofessional when you put it that way.

          • Daniel Kuehn says:

            Yes, I think it was quite brave for him to speak frankly about mistatements about the politician that has authority over him.

            What did Dan Klein call these guys? Overlords? Ron Paul is Andolfatto’s direct overlord. Shouldn’t we be celebrating when someone tells the overlord he has no clothes?

          • Daniel Kuehn says:

            Yes, I agree with Desolation Jones that it was unprofessional. In some ways that made it more impressive. Paul serves at our pleasure, not vice versa. Unprofessionalism is something to keep in mind but nobody should hesitate to speak blunt truth to power over professionalism. When in doubt, speak the blunt truth. We’ll all get over pinheadgate, I think.

          • Richard Moss says:

            “Ron Paul is Andolfatto’s direct overlord.”

            I don’t think so. If he were Andolfatto would be collecting his paycheck elsewhere (not because he said what he said, but because of where he works).

            “Unprofessionalism is something to keep in mind but nobody should hesitate to speak blunt truth to power over professionalism. When in doubt, speak the blunt truth.”

            Does this mean you’ll be reading Bill ‘Wayne’ Anderson’s blog again?

            “Paul serves at our pleasure, not vice versa”

            Well that’s the rub, isn’t it? Just whose pleasure are we talking about here?

            “We’ll all get over pinheadgate, I think”

            Yes, we will, just as ‘we’ would if he said the same thing about Obama or Boehner. That doesn’t mean he would not have initially caught some flak for it if he had.

          • Daniel Kuehn says:

            “Does this mean you’ll be reading Bill ‘Wayne’ Anderson’s blog again?”

            No, I find the quality of the posts quite low there, and the style quite polemical.

            “Yes, we will, just as ‘we’ would if he said the same thing about Obama or Boehner. That doesn’t mean he would not have initially caught some flak for it if he had.”

            You’re joking, right? This wouldn’t be on anyone’s radar if he said it about Boehner or Obama.

          • Richard Moss says:

            “You’re joking, right? This wouldn’t be on anyone’s radar if he said it about Boehner or Obama.”

            No – I wasn’t joking when I suggested this in my initial post either. I think it’s plausible Andolfatto’s boss would have received a phone call or two asking him to rein in his subordinate a bit.

        • Steve says:

          DK, my response to your points:

          1) I am not worried about Ron Paul’s honor. The reason I sent a link to the “pinhead” article to Bob is so that he (Bob) might respond to the guy’s economic ‘arguments.’

          2) n/a

          3) a. I am suspicious of Ron and Rand Paul, though so far, for the most part, they haven’t done anything to make me more suspicious of them than I am. In the case of Rand, I am now slightly less suspicious of him than I was before the election.

          b. I know of no (that is to say, literally zero) libertarians who are, in any sense, enamored with the Tea Party.

      • Daniel Kuehn says:

        Why do you always reach for the “nut job” or “crazy” thing, anyway Bob?

        • Bob Roddis says:

          Why would Bob Murphy worry about the “nut job” or “crazy” thing? Personally, after 38 years, I’m real sick of being called that or a racist or worse by people with no familiarity whatsoever with even the basics of the Austrian School or Rothbardian theory and whose policies have caused wars and real ethnic conflict. Real sick.

          http://tinyurl.com/6d3unpx

          http://www.youtube.com/watch?v=TrcM5exDxcc

          And I just realized that “Interview with a Zombie” is in STEREO!

        • bobmurphy says:

          Why do you keep saying “dude”?

  3. Bob Roddis says:

    My problem with Ron Paul was that he is too polite to his opponents (I realize how unusual that sounds coming from me.) However, I’ve come to appreciate his sly-as-a-fox calm presentations which induce hysteria in his opponents.

    The use of the word “pinhead” here is irrelevant. What is relevant is the substance-less “critique” of Ron Paul by Andolfatto and the baseless claim that the process of the diluting the funny money supply is “neutral”.

    MARK THORNTON , a senior fellow at the Ludwig von Mises Institute, in his article “CANTILLON ON THE CAUSE OF THE BUSINESS CYCLE” (THE QUARTERLY JOURNAL OF AUSTRIAN ECONOMICS VOL. 9, NO. 3 (FALL 2006): 45–60, 48) wrote:

    “…Cantillon showed that changes in the quantity of money were not neutral in terms of production and consumption nor was there any dependable numerical relationship between the quantity of money and its purchasing power. Anticipating the Misesian critique of the helicopter theory of money, he stated, ‘by doubling the quantity of money in a state the prices of products and merchandise are not always doubled’ (Cantillon, pp. 235/177/73). The impact depends on where money is injected into the economy and how the new money would give a ‘new turn to consumption and even a new speed to circulation. But it is not possible to say exactly to what extent’ (pp. 239/181/74). A proportional, quantitative relationship between money and prices might not hold. In fact, according to Cantillon, it almost never did…”

    http://mises.org/journals/qjae/pdf/qjae9_3_3.pdf

    I make a more serious charge. All that the central bank can do is dilute the money supply. People getting the new money are, in essence, stealing the purchasing power of people holding the old money. That is the essence of the process. Of course, ultimately the purchasing power of money is diluted across the board. However, money creation is not neutral and fiat money creation is not some neutral “tool” of experts. The entire process is dishonest, corrupt, criminal, the purpose of which is to surreptitiously shift wealth around without any due process whatsoever. Perhaps these forms of theft “stimulate” additional economic activity in the short run and increase NGDP (as would stealing the life savings from Granny‘s cookie jar by thieves who spend it all on booze and lap dancers), but at what cost?

    I note that Andolfatto got his PhD from the University of Western Ontario. With the SCTV and all, what is this? Celebrate Canuckistan Weekend?

  4. Bob Roddis says:

    Whoops! I forgot to mention how funny money funds slaughterfests like WWI and WWII and our current touchy-felly adventures in the middle east. Murray Rothbard explained the origin of paper money as a way to pay plundering Massachusetts soldiers:

    http://www.lewrockwell.com/rothbard/rothbard261.html

    Funny money is neutral, right?

    • bobmurphy says:

      Maybe that’s what “in the long run we’re all dead” really means.

  5. Sealander says:

    He responded on his blog to your comment:

    “Bob: In case I don’t get to this point, let me address it now for you.

    There are, in fact, two underlying concepts here: neutrality and superneutrality (and each with a short-run and long-run dimension).

    Neutrality states that when you compare two economies with different money supplies (economy 1 is the US in 1913, and economy 2 is the US today), that the different money supplies have no real implications. The only difference one will observe (at least, to a first approximation) is a proportional difference in the general level of nominal prices (and wages).

    In the statements made by Ron Paul that I chose to critique, it is clear to me that he is suggesting that the large increase in the price level today (relative to 1913) has had a significant real effect. He is suggesting that the larger money supply makes nominal prices higher, but leaves nominal wages largely unchanged.I disagree with him, and I think most economists would too.

    Superneutrality is the proposition that real variables remain unaffected by the rate of growth of money.

    Theory and evidence is less supportive of money superneutrality.

    My own view is that inflation is generally a bad thing. But that its likely not worth getting worked up too much about inflation that is low and stable (essentially the current US regime). At least, its not worth getting worked up over when there are so many other pressing problems out there.

    I hope this goes some way to clarify. Thanks.”

  6. Steve says:

    It’s not “pinhead” that bothered me so much as it was bombastic and misleading comments like “So there you go, the Fed is responsible for increasing your nominal wage by a factor of 20. How do all you workers out there like them apples? Ron Paul wants to rob you of these wage increases!”

    Obviously, I would rather have lower nominal wages and more spending power. The Fed is responsible for destroying the spending power of our money by a factor of 20. How do all you workers out there like them apples?

    The guy is either clueless or dishonest.

  7. Bob Roddis says:

    1. Since the central bank’s artificially low interest rates fatally distort long-term investment resulting in the boom/bust cycle, how can that be considered “neutral”?

    2. It seems to me that Andolfatto hasn’t the slightest familiarity with the Austrian School. Didn’t Tom Woods debate some guy who questioned the relevance of studying the Austrian economy? Andolfatto appears to be on that level.