Potpourri
* Another great Anthony Gregory article, this time ripping Republicans. My favorite line: “To say Republicans spend money like drunken sailors insults sailors and greatly exaggerates the effect of alcohol on financial judgment.”
* A great Mises Daily (not from me) showing a silly use of mathematical economics to “prove” the efficacy of a carbon tax.
* Today I was part of the Iowa Ron Paul moneybomb radio marathon. (Note I haven’t donated nor do I vote. A performative contradiction? Discuss.)
* There must be a rational explanation for this…
* I used to teach with this guy at Hillsdale. (He’s an Austrian economist.)
* Speaking of Hillsdale, when I was a student there I took at least 6 classes from Richard Ebeling. Here’s a recent blog post, and remember he will be one of our fantastic speakers this Friday at the Night of Clarity. If you’re within driving distance of Nashville, you can still register.
* Salerno writes his last blog post… (I already know what to say in response, I’m just picking the best Grass Roots song to lead. This one is my personal favorite, so it will get first consideration.)
* And remember kids, tomorrow starts the 2nd class in the tour of Man, Economy, and State. Full details here.
If the debt limit is once again raised, guaranteeing more crazed deficit spending regardless of any promises accompanying the deal, blame should fall squarely on the Republicans.
If the debt limit isn’t raised, blame will also fall on Republicans. Which is why it will end up getting raised.
You’re making Anthony’s point, and yet you seem to think you are contradicting him. If the Republicans are getting blamed for whatever happens, then they might as well do what they really want…which you yourself admit is to spend more.
Bob,
My point is slightly different. Republicans will get blamed in either case, but in the case of default what they get blamed for will be much worse. So they are better off getting blamed for the lesser offense.
We live in “Pickler Nation”. The Picklers don’t want anymore debt, they don’t want to raise taxes and, when asked program by program should this be cut or increased, always insist that spending on each program be substantially increased, except for “foreign aid”. I’m sure Republican surveys tell this week after week.
The solution to all of this, of course, is MMT which has abolished the law of scarcity.
Yeah!
Although you must give some credit to Major_Freedom for abolishing the law of scarcity too. The guy has enough time to write 500 lines just to say hello.
Salerno’s “last” as in final post or his most recent????
Mario, as in his final, as in, “People can criticize me…once.”
Salerno writes his last blog post…
Salerno’s argument is almost identical to mine:
http://consultingbyrpm.com/blog/2011/07/murray-rothbard-muddled-thinker-and-accountants-are-all-keynesians-now.html#comment-20425
I just noticed you made another post here:
http://consultingbyrpm.com/blog/2011/07/murphy-kuehn-tag-team-on-wenzel.html#comment-20429
Since WordPress won’t let me respond there, I’ll respond here. You write:
“That’s right, MF. Of course, if we’re defining the intervals that narrowly, then the moment the person spends some of the $20, he is dissaving.
So for example, if you’re analyzing time in one-hour increments, then yep, when I’m cutting the grass from 2pm to 3pm, my income is $20. My consumption is $0, since I don’t buy anything during that hour. So my saving from 2pm to 3pm is $20. And lo and behold, my cash balance goes up $20 too. So I took my savings and invested it in higher cash balances. Everything checks out.
Then at 3:38pm I go to the movies and spend $15. So analyzing time in hour increments, I would say from 3pm to 4pm, my income was $0 and my consumption was $15. So I dissaved $15 during that period, and yep–my cash balance shrunk by $15.
If instead of hour increments, we do days, then for the day (assuming these are the only events) my income was $20 and my consumption was $15. So my saving was $5. And yep, my cash balance went up by $5 over the course of the day.
How would you analyze this situation? The above is perfectly straightforward and (I claim) exactly how Murray Rothbard would handle it, once he got over the shock of someone denying that “saving = income – consumption.”
I would analyze that situation by saying that because you realize that no matter what time period you take into consideration (1 year, 1 week, 1 hour, 1 minute, 1 second, etc), you must also realize that it is necessarily always true that in a monetary economy, holding money for a positive length of time is inevitable.
Your responses can basically be summed up as “For the time periods people hold cash, I will just define these time periods of cash holding as “saving”. Some people earn and spend money in such a way that these time periods of holding cash are longer than others, and some people earn and spend money in such a way that these time periods of holding cash are shorter than others. But these various time periods are what I will define as “saving.” To really drive this point home, I will say that because most textbooks contain the formula “saving = income – consumption,” and because Rothbard would agree with my definition of saving, then those who deny that holding cash should be defined as saving are the oddball Austrians.”
Maybe it’s just different ways that people think about stuff, but I think pretty much exactly like Salerno when he says:
“The broader point that emerges from this analysis is that Murphy is simply defining “saving” as the holding of cash balances. For consider the ineluctable fact that in a monetary economy everyone must retain a money payment in his cash balance for a shorter or longer period of time, whether he intends to purchase an immediately consumable service like a movie or restaurant meal, a consumer durable like a car or a house, or an investment asset of some kind. In other words, all income and spending (on both consumption and investment) must flow through cash balances. It follows from the very nature of money as the general medium of exchange that there is always a lapse of time between monetary receipts and expenditures. Whether it is a matter of hours, weeks or years, money income once received must always be held in cash balances before it can be spent.”
Are you really prepared to define the “necessarily existing in a monetary economy” positive time periods that contain cash ownership as “saving”, even though it is absolutely impossible to not hold cash for a positive period of time, and thus impossible to NOT save? By your definition, you’d have to say “Everyone who participates in a division of labor, monetary economy, necessarily saves their full incomes in cash. The only distinguishing feature between economic actors in this respect is the length of time that elapses before they exchange their money for something else.”
In other words, what you are really defining to be saving is just the time period of holding cash before making a decision to spend or invest. But wait, you also claimed that by holding cash, one is “investing in cash balances.” In other words, because holding cash is inevitable in a division of labor monetary economy, everyone always saves (for a positive time interval) and everyone is always an investor (because by holding cash they allegedly invest in cash). This is the case even if an individual never makes a single dollar of investment, and only ever consumes. As long as he earns money, he is a saver and an investor!
This leads to your other convictions to completely collapse into incoherence. Can’t you see the germ spreading? It means that any argument you ever make of the type “investors AND consumers…” or “savers AND investors…” would all become complete gobbledygook. EVERYONE are savers and EVERYONE are investors and EVERYONE are consumers, all for the mere fact of taking place in the division of labor and earning money. What nonsense.
But then it must be asked, if holding cash is saving, then what is investment? Is investment a saving too? If you say investment is also saving, then how can anyone take part in the division of labor, and earn money, but not be a saver or investor? If it is impossible for people to not be a saver or investor, because they will necessarily own cash for a positive period of time, then all you’re doing is taking the phrase “holding cash” and simply rephrasing it as “saving.”
My thinking is that if you are going to define holding cash as “saving”, then my way of thinking leads me to ask how it is one could NOT save in cash, so that we can distinguish those decisions of holding cash that is not saving, and those decisions of holding cash that is saving? Or is there no way to distinguish in this way?
In your example with Johnny, you said he saved $5 x 52 = $260 in cash. When you write that, can’t you see how this will lead to others understanding you to be saying that if Johnny did NOT save $5 each week, and consumed all $20 within the week, then he would not have “saved” in cash in your conception?
If I asked you outright, “If Johnny consumed the full $20 each week, then would be have saved anything?” then what would you say in response? Would you then say “I picked 1 week but that’s arbitrary. Johnny is in fact saving 100% of his income…if we make the time period after he receives the money short enough.”
I know you know what everyone knows now, but if you were asked this question at the beginning, then can you really claim right now that you would not have said “If Johnny consumed the full $20 each week, then he did not save in cash.”?
MF, the one good thing in all of this, is that I can’t be so exasperated with you and Wenzel on this point. If even Salerno is (in my opinion) falling for an elementary confusion, then maybe it’s not so elementary after all. I’ll write this up soon.
I hope that as a part of your next post on this, you reconcile the principle that purposeful action is the fundamental determinant in all things economics-related, with the implications of your understanding of a scenario of purposefully going out to consume with one’s money, insisting that “saving” be a part of this action, on the basis that the individual necessarily has to own money before he can spend it, which means that even if an individual does not intend to “save”, you say it doesn’t matter what his intentions are, because as long as he owns cash at all, he is “saving.”
You are going to have to provide a VERY convincing argument that shows even the most spendthrift individual imaginable, one who consumes as soon as it is physically possible for him to consume with his money, one who is purposefully not trying to save at all, is nevertheless still a saver, because he takes ownership of money for a positive amount of time. In fact, you are going to have to show why people should consider the government as a saver, why a robber of money is a saver, and yes, even why the Federal Reserve is creating savings by the mere fact of creating new dollars out of thin air as they purchase T-bills, which is then owned, for a definitely positive period of time, by the primary dealers.
You’d have to explain how to reconcile the “Fed is a generator of savings” logical implication of your understanding, with the position of Rothbard, Mises, as well as every other Austrian, that “true” savings cannot come from the printing press.
And one more:
You’d also have to explain why the Austrian criticism of central banking, by generating “investment that is greater than true savings” is actually incorrect and stupid, because according to you, NO amount of investment could ever exceed savings, because as long as any time elapses at all for money ownership, that’s savings by definition, and so any quantity of investment is necessarily financed 100% by savings no matter how much investment is made, and thus Austrians who say things like “investment greater than savings” are really confused idiots.
I was late to the game in the earlier discussion, but I spelled out my attempt to reconcile the views between the camps. The first two paragraphs are flaky, but here’s what I think is the key insight from that comment:
“Any time you know what you will consume long in advance, you can generally give up some of the option value of the money by committing to consume that good. This manifests in holding a less liquid good in place of the money (e.g. voucher for a specific kind of output, as in [Salerno’s] example, intended to refute you). By giving up this option value, holding [the illiquid cash-substitute] is “more saving-like” because it amplifies future output.
“Any time people are less certain of what they will want in the future, they will prefer to hold their wealth as cash. (which I often argue is where our economy is now) This has the effect of signalling the economy to redirect efforts toward more mutli-purpose capital goods and modes of production. By holding on to this option value, holding cash [is] “less saving-like” because it attenuates (the physical magnitude [of], but not necessarily the value of) future output. (Naturally, the government doesn’t let this beneficial process happen, and instead “fills in” this spending gap with printing money, propping up unsustainable enterprises.)
“Now, can we all shake hands and give me an award for excellence in economic thought?”
I hadn’t seen that comment, Silas, really good stuff. Your response to Salerno is part of what I am going to write up. But I’m not copying you, it was an independent discovery! (And be careful, I think you are a “Keynesian” now in MF’s book.)
Yikes, we really are all Keynesians now! 😛
(One correction to my previous comment: The first paragraph is meant to say that you can give up some of your cash’s liquidity in exchange for more valuable output than if you had held on to the cash’s option value until a later purchase date. Just in case that wasn’t clear.)
“Any time you know what you will consume long in advance, you can generally give up some of the option value of the money by committing to consume that good. This manifests in holding a less liquid good in place of the money (e.g. voucher for a specific kind of output, as in [Salerno’s] example, intended to refute you). By giving up this option value, holding [the illiquid cash-substitute] is “more saving-like” because it amplifies future output.”
How can the mere holding of vouchers “amplify” future output? It’s not only not guaranteed that the vouchers will be made good, but future output on movies and concession items are dependent on investment in the movie and concession industry, which is neither “cash saving” nor “voucher holding” generated. Future output is amplified when there is investment.
“Any time people are less certain of what they will want in the future, they will prefer to hold their wealth as cash. (which I often argue is where our economy is now) This has the effect of signalling the economy to redirect efforts toward more mutli-purpose capital goods and modes of production. By holding on to this option value, holding cash [is] “less saving-like” because it attenuates (the physical magnitude [of], but not necessarily the value of) future output. (Naturally, the government doesn’t let this beneficial process happen, and instead “fills in” this spending gap with printing money, propping up unsustainable enterprises.)
Suppose I cut back from my investment, but maintained the same consumption, in order to increase my cash balance, because I am sure what I will consume, but I am not sure what I will invest in. My actions here do not, as far as I can see, signal to the economy to redirect more resources into multi-purpose capital goods as opposed to other types of capital goods. They are saying to redirect more resources to consumption sooner (retail stores) and less resources to consumption later (capital goods).
Even if my reduction of investment and maintained consumption, which enables me to increase my cash balance, did lead to more investment in multi-purpose capital goods like raw steel, as opposed to more direct-oriented capital goods like newspaper presses, then maybe I am missing the giant elephant in the middle of the room, but how does this solve the dilemma between liquidity preference and time preference when it comes to the determinant(s) of interest rates?
And furthermore, if the context is people holding more cash, out of uncertainty or fear or whatever, then what is the exact mechanism by which investors react to this by investing in more multi-purpose capital goods? Suppose you are increasing your cash balance by either cutting back from your investment, or from your consumption, or both. How do your economic actions in holding more cash affect prices, interest rates, profits, etc, that will enable me as an investor to react and say woah, I have to invest more in multi-purpose capital goods and invest less in direct-oriented capital goods?
It’s easy to imagine how the economy “should” work when you imagine people holding more cash out of uncertainty, and then this fact somehow leads to investors investing in different types of capital goods because that is what the holding of more cash “means”, but it’s quite another to say how it actually does this, and what’s more important, what this has to do with the time preference versus liquidity preference theories of interest, and how holding more cash out of uncertainty leads to changed interest rates that the time preference theory cannot accommodate.
No, you’re not a Keynesian in my book, and neither is Murphy for that matter. I don’t understand why he keeps trying to pin me as holding everyone as Keynesian if they don’t adhere to the time preference theory of interest.
How can the mere holding of vouchers “amplify” future output?
It doesn’t. It’s the *committing to a particular consumption pattern*, thereby improvement the alignment between production and consumer desires, that amplifies output.
Suppose I cut back from my investment, but maintained the same consumption, in order to increase my cash balance, because I am sure what I will consume, but I am not sure what I will invest in. My actions here do not, as far as I can see, signal to the economy to redirect more resources into multi-purpose capital goods as opposed to other types of capital goods. They are saying to redirect more resources to consumption sooner (retail stores) and less resources to consumption later (capital goods)
Sorry, but this doesn’t seem coherent. There’s no such thing as “money that will be spent on consumption” vs. “money that will be spent on investment”. *All* money carries the option of being spent on consumption or investment, and the more money that is held, waiting to be spent on something, the more profitable it becomes to prepare for a broader array of possible demands. That is, if individuals are “keeping their options open”, your best route is to diversify your capables across a broader array of possible wants.
oops, I’m getting sloppy
thereby improvement –> thereby improving
diversify your capables –> diversify your capabilities
It doesn’t. It’s the *committing to a particular consumption pattern*, thereby improvement the alignment between production and consumer desires, that amplifies output.
So then connecting this back to cash preference versus spending, how is spending more in dollars versus spending less in dollars, the same thing as saying “consumption patterns are less sure”?
If consumers are sure that they want to spend less in dollars, and they are sure that the dollars they do spend are for the consumer goods they want to spend them on, then how can you argue that this equates to investors being LESS certain of consumer preferences in the future?
The fact that consumers are spending more in dollars doesn’t enable an increase in investor expectations on what exactly consumers are going to be spending their money on in the future. If you are a consumer, and you tell me “I’m willing to spend $20 this week on consumption” then are you saying that I as an investor would be less informed about what you want, versus you telling me “I’m willing to spend $100 this week on consumption”? Is my knowledge of WHAT to produce for you, based on your level of spending in dollars only, any more informed? Do I go from having less certainty to having more certainty? I would argue hell no. My expectations of what to produce for you is not going to all of a sudden be greatly informed on the basis of you telling me that you are planning on buying $100 of consumer goods instead of $20 of consumer goods.
Furthermore, how does this connect back to the liquidity preference theory of interest? All you have said so far is that the nature of capital goods invested will change from “general” to “multi-purpose.” OK, but how does this relate back to interest rates as such? Do general capital goods carry a different interest rate than multi-purpose capital goods?
Sorry, but this doesn’t seem coherent. There’s no such thing as “money that will be spent on consumption” vs. “money that will be spent on investment”. *All* money carries the option of being spent on consumption or investment
Excuse me, but people DECIDE how much money to spend on their consumption and how much money to spend on investment, and how much to not spend at all and kept as cash. Yes, physically speaking, it is possible that a given sum of money can go to consumption or investment, or neither consumption nor investment and just held as cash. But people don’t randomly invest and consume. They consume and invest according to their preferences. In that sense, there is indeed such a thing as money that goes to consumption and money that goes to investment.
Money only has value to people because of the purposes with which they intend to use it.
and the more money that is held, waiting to be spent on something, the more profitable it becomes to prepare for a broader array of possible demands. That is, if individuals are “keeping their options open”, your best route is to diversify your capables across a broader array of possible wants.
OK, fair enough, suppose I agree with that. Convince me what the heck this has to do with rates of interest.
Your arguments to me don’t seem to be related to what determines interest. They are more of a set of arguments regarding what types of capital goods investors should invest in given the fact that people have lots of cash on hand.
If you can connect what you are saying to why there are interest rates at all, and show how and why time preference does not, or cannot, explain it, then you’ll have sold me. But I’m rather doubtful.
I’m just lost on what you disagree with, and why, and how the purported distinctions you’re making (“to-invest cash” vs. “to-consume cash”?) even exist, and you keep demanding that I apply it to a context that I had never claimed I was applying it to (though would be an interesting topic to explore).
My only purpose behind that comment was to show in what sense “cash-holding” can be regarding as (real) saving, investment, or consumption. It was largely in alignment with (what I understood to be) your view: socking cash away is, from an appropriate standpoint, a species of consumption. Specifically, consumption of option value. My approach explains why you can get more for your money if you trade away some of that option value (e.g. by buying in larger quantities or committing it to a specific use early on).
I haven’t studied this topic enough to have an immediate answer for how it connects to interest rates and liqudity theories thereof. I was merely clarifying how to categorize cash-holding in a fruitful way, and which does away with the unhelpful question of “how long you have to hold cash before it’s hoarding” and such.
I think I’ve accomplished that: I’ve identified the effects of holding cash, and how those effects resemble saving, investment, and consumption, appropriately defined.
Once you concede that the money held is eventually always spent, as Murphy always does in his examples, it is game over for any non-pure time preference theory of interest that attempts to also incorporate demand for money in the theory. Any theoretical elongation of the production structure is always eventually canceled out by a shortening of it once the income is consumed. No lasting change in interest rate can occur.
Murphy must make the assumption that money is hoarded ‘permanently’ by always reducing spending on present goods more then on direct investments on future goods. But this also does a problem for the pure time preference theory because one can both change his reservation demand for money AND lower his time preference at the same time. The former can still solely account for any change in the interest rate.
Assuming this debate is not over mere definitions as is often the case, the debate should be better defined as whether or not demand for money affects the natural/original rate of interest.
Those who adhere to non-liquidity preference theory of interest can explain that, by showing how such an increase in the demand for money affects the ratio between consumption and investment.
If the demand for money rises or falls, but the ratio between consumption and investment remains the same, then the rates of profit, and hence the natural/originary rates of interest, will remain the same, in the long term.
If the demand for money rises, then there might be a short term fall in the rate of profit and thus of interest, as aggregate spending falls instantly with the increase in the demand for money, but aggregate costs will fall only with a time lag, thus decreasing the spread between revenues and costs, but once productive expenditures fall in response to the fall in aggregate spending, costs will eventually fall as well and the differences that remain will be a function of the same rates of time preference.
If the demand for money falls, then there might be a short term rise in the rate of profit and thus of interest, as aggregate spending rises instantly with the decrease in the demand for money, but aggregate costs will rise only with a time lag, thus increasing the spread between revenues and costs, but once productive expenditures rise in response to the rise in aggregate spending, costs will eventually rise as well and the differences that remain will be a function of the same rates of time preference.
The long term tendency is for the rates of profits and thus of interest to be independent of liquidity preference, and determined by time preference as manifested by the difference between aggregate spending and aggregate costs.
In the example of Johnny earning $20 a week, we have to know what change to spending occurred in order to make this wage possible, and what change to spending, if any, occurs after.
If Bob used to spend $20 a week on movie tickets, but then paid for consumer labor in paying Johnny $20, which Johnny then uses $15 a week for movie tickets, and he holds the rest in cash for the year, then the revenues for movie tickets has fallen, and more generally, consumer spending has fallen relative to investment spending. That leads to a lengthening of the productive structure, which leads to a relative rise in investment spending relative to aggregate spending, which then leads to a fall in interest rates. This is contrary to the liquidity preference theory which predicts a rise in interest rates.
If Bob used to invest $20 a week, but then started to pay $20 a week for consumer labor, and everything else remains the same, then investment falls by $20, and consumer spending rises by $15. That is a rise in consumer spending relative to investment spending, which is to say a rise in time preference, which shortens the productive structure, which then leads to higher profits and higher interest rates. Here the rise in liquidity preference does accompany a rise in interest rates, but only because there is a higher time preference manifested in spending. There is a larger consumption to investment ratio.
If we assume the productive structure and interest rates adapt to whatever Bob and Johnny’s habits happen to be, and then we consider consumer Johnny doing something else, like consuming less (holding more cash), or consuming more (holding less cash), then we can see what his “cash saving” results in.
If he changed his consumption to investment ratio from say $15 to $0, to $20 to $0, then this will increase consumer spending relative to investment spending, and his spending more on consumer goods will increase the spread between revenues and costs, which will then increase the rates of profit, and thus increase the rates of interest. Again, this is totally opposite to what the liquidity preference doctrine predicts, which was higher rates of interest on the basis of a lower liquidity preference.
“So I took my savings and invested it in higher cash balances.”
This sentence really irks me.
This sentence makes it seem like you believe you performed an additional action of “investment” AFTER you earned the $20, that is, you claim to be purposefully taking something from here and over to there, that you took something of one form and then after you purposefully transferred it into another form.
But by your own treatment of cash holding = saving, you didn’t actually DO anything new in that sentence that is not already the mere earning of money. You earned $20 and now you have $20 in cash. You invested in cash by the very earning of cash! You therefore cannot say “I took my savings and then invested it in cash.” You invested in cash, and you saved in cash, by the mere earning of cash!
You make it seem like investing in cash isn’t performed until some time AFTER you initially earned the $20. As if one decision is to save, and the other decision is to invest in cash. But by your own logic, you held that $20 as soon as you earned it, which means you saved and invested $20 in cash instantaneously, all at once, already. It is therefore extremely sloppy to write that you initially had savings, and then after that you then acted to invest those savings into your cash balance. Everything you claim to have done after you have earned the $20, is already logically intertwined in the act of earning money itself. You didn’t do anything else other than “earn money.” You didn’t “take” and then “invest”. You took, saved, invested, hoarded, all at once, according to your logic.
In other words, I think you are contradicting your own logic. You want to believe that people can purposefully act to earn money, and then purposefully act to either save or not save, and then under saving you want to believe that people then purposefully act to either invest or not invest. But at the same time, your dogged insistence that by merely holding cash one is saving, you cannot make such statements as the one above. People cannot possibly “take their savings” and then “invest in cash”. The mere taking of money through earning money IS an investment and IS saving according to your own logic.
It would be like me trying to understand the scenario of running into a wall as “He hit the wall and then he stopped and then he no longer moved forward and then he touched the wall and then his velocity dropped to zero.” The same event is being artificially split into more than one seeming event.
Re carbon tax (cue collective *sigh*), that seems like an equally roundabout way to say, “I reject the claims about the magnitude of the carbon externality or ability to calculate it, therefore math has caused people to make foolish arguments about the merit of attempts to factor in the carbon externality.” Naturally, followed with, “Oh, and I oppose all attempts, propertarian or otherwise, to eliminate this externality problem.”
Which is pretty unconvincing when you put it that way. Unless you pull a Kinsella and agree with every argument, no matter how bad, if its conclusion matches your own views.
Silas, I’m not going to click the link again, but as I recall, the guy was responding to someone who used a completely invalid argument to prove the efficiency-enhancing properties of a carbon tax. There was nothing in the mathematical argument about externalities; it could have equally well been a tax on novels.
If you’re saying, the Mises guy wouldn’t have bothered writing the article if the guy had done a diagram showing that a tax on sales of The General Theory would promote welfare, then OK you might be right. So lurking in the background is that fact that the author (and me, in linking to him) don’t want to see a carbon tax implemented.
But in terms of the actual arguments in the article, as I recall it was completely correct. I was actually surprised by how well the guy made the point, since I don’t think he is a professional economist.
It didn’t explicitly reference externalities, sure, but the Mises article’s criticism only works if you deny the benefits of lower CO2 emissions, which was the entire premise behind the “math-savant’s” argument
Hang on Silas, this is actually kind of important. No, the point of the article was that the math-savant’s “entire premise” was not relying on the externalities of CO2 emissions.
The math-savant’s “demonstration” doesn’t rely on externalities at all. If you put in something that didn’t generate negative externalities, his argument would “prove” the exact wrong thing. So it is clearly a bad argument.
I don’t know how else to put this. Yes, in the back of his mind the math guy thinks we need to lower CO2 emissions because of climate change. But he was trying to prove to everyone how right his position is, by using a graph that has absolutely nothing to do with climate change. He might as well have said, “We should tax carbon because the sky is red.”
No, when he argues that technology will be more carbon-efficient, the implicit premise is, “and producing more output per unit of CO2 emissions is good”. The entire refutation seems to just be a fancy way of saying,
“Hah, you didn’t mention you were relying on the fact that lower carbon emissions are good!” Um, okay…
Yes Silas, what you are saying here is correct. But couldn’t you similarly defend any invalid argument, that reaches a true conclusion? Yes, the guy is assuming, “It would be good to reduce carbon emissions.”
But some people disagree with him on that. So to convince them, he draws some curves that only make sense if you already believe, going into it, that “It would be good to reduce carbon emissions.”
It seems you are proving what the Mises guy was saying–this diagram assumes what it purports to demonstrate.
But some people disagree with him on that.
So? They would need to disagree that *if* lower CO2 emissions per se would be good, so would this policy.
This seems back to your old idea of saying that people are stupid to advocate solution X for problem Y, simply because you “disagree” (why?) that problem X exists. Yes, it would be stupid to advocate X in the absence of Y … which is a large part of why people don’t actually do that.
Either way, you’re agreeing that the problem, to the extent one exists, with Mr. Chart, has nothing to do with math turning him into a savant: it’s simply an issue of an unstated premise. Given that his audience largely agrees with that premise (which doesn’t even require that the harm is _worse_ than the benefit of burning those fossil fuels in all caes), I think it’s forgivable.
So no, I don’t see where the reliance on math led this advocate astray, nor any coherency in your response to the AGW beyond, “Hey, GHG emissions can’t possibly violate anyone’s rights, because that violates my dream of what I could do in a libertarian world.”
Pongracic can rock I see:) Very nice guy, immediately clicking with eastern European types:) met him in the Czech Republic and me and my friend had a bit of debate with him on Coase. Good that Josef Sima was there to back us up, so we didn’t suffer much damage:)