30 Oct 2012

Did Matt Yglesias Just Refute Keynes and Krugman?

Debt, Economics, Krugman 46 Comments

It used to be the case that after a natural disaster, we could expect the following:

1) Pundits and even some economists would say that despite the human tragedy, the silver lining was that the disaster would be “good for the economy.”

Then, due to the efforts of Henry Hazlitt, it used to be the case that after a natural disaster, we could expect:

1) Pundits claiming it was good for the economy.
2) Free-market economists saying this was the Broken Window Fallacy.

Now, it it is the case that after a natural disaster, we can expect:

1) Pundits claiming it was good for the economy.
2) Free-market economists saying this was the Broken Window Fallacy.
3) Keynesians saying, “No it is NOT!”

For an example of an economist who quite clearly is saying that the storm is bad on a personal, human level, but that it might actually leave us better off in material terms, see this guy. Now let’s be fair: He is not saying, “I am glad the hurricane happened,” or, “The people on the East Coast, all things considered, are better off.” But he quite clearly says that the storm will boost construction spending and that America will “emerge stronger and rebuild better.” So contrary to the claims of my favorite grad student blogger, this guy is not merely looking at flow variables like GDP, he is also talking about the physical structures being replaced such that we emerge “stronger” than before the storm. Unless he actually said, “Daniel Kuehn be quiet” I don’t see how this guy could be clearer.

Now a much more interesting and defensible analysis comes from Matt Yglesias, who writes:

But suppose that interest rates are zero [and planned saving still exceeds planned investment]. What happens then?

Well, then you’ve got a recession. The recession could be cured by unorthodox monetary policy or by fiscal policy measures, but it hasn’t been. So you’re left hoping that the marginal product of capital will increase, thus bringing savings and investment back into equilibrium. An exciting new technological discovery could make that happen. And so could a hurricane. If there are already a bunch of perfectly good cranes in town, then nobody wants to invest in new cranes, and the crane factory sits idle. But if a hurricane wrecks a bunch of cranes, then the marginal value of a new [crane] goes up, and people want to invest in new cranes.

Now before everyone starts screaming “broken windows fallacy,” take note: This is a terrible solution to unemployment. By reducing society’s stock of capital goods and consumer durables, the hurricane spurs new production into being. But it’s also making us poorer.

The point I want to make about this isn’t that hurricanes are “good for the economy.” The important point is that suffering through a downturn without adequate fiscal and monetary stimulus amounts to rebalancing the economy through a slow-motion hurricane. We will, eventually, return to full employment. But we’re getting there by allowing the per capita stock of capital goods (as it happens, mostly houses) and durables to deteriorate year after year. Eventually this will lead us to a rebalancing, but it’s a form of rebalancing via impoverishment. Stimulus is much better. [Bold added.]

OK so I have some questions for Matt Yglesias (or his fans):

1) Suppose the only two options are a laissez-faire slow grind, in which recovery takes years as more cranes and other equipment become obsolete, versus a hurricane in which all the cranes are destroyed in a day and so recovery occurs within a month. If this is indeed the choice, wouldn’t you favor the hurricane because it would get the pain over with? The workers would immediately be put back to work, and would be spared years of losing their skills. By assumption, the physical stock of wealth wouldn’t be lower in the hurricane scenario than in the slow-grind recovery scenario. It’s just that we would hit rock bottom and start recovering in 2012, rather than (say) 2016. So even on your own terms, isn’t a hurricane a blessing, if (say) Richard Fisher is setting Fed policy and John Cochrane is in charge of fiscal policy?

2) I think you are saying a hurricane is a really bad way to fix the recession because (say) we go from having 1000 cranes down to having only 900, then we put everyone back to work making a new 100 cranes so we end up back where we started, with only 1000 cranes. In other words, we made ourselves physically poorer, in order to give the workers and other idle resources a kick in the pants to replace that lost physical wealth and in the process cure the recession.

2a) But if I have that right, then you would surely agree that burying bottles of money in the ground for workers to dig up, wouldn’t actually be “good for the economy,” right? I mean, sure you’d have a bunch of workers scurrying around, and there would be no more idle resources, but the economy wouldn’t end up acquiring more physical wealth than it had in the original state of recession.

2b) Or, you could surely agree that it wouldn’t actually be “good for the economy” if we erroneously believed aliens were going to invade us, and so we produced a bunch of exotic weaponry that then turned out to be completely useless. In that case, just as with the hurricane “solution,” sure we would have stimulated all the idle resources back to employment, but society wouldn’t actually accumulate any tangible wealth to show for it.

3) Can I ask you, Mr. Yglesias, and any of your fans, a favor? If and when you address these questions, please do not explain that Keynes and Krugman actually favor stimulus spending on useful, productive things. Yes, I know that. But I had thought that in order to disentangle the various factors in the case for stimulus, they intentionally–as a thought experiment–argued that it would be better than nothing if the government spent money on things that were completely useless. So if you are right that rebuilding after a hurricane doesn’t actually “help the economy,” then it seems you must be saying they are wrong with these controversial examples. (And good for you, if so.)

4) Last point: If we can all agree that only a fool would use “real GDP in the United States” as the proper metric of evaluating the effects of the hurricane on the country, when clearly it is the welfare or utility of the actual people living in the United States, then it is crystal clear Paul Krugman was wrong to try to address the “does debt burden our grandchildren?” question by focusing on real GDP in 2100, rather than on the welfare or utility of the actual Americans living in 2100.

46 Responses to “Did Matt Yglesias Just Refute Keynes and Krugman?”

  1. Brent says:

    “then it is crystal clear Paul Krugman was wrong to try to…”

    Ah ha! I see what you did there, Dr. Murphy… very clever… very clever, indeed.

    • Major_Freedom says:

      Oh come on, why is it so clever?

      We should all agree with Krugman. It makes perfect sense to claim that I am just as well off having $100 billion worth of army tanks and aircraft carriers, as I am having $100 billion worth of state of the art medicine, mansions, designer clothing, yachts, factories that produce state of the art medicine, mansions, designer clothes and yachts, and other civilian goods that I personally desire…over army tanks and aircraft carriers.

      Total output in both cases is the same, as measured in dollar spending.

      I hate it when Murphy thinks he has a gotcha against Keynesians. He has to twist and contort into a pretzel to make his cases.

  2. Dan says:

    If I was a Keynesian, I wouldn’t want to read this blog. They have to twist themselves like a pretzel in order to seem like they don’t hold contradictory views.

    • successfulbuild says:

      I’m still waiting for little skylien to explain how having a “gold backed dollar” doesn’t require a government. Who is going to originally set the value of the dollar and prevent it from changing?

      Some Libertarian contradictions: private property has historically been backed by a state and yet Libertarians claim they’re anti-statist; Libertarians favor allowing landed property owners to throw people off their property for being hedonists while claiming to oppose totalitarianism (Hoppe); Libertarians claim that the market will lead to a natural equilibrium while at the same time argue for the privileged rights of aristocratic families and the “natural elites” in the “Libertarian order” (hoppe); Libertarians want to ban FRB while claiming to support “free-banking”; Libertarians claim to be “economic scientists” whereas all scientists know that there is no such thing as absolute certainty in science (this matters because if it could be shown that other systems were superior to the Libertarian monetary order, whatever it is, they should be implemented, thus libertarians result to arguing for moralistic claims which is anti-science), and so on.

      • Matt Tanous says:

        “I’m still waiting for little skylien to explain how having a “gold backed dollar” doesn’t require a government. Who is going to originally set the value of the dollar and prevent it from changing?”

        Your presumption is that the “dollar” exists out in the ether somewhere and is separate from gold. When one talks about a gold backed dollar, they mean that the unit of currency is literally a certain weight of gold, and the “dollar” as a paper ticket is a property title to that amount of gold. They are not separate things.

        ” private property has historically been backed by a state”

        Private property cannot be backed by the state. The state exists only by violating said private property. Property pre-existed the state, and the state recognizes that destroying all wealth production makes for a very poor parasitic income.

        “Libertarians favor allowing landed property owners to throw people off their property”

        I am going to live in your house now, and enjoy raiding your fridge for sustenance. After all, you oppose allowing property owners the right to remove people from their property.

        “Libertarians claim that the market will lead to a natural equilibrium while at the same time argue for the privileged rights of aristocratic families and the “natural elites””

        You fail to understand the difference between recognizing natural elites and believing they should be in charge of other people. Einstein was, for instance, clearly a natural elite – a superior individual intellect. No libertarian is arguing for a society run by people such as this.

        “Libertarians want to ban FRB while claiming to support “free-banking””

        Freedom does not include the freedom to steal by fraudulently creating multiple property titles to the same physical object.

        “Libertarians claim to be “economic scientists” whereas all scientists know that there is no such thing as absolute certainty in science ”

        Failure to recognize the difference between a priori knowledge and empirically based claims. Failure also to recognize that a priori knowledge must be assumed for empirical claims to make sense – especially the existence of time-invariant relationships and the protophysics (algebra, geometry, etc.) necessary to even make observations about data.

        “this matters because if it could be shown that other systems were superior to the Libertarian monetary order, whatever it is, they should be implemented”

        There is no such thing as a “monetary order”, and the libertarian claims are grounded in logic – which you clearly lack the ability to understand, and so attempt to ignore as saying nothing about reality.

        • successfulbuild says:

          “Your presumption is that the “dollar” exists out in the ether somewhere and is separate from gold. When one talks about a gold backed dollar, they mean that the unit of currency is literally a certain weight of gold, and the “dollar” as a paper ticket is a property title to that amount of gold. “

          Exactly my point. You have to have a government for this system:

          “they mean that the unit of currency is literally a certain weight of gold…”

          “A certain weight of gold” means that there is agreed upon standard. So what this Matt guy is saying is that 300 million people, or probably in his distorted little mind the entire planet, is going to agree upon this standard. Its as ludicrous as expecting everybody to have the same definition of property rights, which, of course, they do not now, nor will the human race ever, have a universally agreed upon definition of property.

          “and the “dollar” as a paper ticket is a property title to that amount of gold.”

          Yes, and as Rothbard said there would be no “free-market” in the price of gold. That means it would originally bet set by some agency. But sets it? The government.

          I am going to live in your house now, and enjoy raiding your fridge for sustenance. After all, you oppose allowing property owners the right to remove people from their property.”

          What Hoppe is talking about is having tenants on the property and then the ability to evict them at random.

          “a few individuals acquire the status of an elite through talent. Due to superior achievements of wealth, wisdom, and bravery, these individuals come to possess natural authority, and their opinions and judgments enjoy wide-spread respect. Moreover, because of selective mating, marriage, and the laws of civil and genetic inheritance, positions of natural authority are likely to be passed on within a few noble families. It is to the heads of these families with long-established records of superior achievement, farsightedness, and exemplary personal conduct that men turn to with their conflicts and complaints against each other. These leaders of the natural elite act as judges and peacemakers””

          So not only do the natural elites control the property through hand-me-downs, they become the judge, jury, and executioners of law and order in this society.

          These global GLOs will own all the “property” and these “proprietorships… will be an entrepreneur seeking profits from developing and managing… communities…” Anybody who cannot pay, i.e., the “economically isolated, weak, and vulnerable outcast[s]” will be removed from society and perhaps sent “into the wilderness or open frontier of the Amazon jungle, the Sahara, or the polar regions.” What constitutes such harsh punishment could be anything that Hoppe considers a criminal (i.e. “profanity, drug use… homosexuality…”), or something as simple as “exercising free-speech,” and of course “no beggars, bums, or homeless, but also no Jews, Moslems.”

          As Hoppe likes to say, “restoration of property rights” leads to “a sharp and drastic rise in social “discrimination”.”

          So according to Hans-Hermann Hoppe and these Libertarian economists, a handful of proprietorships and GLOs, who are really insurance companies, control the land and do arms trades with each other at reduced costs. Anybody who lives on these proprietorships is subject to the law and order of the single proprietor and/or corporations. So my freedom is at the discretion of these private companies, who could even ban my free-speech, or kick me out for some other reason. This “owner” in effect acts as a King, in other words totalitarianism.

          Oh yeah, and all these private property dictatorships operate under the gold standard. We wouldn’t want anything that will reduce their power, now would we?

          “Freedom does not include the freedom to steal by fraudulently creating multiple property titles to the same physical object.”

          Fractional reserve banking does not necessarily imply that people have to have the same title to the same object.

          So again, the Libertarian contradictions remain: Matt Tanous is in charge of what is and what isn’t property, what type of monetary systems people can use, and whether or not they can engage in fractional reserve banking.

          Where do I sign up to be ruled by morons on the internet?

          “Failure to recognize the difference between a priori knowledge and empirically based claims. Failure also to recognize that a priori knowledge must be assumed for empirical claims to make sense – especially the existence of time-invariant relationships and the protophysics (algebra, geometry, etc.) necessary to even make observations about data.”

          An axiom is not a “truth” but instead is an unproven assumption readily accepted in order to build on your system. An axiom is a selection from out of an infinite space of possibilities, which we _choose_ to derive our system of reasoning. The truth or falsehood of an axiom cannot really be addressed, except with false questions and other axiomatically derived answers — questions that perhaps could be used for writing grants to perpetuate the existence of people concerned with these things. A debate about the validity of any axioms is thus ultimately pointless.

          No scientists sit around and orders his axioms first. If you knew even the first thing about geometry you’d know that euclidean geometry and non-euclidean geometry have different axioms and therefore different proofs and conclusions. So even in mathematics the axioms are not applied universally. It’s more like you have a certain area of mathematics, and then within that set (think of an Euler diagram) you have truth. That has no bearing on the truth of, say, biology.

          Second, you don’t need algebra and geometry to make observations. Scientists are guided by the scientific method which will be applied differently in different situations. You don’t need algebra, say, to look at the anatomy of animals for instance. You make observations and order them.

          There is no such thing as a “monetary order”, and the libertarian claims are grounded in logic – which you clearly lack the ability to understand…

          I’d be interested in seeing any evidence you’ve studied logic as you clearly are saying things that are false in this very thread. So tell me which textbook again says you need the “axioms” of algebra to study biology? It’d be nice for someone educated at the fake “Mises University” to actually source his claims for once.

          • Matt Tanous says:

            “Exactly my point. You have to have a government for this system:
            “they mean that the unit of currency is literally a certain weight of gold…”
            “A certain weight of gold” means that there is agreed upon standard.”

            There is no need for government to force agreement on a standard. Intel CPUs are manufactured according to standards – and they require no government regulation. All it takes is that I mint a weight of gold and call it the “gold ounce” or “dollar” – if you want to use it, then it will be a gold ounce in the same way a loaf of bread is always a loaf of bread.

            “Yes, and as Rothbard said there would be no “free-market” in the price of gold.”

            Again – the currency would be weights of gold. Not set by anyone. There can be no price of gold in itself, which is what you are wanting.

            “What Hoppe is talking about is having tenants on the property and then the ability to evict them at random”

            Yes, and I say this is acceptable insofar as it is your property and you are not breaking contract. Unless you want me living in your house as an unevictable tenant, you cannot deny this principle.

            “So not only do the natural elites control the property through hand-me-downs, they become the judge, jury, and executioners of law and order in this society.”

            Oh, you’re right. I was so wrong. Why should we choose people with exceptional ability to judge fairly to be our peacekeepers and arbitrators? We should pick drunken rednecks to do that, right?

            “So tell me which textbook again says you need the “axioms” of algebra to study biology?”

            You don’t need a textbook. Only basic logic. Biological measurements – indeed, all measurements – are made with measuring tools. Those tools must presume Euclidean geometry for them to even exist and work.

            “Fractional reserve banking does not necessarily imply that people have to have the same title to the same object.”

            Yes, that is precisely what it means. Under the current regime, up to 10 people have claims to the same paper ticket “dollar”. That’s the “fractional” part, you crazy little man.

            • successfulbuild says:

              “You don’t need a textbook. Only basic logic. Biological measurements – indeed, all measurements – are made with measuring tools. Those tools must presume Euclidean geometry for them to even exist and work.”

              You’re obviously a fool and have no understand of logic. Lobachevsky, Gauss, and Rimann showed that you cannot prove certain propositions of Euclidean geometry (like the parallel axioms) from the other axioms. So a proof can be given that you cannot prove certain propositions in a given system.

              What the non-euclidean geometries show is that Euclidean geometry is not universally true and not necessary. If Euclidean geometry contained absolute truth, then non-euclidean geometries would be false. Kant held there was only one geometry. But NO ONE has ever been able to show that the non-euclidean geometries are inconsistent.

              In other words, new systems of geometries can be constructed that have different axioms and are thus incompatible with euclidean geometry.

              One example is replacing Euclid’s parallel axiom, more than one parallel line can be drawn through a given point, or no lines at all, as is the case of spherical geometry.

              http://www.cs.unm.edu/~joel/NonEuclid/noneuclidean.html

              There are geometries that are considered better replacements.

              So what the prof quoted was true (1) there are infinite many sets to choose from, and (2) it is not our concern to decide the truth of these axioms.

              Finally, spacetime is not euclidean geometry. Of course this is another Mises Institute conspiracy that Einstein’s theories are false, but we know the mises institute isn’t serious at this point.

              You’d also have to have other axioms if you use numbers in mathematics, like the axioms of first order logic. But the axioms of arithmetic are necessarily incomplete.

              Logic fail.

            • successfulbuild says:

              …”Under the current regime, up to 10 people have claims to the same paper ticket …”

              This is false. The FRB actually creates new money for people to use. The original guy who deposited the dollar could be seen as having it in “reserve” while the new money is _created_. In fact how it works is that new reserves are then added and the fed trails the banks in creating new money.

              “Unless you want me living in your house as an unevictable tenant, you cannot deny this principle.”

              Wrong, I can believe that everybody can have a house and at the same time believe that no one can be evicted by property owners in cities. But the proprietorship has the “right” to evict me for basically any reason he wishes, and thus derives power from this ownership.

              Furthermore, accepting some private property doesn’t mean I have to accept a dictator who is the owner of all private property.

              One doesn’t logically follow the other.

              But you’ve been shown to be incompetent in logic. Go back to playing Super Nintendo Chalmers, this is above your level.

          • Major_Freedom says:

            “A certain weight of gold” means that there is agreed upon standard.

            It’s not an arbitrary agreement, the way inflation rates of fiat money, but is rather objective.

            It is a scientific agreement that a quantity of gold has such and such a mass, and no other.

      • skylien says:

        Little skylien has answered..

        • successfulbuild says:

          So you’re saying you’re matt tanous? you use multiple accounts on this blog?

          I didn’t realize you guys had split personality disorder in addition to habitually lying about the beliefs of me and others.

          • skylien says:

            OMG…

            I only wanted to tell you with this that I answered on your OTHER comments to me, since you complained here that I did let you wait for nearly half a day in a blog comment section! Or do I have to answer the same question at 3 different locations?… Stop bitching around and stay factual…

            And not to forget.You did never answer to me what I have to read or who I have to listen to see your worldview fully explained…

      • martin says:

        I’m still waiting for little skylien to explain how having a “gold backed dollar” doesn’t require a government. Who is going to originally set the value of the dollar and prevent it from changing?

        Well, maybe it’s better to speak of using gold for money than speaking of a “gold backed dollar”. Prices can be denominated in troy ounce for instance.

        Some Libertarian contradictions: private property has historically been backed by a state and yet Libertarians claim they’re anti-statist

        Anarchist Libertarians (like me) think private property can be protected without a state (wether it has been historically or not), so there’s no contradiction. (Of course we be wrong, but the fact that we could be wrong doesn’t make it a contradiction.)

        Libertarians favor allowing landed property owners to throw people off their property for being hedonists while claiming to oppose totalitarianism (Hoppe)

        Libertarians think a property owner has the right to decide who is allowed on his property and therefore has the right to evict unwanted people for whatever reason. (Except when bound by contract, but I won’t go into that now.)

        Is it totalitarian to say that if you have guests in your house and you don’t want them there anymore (maybe they’re too hedonist, or not hedonist enough, or maybe you just want to go to bed).

        Libertarians claim that the market will lead to a natural equilibrium while at the same time argue for the privileged rights of aristocratic families and the “natural elites” in the “Libertarian order” (hoppe)

        Where does Hoppe argue for privileged *rights*?

        Libertarians want to ban FRB while claiming to support “free-banking”;

        Libertarians who want to ban FRB argue that it’s a form of fraud. Not all libertarians agree to that, by the way.

        Libertarians claim to be “economic scientists” whereas all scientists know that there is no such thing as absolute certainty in science

        Are those scientists absolutely certain about that? Just askin’…

        (this matters because if it could be shown that other systems were superior to the Libertarian monetary order, whatever it is, they should be implemented, thus libertarians result to arguing for moralistic claims which is anti-science)

        “they should be implemented” is not a moral claim?
        “it could be shown that other systems were superior” superior by what criteria? Isn’t the question which criteria should be used a moral question?

        • martin says:

          Is it totalitarian to say that if you have guests in your house and you don’t want them there anymore (maybe they’re too hedonist, or not hedonist enough, or maybe you just want to go to bed).

          Ok, now the full sentence:

          Is it totalitarian to say that if you have guests in your house and you don’t want them there anymore (maybe they’re too hedonist, or not hedonist enough, or maybe you just want to go to bed) you have the right to send them out?

        • successfulbuild says:

          “Where does Hoppe argue for privileged *rights*?”

          See my quotes above. They have the right to institute justice and make laws, and enforce the “order” of society. And of course Matt Tanous, inbetween making a fool of himself on stuff that has been known since before all of us here were born, rushes in to defend the totalitarian system: “Why should we choose people with exceptional ability [i.e. the aristocrats] to judge fairly to be our peacekeepers and arbitrators?” The natural elite are the “peacekeepers.”

          Hoppe also says that it is the rich who will be subsidized by the poor in the totalitarian system, I’m sorry, Libertarian order.

          “Anarchist Libertarians (like me) think private property can be protected without a state (wether it has been historically or not), ”

          Well, even if I were to grant that there were property titles that existed without a state, and that some pirates and some guy in early America minted coins, and that Intel exists without a government, none of which I’m actually willing to grant, that in itself doesn’t address my concerns. First of all by the late 1700s the early colonies basically resembled the old British monarchy in a lot of ways, and any system of gold being used as money was used because governments had already degreed it money, thus adding to its value. Second, it seems to me that the closest to these type of natural aristocracies today are in the third world, which are blatant failures. Third, I believe it is possible to have some private property while not granting the ability of these private lords to rule over us how they please. Again, Hoppe himself is saying this limited aristocracy will be in charge of vast areas and we must agree to their roles.

          I simply won’t support a system that gives Matt Tanous the right to destroy a productive community merely because they’re engaging in FRB, which he considers “fraud,” or some other type of ownership that he, who doesn’t know what he’s doing, doesn’t find acceptable.

          • martin says:

            Hoppe writes that “men turn to [natural elites] with their conflicts and complaints against each other”, and you interpreted that as “[natural elites] have the right to institute justice and make laws, and enforce the “order” of society” and from that you conclude it’s a “totalitarian system”.

            So in your view a mediator is a totalitarian dictator?

            Hoppe also says that it is the rich who will be subsidized by the poor in the totalitarian system, I’m sorry, Libertarian order.

            Does he? I know he wrote the rich are subsidized by the poor in the current system, but I didn’t know he thinks that would also be the case in a libertarian system.

            On your last two paragraphs: all that has nothing to do with the point I was making: there’s no contradiction.

            Second, it seems to me that the closest to these type of natural aristocracies today are in the third world

            Your saying the third world consists of stateless regions were people employ mediators to solve their conflicts?

            Third, I believe it is possible to have some private property while not granting the ability of these private lords to rule over us how they please.

            Then why are you arguing a libertarian system will be totalitarian?

            I simply won’t support a system that gives Matt Tanous the right to destroy a productive community merely because they’re engaging in FRB, which he considers “fraud,”

            Everybody’s free to put there money in a bank that practices FRB. If they do so knowingly, there’s no fraud. If they do so unknowingly but find out later, they can sue the bank for fraud.

            Not much Matt can do about that.

            or some other type of ownership that he, who doesn’t know what he’s doing, doesn’t find acceptable.

            So what’s your point here? That any type of “ownership” goes? Like owning slaves? Owning the thoughts in someone else’s head? Or is it restricted to types of “ownership” you approve of? So that basically you have the right to destroy a community that engages in a type of ownership that you don’t find acceptable?

      • Major_Freedom says:

        I’m still waiting for little skylien to explain how having a “gold backed dollar” doesn’t require a government. Who is going to originally set the value of the dollar and prevent it from changing?

        Private minters.

        And nobody said redeemable notes from a particular gold warehouse have to continue to trade at par in the market forever.

    • Bob Murphy says:

      If I were a libertarian, I wouldn’t want to read this blog either, since it’s inundated with comments from successfulbuild.

      • Christopher says:

        It’s comments like this that compensate for quite a lot.

      • successfulbuild says:

        We don’t want people who get their information from the website zero_hedge (skylien) to learn that global warming is not a conspiracy and that the supposed proof of the necessity of the gold standard have more to do with the policies of the IMF and the world bank than fiat currencies in general. Also that your policy prescriptions have been dead wrong: for example, countries that have been able to get foreign aid to them to combat diseases like AIDS also vastly improve their chances of reducing starvation. And environmental disasters cause far more deaths than “fiat currencies.” That’s just a fact and there’s another contradiction: Libertarians say they’re against force and yet support allowing property owners to kill a million people every year through pollution and over 30 million people each year through starvation deaths.

        Why should I or anyone else agree to all these rules if nobody can explain them? You’d think people who wanted to force others into these scams would at least have the decency to explain them. If the zero_hedge/Adam Kokesh crowd would admit they’re wrong about their conspiracies they would also admit that they’re wrong about a society of private dictatorships.

        • Gamble says:

          Dear Successfulbuiild,

          You said, “And environmental disasters cause far more deaths than “fiat currencies.””

          How do you know these so called “environmental disasters” are not resultant of fiat currency?

        • Gamble says:

          Dear Successfulbuild,

          You said, “to learn that global warming is not a conspiracy.”

          The earth may be warming but how can you prove man is the cause when there are natural actions that produce greenhouse gas amounts that dwarf the combined sum of all human activity such as decomposing vegetation, volcanoes and other natural occurrences?

          Then we have the sun. Scientist agree if the sun were to go away, the earth would freeze. Does this not prove man alone cannot warm the earth?

        • Gamble says:

          Dear Successfulbuild,

          You said,”Libertarians say they’re against force and yet support allowing property owners to kill a million people every year through pollution and over 30 million people each year through starvation deaths.”

          Pollution allowed to trespass onto another’s property is a failure to respect private property rights. A major tenant of Libertarianism, some may even say the keystone, is indeed private property. The government controlled courts have substantially weakened private property rights as has the government controlled EPA.

          Witnessing death by starvation is not a contradiction of the non-aggression principle. The witness exerted no force. However, Libertarians do understand mass starvation is a failure to allow free market economics to function. How did these people come into existence and then lose their subsistence? Nature would never allow this to occur.

        • Ken B says:

          “Libertarians say they’re against force ”

          Very few Libertarians say that. They are against some commonly accepted uses of force.

      • Matt Tanous says:

        Ah, see, if it was only comments from successfulbuild and LK, I wouldn’t read it either. But with the great Bob Murphy writing comments like these and posts like the above…. who could pass that up? The only thing ranking higher on my preference scale is reading books I ordered from the Mises Institute written by Rothbard.

      • Dan says:

        I stopped reading his comments when I saw him say taxes prevent slavery. He is the perfect example of the pigeon playing chess meme.

        • Matt Tanous says:

          “He is the perfect example of the pigeon playing chess meme.”

          I still wish he would stop shitting all over the board. It’s a nice board – I paid a lot of money for it, and it is hard to clean that shit off.

        • successfulbuild says:

          Right. We need to replace this system that no one considers slavery with actually, Hans Hermann Hoppe style slavery.

          And we’ve seen a lot of claims thrown around this board now:

          mathematics is reducible to logic….
          “axioms” are necessary to make observations…
          Private property doesn’t exist with government (I don’t even get this one, since it obviously does it exist)…

          And so on. I think Robert Murphy’s followers should now start sourcing their claims.

          • Matt Tanous says:

            See. Pigeon on chess board.

    • Daniel Kuehn says:

      Hmmm….

      One of the things I find most entertaining about this blog is the way that Bob keeps twisting himself in a pretzel to play gotcha with Keynesians.

      There are other things I enjoy about it too, don’t get me wrong.

      • Ken B says:

        In this case immediate destruction really is better for Bob. He makes terrifc use of dead horses ….

        🙂

        • Major_Freedom says:

          The stable is full of lively horses. Maybe you thought you killed the horses, or maybe you prefer the horses to be dead, or maybe it’s really not horses at all, but pouring salt into the wound, and you feeling uncomfortable.

      • Major_Freedom says:

        One of the things I find most entertaining about this blog is the way that Bob keeps twisting himself in a pretzel to play gotcha with Keynesians.

        I think that is more of a mental image metaphor of what you hope or want to believe is taking place, rather than a mental image metaphor of what is actually taking place.

        If I wanted to see a pretzel, I would just look at your posts about what Krugman “really meant”.

      • Ken B says:

        “One of the things I find most entertaining about this blog is the way that Bob keeps twisting himself in a pretzel to play gotcha with Keynesians.”

        Yeah. Sometimes on these threads I expect Ray Bolger to show up and start singing Let My People Go

  3. Bob Roddis says:

    Bob Wenzel had found an earlier Yglesias critique of Bastiat here:

    http://www.economicpolicyjournal.com/2012/10/yglesias-bastiat-is-wrong-lets-break.html

    The Bryan Caplan quote that so offended Little Matty was this:

    Are they going to dispassionately put aside the worldview that inspired them to become intellectuals in the first place, then calmly weigh the intellectually serious arguments for and against every feel-good policy on the books? Or are they going to act like defense attorneys – to use their powerful intellects to zealously defend the populist policies they’ve always loved?

    Can’t we all agreed that the universal response of statists everywhere to the newfound popularity of Austrian and libertarian thought has been either silence or the most pathetic examples of acting like defense attorneys for an obviously guilty party? (I love that analogy to defense attorneys).

    The gist of Ygesias’ argument is the following:

    Similarly, Bastiat’s alleged broken windows fallacy involves simply assuming that there’s no such thing as genuinely idle resources or an “output gap.” In that context, yes, it’s a vibrant intuitive depiction of crowding out. But this doesn’t counter any Keynesian or monetarist points about the viability of stimulus during a recession induced by nominal shocks, it involves assuming that no such recessions can occur even though they plainly do.

    Note the rhetorical trick. Contrary to Yglesias, we do not mindless “assume” that there are no “idle resources” or an “output gap”. We emphatically insist that those concepts themselves are nothing but nonsense. The Keynesians have the burden of proof to demonstrate that the market actually fails on its own accord producing “idle resources” and an “output gap”. They cannot do this and they never even try. Instead, all we get is them is acting out like defense attorneys in a way that suggests even they know that their client is guilty and does not have the slightest hope of redemption.

  4. Daniel Kuehn says:

    Awww, I’m your favorite!

    We’re really going to have to agree to disagree on Morici. He goes into detail after that quote about what will be rebuilt better: bigger houses on the shore, for example. I can’t see the flaw in that point. I’m not sure how that implies that we’ll be wealthier. After all, the rebuilding will in many cases come out of wealth. So I don’t see how you can make a declarative statement about what that means for wealth. What you can make a declarative statement about is that people will rebuild better (and Morici made that statement).

    I’m emailing him now for clarification anyway.

    Now giving Yglesias a second close read (thanks for sharing yesterday).

  5. Current says:

    The problem we often face in these discussions is that Bastiat didn’t go far enough.

    “Now before everyone starts screaming ‘broken windows fallacy,’ take note: This is a terrible solution to unemployment. By reducing society’s stock of capital goods and consumer durables, the hurricane spurs new production into being. But it’s also making us poorer.”

    In Bastiat’s description the window of a store may be broken or remain unbroken. Bastiat points out that if the window is broken then that causes work, but work that’s simply restoration of capital. On the other hand if it isn’t broken the shop owner may buy something else with his money, such as a pair of shoes.

    The problem with this argument is that the second part is essentially redundant. If the shop owner doesn’t spend the money in the current period (or indeed, at all) then the economy is still richer because it’s capital endowment is larger. The consumer sees the benefit of this in lower consumer goods prices rather than higher employment. That is, because the shopkeeper has an intact shop he can compete with his rivals which will bring prices down.

  6. Daniel Kuehn says:

    As you know, I thought there was a lot weird about this post too.

    – I think your poke at him in (1) sounds right. I guess one response could be that with a hurricane you are denied the stream of income you expected from those cranes. If investors change their expectations of what they’re going to get out of a capital stock as a result, that’s not good for investment. Plus a hurricane is haphazard, whereas at least slow wear and tear wears out about what you expected it to wear out.

    – I obviously think your (2) is right. This is a kick in the pants to GDP, and can’t be construed as more than that.

    – 2a I think I disagree with. The whole point is that if idle workers have incomes they’ll increase their demand. The economy is demand constrained initially due to inability to pay, due to unemployment. That’s the whole point of burying banknotes/helicopter drops, right? The whole Keynesian tragedy is that we are poorer but there’s not technical reason why we ought to be. Burying banknotes gives us the demand to generate wealth without destroying any. Banknote diggers go out and buy things.

    – 2b is better than a hurricane because it doesn’t destroy anything, but it seems like you’re misdirecting the factors of production that are sitting idle.

    – 3, I disagree for the reasons above – burying banknotes doesn’t destroy any wealth while hurricanes do. Keynesians reiterate this point because people like Russ Roberts make videos that imply Keynesians are indifferent between war spending and other types of spending, and commenters on blogs and fb call us statist warmongers. If you had those things said about you, I think you’d clarify as well.

    – 4. I think the point is that GDP isn’t the only metric. That doesn’t mean it’s not an important metric. We should think of both utility and GDP when it comes to debt, right? If we only focused on GDP and abstracted from the things we were abstracting from in that conversation – if that was the only thing that mattered to Krugman – wouldn’t he be calling for 100 trillion gazillion dollars of debt? Why not? But he didn’t, because I think we all agree it’s not the only metric. It’s an important one, though, because it is so closely related to employment rates.

    • skylien says:

      “Burying banknotes gives us the demand to generate wealth without destroying any. Banknote diggers go out and buy things.”

      This demand is taken away from someone who now has to buy that much less. On net this does not increased effective demand, or are you arguing that non banknote diggers don’t buy things? Producing real wealth is punished while doing useless stuff is rewarded. So the only thing you do with this is creating bad incentives.

      • Daniel Kuehn says:

        Who has to buy that much less? I’m not sure I follow the zero-sum logic here.

        • skylien says:

          You have to tax people to give the money diggers an income, whether via direct taxation, postponed taxation (debt) or inflation.

    • Matt Tanous says:

      “The whole point is that if idle workers have incomes they’ll increase their demand. The economy is demand constrained initially due to inability to pay, due to unemployment. That’s the whole point of burying banknotes/helicopter drops, right?”

      The problem is those workers need to accept lower wages in other lines of work, and your attempts to solve their idleness only causes yet another misdirection of production into wasteful endeavors.

  7. Ken B says:

    4) is not so convincing.

    First PK did not argue that GDP was the only relevant measure. He acknowledged that the transfers induced by a debt can have ill effects. He was arguing that the debt does not per se reduce GDP. That’s important because the opposite is regularly argued by PK’s political foes.

    Second it does not follow that immediate destruction really is better than slow degradation. After all old cars arestill useful as are old houses. Certainly a defender of Krugman’s arguments can think that, and is n ot bound to agree with Yglesia’s analogy.

    Third GDP is something Krugman can frame a correct argument about GDP succinctly and in a way that most readers can follow. Not so clear with utility. We see this even now with the comments about utility on the Arrow thread.

    Fourth PK is arguing as part of a bigger pitch for a huge new fiscal stimulus. He thinks THAT will lead to higher plateaus of GDP and welfare. In that case all he needs to show is that debt won’t impoverish us directly, because any transfer costs can be mitigated by redistribution of the new, greater wealth.

  8. Gamble says:

    We should simply destroy every asset known to mankind and the rebuild. Infinite prosperity for all, yahoo!

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