The Fatal Conceit
[UPDATE below.]
The title of this post refers, of course, to Hayek’s warning about really smart guys thinking they understand a complex system well enough to start tinkering with it. Nick Rowe has had the generosity (and intrepidity) to hang out in the comments of my post criticizing his optimism over QE3. He told me he didn’t really understand what I was driving at, especially since the two of us agreed on what (Nick claimed) was the sole point of his post.
As Obama would say, let me be clear: I am saying that guys like Paul Krugman, Scott Sumner, Nick Rowe, and (so help us) Matt Yglesias think they understand the global economy well enough to say that the Fed buying another $40 billion per month of MBS until it works, is a “step in the right direction” or evidence that “we’re winning.” Yet their models are incredibly crude. The only reason they don’t understand how problematic this is, is that they spend most of their time talking to each other. Paul Krugman actually spends a lot of time bragging about how much you can learn about fighting this crisis from studying a chart of two lines intersecting each other, and Nick actually wrote the following, thinking it was a slam-dunk against (some of) the people opposing more monetary stimulus:
Even suppose the financial system totally collapsed. Why should that prevent monetary and fiscal policy working to increase demand? The biggest flaw of orthodox macroeconomic models is that they have no financial sector. So, if the financial system disappeared, that ought to mean those models would work even better.
Now look, I understand “what Nick meant by that.” He is making a very specific point to a subset of analysts who (a) agree with him that a shortfall of generic aggregate demand is “the problem” and (b) doubt that more QE will help on this front. What I am saying, however, is that if you find yourself typing out the above statements, you should pause before being so sure that creating another $40 billion per month–indefinitely–in propping up the housing market is a good idea.
There are lots of areas of scientific inquiry where the experts involved simply don’t understand the phenomenon very well. If, say, some physicists approached Congress and asked for $40 billion per month to fund the development of a cold fusion reactor, and Congress said, “How much total money do you need?” and they said, “Until we get it right,” that would be alarming. Especially if they admitted their models didn’t include electrons because that took up too much computing time.
Notice in this scenario, that these physicists could still be the world’s experts on the processes involved. The critics in Congress and the public who thought the $40 billion monthly funding wasn’t justified, wouldn’t have to prove they knew the physics better, nor would they have to perform better on a prediction of how subatomic particles would behave in experiments 6 months prior to the funding request. We could still imagine circumstances in which it would be perfectly correct, “rational,” and “scientific” to tell the physicists and engineers, “You guys are all really smart, you have done pioneering work in these fields, but sorry, we just don’t feel you understand Nature enough to get this kind of funding right now. We have seen you guys arguing with each other, and it’s not pretty. We’re not at all convinced that you have an adequate handle on this to justify what you’re asking.”
So I claim we have something similar with mainstream macro and monetary economists right now.
UPDATE: As always, Blackadder tries to keep me honest in the comments. His caustic barb reminded me of something I meant to say in the original post: I now believe more than ever, that if someone made me Fed chief, the proper thing to do would be to resign. Libertarians often say that type of thing in Q&A sessions, and it’s partly to be funny I suppose, but in reality it’s the right answer: There is no “proper” way to run a central bank. Even in terms of shutting it down, it’s really hard to start writing on this topic without just making stuff up. For example, Carlos Lara and I had a proposal (deep into this book) for going back to gold money and free-market banking (not to be confused with “free banking” necessarily), but it involved some arbitrary features. After reading Mises’ proposal (which also was “second best”) I realized he had thought of some things we hadn’t.
What I am saying is, I would like to think if I actually were offered the option of scaling back (but not eliminating) the government’s influence over the monetary and banking sector, that I would have the wisdom and courage to throw the ring of power back. The virtue of the Austrian School is that it understands the limits of our ability to predict what will happen in something as complex as the global economy. We think we have a qualitative understanding of how market forces work to correct disequilibria, but the claim really isn’t that “our model is better at prediction than the Keynesian ones.”
This, this, a thousand times this. Models are not the thing they’re modeling. They’re just representations, and not necessarily good ones at that. I see absolutely no reason to bet the future of the economy itself, and by extension the country, on models that are grossly crude as compared to the actual thing being modeled, and the recomendations that flow from those models.
To quote Rumsfeld, of all people, there are things you know that you know, and things you know that you don’t know, but the most dangerous things are the things you don’t know that you don’t know.
Krugman can’t even properly state the Broken Window Fallacy, how am I supposed to believe he can construct and iunderstand a model of the world economy?
Agreed about the limitation of models, however may I point out that to take action (i.e. interfere with an economy because you know better) is to make a decision. However, to not take action (because you believe that there’s nothing you can/should do) is also making a decision.
Either way you need a model, and more than that, you need to include yourself in that model. Either way you could be wrong.
In other words, the Precautionary Principle also disallows dependence on the Precautionary Principle.
We don’t need a model for central planning. Individual action in the market process is sufficient.
You may choose to include this or that in your model, and exclude something else. At the end of the day it is still your model. To pretend that you don’t use a model at all is just silly.
The Austrian model is more general purpose than the Keynesian model, but then again it also promises less.
I had to share this. Sorta related, because he has clout on the left.
http://www.youtube.com/watch?v=7s6ye-XrfeU&feature=related
Is saying that we should abolish the Fed and adopt 100% gold-backed reserve banking an example of the fatal conceit? Or is the idea that we have no idea whether doing this would be good or bad, but we should do it anyway?
If one Administration had approved the $40 billion/month for the physicists, and they produced nothing (but didn’t blow up the universe as some of their critics had warned), and the next Administration canned the program, I wouldn’t say the latter were just as conceited as the former.
However, see the update I am putting in the post now, Blackadder.
BA’s comment was rather weak.
Sounds like an example of a straw man to me.
Abolishing legal tender laws would allow the market to determine what constitutes money, and the result might be 100% gold-backed reserve banking, bit it also might be a lot of other things (e.g. sliver coins, bit coins, a public reputation system, or some combination of all the above).
Abolishing central planning and abandoning central planning models is not the same thing as adopting a new central plan and new central planning models.
The rejection of fatal conceit is not the same thing as adopting a new fatal conceit.
I get into arguments constantly with people who are convinced that my position in favor of individual liberty somehow “imposes” my view of right and wrong on them.
The idea that opposing something somehow promotes it is a figment of the left-right delusion, where if you’re not a Socialist then you must therefore be a Fascist by definition.
Sometimes you need a plan for how to dismantle a plan; hopefully one simpler than the plan you’re dismantling, however. It’s true however that one must be careful to measure and react accordingly to try to best ensure that the plan that has been planned for dismantling the plan, goes according to plan.
I wonder if “Stop Printing Money” is a valid plan?
Of course, I then provide my own Fatal Conceit by imagining my own progress from that idea, that the Govt could continue to accept FRNs as payment of taxes, as well as silver and gold, and the entire market floats as long as the existing FRNs are in circulation, etc etc etc.
It’s really very hard to do, as Mises and Murphy have both said, simply resign.
Bob: If we were talking $40 billion monthly in real resources, that needed to be transferred from some other use, I would say you have a point. But we’re not. We’re talking about paper and ink, or, errrr, ummmmm, electrons. Being used to buy other bits of paper and ink. To try to prevent a misallocation of real resources caused by monetary disequilibrium, that is creating all sorts of malinvestments (and underinvestments too). If the Fed exists, we need it to create some stable “rules of the game” so that individuals can make their plans at least knowing that, whatever else will disrupt their plans’ fulfillment, it will not be capricious monetary policy. An NGDP level path target, as Hayek saw with his deeply insightful perspective, would be a reasonable “rule of the game”.
Nick Rowe wrote:
If we were talking $40 billion monthly in real resources, that needed to be transferred from some other use, I would say you have a point. But we’re not. We’re talking about paper and ink, or, errrr, ummmmm, electrons. Being used to buy other bits of paper and ink.
Nick, I think this notion is one of the worst things to come out of fiat money and the recent crisis in particular. I think it is wrong and dangerous to think that if the Fed is creating the money to buy these assets, that it’s somehow “not real.” Alas, even plenty of Austrians are saying this kind of thing, that if the Fed buys $40 billion in MBS, that money’s not “in the economy” unless a commercial bank lends it out. Tell that to the investor who sold the MBS.
Nick,
This is just were the knowledge problem bites hold:
“If we were talking $40 billion monthly in real resources, that needed to be transferred from some other use, I would say you have a point. But we’re not. We’re talking about paper and ink, or, errrr, ummmmm, electrons. Being used to buy other bits of paper and ink. To try to prevent a misallocation of real resources caused by monetary disequilibrium, that is creating all sorts of malinvestments (and underinvestments too).”
And Note Well: this is _also_ just were the existence of alternative production processes of rival length & output bites hold — economists without alternative production processes in their econ brain has no grounds for telling anyone else about misallocation of resources when their real world core of resource adjustment is completely absent from their fake mental / model of the ‘world’.
I think this sums up the flaw I see in the pro-printing crowd: assuming away the benefits of hoarding, and the important signal it sends to the rest of the market. If hoarded money provides no value whatsoever, nor any signal, but is just pure waste, then why, it sure seems like a good idea to make people spend more money, and pretty harmless to print more.
It almost seems like the ideal is for everyone to spend money as soon as they get it, else they might be economic terrorists.
I think this sums up the flaw I see in the pro-printing crowd: assuming away the benefits of hoarding, and the important signal it sends to the rest of the market.
Isn’t the signal typically given by hoarding that the supply of the hoarded item should increase?
No, it shows there is too much bad debt (malinvestement) that needs to be cleared before people dare to invest again.
Expressed differently. The opportunity cost of hoarding is forgoing possible gains if the money were invested. Since there is extreme uncertainty currently in what to invest and how high the return would be, hoarding is quite attractive. Or put differently again: “People are not concerned about the return on their investment but of their investment”
No, it shows there is too much bad debt (malinvestement) that needs to be cleared before people dare to invest again.
So if people are hoarding apples it means there is too much bad debt? I don’t think so.
You confuse hoarding of a means of exchange with hoarding a consumer good. If the apples were hoarded because people would intend to use them only for a later resell, yes it would be correct.
However apples are not suitable for this purpose. People who hoard gold for example, use gold as alternative to cash and as a means of exchange. They do not intend to use the gold for direct consumption. Hence gold acts like a cash balance.
I might add to be clear: If people hoard apples because they want to consume them in the future but not want to use them for reselling, then yes it is good to expand apple production even in their view. It therefor cannot be a sign of too much bad debt.
But if you have cash hoarded you want as much purchasing power as possible per dollar. You are not consuming the dollars. Increasing the amount of dollar notes would obviously defeat this purpose. If people pull out of investments and decrease consumption to hoard cash, then they do this for a reason.
“So if people are hoarding apples it means there is too much bad debt?”
Yes.
People hoard commodities because they expect those commodities to be worth more than money. Silver and gold are just commodities, and I know people who are hoarding canned food, toilet paper and whiskey.
They are doing this specifically because there is too much bad debt and they expect crash and massive/hyper inflation to make their FRNs effectively worth less than the commodities.
So yes. People are hoarding “apples” because there is too much bad debt.
Yes, by producing things that actually placate the demand that is producing the hoarding. Printing fiat money does satisfy the hoarders’ desire any more than printing coat check tickets increases the supply of coats.
Hoarding happens when people desire the option value that money contains (usually due to uncertainty about the future, especially ability to earn money). Inflating the money supply hinders the hoarders’ efforts to protect themselves, and without placating their desire for this option value.
Darn! I though people hoard cash because they just suddenly feel the irresistible urge to stack dollar notes as high as possible…
Darn again! *thought*
Silas,
Imagine a society where we actually used gold as money. Now imagine that in this society people start hoarding this gold-money (because they are uncertain about the future, especially about their ability to earn gold-money). Let us further imagine that the owner of a local gold-mine looks at all this and says to himself “gosh, all this gold-hoarding has driven up the profitability of gold-mining, because there is more demand for gold. I suppose I should expand my mining operation to take advantage of it.”
Is this gold-miner a fool and a knave? Is he doing harm to the local hoarders by increasing the supply of gold-money to match the increased demand from the hoarders?
I hope I am allowed to answer as well 🙂
To a certain extent this is just as bad as with fiat money.
However the extra gold is not used to prop up bad debt.
Secondly: Gold mining is a very capital intensive slow production process. The gold miner needs to think twice if it pays to heavily increase gold-mining. He might only see the first increase of mined gold only one year or even more after he started exploring and investing.
Does he know how long the uncertainty will persist? If companies are not propped up by a government it is doubtful that this would take several years until the expanded gold mining really would kick in. So it is quite risky to invest in further gold mining if it would pay off only for a few months at best, which hardly would pay for the additional capital invested at all.
Nevertheless as far as the expansion of gold mining solely is due to this effect it is just as harmful in my point of view.
Yes, the gold hoarder is a fool to the extent his gold hoarding was predicated on gold continuing to be a highly-traded, relatively scarce good that could be redeemed for arbitrary other goods, and there was a coming supply shock, and there were no better alternatives.
In a sense, USD hoarders are “fools” too, to the extent that they can’t find a more reliable way to hoard.
When I say hoarding provides a signal, I’m talking about the “not-buying” aspect of it. If people aren’t buying what’s out there, the solution is obviously not to prod them to buy more, but to … make something else. If you don’t allow that signal, the economy can’t work its way out of a non-productive rut.
Further, when you print paper money, you’re redistributing wealth, not creating it. The new holders of the money get claims to the same existing wealth, while new holders of gold get more gold, and any devaluation of hordes is because of the proliferation of genuine options for others to procure the same real goods.
I would agree this is a complex issue that I can’t do justice in a short comment and so one may still think that government printing press is producing value in the same sense that digging up more gold is producing value.
Silas if you think you can smack down BA on this and do a long response at your blog, I’ll post it here (assuming I think you make sense).
Could you clarify which thesis you’re talking about there, Bob? Did you mean the general point about how hoarding sends an important signal, or how hoarding differs in the case of fiat money vs gold money?
Well they’re related, right? But specifically, I liked your point saying that if people are trying to get more liquidity, it seems weird that printing up a bunch of fiat notes will make them better off. After all, in real terms clearly it’s not like the economy is now more nimble and able to cater to an uncertain future.
But then Blackadder says, “What happens to your analysis if we had gold coins as money?” and I’m not sure. It sounded like you recognized why, superficially, that was a good comeback, but that you could blow him up if you had more time.
So, I’m curious to see you blow him up.
Ah, okay, I understand now! Adding that essay to the list…
We can have a race. See if you can do that one before I do the one on Bitcoin.
People save based on the expectation of better purchases in the future. Hoarding is just saving.
What is still traded goes up in relative value because of the decrease in supply. So everyone who has saved benefits.
But I have to wonder, just what kind of problem has “hoarding” ever been? Did the guy in Las Vegas who had $7M in gold in his garage, certainly “hoarding”, effect the price of gold on the world market -at-all-?
In my opinion, “hoarding” is a Red Herring and deserves to be put in the same can as the rest of Keynes’ hobgoblins.
Money is not injected into the economy without affecting real resources. Inflation necessarily redistributes real resources from where the market process would have put them, to where a government hampered market ends up putting them.
Here’s another analogy: suppose we currently had central planning in the production of apples. An Austrian comes along and says we should allow the market to decide the production of apples. The central planner asks the Austrian: “Can you tell me exactly how many apples will be produced if we switch to the market?” The Austrian admits he cannot. So the central planner replies: “So you want us to switch to a free market in apples even though you yourself admit you have no idea how many apples will be produced by the free market? No way!”
Nick, I understand the Central Planners rejection to the Austrian response in your specific hypothetical, but I think the Austrian wouldn’t have bitten, or accepted the premise of the question proposed by the Central Planner. In essence I think the Austrian response could have just as easily been, “the correct amount”, and the Central Planner would have been stopped dead in his tracks.
Jason: i fully agree. My Austrian was just a little too tongue-tied to think of the right response quickly enough. The whole point of having a market in apples is because no individual, including the central planner or the Austrian economist, can know what the correct amount of apples is. If the Austrian economist really did (by some miracle of omniscience) know how many apples the market would produce, that Austrian economist should simply take over as central planner.
The correct response, for a non tongue-tied Austrian economist, is “I don’t know, and nor do you, and that’s precisely why we need a market to decide”.
I think you’re still wrong. Why “should” someone decide to be central planner of something that doesn’t require central planning? Because we want power even when we admit there is no benefit to exercising it? There are clearly costs or potential costs to this planning even if it is “correct” so why “should” the Austrian do it? Ceteris paribus, no central planning is preferrable to central planning.
I’m so used to thinking of the market solution as optimal in a practical sense that I overlooked the idea that you could theoretically have a better solution that no one saw, even if you believe the government would also be unable to see it. So the “miracle of omniscience” blows up my comment a bit.
It is not theoretically possible to be omniscient, IF one subscribes to the philosophy that the only way to know all is to BE all, on account of the fact that all knowledge would include the knowledge of the experience BEING a being.
In other words, the knowledge that is an experiencing of yourself is a knowledge that no other entity in the natural universe has.
Dean, it looks as though Rowe is agreeing with you in principle, in that he wasn’t actually saying it is possible for an Austrian to be intellectually capable of being a central planner of apples. That’s why he conditioned it with “by some miracle of omniscience”. It is because he doesn’t believe it.
The problem is that the Central Planners just point to some random thing on Earth that went wrong and say, “Ha! The free markets didn’t fix that, so how can it possibly work for apples?”
Thanks to God, there’s always some random thing on Earth going wrong somewhere… and if there isn’t then I’m sure in 3, 2, 1 … got it!
How does that analogy help you here, Nick? Now you’ve turned the tables and confused me.
Yes, that analogy is right, and I would say what that Austrian said. But then Nick Rowe comes along and says, “Given that you are a central planner in apple production, I think you should be planting 40 billion more Granny Smith apples per month, because people are hungry. We’re winning!”
(Feel free to walk away from my “funny” lines whenever you want, Nick. There are no border controls on the Internet.)
Bob: I gotta teach. Will be back later.
Bob: suppose there were no Fed. Suppose Americans used competitively supplied money. Then your perspective would make sense.
But there is a Fed. And so it’s no use saying “whatever it does is OK by me”. You can ask it to target NGDP, or inflation, or base money, or the price of gold, or unemployment, or whatever. But it will be doing something.
I want it to target NGDP. I think that would be least likely to cause monetary disequilibrium. That is not a target for a fixed quantity of asset purchases per month, whether $40 or $40 trillion.
What do you want the Fed to target Bob?
Or are you hoping it will screw up so badly that it brings forward the revolution? Your ideal revolution might be a private monetary system. But that might not be the revolution you get.
Much better to collaborate with the occupying forces!
“You can ask it to target NGDP, or inflation, or base money, or the price of gold, or unemployment, or whatever. But it will be doing something.”
Who says it must be doing something? The best way to collaborate with the occupying forces would be to tell it to sit back and do nothing, even though it exists.
Marc: I can think of 1,001 different ways of “doing nothing”. Doing nothing with the price of gold, the price of silver, the monetary base, the rate of interest, the inflation rate….Which one do you mean?
I can’t speak for Marc, but I thought he meant doing nothing with our Monday afternoon.
Exactly as Bob says.
Nick,
Why does “doing something” have to mean “targeting something?” I apologize if I misread your comment, but that’s what it sounds like you’re saying.
The original Federal Reserve Act spoke nothing about targeting anything. It was established to provide a fairly basic central banking role by extending credit against good collateral to solvent institutions and to protect the $US dollar. There was nothing about manipulating macroeconomic outcomes, financial asset price levitation, etc.
So, if we were to proceed forward with the assumption that we have a Fed so we must do “something” then why not reverting back to a traditional, passive central banking role as prescribed in the original Federal Reserve Act?
No way, Nick. I reject this line of argument. I am allowed to say, “The world economy is really complex, and I have not been convinced that buying $40 billion of MBS per month is a good idea by the people telling me it’s a step in the right direction,” without me offering my own counterproposal. That’s what baffled me about your apple example. You are the one with a very specific plan for apple production, and I’m the one saying (correctly) that there should be no such thing. Then you come back and say, “Nope Bob, you have to decide: are we making Granny Smith or Golden Delicious next month? Or a mix? You can pick a mix if you want, but we have to do something. None of this ‘I think the market should produce apples’ cop-out.”
Bob: you and the other Americans own an orchard, called the Fed. You are part of the market.
This reminds me of the Krugman/Ron Paul TV faceoff where Krugman casual declared that there has to be a central bank. Not because there would be problems without one, which he believes, but just existentially, not having a central bank is inconsistent with Krugman’s view of reality.
It should be clear: the government doesn’t have to manipulate or control money in any way. It literally should do none of the 1001 things you allude to above.
“This reminds me of the Krugman/Ron Paul TV faceoff where Krugman casual declared that there has to be a central bank.”
>> That was my biggest takeaway from that whole debate between the Paul’s. Krugs couldn’t imagine the government not involved in monetary policy, because he can’t comprehend a world without the very existence of monetary policy itself. To me, that seems to be the root of his, and many other economists, dismissiveness of alternatives.
Bob: you and the other Americans own an orchard, called the Fed. You are part of the market.
Is this one of those times you’re supposed to follow up with “… or did I just blow your mind?”
Well it’s more along the lines of owning the only orchard and having the right to legally block anyone else from planting an orchard (hell Rothbard showed that even without government support calculation problems can arise with monopolies). But nonetheless, I do think I understand your point. We aren’t getting rid of the federal reserve anytime soon even under the most optimistic scenario. We aren’t allowed to just throw the ring of power into Mount Doom, so if we can’t destroy the ring, and can’t prevent it from being used, we should try to use it for less bad purposes.
This is a point of view I can sympathize with, but I’m not convinced by. For one thing, which way are we more likely to get rid of the federal reserve? By making the federal reserve kind-of sort-of work and convince people that all that needs to be done is tweek it with reforms? Or by consistently and forthrightly arguing for abolition? One thing to look at would be how the two previous versions of a US central bank were gotten rid of. Jefferson and Jackson did not nibble away at the edges adding rules and controls on the First and Second Banks of the United States. They just outright pulled all support for them and let them die on the vine. It’s true those were different times with a gold standard still in place, banks that were younger, and stronger public support for abolition. Nonetheless we have examples of central banks being defeated by simply arguing for their end, and we don’t have examples of them being hemmed in by rules and then being gradually whittled away to nothing.
Now, it’s true that if there’s a major financial collapse that forces an end to the Fed what comes next could wind up just as bad or worse than what we have now. But in that scenario, the best possibility for just avoiding central banks altogether (the most desirable outcome for those opposed to central planners) is if there is a strong group of people who predicted the problems and argued all along that the only fix was abolishing the bank. If instead people who saw the problems mostly were complaining about not having the right set of rules then there is a far greater chance of the public coming to the conclusion that central banks aren’t inherently bad, they just need the right rules governing them. Or worse, what if the rules you want are consistently adopted and the inherent problems of central planning overcome and salutary effect they might have and collapse still comes? Then there’s a strong chance on the rules you advocated being seen as the cause of the problems and we’re back at square one. Gradualism could thus very well blow up in our faces.
So I appreciate what you’re trying to do but I’m in the “the only victory is abolition” camp.
Oh boy Nick, I can’t tell at this point if you’re being serious or not. Anyway, I will leave things at this:
(1) My ideal world has no Fed or government manipulation of money/banking. That is the “first best” policy. I’m not even sure of the best way to get there, given that we’re currently not there.
(2) Given that we have a Fed, I still say the prudent thing to do is stop injecting historically large amounts of base money in by buying particular asset classes in an effort to prop up a certain sector (which just so happened to be the epicenter of the last blowup that put us in this mess). If you want to argue that a total cessation of OMOs is more “interference” than rolling over current holdings into Treasuries as they mature, OK I think that’s a fair thing to say. But to say (as you seem to) that all moves are equally “taking action” and so therefore our ignorance should give us no reason to prefer some moves over others, sounds silly to me and would be clearly so in other contexts, like medicine or if your wife tells you she saw the guy down the street cheating on his wife and thinks you guys should storm over there at dinner time.
Bob: “Given that we have a Fed, I still say the prudent thing to do is stop injecting historically large amounts of base money in by buying particular asset classes in an effort to prop up a certain sector (which just so happened to be the epicenter of the last blowup that put us in this mess).”
Would you advocate a policy that tries to buy up a very broad category of assets such that no sector or asset class benefits disproportionately?
Would you advocate a policy that tries to buy up a very broad category of assets such that no sector or asset class benefits disproportionately?
The only category that would accomplish that is for the Fed to buy up everything from everybody.
If Bob owns the Fed, why can’t he sell his “shares”, without being intimidated, coerced, or thrown in a cage by the state? Doesn’t ownership carry with it the right to dispose of one’s property if one prefers it?
If one did try to sell one’s “shares”, and then deal only in gold, or silver, as payments, the IRS would still demand taxes on those precious metal incomes in dollars only, which means Bob would be coerced into finding and accepting dollars in the market somehow, which of course would mean he would have to remain a “shareholder” if he wants to avoid living in a cage at gunpoint.
Ownership is a rather inaccurate choice of terms to describe the relationship between the Fed and non-Fed Americans. Come on, let’s not spoil the meaning of words. Let’s call a duck a duck and a goose a goose.
I’m really curious as to how You define ownership here. You would have to define market too so it includes governmental power from which FED monopoly comes about – this line will lead to some kind of nihilism, and this would mean that You are running away to a mataphysical rathole from logic.
But in your physicist analogy, those guys could conceivably get the right answer, even if it were just blind luck and they guessed.
Can the central bank get the “right” answer?
What is the criterion for “right”? For the mainstream, I know employment/GDP/etc matter…
I think Austrians are Socratians in that they know that they don’t know…
I think Blackadder is right. Really every thing human beings do is a fatal conceit. It’s not like there’s such a thing as “not doing anything” in any real sense. That has consequences.
For that reason I’m not even sure your proper response of quitting is proper. You quitting means that we are less likely to do what you think makes the most sense than if you hadn’t quit.
I don’t see how this line of argument has any special merit against Sumner, Krugman, Rowe, etc. Everyone is proposing taking the action that they think will do the most good (or the least harm).
Now, we can argue about who is right, but I’m not sure any side is more conceited than the other. The people who call Keynesians conceited seem pretty damn sure they know what the best course of action is, and they’re willing to bet everyone else’s wellbeing on it.
Where Hayek consistently sounded like a modern “internet Austrian” was when he accused people of this sort of hubris. Either he misunderstood the argument, or he deliberately distorted it. I am not sure which, but I think it’s more of the former. Hayek never quite seemed to get this distinction between the volume and direction of employment that Keynes made. It’s one thing to say (as the early Hayek did) that macro policy may have micro consequences. That may be true (in fact it’s almost certainly true). It’s another thing to equate macro policy with micro policy (as you were more apt to hear the later Hayek suggest).
I think Blackadder is right. Really every thing human beings do is a fatal conceit. It’s not like there’s such a thing as “not doing anything” in any real sense. That has consequences.
No, this is totally wrong. There are plenty of areas where it is obvious that one shouldn’t “interfere” because one doesn’t understand the likely consequences well enough.
re: “There are plenty of areas where it is obvious that one shouldn’t “interfere” because one doesn’t understand the likely consequences well enough.”
You are making a judgement about the likely consequences of not interfering, though.
I agree – there are plenty of areas where it is obvious that the likely consequences of not interfering are better than the likely consequences of interfering. That is certainly the case. But you can’t just declare that somehow non-interference is a privileged default state.
Isn’t this basic Mises/proof of the action axiom as tautological? I would have thought the point that appealing to “non-action” as being out of bounds would be relatively easy for Austrians to accept.
Non-interference of violence is most certainly a justified default state. It is not an ex cathedra pronouncement. It is not arbitrary. It has rational foundations.
You are lumping in violence and peaceful interference into one category of interference. I suppose doing so is necessary to make certain points, but the point of the fatal conceit is not market process interference, but political process interference.
The fatal conceit is targeted against central economic planning, which is based on systematic coercion against individual property rights. It is not targeted against individual action in the market.
In other words, if there was no fatal conceit had by anyone in the world, then the market process would still be possible, indeed it would be maximized, precisely because every individual plans and acts through using his own person and property and nobody else’s (without their consent).
The action axiom is tautological yes, but in the sense that the Pythagorean theorem is a tautology, in that it isn’t saying anything external to plane right triangles. If one refers to a plane right triangle, one is already referring to the relation between the triangle’s sides in accordance with the theorem. The theorem is analytic. Nevertheless, it still enlarges our knowledge of plane right triangles. It isn’t immediately understood. It has to be learned. Once it is learned, the tautology is revealed.
Same thing with praxeology. It requires learning. Once it is learned, it is revealed as tautological.
Tautologies are not necessarily empty of content.
—————-
As for the concept of non-action, it can refer to either absence of a particular action (and thus the presence of another particular action), or it can mean non-existence of self-consciousness (death, coma, etc). Typically when Austrians speak of non-action (on the part of the Fed for example), they mean action on the part of individual market actors in that area of inquiry (money production). They don’t mean non-action on the part of everyone as in the absence of self-consciousness interpretation.
Daniel, here’s a brief comment on this.
I don’t agree that your point applies here, but I have seen other cases of it. I like to point out, for example, how the economic calculation problem applies just the same to intellectual works as to sofas, thereby justifying exclusion rights in ideas for their originators (i.e. intellectual property rights). (Scroll down to point 3.)
The typical response back from libertarians is to trot out Menger and say, “Nope, ideas don’t meet his definition of a good, therefore no calculation problem exists.” So there is a strange tendency to say “the fatal conceit doesn’t apply to stuff I like”…
DK, you are totally ignoring the fact that some types of “interference”, some types of action, PREVENT others from interfering and acting with their own property the way they see fit.
You are equivocating between the coercive, violent “interference” that is the political process, and the peaceful, consensual “interference” that is the market process.
The fatal conceit that Hayek spoke about is believing one to have the requisite knowledge of the entire market such that one can make use of the political process to “improve” the market process through central planning.
—————–
It is not wrong to equate macro policy with micro policy, because as Mises and later Rothbard have shown, the divorcing of economics into macro and micro spheres was an unjustified one that has led to confusion, destruction, and quite frankly bad economics.
Keynes for example never understood that the volume and direction of employment are completely micro-based. If any economics doctrine cannot be completely expressed in terms of individual action, then it is not related to economic science, but idealism, if not dogmatism.
You are assuming that other people accept your right to own property at all. Not everyone shares your set of values.
You are assuming that other people accept your right to own property at all.
Where? Which statement(s)? I know there exists people who don’t believe in other people’s property rights, and only their own, or the rights of a select few people according to their criteria, but I don’t see how I made the assumption you say I made in what I said above.
Ahh, well in that sense you are wrong. I for one, am more than willing to isolate my own wellbeing from that of people who disagree with me, and gather together with people of a like mind. On a suitable basis of mutual agreement we could decide the extent to which this isolation is practical and settle the matter.
What I’ve noticed is that it is difficult to get the central planners and statists to agree to any limit of their own authority over other (while the non-statists are entirely happy to limit their authority over others). I admit, I might be stupid and I’m willing to take the consequences, but I ask in return that I also get a chance to be rewarded if I happen to get it right. If you think I’m an idiot then it should be an easy deal right?
I wouldn’t go as far as Daniel does above. As I see it, the dispute here is really over the proper baseline to judge actions against. Bob aptly summarized the fatal conceit as “really smart guys thinking they understand a complex system well enough to start tinkering with it.” Does scrapping the Fed in favor of 100% gold reserve banking constitute tinkering with the system? It is if your baseline is the status quo. On the other hand, if your baseline is Rothbardianism, then abolishing the Fed would simply mean that you had stopped tinkering.
My inclination is that having a status quo baseline is more consistent with Hayek’s arguments about the evolution of traditions and practices, but Hayek does sometimes speak as if the baseline is something closer to libertarianism (though obviously he never goes full Rothbard).
If the baseline is the status quo, then I don’t know if you can justify tripling the base money supply? I mean it is absolutely arbitrary where you set the status quo this way..
Base money supply, M2, CPI, GDP, Central bank tools (QE, paying interest on excess reserves, NGDP targeting)…?
Sorry I see quite nearly no one arguing for the status quo, except you count having a central bank and disregarding everything else…
IMO it seems really not that weird to assume a baseline of natural market interactions. Many economic insights show that you should not tinker with them (rent controls etc), just interest rates do not count for whatever reason.
By Bob’s definition of the fatal conceit only interventionists can be fatally conceited.
I’d prefer not to argue from definition here.
It seems to me the fatal conceit is “really smart guys thinking they understand a complex system well enough to take action of some sort that impacts it”.
We are all in this conundrum, unfortunately. It’s the human condition and “in-action” is a mirage.
It seems to me the fatal conceit is “really smart guys thinking they understand a complex system well enough to take action of some sort that impacts it”.
No, that’s not the fatal conceit. The fatal conceit includes a specific type of action, namely, political action.
An individual investor or seller or entrepreneur who acts in the market is “interfering” with the world, yes. He is using his body and his material means to change the course of history. But, he is not acting as a central planner. He is acting as a market actor. While both the market actor and the central planner are interfering, while they are both taking action that impacts “the system”, they are not acting with a fatal conceit because they are not acting as central planners.
Fed technocrats are acting with a fatal conceit, because their interference is a form of central planning, in that it is based on the systematic coercion of the state that threatens others to use their body and material property in ways that they otherwise would not have done had they not been so threatened.
Fine – I’m happy to restrict it to political action.
The point is still that if your decisions affect everyone inaction is an important type of action. And in political action, your decisions do affect everyone, so libertarians can’t hide behind this idea that inaction is a default state immune from the fatal conceit.
We all have this problem, and we need to act accordingly, do the best we can, and build institutions that are robust and adaptable.
The point is still that if your decisions affect everyone inaction is an important type of action. And in political action, your decisions do affect everyone, so libertarians can’t hide behind this idea that inaction is a default state immune from the fatal conceit.
I am disputing that point actually.
Inaction from the state does not actually AFFECT those not in the state, DK. What you are probably thinking of, the resulting course of affairs that would almost certainly differ from the expected course of affairs, would not be a CREATIVE act of the state at all, but rather, it would be generated by the creative acts of non-state actions. The radical changes you would observe would be caused by everything except statist action, since statesmen are not acting in a state-like manner, but in a more market based manner (not perfectly market based, because they may still act violently).
I’ll give an example. Suppose the state suddenly ceased paying out welfare, and afterwords, a person dies. You would probably consider this to be an inaction that CAUSED this man’s death. I on the other hand would say that the cause was whatever actually killed them, either lack of food, or cancer, or whatever.
I wouldn’t say that that inaction affected this person, because what one person’s inaction does is make way for another’s action.
I reject your assertion that libertarians cannot “hide behind” the idea that inaction is the “default” state immune from fatal conceit.
Calling for an ABSENCE of central planning is not in any a manifestation of a fatal conceit. It is the elimination of action based on it.
According to your logic, it is impossible to abolish fatal conceit central planning once it starts. Do you not see this as a weakness?
Assuming by “tinker” he was making allusions to intervention.
If the baseline is the status quo, then I don’t know if you can justify tripling the base money supply?
I wouldn’t argue that adopting NGDP targeting would be going with the status quo. Obviously it would be a major change from the status quo. Junking the Fed altogether, however, would be an even bigger departure from the status quo, which is why I thought this was an odd argument coming from Bob.
IMO it seems really not that weird to assume a baseline of natural market interactions.
If you internalize the libertarian ideology then it can seem obvious and natural to treat it as a baseline. But it’s not obvious to most people and hasn’t been obvious historically, which is what you would need for Hayek’s argument.
In the last 100 years there were lots of similar big changes e.g. inclusive introducing the FED in the first place, that according to Selgin didn’t make anything better no matter which metric you look at. Followed by introducing a gold exchange standard that didn’t work, Bretton Woods that didn’t work, converting for the first time in history the whole world to a fiat money standard in 1971 which it seems might be crumbling as well… The last 100 years are a history of failed tinkering and always major changes towards more tinkering never less. And now that we tinker a lot we call this the new baseline, and going away from it is revolutionary and dangerous?
I guess I can call you biased with just as much reason..
The last 100 years are a history of failed tinkering
The last 100 years have been a time of enormous increased prosperity and growth.
Has this growth come because of the development of things like the Fed or despite it? Most economists would say the former, but there are some like Selgin who would claim the latter.
Suppose you take the view that the economy is incredibly complex, and that it is hubristic to think that we understand exactly how it works. In that case, I would think you would not be inclined to support a Selginian proposal to abolish the Fed and adopt some form of free banking. After all, even if he is right that the Fed makes things worse, it is still compatible with the prosperity and civilization we see around us today. Whereas if he’s wrong, then adopting his proposals could lead to an economic and civilizational collapse.
How could this be right? You are saying that because there has been a tremendous amount of growth and increases in standard of living in the past 100 years, that anything that occurred during that time is compatible with that growth and thus shouldn’t be abolished?
What role would economics and public policy analysis even have under such an assumption? And I don’t see how you can assume that in the event anti-FED economists are wrong, the outcome could be economic and civilization collapse. Surely, there are an infinite number of possible outcomes in terms of varying degrees of success or failure, couching it in terms that it could lead to societal collapse seems extremely misleading. Again, what changes or attempted improvements are permissible under such a framework?
Also, I believe you are overlooking the fact that there are no constants in this equation. So as the economy today is much different than it was 100 years ago, and as it continues to evolve, you must equally consider the possibility that maintaining programs and/or institutions that happened to be compatible with the growth that occurred over the past 100 years, may very well be counter-productive for this new, ever-changing economy going forward.
Note that I don’t think this is the case. I think central banking has always been a net negative, but I’m just pointing out that the argument for not touching anything is even less persuasive when you consider the ever-changing nature of the economy.
Robert,
First off, you shouldn’t equate what I say about what a particular Hayekian argument implies with my own substantive views on the matter.
Second, how one ought to react to proposed policy changes depends on how much economic knowledge you think we have. If you really think that nobody knows nothing, then economics and public policy analysis would be pretty worthless.
More realistically, if you think that our knowledge of such matters is highly limited, then you ought to be very wary of major policy changes, no matter how appealing they might sound, at least as long as society is functioning decently well. The sorts of proposals you would get behind would be more likely to be incremental, or experimental in nature.
In other words, you’d be Jim Manzi. I don’t know Manzi’s views on monetary policy, but I would be surprised if he thought that we should just get rid of the Fed and adopt 100% gold reserve banking.
What would go wrong with abolishing the Fed?
It’s not enough to tell us you’re scared of drastic changes.
You are confusing technological advances with economic policy changes. Not really sure how one could say the plow, the cotton gin, the automobile, the tractor, the air plane, the harnessing of electricity etc. that most would concede were the cause of all that increased prosperity and growth came because of the Fed. Technology was already changing rapidly before the Fed existed and many of these things happened (or their predecessors) before the Fed existed. Much of the technology that caused this prosperity was well underway in the second half of the 1800’s and turn of the century.
Whether you are saying that most economists think the Fed was the cause of our prosperity and growth and our technology wasn’t, or you are saying that technology was because of the Fed, you will have scientist and historians all over the world thinking most economists are idiots.
So, the two world wars must have been the secret to our current prosperity!
After all, even if he is right that the Fed makes things worse, it is still compatible with the prosperity and civilization we see around us today. Whereas if he’s wrong, then adopting his proposals could lead to an economic and civilizational collapse.
So that’s why abused wives shouldn’t leave their husbands. As bad as it is, it may be worse if they leave, so all abused wives should be inclined to staying.
Now it all makes sense. Have such low self-esteem that the status quo becomes an irreplaceable mental crutch.
Sorry this argument proves nothing. There was enormous increases in properity before the FED as well.
As Silas noted below then even the 2 WWs can be called to have been compatibel with our prosperity and it would have been dangerous if we would have avoided them.
Economics seem to be the science of confirmation bias…
*as Silas noted above…*
🙂
*prosperity*…
But wouldn’t the status quo for Hayek have been the gold standard, sans Fed? Weren’t most of his writings on this subject from the ’30’s? Over the course of his lifetime, he saw the Fed established, the abandonment of fixed exchange rates, and the abandonment of the gold standard altogether.
Obviously, this kind of suggestion from an Austrian looks radical today, but from Hayek’s own point of view, wouldn’t he have been arguing just to go back to the way things were before all the tinkering started? All the old farts of his own time would have thought this an extremely conservative suggestion, I would think. It’s like the old guy who says, “you know, back when I was a kid…”
Hmmm.. Skylien beat me to it…
But wouldn’t the status quo for Hayek have been the gold standard, sans Fed? Weren’t most of his writings on this subject from the ’30′s?
The Fatal Conceit was published in 1988.
Which contained ideas the origin of which was the 1930s (and prior):
“The order of the extended economy is, and can be, formed only by a wholly different process – from an evolved method of communication that makes it possible to transmit, not an infinite multiplicity of reports about particular facts, but merely certain abstract properties of several particular conditions, such as competitive prices, which must be brought into mutual correspondence to achieve overall order. These communicate the different rates of substitution or equivalence that the several parties involved find prevailing between the various goods and services whose use they command. Certain quantities of any such objects may prove to be equivalents or possible substitutes for one another, either for satisfying particular human needs or for producing, directly or indirectly, means to satisfy them. Surprising as it may be that such a process exists at all, let alone that it came into being through evolutionary selection without being deliberately designed, I know of no efforts to refute this contention or discredit the process itself – unless one so regards simple declarations that all such facts can,
somehow, be known to some central planning authority. (See also, in this connection, the discussion of economic calculation, in Babbage (1832), Gossen (1854/1889/1927), Pierson (1902/1912), Mises (1922/81), Hayek (1935), Rutland (1985), Roberts (1971).)” – pgs 86-87
Market monetarists say that NGDP targeting wouldn’t be a “major” change from the status quo, because they refer to the period 1980-2007, which had “de facto” NGDP targeting in their opinion due to the fact that NGDP rose on average by around 5% per year (which was an indirect outcome of dual mandate and allegedly “worked pretty well”)
Of course, what they are ignoring is that NGDP targeting would carry with it the criticism of Lucas and Goodhart, which is that once a statistic is chosen to be a subject of monetary or fiscal policy, on account of the information it previously conveyed, then it will lose that information content that originally qualified it as a policy target.
My interpretation of the Lucas/Goodhart critique is this: the same reason why the price level, which was chosen for monetary policy on account of the information it originally conveyed, eventually “failed” is the same reason NGDP targeting will fail if it ever should be adopted. The type of information content from NGDP during the period 1980-2007 would not be the case for the period in which NGDP is explicitly targeted. Thus, should market monetarists observe high unemployment and/or low output during NGDP targeting, they may overlook the possibility that NGDP targeting is at fault, because they will be thinking “Output and employment were impressive during 1980-2007 when NGDP was growing all nice and stable, so because we have NGDP targeting now, the problems must be due to something else.”
Admittedly, I once saw Sumner say that he would question NGDP targeting if it was accompanied by prolonged high employment and/or low output.
The default position should always be private property and the non-aggression principle. Except for a few exceptions, that is the basis of our English common law. Average people understand these concepts: my house, my body, my bank account, my yard. It is only because of the government schools that they also simultaneously tend to give credence to this bizarre other-world of “politics” where the normal rules of behavior go out the window. This is mostly based upon being taught the phony statist narratives that the free market causes monopolies, business cycles and poverty which we know to be lies and nonsense.
Individuals also each hold their own special knowledge and subjective values which are uniquely expressed as objective information through market prices. Keynesian-style monetary and fiscal policies distort that flow of essential information.
The Keynesian hoax consists of pretending that the market fails and that markets have but must be provided with “momentum”. Allegedly, shots of diluted fiat funny money injected into society will provide the allegedly missing “momentum” when the only functionality of such injections is the theft of purchasing from those holding the old money to those getting the new money first. It is nothing but fraud and theft with a lot of unintelligible jargon thrown in to help pretend otherwise and to fool the masses.
The fatal conceit consists a) in thinking that the elite technocrats have some sort of essential information that the masses lack; and b) while at the same time claiming (a priori) that the masses have the wisdom to vote for the particular gang of experts which will then be in a position to override the private property, contract rights and due process rights of the masses under threat of imprisonment and solve the alleged problem that really does not exist but for the violation of rights by the technocrats.
And let Kuehn and Callahan argue to average people that private property is coercion.
Bob: My old post on this subject: http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/06/the-macroeconomics-of-doing-nothing.html
Maybe the confusions regarding “saving” stem from the unfortunate choice of definition.
The definition you provided for saving is “not spending part of your disposable income on newly-produced consumption goods and services”.
Well, when one defines a concept as the absence of something, then it’s no wonder confusion arises! It’s like asking someone for directions to a hotel, and they say “It’s NOT on 4th street.”
Asking someone what “saving” is, and they say “It’s NOT consuming”, then is it any wonder why the popular fallacy has arisen that what is saved is simply hoarded?
Suppose macro-economists used my definition for saving:
“the use of revenue or income for purposes other than purchasing consumer goods and services.”
This definition is not an absence of something, but rather a presence of something, namely, the use of revenue or income for anything other than consumption. If someone asks me what the definition of saving is, and I say “It’s using your money for anything other than consumption”, then they will for sure start imagining various uses for money other than consumption, rather than becoming lost because I told them saving is not consuming.
Nick, that article is the most communist article I have ever read. I got so sick and felt I was reading the communist manifesto I had to retire to grab a coor’s light to relax the ussr national anthem I heard afar in my brain as I read on and on. It is important to understand that every individual acts to satisfy his own rational self interests. When you automatically assume that government must stimulate an individual’s preferences, you are basically attempting to guide individuals who think subjectively to some uniform fascist robotic lifestyle. If you see economics within a means-ends framework, as you attempted to explain in a statist macroeconomic sense, you’d see that every individual thinks and uses their own means to attain their own ends. Your perspective is the stimulate habits or to interrupt individual means-ends constructs. It is impossible to attain a collective synchronization through force, which is what monetary stimulation is. It is force rendered through a monopolized money. This is why people never do what economists predict they will do, because attempting to interrupt individual’s natural habits only exacerbates more problems. A means-ends framework that allows the individual the freedom to attain their subjective preferences is realistic, a means-ends framework (like mainstream macroeconomics) that desires to stimulate groups of people to attains the ends statist economists attempt to predict will always be wrong. We are not cattle, government cannot herd us toward their ends. We are rational beings.
Thus by the government getting out of the way, one is essentially allowing for individual value scales (human preferences) to dictate future circumstances. It is a recalculation of the market. The failure of the economist, as Murphy pointed out in the article with a link to Hayek, is to think he is an all knowing being for other unique individuals that have their own personal interests. Modern mainstream economics is Christopher Columbus economics. They try to go to one place and name it something they never intended to arrive at, and are not present in. Columbus wanted to go to India, he landed in the New World, called it India, and then destroyed it….thinking he made it a better place. Let the market work man, pick up a book on capital theory. Cobb-Douglas is failing you.
“This is why people never do what economists predict they will do, because attempting to interrupt individual’s natural habits only exacerbates more problems.”
Inability to scientifically predict future human actions would be true in a purely free market also.
You basically just claimed that you would be able to predict my future path of knowledge and my future actions if I am not subjected to violence.
I never made those claims. I’m specifically stating that interrupting an individual’s natural habits exacerbates more problems. When did I ever say that economists can predict what humans do? I never stated that at all, in any permutation. Please read more thoroughly my friend, I just went on a rant about individuals and their subjective values. Good one though man, you just totally misread my statement. High five!
OK I’ll take a look, but Adrian is saying it’s the most communist article he’s ever read…and he’s read a lot of commie propaganda in his day.
“Communist” was a stretch.
Prof Murphy, I agree. I was educated at a public school and also studied orthodox economics at a university. Indeed you know where I come from.
Adrian is saying it’s the most communist article he’s ever read…and he’s read a lot of commie propaganda in his day.
Well, Nick is a Canadian after all.
Damn! Busted! It must have been all that time I spent teaching economics in Cuba, seeing the success of the glorious revolution all around me. Happy workers, paddling their picturesque home-made rafts across to Florida for a short vacation.
BTW Nick I tried to read that older post, but I got distracted with the link to the prior one about wife jokes. (For real.) I understand what you were saying in it, and I actually liked how you were taking Keynesians to task. FWIW, I think savings always equal investments, because even if I accumulate more cash balances, I am investing in cash, which is an asset after all. (Nick you should have seen it: Major Freedom doesn’t like when I talk like that. It’s like Superman II when the Kryptonians clash. Do you Canadians even know who Superman is? Maybe I need to use Marvel characters instead.)
“As always, Blackadder tries to keep me honest in the comments. His caustic barb reminded me of something I meant to say in the original post: I now believe more than ever, that if someone made me Fed chief, the proper thing to do would be to resign.”
Dr. Murphy, do you think this is in conflict with Rothbard’s opinion of a strategy toward liberty?
“We conclude this part of the strategy question, then, by affirming
that the victory of total liberty is the highest political end; that the proper
groundwork for this goal is a moral passion for justice; that the end should
be pursued by the speediest and most efficacious possible means; that
the end must always be kept in sight and sought as rapidly as possible;
and that the means taken must never contradict the goal-whether by advocating
gradualism, by employing or advocating any aggression against
liberty, by advocating planned programs, or by failing to seize any opportunity
to reduce State power or by ever increasing it in any area.” – Rothbard in The Ethics of Liberty [my emphasis in bold]
Personally, after reading that last chapter, I had some trouble piecing everything together with my own judgments. For example, if getting rid of welfare immediately would cause riots in the streets and a tendency for people to put the blame of said riots on libertarianism, would this be counterproductive in a path toward liberty? After all, liberty in the short run can and should be distinguished from liberty in the long run. What is essential for one does not necessarily apply to the other.
Rothbard was astute in pointing out that the means should never contradict the ends, but I’m surprised I have not seen any responses from him from the welfare situation I just laid out above. That seems like the first thing anyone would think of after reading Rothbard’s passage.
Yes, I often struggle with the same.
On the whole, gradual evolutionary change is better for everyone than revolutionary change. However, all the gradual evolutionary changes tend to favour the growth of state power. It is always easier for useless committee attendees to secretly slide the knife into a faceless and unsuspecting public than it is to turn to their fellow committee attendees and say, “Some or all of us are a complete waste of space.”
One logical reason to vote for Obama and his fellow socialists, is if you think it will all fall over in a heap anyhow, might as well get it finished sooner than later, and give no room for the blame game. Of course, then you have to be willing to suffer through escalation of military power used against civilians, like to Soviets did in order to hold it all together. They might come after you just for saying, “Told you so.”
Not that I seriously think Romney is much different to Obama. Neither shows any signs of delivering on promises.
Socialism can be very stable, look at North Korea… they should have collapsed years ago but they seem to just hang in stasis at the edge of existence. No riots, no food, no progress, no ideas. That’s really the nightmare scenario. Presumably the rest of the world sits and leaves the North Koreans as a warning to remind us what can go wrong.