29 Apr 2013

Just the Facts, Ma’am: “Testing” Keynesian Theory

Economics 166 Comments

I realized that I was being too fair to “Lord Keynes” in the last post, since total GDP statistics include government expenditures. To really test whether the Obama stimulus episode seems more consistent with the Keynesian versus the Austrian story, let’s look at what happened to gross private investment (I couldn’t find any FRED series for total private GDP) when the Obama stimulus kicked in, in early 2009. Here ya go:

Again, this doesn’t prove a darned thing. But remember what Lord Keynes had said to me: “If stimulus is counterproductive, then why didn’t real output plunge even further when the stimulus was implemented?”

So my point here is that if you are a Keynesian and think the data are overwhelmingly on your side, I think you need to take a second look. There is a reason a lot of us still cling to the notion that giving politicians control over resources is hardly the path to prosperity, when the economy is already reeling.

166 Responses to “Just the Facts, Ma’am: “Testing” Keynesian Theory”

  1. Steve Horwitz says:

    I’d like to see that series with NET investment too.

    • Daniel Hewitt says:

      Also, federal government expenditures should instead be total government expenditures, to be fair to the Keynesian argument that reductions in state/local government spending nullify some of the increases in federal government spending.

  2. Major_Freedom says:

    Real output includes the production the government buys, i.e. output directed towards the ends of politicians. LK would excuse himself by pointing to total output, not just private output.

    Even if the government borrowed and spent money in such a way that private investment and production collapsed to 5% of what it once was, but the production of weapons of war, bridges to nowhere, potatoes and rice, and so on, expanded significantly and the money spent on those goods exceeds the money spent on goods prior to the stimulus, then LK would define that as productive stimulus, not counter-productive stimulus, because “total output” increased (in terms of spending).

    LK conflates government spending with private spending, and politically directed output with consumer directed output. But when pressed on this, he’ll hedge his universal claim about “output” with appeals to superior and inferior value of certain goods relative to other goods.

    So he’ll use total output when it suits his agenda about overall stimulus, but then when this claim is revealed as implying goods and spending are all interchangeable, he’ll say “But I personally prefer more schools and roads as opposed to more weapons”, which of course completely nullifies his earlier universal claim about the supposed justification for the efficacy of stimulus.

    • Lord Keynes says:

      “LK conflates government spending with private spending, “

      False. Even the data Murphy just posted supports what I argued earlier.

      • Major_Freedom says:

        Pointing to “output”, “aggregate demand”, as means to justify whether or not stimulus “works”, and whether or not laissez-faire theory “works”, is conflating government spending with private spending.

        You always point to GDP and not private product, “output” and not private output, “employment” and not private employment, when judging the merits and flaws of laissez-faire and Keynesian theories.

        • Lord Keynes says:

          Even if you strip out government spending, private sector investment still recovered in mid 2009 and continued growing WITH large government spending and stimulus for years.

          Too bad there is a little thing called empirical evidence, and it is not on your side.

          • Bob Murphy says:

            LK wrote:

            “Too bad there is a little thing called empirical evidence, and it is not on your side.”

            LK, are you for real? Do you really mean to tell me that you can’t see how an Austrian might think that chart supports the notion that government expenditures crowd out private investment? You don’t think that looks at all consistent with the view the the lines move in opposite directions?

            I’m not asking if you can ALSO make it consistent with your worldview. I’m just asking if you can see why someone who goes into the exercise, thinking the stimulus hurt the private sector and that the fading out of stimulus would allow a gradual recovery, might think the data show precisely that.

            • Lord Keynes says:

              “LK, … Do you really mean to tell me that you can’t see how an Austrian might think that chart supports the notion that government expenditures crowd out private investment? “

              (1) I can see how someone who thinks that there should have been an instant change in GDP or private investment as soon as the stimulus was begun would think such a thing.

              (2) ” I’m just asking if you can see why someone who goes into the exercise, thinking the stimulus hurt the private sector “

              But your graph shows years of a positive correlation between the stimulus and rising private investment, after a (perfectly reasonable) lag period during which time the stimulus took effect.

              Logically that is not what should have happened. What should have happened is continuing and even accelerating GDP or private investment collapse for all these years during which the stimulus occurred.

              (3) Finally, as I have said before, there is a mountain of empirical data not just from the US past (e.g., Reagan’s Keynesian stimulus after 1982), but from many other countries.

              All the signs were that Australia was headed for bad recession in 2008. Then the government guaranteed deposits (saving the banks) and stepped in with a quick and effective stimulus. No recession actually occurred.

              • Stefan says:

                So wait….. is it all spending since 2003 that you’re considering as stimulus, just because spending is increasing? It would help me, at least, if you were clearer on what you meant by ‘the stimulus’ and what period or structural conditions it is confined to.

            • J. Hansen says:

              That is your argument, Murphy? Sure, I can see how you can pastiche such a fallacy together with intellectual bailing wire, but is this the best you Austrians can do? As I said in another comment, the “stimulus” was half tax cuts – so that “$400B” is amortized over the rest of 2009. The rise in Federal spending over 2008 and then much of the rest of the rise is just rising counter-cyclicals as well baby-boomers eligible for retirement buggin’ out and retirin’.

              I mean, do the math! How does ~$400B in actual stimulus, delivered incrementally over many months “crowd out” $1.4T in private investment???? (extrapolate the investment to early 2009 and you get about 2.9T – and if you don’t like that figure, then do your own extrapolation! And then explain to us how the heck you think any of this adds up!)

              I mean, go look at what the money was spent on, too – very little of it was even capable of crowding private investment – 20% was just propping up existing State&Local spending!

              Meanwhile, consider the Keynesian story: suddenly, most people (and businesses) felt they had too much debt, en masse, and so stopped pushing capital into investments and instead started withdrawing their investments to pay down debt. Even those with low debt no longer saw plausibly successful things to invest in, so tucked their capital anywhere other than domestic investment (can anyone say offshore? And we know one hedge fund that decided to drop a few hundred billion in Greek bonds….!?!?).

              Also, look at the points of INFLECTION – the points where the change in slope change their trend. These are the points where mass-strategy changed.

              The negative inflection change happened in late 2006 – and after that, federal spending increased at a more or less constant RATE, while domestic investment decreased at a more or less CONSTANT *RATE*. This corresponds perfectly to the sub-prime effects that led to stagnating home markets, market instability, recession expectations, and then layoffs, and mass de-leveraging.

              The positive point of inflection kicked in right around Jan 1 2009. That is where the previous rate-change pattern reached its “peak” negative slope, and the downward slope began to improve from there. What could correspond with that? Oh, I dunno, could it be TARP, followed by stimulus, followed by TARP 2, followed by FED accommodation policy changes?

              If you simply consider the loss in EXPECTED HOME SALES (extrapolated from whatever previous sustainable rate you want to use – it really doesn’t matter) – that loss of housing “sales” must mirror a loss of investment (because houses are purchased with loans, which must be backed by “investment” somewhere, somehow). That loss of “investment” dwarfs any effect you want to attribute to $400B – or even $787B – take your pick!

              I swear – you Austrians are clueless. I am seriously starting to think your brains just don’t quite have the advanced complexity-features we liberal Keynesians have. But, unfortunately, I come from a family of 4 older brothers that are on your side, while I’m the only Lib-Keyn – but most of us had genius IQ’s all our lives. So you guys aren’t exactly dumb from the start, but your arguments and your capacity for critical thinking and testing your own arguments are just as bad as theirs. It is as if you older people just breathed too much of those leaded-gasoline fumes before they were banned…. or something. I don’t know what, but you you’re in the wrong career.

              • Major_Freedom says:

                “Meanwhile, consider the Keynesian story: suddenly…”

                That’s exactly why the Keynesian story is garbage.

              • Major_Freedom says:

                “I swear – you Keynesians are clueless. I am seriously starting to think your brains just don’t quite have the advanced complexity-features we liberal Austrians have. But, unfortunately, I come from a family of 4 older brothers that are on your side, while I’m the only Lib-Aust – but most of us had genius IQ’s all our lives. So you guys aren’t exactly dumb from the start, but your arguments and your capacity for critical thinking and testing your own arguments are just as bad as theirs. It is as if you older people just breathed too much of those leaded-gasoline fumes before they were banned…. or something. I don’t know what, but you you’re in the wrong career.”

          • Major_Freedom says:

            “Even if you strip out government spending, private sector investment still recovered in mid 2009 and continued growing WITH large government spending and stimulus for years.”

            Right, but you cannot discern from that data alone whether real private investment increased because of the increased government activity, or despite the increased government activity.

            Real private investment increasing in a context of government activity increasing is not sufficient to conclude that the increased government activity caused the growth in real private investment activity.

            The empirical evidence is fully and 100% on the side of the laissez-faire theory.

            • Lord Keynes says:

              That is actually where what I said yesterday comes in:

              (1) widespread fixprice markets are a reality through all major capitalist economies, and

              (2) it is quantity signals that induce changes in private sector output and employment in fixprice markets.

              Reality is described by propositions (1) and (2), and it follows from them that inducing changes in quantity signals (demand, sales orders, sales volumes etc.) by stimulus will increase output and employment.

              • Major_Freedom says:

                “widespread fixprice markets are a reality through all major capitalist economies”

                Fixprice markets are a reflection of costs of production (plus profit) pricing. Costs eventually fall with a lower spending in general, for costs are a function of past prices paid for productive investments.

                “it is quantity signals that induce changes in private sector output and employment in fixprice markets.”

                It is also price changes, since investments are made when there is a (expected) difference between input prices and output prices.

                Quantity demanded is a function of price.

              • Richard Moss says:

                Reality is described by propositions (1) and (2),

                Great. Then just as Bob said you can’t just look at the data and say it proves the Keynesian case – you had to rely on other propositions.

              • Lord Keynes says:

                Everything M_F just wrote about fixprice markets is either true but irrelevant, or just confirms what I said.

              • Major_Freedom says:

                Everything you have said about fix prices and quantity demanded, is irrelevant to Keynesian stimulus theory, and also doesn’t disprove what I said.

              • Major_Freedom says:

                More accurate, it is irrelevant in the justification for impeding the free market process.

              • Lord Keynes says:

                “Everything you have said about fix prices and quantity demanded, is irrelevant to Keynesian stimulus theory, “

                This pretty much takes the cake!

                So the evidence that changes in quantity signals (increased demand, sales orders, sales volumes etc.) will increase output and employment is “irrelevant to Keynesian stimulus theory”!

                It’s like you have a shovel and are digging yourself deeper into a hole with every comment.

              • Major_Freedom says:

                “This pretty much takes the cake!”

                You forgot about the cherry I put on top right after, where I wrote “More accurate…”.

                But yes, fixed prices and quantity demanded are irrelevant to the Keynesian theory. Those assumptions were introduced after Keynes, by his neo-classical influenced followers.

                Keynesian theory proper does not hold stimulus as effective due to cost plus profit pricing, or from changes broughout about by changes in quantity demanded.

                Keynesian theory proper asserts that capitalism is plagued by an inherent tendency of too low profits, which results in money hoarding, and thus unemployment and reduced output.

                Cost plus profit pricing, or what is termed “fix pricing” by neoclassicals wedded to marginal revenue theory of pricing, introduced it later on after Keynes’ original theory was shown as bogus.

                “So the evidence that changes in quantity signals (increased demand, sales orders, sales volumes etc.) will increase output and employment is “irrelevant to Keynesian stimulus theory”!”

                Yes. It is relevant to neo-classical influenced followers of Keynes, as a last ditch resort.

                I find your belief that you are not the one digging himself a deeper hole, incredibly amusing. You’re being lit up left right and center on this thread. Fallacies and errors galore, and you are even adapting your claims somewhat to those criticisms, and yet you think you’re not being schooled. Too funny.

              • Lord Keynes says:

                (1) So if Post Keynesian theory says:

                (1) widespread fixprice markets are a reality through all major capitalist economies, and

                (2) it is quantity signals that induce changes in private sector output and employment in fixprice markets.

                Is the evidence that changes in quantity signals (increased demand, sales orders, sales volumes etc.) will increase output and employment “irrelevant” to Post Keynesian stimulus theory?

                (2) Are propositions (1) and (2) above true or not?:

              • Major_Freedom says:

                LK:

                Strictly speaking, Post Keynesianism rejects sticky prices (fixed prices) as the reason for unemployment. New Keynesians and Neo-Keynesians hold that.

                At any rate, your question implies Post Keynesianism to be a coherent and integrated school of economics. It isn’t. Not by a longshot.

                It’s in reality a collection of flotsam and jetsam garbage smashed together by a bunch of neo-Marxists such as Kalecki and Robinson, who viewed economic life as a class struggle between capitalists and workers, and attempted to synthesize Marxism with Keynesianism, most likely because A. Keynesianim was on the rise in terms of popularity and Marxists tend to be dillitantish opportunists, and B. Keynesianism has definite synergistic qualities with Marxism (Keynes admitted as much in his preface to the German Edition of the GT).

                Post Keynesianism is nothing but a polluted wave carried by the tide of anti-capitalist ideology dating back centuries.

              • Lord Keynes says:

                Your unwillingness to answer my questions speaks volumes.

                (1) widespread fixprice markets are a reality through all major capitalist economies, and

                (2) it is quantity signals that induce changes in private sector output and employment in fixprice markets.

                Are propositions (1) and (2) above true or not?.

              • Major_Freedom says:

                I answered your first question, by

                (1) Pointing out to you that Post Keynesian theory proper does not hold price fixing to be a cause for unemployment, and

                (2) Pointing out to you that Post Keynesian theory doesn’t even have an answer for your question, because it isn’t a consistent doctrine. It would be like demanding an answer to the question of whether or not the color read tastes like chicken.

                Your post here is just a repeat of whether these two things are true. Perhaps you are slow, but I have already answered this question to you. On this thread.

                Also, I’ll give you a hint: they do not imply what you believe they imply, and they are not caused by what you think cause them.

              • Hoodnick says:

                1)LK have you ever worked for a for profit company before. Prices are based on negotiated prices not fixed price. Yes prices are fixed in the short run but after (6 months in my experience) but after that time prices are negotiable. Name one for profit company that does this:. General Electric, DuPont, Dresser Rand I have worked with all three and know there pricing policy.
                2)It is not quantity but profit signals that determine output and employment. High profit lines get additional resources. Low profit lines get less resources or are dropped.

  3. Lord Keynes says:

    OK, in the interests of both civility and fair-minded debate, thank you for this interesting, critical post.

    (1) first, isn’t it obvious that government spending takes time to induce changes in private investment? Why should there be a simultaneous movement? If you read my comment that way, I have expressed myself poorly. The shocks to business confidence were very severe indeed in 2008. I do not find it surprising that private investment continued to contract in that year and early in 2009.

    (2) private sector investment did turn around about mid-2009: after 6 months or so of stimulus spending, which stabilised demand for products.

    (3) and there is a clear trend of rising private sector investment with rising government spending after mid-2009. Do you have an explanation for this? Are you willing to admit it is consistent with the Keynesian interpretation?

    If private sector investment had continued to contract for years after the stimulus, you would then have empirical evidence to support your case. But that is not what the data show.

    • Daniel Kuehn says:

      I think you’re missing the point. This is why Bob says it doesn’t prove a darned thing.

      I would cite endogeneity of government spending, but the point is there’s no obvious evidence here against Bob’s view.

      I think these strong claims – like Mike Konczal’s – are a little premature. Of course these data are suggestive to all of us and we ought to highlight the most suggestive data and tell our respective stories. But this talk of “experiments” or any suggestion that the empirical case is closed are inappropriate.

      If we we want to try to close the case based on several decades of data and theory, that might be worth attempting. But I don’t think the story of this episode as an individual episode is nailed down yet as a scientific matter – there’s more work to be done.

      Now as a policy matter we have to make do with what we have – the scientific work on the past and the suggestiveness of this episode. But policy and science are two different things.

      • RPLong says:

        Good comment, DK.

      • Lord Keynes says:

        I think you’re missing the point. This is why Bob says it doesn’t prove a darned thing.

        It “doesn’t prove a darned thing”? No, that is simply untrue.

        If we saw nothing but repeated prolonged recession or private sector investment collapse during all or most periods during which stimulus has been conducted in all countries or most countries, then that would clearly “prove” in an inductive
        sense that Keynesian stimulus does not work.

        “Prove” does not have to mean 100% certain, since the conclusion of an inductive argument is only ever probable.

        What is seen in the real world and repeatedly — especially in the golden age of capitalism — is that recessions end after expansionary fiscal policy is applied.

        This is data that DOES support — “prove” in an inductive manner — arguments about the truth of Keynesianism.

        The empirical evidence is on our side. You concede to much to Murphy.

        And what is especially absurd here is that Murphy is taking an extreme opinion not even representative of many other Austrians. He is — even in the Austrian school — out on left field.

        E.g., Hayek and even the extreme Rothbardian Huerta de Soto do not deny that government stimulus can and does raise employment and output.

        See links below.

        • Major_Freedom says:

          “It “doesn’t prove a darned thing”? No, that is simply untrue.”

          “If we saw nothing but repeated prolonged recession or private sector investment collapse during all or most periods during which stimulus has been conducted in all countries or most countries, then that would clearly “prove” in an inductive
          sense that Keynesian stimulus does not work.”

          No, you would just say that the Keynesian stimuli were inadequate, which is what you have done thus far in your posting history.

          You would say that the output gap was greater than the “paltry/meager/insufficient” stimulus requires.

          You would say that if only the stimulus were greater, then there would have been no significant collapses.

          You are hiding behind a vague definition of “stimulus” in this post, because you know that if stimulus was in fact accompanied by reduced real private investment, you would consider that to be a vindication of Keynesian theory, on the basis that the politicians in control, have systematically engaged in austerity, every time a recession hit, and then you would argue that because Keynesian theory calls for much larger stimulus that what actually took place, Keynesian theory would still be considered true in your mind.

          You’re close to lying by claiming that you would be open to the possibility of “sufficient stimulus” occurring during private investment declines over and over again. For you DEFINE “sufficient stimulus” in accordance with the results! If the results are sub-optimal, then you would just consider history to be one full of neo-liberal austerity bastards in control of government, and that if only there were Keynesians in charge, those recessions could have been avoided.

          ““Prove” does not have to mean 100% certain, since the conclusion of an inductive argument is only ever probable.”

          Yet that doesn’t stop you from over and over again concluding that recessions are due to a lack of sufficient government activity, based on that data!

          “What is seen in the real world and repeatedly — especially in the golden age of capitalism — is that recessions end after expansionary fiscal policy is applied.”

          We see, repeatedly, over and over again, in the real world, that real private output grows despite increased government activity. We see it as many times as you think you’re seeing government activity causing those increases in real private investment!

          The empirical evidence is on the side of laissez-faire theory.

        • guest says:

          What is seen in the real world and repeatedly — especially in the golden age of capitalism — is that recessions end after expansionary fiscal policy is applied.

          This is data that DOES support — “prove” in an inductive manner — arguments about the truth of Keynesianism.

          That begs the question. Austrians don’t deny that stimulus applied to sectors experiencing recession stops those sectors’ recessions.

          What we’re saying is that those sectors were made unsustainable by prior interventions, and that stimulating them with new money doesn’t change the unsustainable nature of those sectors.

          The stimulus stops the recession in those industries in terms of nominal dollars, but at the expense of other sectors. As wealth is being taken from other sectors (the purchasing power of existing money being eroded), this leaves people even less able or willing to purchase from/invest in the receding sectors.

          It doesn’t matter that the stimulated sectors “recover” in nominal dollar terms or in terms of “output”. That’s not recovery; That’s cronyism.

    • Major_Freedom says:

      “first, isn’t it obvious that government spending takes time to induce changes in private investment? Why should there be a simultaneous movement?”

      This is a reflection of your double standard.

      An austerian could also say “Isn’t it obvious that reduced government spending takes time to induce changes in private investment?”

      On repeated occasions, you have made the claim “the economy was plunged back into recession” as soon as, or right after, government spending wasn’t as high as you wanted, and you then claimed, repeatedly, that austerity is proven a “failure” as a result. In these instances, when debating those who want less government spending than you do, you treated output and employment as having to immediately adjust to the changed government spending (in the downward direction).

      But here you’re now saying that increased government activity should be gauged as effective or not by including a time lag, as if that is what you have held all along for all changes in government activity.

      Why don’t you consider a time lag when gauging the effectiveness of government spending being lower than you prefer, when debating “austerians”? After all, the laissez-faire theory does not hold that the economy instantly rebounds after a change to government activity in the austerian direction, so even on their terms, you can’t judge their theory as right or wrong by pointing to the economy right after there is a change to government activity in the downwards direction. It takes time for producers and entrepreneurs to figure out the new spending conditions and preferences, given a change to government activity, in both directions.

      Is this a competition over which policy (stimulus or austerity) can bring about more private investment sooner? If you believe it is, then that stacks the deck in favor of Keynesianism, because violent activity is less thought intensive and time consuming than rational activity. Violent activity can be used sooner than consumer preference informed peaceful activity. A state can overrule reason and bring about mindless “spending” sooner than individuals in a market context who must learn due to being constrained to private property rights. This does not mean stimulus is superior to austerity, if the standard is consumer preference informed activity. If the standard is mindless “spending”, then yes, states win hands down, especially when they impose for themselves a monopoly in money production.

      But you don’t tolerate such delays in the austerity direction. You point to the lack of immediate turnaround, and claim this falsifies austerity theory. And worse, if “austerians” say to you that all things take time, including austerity, you view them as heartless, cold, and not caring of the poor, because they aren’t going apes#!t in the present so much that they demand state violence to solve the problem that would seem to have ot be solved immediately.

      So austerians have to wait for increased government activity, but you won’t wait for decreased government activity, when judging and contrasting the theories.

      “If private sector investment had continued to contract for years after the stimulus, you would then have empirical evidence to support your case. But that is not what the data show.”

      Right, because then you’d set up the delay as that time lag minus a little bit, and then argue that private investment did finally grow after that time. You’re not making as rigorous explanation as you think. You are just setting up the cutoff date as 6 months and “years”, respectively, because that just happened to be the time that elapsed before private investment spending started increasing again. So you pretend to be open to falsification, by pushing the hypothetical date further into the future, knowing that because it’s hypothetical anyway, you don’t have to worry about this time being falsified.

      If it was “years delay” all along, you’d be here saying Keynesianism would only be falsified if private investment fell for “decades” or whatever.

      Most importantly, the very falsification you’re setting up, of “years” of falling private investment having to take place in order to falsify Keynesian stimulus theory, is bogus anyway. For it is the case that even if real private investment rose over time instead, soon after or 6 months after increased government activity, it does not falsify the theory that real private investment would have been even higher had the government not increased its activity in the first place. It is not necessary that real private investment continually decline in the temporal sense, before Keynesian theory can be understood as counter-productive to real private investment. One could legitimately argue that real private investment rose despite the increased government activity. That the chart Murphy linked to, would have otherwise had a greater slope in the real private investment line, had there been no increased government activity the whole time. That it is just barely rising now, instead of rising more, because of the increased government activity.

      • Lord Keynes says:

        In these instances, when debating those who want less government spending than you do, you treated output and employment as having to immediately adjust to the changed government spending (in the downward direction).

        That is false. Contractionary fiscal policy will also take time to induce changes in real output and unemployment.

        “After all, the laissez-faire theory does not hold that the economy instantly rebounds after a change to government activity in the austerian direction,”

        You mean Austrian liquidationism requires depression? You are correct!

        And that destroys all your rubbish in previous posts about how GDP growth would have been higher if only there was no stimulus! Logically, if there was no stimulus, your own Austrian theory suggests that GDP growth would have been lower than what it was — that is a necessary consequence of liquidationism.

        Congratulations on destroying yourself here, M_F.

        • Major_Freedom says:

          “That is false. Contractionary fiscal policy will also take time to induce changes in real output and unemployment.”

          Yes *I* know it’s false, but that isn’t how you have historically been treating it.

          “You mean Austrian liquidationism requires depression? You are correct!”

          No, that isn’t what I said. If you want to introduce the concept of “depression”, then it depends on how you define “depression.” Make sure you define it in such a way that the delay in between austerity and recovery, includes depression.

          “And that destroys all your rubbish in previous posts about how GDP growth would have been higher if only there was no stimulus!”

          It does not follow from a temporal decline in real sustainable output, with no increased government activity, that stimulus would have made it higher.

          Sure, it may increase “output” that includes things like weapons, bridges to nowhere, and other “output”, which when measured as total spending may show an increase over time, but this doesn’t contradict what I have been saying, which is not just “GDP” that includes government spending, but real private GDP.

          “Logically, if there was no stimulus, your own Austrian theory suggests that GDP growth would have been lower than what it was”

          The government can increase “output”, as measured by total spending, in the short run, by printing and spending money on random projects according to political whim.

          Nobody is denying that.

          The laissez-faire theory does not hold that total output, including politically directed output, will always be greater in the short run with stimulus than without. Over the long run, increased government activity will reduce even total “output” as compared to laissez-faire all along. But in the short run, the government can use force to bring about a consumption of capital, increased total output in the short run, and reduced standards of living in the long run.

  4. Lord Keynes says:

    And yet another point is, quite simply, Robert Murphy (presumably) advocates Austrian liquidationism as the policy that should have implemented in 2008.

    Liquidationism entails significant liquidation of many investment projects. We all know perfectly well that failure to intervene in 2008 would have meant the collapse of the financial system and loss of demand deposits, causing a massive shock to aggregate demand for both households and businesses. This would have been caused a severe and lengthy depression.

    Logically, Murphy is committed to saying that the stimulus impeded this liquidationism. But that implies that the stimulus DID add demand to the economy and allowed many private business to keep operating — which can only mean he IS committed to conceding my point, unless he just admits he is guilty of logical contradiction.

    But now what he is actually suggesting above is this: No!! the stimulus did nothing or little to boost demand and increase private sector investment.

    Well, in that case, it cannot have been an impediment to recovery if it had zero effect on consumption and private investment.

    • Major_Freedom says:

      “Liquidationism entails significant liquidation of many investment projects. We all know perfectly well that failure to intervene in 2008 would have meant the collapse of the financial system and loss of demand deposits, causing a massive shock to aggregate demand for both households and businesses. This would have been caused a severe and lengthy depression.”

      Purging waste inducing, unsustainable investment in the economy has the net upshot of ensuring that investments from then on are less wasteful and unsustainable.

      Rescuing unsustainable investments through inflation does not cure the underlying problem.

      It is not sufficient that a person gets a really bad, painful headache after a night of binge drinking, to conclude that sobering up is the sub-optimal course to take. That because cold turkey would be more painful, there is cause to keep drinking.

      Same principle in the economy. The economy is controlled, for the most part, by many tens of thousands of independent producers in a division of labor. Only one capital structure is consistent with given cross sectional (and temporal) consumer preferences. If for whatever reason the totality of investments are not in line with consumer preferences and activities, then

      “Logically, Murphy is committed to saying that the stimulus impeded this liquidationism. But that implies that the stimulus DID add demand to the economy and allowed many private business to keep operating — which can only mean he IS committed to conceding my point, unless he just admits he is guilty of logical contradiction.”

      You are just conceding Murphy’s point. Nobody is denying that increased state activity can prevent malinvestments from liquidation. That’s a core component of ABCT.

      The point however is what increased government activity does to new, potential, as of yet unexploited, investment opportunities. While it can save malinvestments from liquidation, it can also prevent new real private investment.

      But remember, Murphy has said that this chart proves nothing. That just because real private investment fell over time, it doesn’t prove that increased government activity caused it.

      He isn’t “suggesting” that the stimulus did this or that. He stated very clearly that the chart proves nothing. Only that the data shows a decline in private investment over time during increased government activity.

      • Lord Keynes says:

        “He stated very clearly that the chart proves nothing.”

        Even that is false.

        • Lord Keynes says:

          Consider this:

          (1) government stimulus will always and continuously be correlated with a contraction in private investment for the period when it is done.

          That proposition is falsified by the data above.

          It is absurd to say that such data “proves nothing”.

          • Major_Freedom says:

            DEFINE SUFFICIENT STIMULUS.

            You’re not saying what you think you’re saying.

            All you are doing is couching the term “stimulus” in a vague, undefined manner, and only when you are presented with data, will you then settle on a definition. For those periods that recessions occurred, you would say stimulus was insufficient. For those periods that recessions did not occur, you would say that stimulus was sufficient.

            • Major_Freedom says:

              In other words, even if the data show “stimulus” accompanying declines in private investment, you would just conclude that stimulus was insufficient, not that the stimulus caused the decline.

              You have done this throughout your posting history.

            • Lord Keynes says:

              False.

              Stimulus = Fiscal policy at all levels of government in one year — spending and tax changes — that injects spending power into the economy.

              That is clear and objective and can be easily calculated.

              • Major_Freedom says:

                “Stimulus = Fiscal policy at all levels of government in one year — spending and tax changes — that injects spending power into the economy.”

                So if the government spent only $1 more during 2008, then I can conclude that stimulus is correlated with depression?

                “That is clear and objective and can be easily calculated.”

                In terms of “sufficient” and “insufficient” stimulus, you point to the outcomes. Recession occurred, ergo stimulus wasn’t enough. Recession did not occur, ergo stimulus was enough.

                You’re not saying what you think you’re saying.

        • Major_Freedom says:

          It isn’t false. It’s true. You cannot conclude, on the basis of the chart alone, whether one caused the other, or whether one occurred despite the other.

          • Lord Keynes says:

            It is falsified because I only said CORRELATED, not caused.

            Yet another laughable straw man. You deliberately ignore what I wrote.

            No surprises there.

            • Major_Freedom says:

              You’re missing the point.

              Increased government activity is CORRELATED with decreased private investment, in this chart, if the time delay chosen is different from the one that happens to generate a positive correlation.

              In other words, THERE IS NO ONE CORRELATION. You can point to many correlations, none alone popping out from the data itself.

              • Lord Keynes says:

                lol:

                (1) government stimulus will always and continuously be correlated with a contraction in private investment for the ENTIRE period when it is done.
                —–

                I just defined one possible correlation in this proposition and refuted the proposition with the empirical data.

                With every comment you wrote, you reinforce your inability to do anything but engage in straw man argument or red herrings.

              • Major_Freedom says:

                “government stimulus will always and continuously be correlated with a contraction in private investment for the ENTIRE period when it is done.”

                “I just defined one possible correlation in this proposition and refuted the proposition with the empirical data.”

                DEFINE “ENTIRE PERIOD.”

                That also doesn’t pop out from the data itself.

                You keep introducing assumption after assumption, and pretending that the chart is telling you those assumptions.

            • Major_Freedom says:

              In other words, you smuggled in the theoretical assumption of 6 months delay. That assumption is not from the chart itself. Without that assumption, you couldn’t conclude that the chart shows stimulus being correlated with recovery.

              That is what is meant by the chart not proving anything.

              You need to be careful of your assumptions and making sure that you realize where they come from. You are so sloppy that you believe they are coming from the chart itself such that the chart shows a particular correlation. No, YOU are arguing for a specific correlation relationship that is NOT popping out from the chart itself.

  5. Lord Keynes says:

    That is to say, let Robert Murphy explain how the stimulus impeded liquidationism WITHOUT adding to and increasing consumption and private investment.

    • Major_Freedom says:

      The argument that government can stimulate bridges to nowhere, and weapons of war, such that statistical aggregates measuring investment may increase over time, does not require, as an implication, the argument that such stimulus impedes liquidation of malinvestment.

      You are ignoring opportunity costs. You are ignoring what could have occurred had the increased government activity not occurred in the first place. This is the case no matter if you observe a temporal decrease, a temporal stability, or a temporal increase in aggregate total output as measured by total spending, or total spending corrected for inflation indexes.

      When the government spends money, it is consuming resources. Not always in the direct sense such as eating food and using up resources, but also in the indirect sense of bringing about a consumption of capital in the division of labor, which reduces growth going forward, and often leads Keynesians to claim that the stimulus should have been larger, because real output fell and hasn’t returned.

      The theory that increased government activity, while bringing about short term increases to certain aggregate statistics, but nevertheless destroying much needed capital to sustain the same long term growth, such that the “natural” real output growth is reduced going forward, is perfectly confirmed by the data.

      There is no rational reason to believe that past growth rates during the boom are “natural” and must be duplicated now, by whatever quantity of additional government activity is necessary, even if it means even more capital consumption and even lower “natural” growth rates going forward.

      Additional government activity has the capability of consuming the entire supply of capital. Just because for the last 100 years the government has refrained from additional activity, such that real private growth is possible, it doesn’t entitle you to conclude that it was because of the government’s activity that real growth took place. There is always the theory that growth occurred despite the increased government activity, and the last 100 years of data confirms this theory perfectly 100%.

  6. Bob Roddis says:

    I would add that it is a preposterous argument for the Keynesians to suggest that government spending or debt at a somewhat lower rate than the Keynesian “optimum” for filling “the gap” and/or funny money dilution at less than the alleged Keynesian optimum amounts to “austerity”. Further, it is absurd for them to claim that this has proven that a true slashing of government spending in real terms by 50%, 75 or 90% has been shown by the evidence to have failed or that an ending of funny money dilution has been shown by evidence to have failed.

    They have nothing but unmitigated gall to call the government’s 57% of the Keynesian optimum “austerity” and then to try to blame it on us when it inevitably leads to decades of depression (as we predict over and over and over).

    • Major_Freedom says:

      “They have nothing but unmitigated gall to call the government’s 57% of the Keynesian optimum “austerity” and then to try to blame it on us when it inevitably leads to decades of depression (as we predict over and over and over).”

      Yes. Even if “stimulus” was accompanied by sluggish growth, the conclusion from Keynesian theory would be that the stimulus wasn’t great enough, not that the stimulus caused the sluggish growth.

      Even if laissez-faire theory holds that 57% Keynesianism will positively cause an impeded recovery, by virtue of there being Keynesian activity in the first place, LK would still claim that austerity theory has been falsified, that Keynesian theory is the only correct theory, etc, etc.

  7. John Lambert says:

    I think this debate actually ultimately proves the Austrian point. We as human being are actually debating the effectiveness of stimulus spending. It is showing that we as human beings are in quite frankly, human. We make mistakes.

    For sake of argument, let us say the Keynesians are right. Stimulus is actually a positive. However, this in itself brings up interesting questions. Where does the money get spent? Areas of the economy that might actually need investment? Or those with the biggest connections with the central government? Can the bureaucrats actually make the determination where it is best to spend billions of dollars? Remember, most of these bureaucrats are bureaucrats because they couldn’t survive in the private sector.

    So do we really want these folks making decisions involving billions of dollars. Even the most skilled businessmen will go bankrupt. This is when they are risking their own capital. How are bureaucrats going to invest this money when they really don’t have a stake involved. Not like corruption doesn’t enter the picture as well.

    Then when it fails, these same bureaucrats can simply say, “We didn’t spend enough!”

    Yes, this whole Keynesian notion makes a lot of sense. It is the bureaucrats wet dream.

    • Major_Freedom says:

      The fact that prices of already used resources and already employed labor rose since the stimulus, while there remain unemployed people making zero wages, and idle resources not being sold, “confirms” the theory that stimulus does not only remove “slack”, but effects already used resources and employed people. Those people who have to pay higher prices are incurring costs, which means stimulus doesn’t help everyone, only some at the expense of others. It isn’t a means to general prosperity. It is a short term special interest group activity, which brings everyone down in the long run.

  8. Bob Roddis says:

    Despite the fact that Krugman does not understand Austrian analysis (because no Keynesian in the galaxy does), he still announces:

    The central debate over macroeconomic policy is, of course, between Keynesians and Austerians. And at this point the Keynesians have overwhelmingly won the debate everywhere except where it matters – the intellectual basis for austerity economics has collapsed, but actual austerity continues apace on both sides of the Atlantic.

    You can read him here without using up a page view of the NYT:

    http://softcurrencyeconomics.com/2013/04/28/krugman-legitimizes-modern-monetary-theory-mmt-as-a-school-of-economic-thought/

    • Major_Freedom says:

      Haha, meanwhile as Krugman is declaring yet another pyrrhic victory, over a debate between two schools, one of which he doesn’t even understand, austerity continues to not be practiced in accordance with laissez-faire theory (Austrian theory is wertfrei and doesn’t make empirical predictions).

      Is this man a comedian?

  9. Bob Roddis says:

    How does Krugman claim victory when the UMass paper shows that debt/GDP ratios of 30% correlate with 4.2% growth and ratios above 90% correlate with 2.2% growth? Where’s the evidence that debt CAUSES growth in the first place? Why would anyone assume such a stupid idea?

    See figure 1 of the famous paper:

    http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_301-350/WP322.pdf

  10. Reality Engineer says:

    Of course the same sort of graph shows up comparing how much the government borrows vs. how much the private sector borrows, and government borrowing vs. private investment. See further down on this page (which starts out on a different topic but then gets into why debt is bad):

    http://www.politicsdebunked.com/article-list/obama-lied-about-paying-down-the-debt

    It also shows graphs of investment spending compared to consumer spending,which hasn’t recovered since the recession.

    It also shows graphs indicating that one thing that happened was banks raised lending standards after the financial crisis, which leads companies to not bother trying to get loans they can’t get and so the reported demand for loans is lower, and interest rates aren’t forced up as much as they otherwise might be. It is crowding out, without the interest rate rise some claim would happen if there were crowding out. Obviously the same “flight to safety” occurs in the bond market where companies don’t bother issuing if they know investors are skittish, whereas if the government weren’t borrowing so much investors might be forced to take more risks (and because the economy might be doing better).

  11. Bob Roddis says:

    In addition to the implicit admission of total defeat by Krugman on “austerity”, there is the implicit admission of total defeat regarding the new Ron Paul Institute for Peace and Prosperity by the regime-defending Forces of Darkness.

    Salon.com confirms as The Daily Beast reported yesterday that the Ron Paul Institute for Peace and Prosperity is ostensibly designed to promote a discourse about U.S. foreign policy. But its advisory board is stacked with “a bevy of conspiracy theorists, cranks, and apologists for some of the worst regimes on the planet.”

    And just who are the far-right luminaries helping guide Paul’s new endeavor? Lew Rockwell, Butler Shaffer, Judge Andrew Napolitano, journalist Eric Margolis, Michael Scheuer, the former CIA intelligence officer and Walter Block who are extremists and conspiracy theorists An article in The New York Times in 2011, when Paul was running for president, noted that white supremacists, survivalists and anti-Zionists had allied behind Paul’s campaign.

    http://www.salon.com/2013/04/29/ron_paul_casts_lot_with_extremists_conspiracy_theorists_partner/

    Apparently, this is the best the regime apologists can do when confronted with the NAP, non-interventionism, laissez faire, Austrian economics and peace.

    It’s over. We’ve won.

  12. Bob Roddis says:

    Then Salon.com introduces us to some poor guy who spent the last 25 years in jail for drug dealing at age 23 which, of course, would not have happened if those white supremacist, survivalist and anti-Zionist conspiracy theorists and cranks of the Ron Paul movement had had anything to say about it.

    http://www.salon.com/2013/03/14/after_25_years_in_jail_the_internet_blew_my_mind_partner/

    • Ken B says:

      Personally I find people are more receptive to arguments about the horrors of our awful drug policies if you don’t include stuff about private cops, Zionists, or the iniquity of public school funding.

  13. Edward says:

    Its very easy to determine whether or not the “stimulus was too small or large” if you’re a market monetarist. Just do level targeting. If gdp falls by 10%, and after the Fed reflates, most of it comes in the from of inflation and not real growth, than you know its not a demand problem, but supply. If the opposite occurs, it sure as heck IS a demand problem.

    Just to clarify things.

    1. Government Spending and Deficits are two different. things It always irks me when idiots on both sides of the isle insist on conflating the two, as if balanced budgets and govenment spending as a percent of gdp were the same thing. Theyre not. It mystifies me completly when the Republicans insist on lying their ass off and moan about deficits when they really (and this is only in theory!) want to reduce government spending.

    I happen to think that the evidence lies more on the Keynesian/Monetarist front. (more on the monetarist) but I agree, oddly enough that the real battle lies between competing theories. One theory venerates misery and suffering in practice in both the long and short term, pulls nonsense out of its collective rear end about “distortions in the capital structure.” which they insist on leaving undefined and unfalsifiable. It holds government, people, and the free market in contempt, thinking entrepeneurs are as dumb as dog***t to keep getting fooled by the Fed again and again. The other side is more optimistic both about government and the individual entrepeneur. A lot of its followers have socialistic baggage, but you dont have to accept THAT part of it.

    • Major_Freedom says:

      “Its very easy to determine whether or not the “stimulus was too small or large” if you’re a market monetarist. Just do level targeting. If gdp falls by 10%, and after the Fed reflates, most of it comes in the from of inflation and not real growth, than you know its not a demand problem, but supply. If the opposite occurs, it sure as heck IS a demand problem.”

      It’s very easy to determine whether or not stimulus was too large or too small if you’re a thief. Just steal $100,000 per year. If GDP falls by 10%, and after you steal $100,000 you get less supply, then you know that it’s a lack of supply problem. If after you steal $100,000 you get more supply, then you know that it’s a lack of theft problem.

      “I happen to think that the evidence lies more on the Keynesian/Monetarist front. (more on the monetarist) but I agree, oddly enough that the real battle lies between competing theories. One theory venerates misery and suffering in practice in both the long and short term, pulls nonsense out of its collective rear end about “distortions in the capital structure.” which they insist on leaving undefined and unfalsifiable. It holds government, people, and the free market in contempt, thinking entrepeneurs are as dumb as dog***t to keep getting fooled by the Fed again and again. The other side is more optimistic both about government and the individual entrepeneur. A lot of its followers have socialistic baggage, but you dont have to accept THAT part of it.”

      I happen to think that the evidence lies more on the Austrian front, but I agree, oddly enough, that the real battle lies between competing theories. One theory venerates misery and suffering in practice in both the long and short term, pulls nonsense out of its collective rear end about “lack of demand” which they insist on leaving arbitrary and baseless. It holds free markets, people, and peace in contempt, failing to understand that it is impossible for the Fed not to fool investors on the basis that true market prices are unobservable due to Fed activituy. The other side is more optimistic both about free markets, people, and the individual entrepeneur. A lot of its followers have anti-violence “baggage”, but you dont have to accept THAT part of it if you’re a morally contemptible, anti-social hypocrite.

  14. Edward says:

    Oh, and stimulus is not like drugs. If you want to use a biological analogy. Its more like… food.

    • Major_Freedom says:

      The government does not know how much food vis a vis other goods people want. Only the market process can reveal this information.

  15. Edward says:

    In theory, Austrians never SUBSTANTIALLY address the problem of debt deflation. Wages falling might clear the labor market. but the debt overhang will make sure it doesnt clear it as much as it would have had there been less debt. the best Ive seen from contemptible vile heartless fools on this site is: “don’t start the boom with funny money, then you’ll have less debt. (As if it will solve the problem of the debt overhang after the bust!) Even if the false analogy of the druggie WERE true, Austrians would be like the doctor who, after seeing a patient in anaphlaxis, low blood pressure, and a weak heartbeat, would advise his nurses not to give the patient an adrenaline shot to the heart, on the basis that it would be moral hazard, rewarding the cocaine user for his misbehavior.
    Even worse. The cocaine addict has a wife and kids. The wife is a stay at home mother, and the family has no other source of income other than the dad. Dr. Mises-Rothbard would rather consign a wife to widowhood and children to be partial olrphans than to lifet a finger to help them.
    Heartless

    • Major_Freedom says:

      In theory, statists never SUBSTANTIALLY address the problem of central banking. Wages falling can clear the labor market, and liquidate debt, but statists need the problem of debt overhang to pretend that liquidation is evil. Tthe best I’ve seen from contemptible vile heartless fools on TheMoneyIllusion and other statists site is: “Ignore the boom and funny money, because if debt expands then just expand debt inflation by more.” (As if more debt inflation will solve the problem of the debt overhang after the bust!) Even if the false analogy of the death by debt WERE true, statists would be like the doctor who, after seeing a patient in anaphlaxis, low blood pressure, and a weak heartbeat, would advise his nurses to give the patient more of what caused their illness in the first place, on the basis that it would be immoral for reality to be faced, rewarding the cocaine user for his misbehavior.
      Even worse. The cocaine addict has a wife and kids. The wife is a stay at home mother, and the family has no other source of income other than the dad. Dr. Sumner-Mosler would rather consign a wife to future widowhood and children to be future partial olrphans than to lift a free market finger to help them.
      Heartless

  16. Edward says:

    MF.

    “I know you are but what am I.” Is THAT the best you can do!!! 🙂 Copy cat. and lack of demand is measurable, (Its roghly the same as NGDP level changes downward) unlike “distortions in the capital structure” The capital structure is very adaptible to consumer preferences

    • Major_Freedom says:

      Typically for people like you who don’t understand the value of peaceful market activity, or economic science, I find that using the same form of argument back at the person is the only way for that person to understand the utter shallowness of their vitriol.

      Lack of demand is not measurable. You don’t know what demand should be, because you aren’t considering the only source that such information can be revealed, namely, market process. You don’t know if NGDP should rise, fall, or stay the same during any moment in time. Your worldview is arbitrary, which is exactly why it requires initiations of violence to bring it about.

      The capital structure becomes misaligned with the non-market inflation you’re peddling, but it’s not surprising you don’t seem to be able to grasp that, and prefer to hide behind a fake pro-market stance that gives investors the gift of omniscience, who can discern in all prices which component is driven by changes in consumer marginal utility, and which are driven by inflation.

      You’re just making it up that the capital structure is “very adaptable to consumer preferences” in a context of inflation distorting market price signals.

  17. Edward says:

    Roughly

    • Major_Freedom says:

      Not close enough to prevent malinvestment and business cycles.

  18. Edward says:

    AND HOW exactly, would debt be liqudiated? By throwing homeowners who’ve always been current on their mortagage on the street?

    Your second part was just pathetic. 🙂 You are out of practice MF. My point about the docttor and pateint was to bring an example of a stimulant drug that is, unlike cocaine, indeed used mostly in emergency situations. And the point about his kids was to illustrate the point that the people who do the misbehavior, and the people who pay for it, are not always the same people.

    • Major_Freedom says:

      “AND HOW exactly, would debt be liqudiated?”

      Let me get this straight. If we were living in a communist society, and I said that cars and potatoes should be produced in a competitive market, where losses due to bad decisions are incurred, and gains due to good decisions are made, and you demanded right there and then the details of how car and potato production will be carried out, and I say I don’t have all the answers to that, that this justifies in your mind continued communist control?

      You asking me to give you detailed answers about how others will liquidate debt, how others will renegotiate, how others will go through bankruptcy proceedings, is missing the mark entirely. The market process is what will decide which debt is bankrupted on, how, when, and where. There is no a priori details that can be expressed before people do it.

      “By throwing homeowners who’ve always been current on their mortagage on the street?”

      Who said anyone is entitled to spending more than they earn? If lots of people default on their debt, then that wouldn’t make them any less competitive vis a vis each other.

      If there are many borrowers in default, the debt terms can be renegotiated. If people “end up on the street”, then they can rent instead. There are many solutions that don’t require initiating harm against innocent people.

    • Razer says:

      Your analogy doesn’t work. You are demanding an Austrian solution to a problem that wouldn’t exist in the Austrian world. The patient is a coke addict because of MM or Keynesian activities, so why not blame them for getting the patient hooked? Why let them off the hook?

      • Bob Roddis says:

        You are demanding an Austrian solution to a problem that wouldn’t exist in the Austrian world.

        Exactly. So why, after we’ve explained that 787 times, do the Keynesians keep making that same stupid argument?

  19. Edward says:

    And you don’t NECESSARILY have to have more debt to solve the problem of previous debt. The Fed could in theory write checks of equal amount to everyone in the United States.

    • Major_Freedom says:

      “And you don’t NECESSARILY have to have more debt to solve the problem of previous debt.”

      THAT’S HOW INFLATION PRIMARILY TAKES ITS FORM IN OUR REAL WORLD CENTRAL BANKING ECONOMY.

      “The Fed could in theory write checks of equal amount to everyone in the United States.”

      And rip off every lender in the country? That’s insane.

  20. Edward says:

    “Only the market process can reveal this information.”

    IT DOES reveal the information, even in a “funny money” {ha what a joke! :-)} boom, you ninny. Profit margins, unlike simple nominal profits, tell you how good a business is in controlling costs, which are measured in real terms and in nominal dollars. Thus the overused “bricklayer” analogy is covered. A scarcity in real resources will show up IMMEDIATELY in higher costs and lower profit margins, and eventually in lower profits, period.

    • Major_Freedom says:

      “IT DOES reveal the information, even in a “funny money” {ha what a joke! } boom, you ninny.”

      No, it does not reveal actual consumer marginal utility preferences. It reveals both marginal utility preferences and inflationary distortions to prices.

      If someone printed off $100k in their basement, and lent that money at interest, they would be sending signals in the economy that are not a reflection of their own productivity and savings. They would be distorting prices and interest rates away from free market pricing.

      “Profit margins, unlike simple nominal profits, tell you how good a business is in controlling costs, which are measured in real terms and in nominal dollars.”

      It’s not sufficient that businesses earn nominal profits. The RIGHT business activity has to earn nominal profits, and the only way that can occur is if money production itself is free market driven, so that profits and losses in money production itself can constrain and contract money production as necessary, which changes and expected changes in savings rates, money preferences, and other marginal utility considerations.

      “Thus the overused “bricklayer” analogy is covered.”

      Non sequitur.

      “A scarcity in real resources will show up IMMEDIATELY in higher costs and lower profit margins, and eventually in lower profits, period.”

      False. Scarcity in real resources takes time to be revealed in a division of labor economy. Years can go by before such constraints are revealed.

  21. Edward says:

    ” One theory venerates misery and suffering in practice in both the long and short term, pulls nonsense out of its collective rear end about “lack of demand””

    I thought even Austrians agreed that stimulus can temporarily boost employment. Now your’e saying that it can’t even in the SHORT TERM? WTF?

    • Major_Freedom says:

      “I thought even Austrians agreed that stimulus can temporarily boost employment.”

      Austrians do not deny that the state can print money and pay people to dig holes in the ground, or build weapons of war, and then calling it “employment.”

      The question is whether the employment is in line with actual consumer preferences, both cross sectionally and temporally. Non-market inflation falsifies the price signals that would guide investment to be in line with such preferences.

      “Now your’e saying that it can’t even in the SHORT TERM? WTF?”

      Pay attention.

  22. Edward says:

    One eternal law of the universe:

    Bob Roddis has been and will always be a one-trick imbecile. Cue the post calling me an asshole and saying I dont understand economic calculation (Even though I do)

    • Razer says:

      Can you demonstrate this assertion? So far I haven’t seen it.

    • Major_Freedom says:

      You don’t understand economic calculation to save your life.

    • Bob Roddis says:

      1. Seeing that I can’t read other people’s minds, I really do not know if they understand Austrian analysis and/or concepts or not.

      2. It has been almost 4 years since I started making online comments about Keynesians and the Austrian School. It all started with this pathetic post by Yglesias on Tom Woods which used to have over 300 comments.

      http://thinkprogress.org/yglesias/2009/05/05/192820/the-right-and-austrian-business-cycle-theory/

      3. Back in the 70s, there were no hip Keynesians, just socialists and commies. Since I was an Austrian before I ever understood Keynesianism, my first reaction to Keynesianism in 1974 was “you can’t be serious!!!”. You don’t actually run into Keynesians in the legal profession over the decades.

      4. When the crash came in 2008 as predicted by Peter Schiff and others, I figured that that would be the end of the Keynesians. Instead, vast armies of defendants, oblivious to Austrian analysis, arrived on the scene.

      5. After reading the Yglesias post along with the linked comment by Quiggin followed by all of the hysterical name-calling by the commenters, it began to dawn on me that these people did not have the faintest clue about Austrian concepts or analysis. Or laissez faire. Or the NAP. However, that did not seem to stop them from expressing their opinion about what they refused to understand.

      6. Somewhat tongue in cheek, I announced that no Keynesian anywhere understood basic Austrian concepts or analysis, especially the central concept of economic calculation.

      7. I assume that someone somewhere would be shamed into taking a shot at explaining their understanding of Austrian concepts and analysis. I was surprised as anyone that no one ever made the attempt.

      8. Conclusion: Either the vast army of Keynesians is keeping their vast knowledge of the Austrian School a secret in their head or else they are utterly clueless since there is no evidence that they have even the most superficial familiarity with basic Austrian concepts and/or analysis.

      9. Edward is clearly keeping his vast knowledge a secret.

      • Bob Roddis says:

        Typo:

        Instead, vast armies of DEFENDERS oblivious to Austrian analysis, arrived on the scene.

  23. Edward says:

    AND he’s lazy in updating his blog

    • Major_Freedom says:

      You’re intellectually lazy.

  24. Edward says:

    MF,,

    “It’s very easy to determine whether or not stimulus was too large or too small if you’re a thief. Just steal $100,000 per year. If GDP falls by 10%, and after you steal $100,000 you get less supply, then you know that it’s a lack of supply problem. If after you steal $100,000 you get more supply, then you know that it’s a lack of theft problem.”

    This paragraph is beneath contempt. Ive told you again and again that purchasing power is an unstable part of the dollars you hold in you pocket. It doesn’t “belong” to you only! Its shared, between you, the businesses that you patronize, and the Fed

    • Major_Freedom says:

      “This paragraph is beneath contempt.”

      Now you know how peace advocates, those who want to protect the market, think when you spew the vitriol concerning what proves to you whether or not inflation is justified or not.

      I am using the same exact reasoning as you did, I just changed the statistics observed, so as to show you the absurdity in your reasoning.

      I don’t give a flying hoot if you feel “offended” by your own immoral hate and violence mongering couched in the name of poor people.

      “Ive told you again and again that purchasing power is an unstable part of the dollars you hold in you pocket.”

      I’ve told you again and again that the free market process is not about arbitrary stabilizations of purchasing power, but about fluctuating, but long term increasing purchasing power.

      “It doesn’t “belong” to you only! Its shared, between you, the businesses that you patronize, and the Fed”

      Collectivist nonsense. Other people’s private property does not belong to YOU, and yet you nevertheless advocate for theft on a massive scale, and stealth tax via inflation on a massive scale. You’re a hypocrite on a massive scale.

    • Razer says:

      Nonsense and reveals how immoral you are. The businesses I patronize can’t debase my purchasing power. They can try to charge any price they want and I can refuse. No theft of purchasing power.

      But the FED can debase my purchasing power and give it to their friends without me being to do anything about it, especially if you force to me to accept that currency on pain of death, which I bet you wholly support. So what you are really saying is that my purchasing power is a gift to me granted by the FED that can be taken away any time they (you) choose.

      Does my property and labor also belong to me or do you want a stake in that too? Amazing the depths you descend once you accept violence as the basis or your worldview.

    • guest says:

      Ive told you again and again that purchasing power is an unstable part of the dollars you hold in you pocket. It doesn’t “belong” to you only!

      We don’t expect money to be stable in the sense of price rigidity. We expect it to be stable in the sense that it reflects personal preferences, rather than manipulation by a would-be central planning agency.

      If a guy wanted gold last week, and he had what I wanted, but then he no longer wanted gold, such that I could no longer buy what he had, I’m not going to blame the person for changing his preferences, because that’s his right.

      I’m not going to blame the gold because, as a commodity, it has utility which can be used to determine the subjective utilities of other goods.

      What I’ll have a problem with is someone claiming that the money substitutes I’m using as currency represent existing wealth, when they are simply being created out of thin air, not representing anything.

      (Saying a dollar is worth a dollar tells me nothing about its purchasing power.)

      Also, money isn’t a social good. It belongs to individuals like any other good.

      No one is entitled to someone else’s supply of what most people use as the money. Money is a convenience for individuals. The more people that find they can profitably use the money in exchange, the more that individuals will want to hold it for that purpose.

      “Purchasing power”, which requires that another person be willing to trade with you, is a function of the subjective utilities derived from one good as compared with another, and so is not a collective concept.

      No affinity between traders is required for money to function.

  25. Edward says:

    By the way, “Geoff” nice new handle at the moneyillusion.com

    • Major_Freedom says:

      That isn’t me.

  26. Edward says:

    “Collectivist nonsense. Other people’s private property does not belong to YOU, and yet you nevertheless advocate for theft on a massive scale, and stealth tax via inflation on a massive scale. You’re a hypocrite on a massive scale.”

    Are you mentally challenged? Youre the one who is asserting that purchasing power, which is inherently unstable (another thing u wrongly attacked me for by the way. ) is yours only. Youre like a slaveowner who’s claiming to abolitionists, “don’t mess with my private property!”, as if your mere assertion that slaves are your property is true, it isn’t!
    To jump back to purchasing power, whenver a business changes its price upward, it diminishes a potential customer’s buying power. If it lowers the price, it increases it. Now THERE IS NOTHING WRONG WITH THIS. Its just, be aware that this is happening, and how this challenges you worldview. You have $100,000 in savings. those numbers on a computer screen or paper notes belong to YOU and to you only. What those notes can buy is a different matter. Now we come to the Fed. Greenbacks have on them “federal reserve note.” They orginated from the Fed. the Fed isn’t literally taxing your hoards. Nor is the treasury. what the fed does with the dollars it prints is its business. Just like what you do with your dollars is yours, just like what businesses do with theirs is theirs, just like what I do with mine is mine. You never had a right to a “stable” purchasing power in the first place!, or long term increases in purchasing power, only to your nominal property. To say you do, tantamounts to whining for a free ride from deflation, and stealing from debtors.
    “who said people are entitle to spend more than they earn?” I didn’t But most people took out loans under pressure innocently from fraudsters making them wild promises. You can accuse them of naivete, even stupidity.” but would you condemn a women being micked with rohypnol at a bar by a handsome stranger. (slick mortage operator). If you do youre a heartless bastard.

    Razer. You are a clueless ignoramus
    It is wrong and immoral for you to assert dominion over the private property decisions of other people. You dont have to accept dollars. You can demand payment in gold and pay your taxes in dollars. If you think they are trash, please send them to me.

    • Major_Freedom says:

      “Are you mentally challenged?”

      Yes. I have a note from the government saying so.

      “Youre the one who is asserting that purchasing power, which is inherently unstable (another thing u wrongly attacked me for by the way. ) is yours only.”

      I never said one owns purchasing power. Purchasing power is an abstract relation between money and goods in a market setting.

      What people do own is their legitimately acquired property, meaning what they originally appropriated and what they traded for. This leaves zero room for theft, aggression, and zero room for coercive monopolies that violate individual property rights, such as central banks, which means you nor anyone else has a right to do that which has the side effect of decreasing the purchasing power of money. It’s not that the decrease in purchasing power itself that is illegitimate, it’s the activity that makes such devaluation possible in the first place, i.e. coercion against property owners to maintain the state and the central bank’s control.

      “Youre like a slaveowner who’s claiming to abolitionists, “don’t mess with my private property!”, as if your mere assertion that slaves are your property is true, it isn’t!”

      You’re like a rapist who’s claiming to his victims “Don’t mess with society’s need to reproduce!”, as if your mere assertion that sex is a public good makes it OK to force it by coercion on others. You’re doing that with money.

      “To jump back to purchasing power, whenver a business changes its price upward, it diminishes a potential customer’s buying power. If it lowers the price, it increases it. Now THERE IS NOTHING WRONG WITH THIS.”

      THAT ISN’T WHAT IS BEING IDENTIFIED AS IMMORAL BY LIBERTARIANS.

      WHat is being identified as immoral is the NON-MARKET coercive monopoly over money, which has a side effect of raising prices BY COERCIVE MEANS.

      It’s not the rise in prices itself that is evil, it’s the coercion that generates it that is evil.

      “Its just, be aware that this is happening, and how this challenges you worldview.”

      You clearly don’t even understand the libertarian worldview.

      “You have $100,000 in savings. those numbers on a computer screen or paper notes belong to YOU and to you only. What those notes can buy is a different matter.”

      And poof it goes into the blackness of vague nonthingness. A different matter? That’s it? You’re ignoring the coercion that is responsible for the very dollar system in the first place.

      “Now we come to the Fed. Greenbacks have on them “federal reserve note.” They orginated from the Fed. the Fed isn’t literally taxing your hoards. Nor is the treasury. what the fed does with the dollars it prints is its business.”

      It’s business is based on initiations of force against private property owners. The state forces people to pay it taxes in dollars, whether they earn dollars in their trades or not. The state enforces its own laws on the people, and demands people found guilty to pay in dollars. This coercion is what backs the dollars circulating in trade throughout the territory of land under which its inhabitants are forced to pay. This force is considered by libertarians as unjustified. Removing that coercion and allowing free choices in money, will reveal the “business” of the Fed to be nothing but naked aggression.

      “Just like what you do with your dollars is yours, just like what businesses do with theirs is theirs, just like what I do with mine is mine.”

      That’s a lie on your part. You are NOT find with others using their dollars as they see fit. You want them to be threatened with violence, and initiated with violence if they peacefully resist, and killed if they defend themselves against that aggression, if they don’t pay your mommy and daddy state, what you call “taxes”.

      “You never had a right to a “stable” purchasing power in the first place!”

      I never claimed anyone has a right to this abstract concept being observed. You’re missing the whole point of the argument about purchasing power. It isn’t the purchasing power itself, it’s the violence that brings it about.

      “or long term increases in purchasing power, only to your nominal property. To say you do, tantamounts to whining for a free ride from deflation, and stealing from debtors.”

      Purchasing goods in a free market context of deflation is not free riding or stealing. In a free market, earning money is justified. Selling money is justified. If there is gradual price deflation, then debtors and lenders can agree to a lower nominal interest rate on loans than they otherwise would agree to if prices were gradually rising over time.

      If you actually believe that falling prices allows people to “steal” from debtors, then to be consistent you must also believe that rising prices allows people to “steal” from lenders! But you aren’t saying that. And why? Because the argument is based on a fallacy that you refuse to see, or are unwilling to see, but for convenience you bring it up in your own mind in a context of no state control over money, i.e. price deflation. This “free riding” is nothing but a (flawed) excuse from you.

      And ah yes, the “whining.” Were you abused growing up? You are displaying the telltale signs of physical and emotional child abuse, because the phrases you are using are the sorts of phrases used by tormenters and abusers of children.

      “I didn’t But most people took out loans under pressure innocently from fraudsters making them wild promises.”

      Why should those who weren’t fooled be harmed for the sake of those who were? It is not true that “most people” who took out loans were defrauded. It is true that most borrowers were a little too greedy and wanted to spend more than they earned, and gladly took on the loans.

      You’re making it sound like “most” of the recent housing bubble and bust was due to fraud and lies. But that’s wrong. Most of the bubble was caused by the Federal Reserve keeping interest rates too low too long, and the Federal Reserve System flooding the market with credit expansion. None of this is free market activity, but a direct product of state activity.

      “You can accuse them of naivete, even stupidity.” but would you condemn a women being micked with rohypnol at a bar by a handsome stranger. (slick mortage operator). If you do youre a heartless bastard.”

      Heartless bastards initiate force against innocent people. You are OK with such initiations of force. What does that make you?

      “It is wrong and immoral for you to assert dominion over the private property decisions of other people. You dont have to accept dollars. You can demand payment in gold and pay your taxes in dollars. If you think they are trash, please send them to me.”

      You’re ignoring the fact that Razer is going to be taxed in dollars even if he accepts gold as payment. He has to go out and earn dollars in trade, just like every other taxpayer. That is coercion.

  27. Edward says:

    and I know your style, “Geoff” you liar.

    • Razer says:

      Edward, you are a clueless moron that never heard of legal tender laws. And a business can’t dilute purchasing power without increasing the money supply. That’s how dilution occurs, you buffoon. You don’t even understand what purchasing power is.

    • Razer says:

      Edward, so now you are claiming inflation is not a monetary phenomenon?

      Also, how about you take the Austrian challenge? Prove these wrong and I’ll gladly agree that Austrian Economics is rubbish.

      1) Individual preferences are subjective. ( I.e. each person’s preference is different from each other, known only to them and subject to change at any time).

      2) No human can know people’s preferences in advance without being omniscient. (I.e. we haven’t found any god-like omniscient humans running around earth yet.)

      Can you prove either of these propositions false? If not, do you accept that they are true? I’ll go over the implications after we pass this hurdle. If you can prove them to be false, then Austrian Econ is finished in my book.

      Please give it a go. Can’t wait.

    • Major_Freedom says:

      I am not “Geoff.”

  28. Edward says:

    “A scarcity in real resources will show up IMMEDIATELY in higher costs and lower profit margins, and eventually in lower profits, period.”
    False. Scarcity in real resources takes time to be revealed in a division of labor economy. Years can go by before such constraints are revealed.”

    Making stuff up again, brilliant! Youre like a Marxist, you can never be wrong!

    • Major_Freedom says:

      “Making stuff up again, brilliant! Youre like a Marxist, you can never be wrong!”

      It isn’t made up. It is reality.

  29. Edward says:

    I’ll bet not one Austrian will take the “please send them to me challenege!” ask any clueless imbecile whining about paper trash as money to do so, and they will be reveled for the hypocrites and liars they are.

    • Major_Freedom says:

      “I’ll bet not one Austrian will take the “please send them to me challenege!” ask any clueless imbecile whining about paper trash as money to do so, and they will be reveled for the hypocrites and liars they are.”

      You have been shown to be uninformed on this thread.

  30. Edward says:

    “Typically for people like you who don’t understand the value of peaceful market activity, or economic science, I find that using the same form of argument back at the person is the only way for that person to understand the utter shallowness of their vitriol.”

    No, it only proves how pathetic you responses really are.

    • Major_Freedom says:

      “No, it only proves how pathetic you responses really are.”

      No, it helps you understand how shallow your posts are.

  31. Edward says:

    “If someone printed off $100k in their basement, and lent that money at interest, they would be sending signals in the economy that are not a reflection of their own productivity and savings. They would be distorting prices and interest rates away from free market pricing.”

    If they said they were us. dollars yes they would be. But if they were currency’s with the intials E.D. or M.F. you u didnt force them on those outside your home, there would be nothing wrong with the, If like bitcoins, they had lines of code, required to make them, , or perfromed another useful function…. then they would be accpeted as money without coercion. That would be the ideal system. An ancap utopia. But usually, Austrians mix the terms up, “free market money,” and the gold standard, not realizing that they are not the same thing at all.

    • Major_Freedom says:

      “If they said they were us. dollars yes they would be.”

      Hahaha, OK, the people in the basement I was referring to *is* the Fed.

      You just conceded the point, while thinking you had one of your own. Too funny.

      “But if they were currency’s with the intials E.D. or M.F. you u didnt force them on those outside your home”

      The state is forcing dollars by demanding that people pay taxes in them, no matter what they earn.

      “But usually, Austrians mix the terms up, “free market money,” and the gold standard, not realizing that they are not the same thing at all.”

      No Austrian is saying free market money == Gold money. What they do say, if you bothered to actually read that which you choose to criticize, is that in a free market of money, it is likely, as an empirical question, that gold will “win” the competition for money.

  32. Edward says:

    “and you din’t force theM on someone outside your home there would be nothing wrong with them..

    • Major_Freedom says:

      The state forces dollars by taxing in dollars.

  33. Edward says:

    “Edward, you are a clueless moron that never heard of legal tender laws. And a business can’t dilute purchasing power without increasing the money supply. That’s how dilution occurs, you buffoon. You don’t even understand what purchasing power is.”

    Legal tender laws only apply to DEBTS public and priavte. Businesses can dilute purchasing power by raising the price.Itys true, this occurs, most of the time, with increasing the money supply. But expalin to me this. How is possible, for healthcare to rise at exorbitant rates above the offical and even the shadowstat rates of inflation and creation of the monetary base.

    Answer: Long running supply side restrictions in the health care industry. (Who’s the clueless moron now Bub?”)

  34. Edward says:

    Negtive supply side restriction can create inflation in the long run, even

    • Razer says:

      Do you even know what inflation is? Hint: you are confusing a symptom for a cause. Go back to Friedman for a definition. What kind of monetarist are you?

    • Major_Freedom says:

      Sure, but that doesn’t explain the real world in this country. It would require a collapse in supply the size of the Roman Empire.

      A 2-3% annual price inflation, caused by decreasing supply, for 100 years, would result in supply shrinking to a factor of (1- .025)^100 = 0.08. In other words, supply today would have to be only 8% of what it was compared to 100 years ago.

      Clearly price inflation in the long run has been caused by more money and spending, i.e. inflation.

  35. Bob Murphy says:

    Hey guys, can you stop calling each other names? I don’t want to lose my free period sitting with you in detention.

    • guest says:

      Hey, Edward … You have 15 seconds to comply.
      😀

      Bob “RoboCop” Murphy; Keepin the peace.

      (Just call him Murphy.)

  36. Edward says:

    Sorry Bob, its just fanatics bring out the worst in me.

    I would never call YOU names

    • Razer says:

      Edward’s definition of fanatic: one who challenges my sloppy assumptions and poor reasoning and rejects my call for violence against peaceful humans based on such.

    • Major_Freedom says:

      You mean you’re bringing out the worst in yourself?

  37. Edward says:

    Razer,

    “Also, how about you take the Austrian challenge? Prove these wrong and I’ll gladly agree that Austrian Economics is rubbish.
    1) Individual preferences are subjective. ( I.e. each person’s preference is different from each other, known only to them and subject to change at any time).
    2) No human can know people’s preferences in advance without being omniscient. (I.e. we haven’t found any god-like omniscient humans running around earth yet.)
    Can you prove either of these propositions false? If not, do you accept that they are true? I’ll go over the implications after we pass this hurdle. If you can prove them to be false, then Austrian Econ is finished in my book.
    Please give it a go. Can’t wait.”

    Easy. Those two statments are trivial tautologies,. and have nothing to do whatsoever to specific policy proposals. “Human action” can be believed by a Marxist, Austrian, Keynesian, or even Moentarist. There is nothing uniquely “austrian” about it.
    i would quibble a little with the second one. Its definitely true that no human is infallible, and that we can’t know for SURE people’s preferences in advance. However, we can get a rough estimate, and educated guess, by taking a look at revealed preferences over time, and how they change.

    On inflation. If you noticed, I said that the root cause of MOST inflations was monetary. However it IS possible to have the government purposefully restrict the supply of some good for a long period of time, and create inflation that way. A perfect example is health care inflation

    • Major_Freedom says:

      “Easy. Those two statments are trivial tautologies”

      Tautologies are not empty voids. The Pythogorean Theorem is a tautology, as the relation itself analytically follows from the nature of a plane right triangle, but that doesn’t mean the relation does not expand our knowledge.

      Trivial tautologies encompass every science of philosophy, and philosophy of science. Take positivism. Positivism is based on the tautology that the nature, or truth, of things is unchanged over time. Why? Because truth is by definition unchanging of course. That’s a tautology, and every single physicist and chemist assumes it.

      “and have nothing to do whatsoever to specific policy proposals.”

      Austrian praxeology DOESN’T CLAIM TO BE non-wertfrei. You might as well dump on mathematicians and logicians because their field of inquiry is not “political.”

      ““Human action” can be believed by a Marxist, Austrian, Keynesian, or even Moentarist. There is nothing uniquely “austrian” about it.”

      What kind of a stupid statement is this? Human action is human action not because it’s an Austrian insight. It’s a HUMAN concept. OF COURSE other humans, calling themselves Marxist, Keynesian, whatever, will be true for them and can be recognized by them too.

      “i would quibble a little with the second one. Its definitely true that no human is infallible, and that we can’t know for SURE people’s preferences in advance. However, we can get a rough estimate, and educated guess, by taking a look at revealed preferences over time, and how they change.”

      You’re presuming the past repeats. But there are no constants in human action. Rough estimates, educated guesses, these are just you coming to terms with the fact that there are no constants and you have to make do with unscientific expectations.

      • Lord Keynes says:

        Edward says:
        ” Those two statments are trivial tautologies,. and have nothing to do whatsoever to specific policy proposals.”

        Correct.

        M_F:

        “Austrian praxeology DOESN’T CLAIM TO BE non-wertfrei. “

        So by this, you mean praxeology claims to be wertfrei?

        But that just proves what Edward says.

        “You’re presuming the past repeats. But there are no constants in human action.”

        That is just utter rubbish. E.g., humans eat. It is a biological constant.

        Is M_F so deluded that he thinks that it is likely or possible that humans will just stop eating tomorrow?

        • Major_Freedom says:

          “So by this, you mean praxeology claims to be wertfrei?”

          Yes.

          “But that just proves what Edward says.”

          It doesn’t “prove” what he said. It was true before he ever spewed over it. If it’s politics he wants, praxeology can only reveal to him the logical constraints to his activity. it won’t tell him that violence is justified or unjustified. It will only tell him that his actions will have costs, that he will choose on the margin, etc.

          “That is just utter rubbish. E.g., humans eat. It is a biological constant.”

          Biological constants are not constants of human action. Humans must choose to eat, as opposed to choosing other courses of action. Not everyone chooses to eat (anorexics, etc). Eating satisfies a biological urge. But that doesn’t mean that “eating” is a constant of human action. Just because I ate yesterday, it doesn’t mean I have to eat tomorrow or the next day, or for the rest of my life. I could choose to stop eating any time I want.

          You need to think about these so called “trivialities” some more. Obviously even the simple things are going so far over your head they’re landing on mount Everest.

          • Major_Freedom says:

            And human action is NOT, contrary to your treatment of it, a “society-wide” concept.

            Praxeology is the study of *individual* behavior.

            For an individual human, praxeology only says that the individual will seek their preferred ends. If those ends happen to include living, then eating is a scientific issue. One has to decide that one wants to live, or, at the basest level, satisfy one’s urges, if one is going to choose to eat.

            Eating is simply not a constant law of human action.

            You’re confused.

          • Lord Keynes says:

            ” But that doesn’t mean that “eating” is a constant of human action. Just because I ate yesterday, it doesn’t mean I have to eat tomorrow or the next day, or for the rest of my life. I could choose to stop eating any time I want.”

            The basic desire to eat — via pangs of hunger — is biological. That is the finding of science.

            Of course, when you’re a deluded Austrian fanatic, basic scientific truths have no significance, do they?

            • Major_Freedom says:

              “The basic desire to eat — via pangs of hunger — is biological. That is the finding of science.”

              Eating is a choice. HUNGER is not a choice. Hunger is not a praxeological concept. Eating is. Praxeology is the study of human ACTION. Not human biology.

              You can be hungry due to biology, but you have to ACT in order to remove hunger pangs.

              “Of course, when you’re a deluded Austrian fanatic, basic scientific truths have no significance, do they?”

              Of course, when you’re a deluded Keynesian fanatic, basic praxeological truths have no significance, do they?

              • Lord Keynes says:

                “You can be hungry due to biology, but you have to ACT in order to remove hunger pangs.”

                And that action is clearly induced by biological causes. The human act of eating will not stop unless biology changes.

                The assertion that there are no “constants in human action” is absurd.

              • Major_Freedom says:

                “And that action is clearly induced by biological causes.”

                And what caused those biological causes? And what caused those causes? And what caused those causes?

                Praxeology doesn’t deal with creationism. Praxeology takes desired ends AS A GIVEN.

                Whatever the causal chains are responsible for there being individual humans here now, with hungry tummies, having an urge to remove hunger pangs, is outside the scope of praxeology.

                Praxeology takes the desired ends, for example eating, as givens. The desired ends are the datum by which praxeology has content. Purposeful activity, as opposed to biological activity.

                Biology cannot explain why I am eating right here right now. Any explanation it gives, would be incomplete, in the sense that it would beg the question of what caused the proximate cause, and so on, back and back until the biologist would be unable to give an answer.

                “The human act of eating will not stop unless biology changes.”

                This has no bearing on praxeology, which studies action itself. Eating is but one action among many that humans can engage in. Praxeology deals with action as such. Thymology deals with the particular ends and particular means and particular motivations. Praxeology is like the steel frames to buildings, and thymology are the bricks or concrete or wood that fill the frame.

  38. Edward says:

    “Edward’s definition of fanatic: one who challenges my sloppy assumptions and poor reasoning and rejects my call for violence against peaceful humans based on such.”

    Yours and major freedom’s definition of violence is orwellian

    • Major_Freedom says:

      Your definition of peace is Orwellian.

    • Lord Keynes says:

      Also, most of his objections to government intervention just boil down to ethical arguments, after M_F gets defeated on his economic arguments.

      • Major_Freedom says:

        So do yours. Every time you’re pressed, you always eventually gasp and exasperate and ask rhetorical questions, insinuating that laissez-faire advocates don’t care about unemployed people, poor people, etc. It’s the same every time.

        Not only that, but your Keynesianism boils down the ethical argument that systematic centralized violence is justified, because the alternative is, in your mind, morally worse. It takes value judgments to claim that unemployment SHOULD fall, and that output SHOULD rise, by violence if need be.

        Your whole worldview is one giant morality play on statism. That’s it. Everything else is faux wertfrei posturing.

        The only reason you don’t like it when laissez-faire advocates reveal their morality as against yours, is because you don’t like being reminded all the time that your morality sanctions naked aggression against innocent people. That is what you want to convince yourself is justified and that is what you want to convince others is justified, in order to bring about the effects you personally want. Talking about employment and output are but mere means to that end.

        • Lord Keynes says:

          ” Every time you’re pressed, you always eventually gasp and exasperate and ask rhetorical questions etc etc, “

          No, M_F we have already established that this is your intellectually bankrupt operating procedure, not to mention the unwillingness to answer simple questions, such as:

          (1) widespread fixprice markets are a reality through all major capitalist economies, and

          (2) it is quantity signals that induce changes in private sector output and employment in fixprice markets.

          Are propositions (1) and (2) above true or not?.

          You could answer this economic question concisely and clearly if you were honest and actually had any arguments.

          But, instead, you will evade it with straw man arguments or red herrings, won’t you, just like the laughable intellectual coward you are.

          • Major_Freedom says:

            “No, M_F we have already established that this is your intellectually bankrupt operating procedure”

            No LK, we’ve already established that violence is your intellectual bankrupt procedure, and that economic *science* is not your method.

            Your method is nothing but apologizing for and advocating for violence, behind walls of data that through your warped ideological lend is being claimed by you as “evidence” that your warped ideology is correct.

            Without aggression against person and property, poof goes your all your desired Keynesian policies.

            “not to mention the unwillingness to answer simple questions, such as:”

            “(1) widespread fixprice markets are a reality through all major capitalist economies, and”

            That isn’t a question, and I have already repeated more than once the economics of “fixed pricing.”

            “(2) it is quantity signals that induce changes in private sector output and employment in fixprice markets.”

            See above.

            “Are propositions (1) and (2) above true or not?”

            Already answered more than once.

            “You could answer this economic question concisely and clearly if you were honest and actually had any arguments.”

            What good would it do? You’ve already proven yourself incapable of recognizing answers when you see them.

            For the 4th time, fixed pricing is related to costs of production plus profit pricing, both of which can change, and quantity changes are affected by price changes.

            “But, instead, you will evade it with straw man arguments or red herrings, won’t you, just like the laughable intellectual coward you are.”

            Hahahaha, look in the mirror.

            • Lord Keynes says:

              “Are propositions (1) and (2) above true or not?”

              Already answered more than once.”

              So, what, you say that propositions (1) and (2) are true?

              Give a clear “yes” or “no” answer.

              I bet you can’t, can you?

              Because a clear answer will reveal your intellectual fraud.

              • Major_Freedom says:

                You’re very slow on the uptake.

                For the 5th time:

                Fixed pricing is a phenomenon caused by considerations of costs (plus profit) when sellers decide on offer prices. This is why we see things like restaurants selling food at the same prices throughout the day, no matter if they have 1 customer or 100 customers.

                For quantity changes, quantity changes are influenced by price changes, and at the same time, quantity changes influence price changes. Greater supply will lower prices, all else equal, and vice versa. Quantity changes (due to demand changes) influence things like allocation of labor between industries, and capital.

                Asking me if those two things are “true”, depends vitally on what you mean by them, what you think cause them, and so on. I can’t agree to something if I disagree with its premises.

                Do prices not change with every change in demand? YES.

                Do quantity demand changes influence employment and capital in terms of allocation? YES.

                Can prices nevertheless change in “fix price” markets? YES. They just don’t change with every penny change in demand. They change over time, on the side of cost prices changing.

                Why won’t you engage these arguments?

                You’re a fraud if you want to get me to agree with two sentences the premises of which you know I disagree with.

              • Lord Keynes says:

                Excellent indeed.

                You say:

                “Do quantity demand changes influence employment and capital in terms of allocation? YES.”

                And can increased quantity signals increase total investment expenditure measured in money terms? Yes or no?

                Once you have conceded that, with a “yes” answer, all your years of denying that demand (via quantity signals) can increase employment and aggregate output collapse like a house of cards.

              • Major_Freedom says:

                “And can increased quantity signals increase total investment expenditure measured in money terms? Yes or no?”

                I love how you’re desperately trying to logically lead me into accepting Keynesian violence, while actually believing you’re going to be able to succeed in it. I’m like 4 steps ahead of you.

                But OK, I’ll play along.

                “Once you have conceded that, with a “yes” answer, all your years of denying that demand (via quantity signals) can increase employment and aggregate output collapse like a house of cards.”

                Wait what? That was weak. I was expecting more.

                I never denied that the government can print money and delude investors into making investments in lines that consumers aren’t willing ot release the necessary resources to complete, nor have I denied that the government can print money and increase costs of production and thus increase “fix prices”.

                Your two propositions do not even imply that printing money or increasing aggregate demand can increase employment and output in the aggregate.

                Printing money raises prices AND COSTS from what they otherwise would have been.

              • Major_Freedom says:

                And besides, I also have never denied that increasing aggregate spending via inflation can prevent malinvestments from being liquidated, and thus bring about an employment and output that is higher that it otherwise would have been had there been no printing of money. This is actually a component of ABCT.

                But having said that, this does not imply that increasing aggregate spending *causes* increasing employment or output. It is possible for aggregate spending to rise in the form of higher consumer spending all else equal, with no additional dollars going to either employment or capital goods.

                It is also possible for aggregate spending to rise and impoverish the population through consumption of capital.

                As is usual, Keynesians take a kernel of truth (the government can print money and hire people to do X), and infer from this that raising inflation and spending cause prosperity. The latter doesn’t follow from the former.

                The “employment” and “output” that statistically rises in the aggregate, is the wasting away of resources and labor into wealth consuming activities, as opposed to wealth increasing activities.

                The goal of economic life is not to ensure that everyone is “working” and “producing something.” The goal of economic life is for the individual to be able to work in lines that are consistent with consumer preferences, and to be able to produce what consumers actually want WHEN they want them, given that resources are scarce.

                Keynesian intervention distorts this goal and brings about wasteful activities and unsustainable capital and labor allocations.

              • Lord Keynes says:

                “Your two propositions do not even imply that printing money or increasing aggregate demand can increase employment and output in the aggregate.”

                Yes, they do.

                Proposition (2) is ALREADY generally defined and is perfectly capable of being true when defined in an individual market, sector or wide aggregate sense:

                (2) it is [e.g., sectoral, individual or aggregate] quantity signals that induce changes in private sector [sectoral, or individual or aggregate] output and employment in fixprice markets respectively.

                And you have already conceded that

                (1) Do prices not change with every change in demand? YES.
                = increased demand will not necessarily just increase prices.

                (2) Do quantity demand changes influence employment and capital in terms of allocation? YES.
                = Employment can increase with increased demand changes.

              • Lord Keynes says:

                “And besides, I also have never denied that increasing aggregate spending via inflation can prevent malinvestments from being liquidated, and thus bring about an employment and output that is higher that it otherwise would have been had there been no printing of money. “

                And aggregate spending via the mechanism of quantity signals can induce greater employment and output in the fixprice markets, which you already admit do not necessarily change prices when demand rises.

                In all respects your attempts to deny that increased aggregate demand via quantity signals increase employment and output fail.

              • Major_Freedom says:

                “Yes, they do.
                Proposition (2) is ALREADY generally defined and is perfectly capable of being true when defined in an individual market, sector or wide aggregate sense”

                False. Not all prices are set in terms of costs of production plus profit. Your “aggregate sense” garbage is just a fallacious extrapolation into the “macro” sphere where you want violence (which of course is still against individuals).

                “(2) it is [e.g., sectoral, individual or aggregate] quantity signals that induce changes in private sector [sectoral, or individual or aggregate] output and employment in fixprice markets respectively.”

                No, that’s wrong. See above.

                “increased demand will not necessarily just increase prices.”

                There are some prices that increase, and some prices that so not increase, with a given change in aggregate spending.

                Inflation is at best a short term solution that creates more of the same problems that it is being advertised as solving.

                “Employment can increase with increased demand changes.”

                Only if the demand takes the form of demand for labor specifically, and only if the demand for labor takes the form of demand for surrently unemployed labor specifically.

                Aggregated thinking is leading you astray.

              • Major_Freedom says:

                “And aggregate spending via the mechanism of quantity signals can induce greater employment and output in the fixprice markets”

                Not in the long run, because the “employment” and “output” that results is not in line with actual consumer preferences of goods cross sectionally and temporally. It is eating the seed corn.

                The issue is not “employment” and “output”, but “specific employment” and “specific output”.

                “In all respects your attempts to deny that increased aggregate demand via quantity signals increase employment and output fail.”

                No, your denial of the malinvestments that result from such non-market inflation has failed, because even after prompting, you refuse to address it. Which likely means you agree with it.

              • Lord Keynes says:

                “Not all prices are set in terms of costs of production plus profit.”

                That is true but irrelevant since the current discussion concerns the fixprice markets.

                (2) If one considers a set of industries in one sector where there are fixprice markets, can increased quantity signals induce increased ggregate employment and output in that sector ?

                Yes or no?

              • Major_Freedom says:

                “That is true but irrelevant since the current discussion concerns the fixprice markets.”

                No it isn’t because inflation affects more than fixed price markets.

                If you were talking about some weird form of targeted inflation, where money is printed and ONLY circulates within fixed price markets only, then you might have a point. But because inflation affects all markets, it means that you can’t say inflation does this or that to the aggregate.

                You are committing the fallacy of composition.

                “(2) If one considers a set of industries in one sector where there are fixprice markets, can increased quantity signals induce increased ggregate employment and output in that sector ?”

                Inflation affects COSTS as well as final goods prices. You are holding prices constant in a context of inflation, when in the real world, fix price markets are in part a function of inflation.

                Yes or no? ANSWER ME!!!!!! Hahaha

              • Lord Keynes says:

                Yah, in other words, you are back to evasion of questions, aren’t you?

                You are holding prices constant in a context of inflation, when in the real world, fix price markets are in part a function of inflation.

                The prices in fixprice markets will rise if factor input costs rise, but that does not change the fact that the quantity signals will still increase aggregate employment and output in that sector .

              • Lord Keynes says:

                The set of all fixprice market sectors where quantity signals induce increased employment and output is the next relevant aggregate.

                It follows that quantity signals induce aggregate changes in output and employment in all fixprice markets, which is wide swath of the economy.

                That changes in prices can and do occur in fixprice markets via cost of production changes or changes to profit markups does not change that truth.

                Of course, reality has no bearing on Austrian theory, does it, M_F!

              • Major_Freedom says:

                “Yah, in other words, you are back to evasion of questions, aren’t you?”

                No, I answered your questions. The problem is that you just don’t like the answers.

                “The prices in fixprice markets will rise if factor input costs rise, but that does not change the fact that the quantity signals will still increase aggregate employment and output in that sector .”

                Only if the nominal demand for labor rises in that sector, given a price for that labor.

                Quantity alone is insufficient. What matters are input prices and output prices.

                “The set of all fixprice market sectors where quantity signals induce increased employment and output is the next relevant aggregate.”

                Again, employment does not rise in those specific sectors (which you misleadingly call “aggregates”) unless there is a rise in the nominal demand for labor in those sectors, given prices of labor.

                “It follows that quantity signals induce aggregate changes in output and employment in all fixprice markets, which is wide swath of the economy.”

                Quantity “signals” are A FUNCTION of price signals.

                “That changes in prices can and do occur in fixprice markets via cost of production changes or changes to profit markups does not change that truth.”

                It isn’t true. You’re making the mistake of conflating quantity of goods demanded with nominal demand for labor. Employment will not rise in a sector unless there is a rise in the nominal demand for that labor, at a given labor price. The price is itself a function of the value of that labor type relative to other labor types.

                A business cannot sell more goods unless there is an innovation on the side of investment. Selling more goods presupposes an innovation in investment.

                Your reasoning is backwards. It is not output that causes employment. It is employement that causes output. It is only at the individual firm level that output can be viewed as causing employment in that sector. But employment as such, in the aggregate, is not caused by output.

                All you’re doing is eliciting the same consumptionist dogma, the same reversal of economic logic gobbledygook, that Keynesians are infamous for doing. You take what is true for a specific firm, which is that employment is dependent on the demand for the output of that firm, and then you commit the fallacy of composition and claim that the same principle is true in the aggregate.

                You’re just confusing the crap out of yourself, as usual.

              • Lord Keynes says:

                “Your reasoning is backwards. It is not output that causes employment. “

                And now you’re back to deliberating making things up.

                This discussion has been about how the process of investment and production, requiring more labour and more factor inputs, producing more output in fixprice markets is driven by quantity signals.

                Nowhere was it said that final output drives employment or whatever lying nonsense you’re now trying to spin out.

                And there is no fallacy of composition because the empirical evidence shows quite clearly that the property existing in individual markets does also exist at the higher level of sets of fixprce markets.

          • Bob Roddis says:

            Why do we care if:

            (1) widespread fixprice markets are a reality through all major capitalist economies and/or

            (2) it is quantity signals that induce changes in private sector output and employment in fixprice markets.????

            How is this such a problem that it requires violence to solve it?

            How do the violent government actors have superior information to that of the voluntary actors themselves to solve this alleged problem?

            That’s 3 questions.

            • Lord Keynes says:

              Do you accept the truth of those propositions (1) and (2)?

              And they are not describing “problems” : they are describing economic reality.

              If you are not interested in how REAL WORLD economies work, then there is no reason why any Keynesian should waste their time engaging with you, roddis.

              • Bob Roddis says:

                Do you accept the truth of those propositions (1) and (2)?

                Not necessarily. But if they aren’t “problems”, then there is no reason to call the cops and initiate violence upon peaceful people, is there? Further, I fail to see how these “problems” are relevant to either Austrian analysis or the pro-laissez faire position.

              • Major_Freedom says:

                Fixed pricing and quantity based decision making are not realities that justify violence.

                You are trying to justify violence by pretending non-problems are problems.

              • Major_Freedom says:

                It would be like me pretending to be “value free” while saying:

                “Do you or do you not accept that because some people are stupid and consume more than they produce, that should those people happen to die, that total output would rise and prosperity for the living would rise?”

                Then claim that “THIS IS THE REAL WORLD”.

                Then feign outrage should anyone see through this vitriol as an implicit advocacy for mandatory euthenasia, given that everyone knows you are in favor of it but are too cowardly to come right out and make it explicit, where you instead make vague and fuzzy references to a laundry list of possible ethical norms, all of which sanction violence in some way, and tell your readers “This is the approved list of ethics. All those ethics that prohibit violence are flawed.”

              • Lord Keynes says:

                “Further, I fail to see how these “problems” are relevant to either Austrian analysis or the pro-laissez faire position.”

                And no surprises there.

                You fail to see how those propositions support the statement that aggregate demand drives output and employment in fixprice markets.

                Roddis, you are now on the record as saying that you are so blind you are unaware that descriptions of reality that support Keynesian theory are in any sense important to you.

              • Major_Freedom says:

                “You fail to see how those propositions support the statement that aggregate demand drives output and employment in fixprice markets.”

                Inflation doesn’t just affect quantities in fix price markets.

                It also affects other markets. It redirects scarce resources away from where consumers are willing to have them via their preferences, to uses that they do not. Waste results.

                Fix prices in a context of inflation can rise, due to the effects that inflation has on COSTS.

                You are ignoring the fact that inflation raises costs as well as final output prices. With higher costs, the “fix prices” will be higher as well.

                You’re holding prices constant. You’re letting the term “fix prices” mean absolutely unchanged in the face of inflation. Fix prices are after all in part a FUNCTION of inflation.

              • Bob Roddis says:

                I dispute the statement that “aggregate demand” drives output and employment in fixprice markets except for the truism that you shouldn’t make what people don’t want to buy. Further, the concept of “aggregate demand” as used by Keynesians is a garbage term. For each day, month, or year that is of concern, it is nothing but a statistical historical approximation of what happened. As you point out, the market is non-ergodic. There is no MORAL or practical reason why last years’ numbers, fashions or songs MUST BE replicated again this year, especially by force.

                The entire concept is sheer nonsense and was concocted to fool the weak minded and morally challenged.

            • Major_Freedom says:

              “How is this such a problem that it requires violence to solve it?”

              LK believes it is immoral for people to only act peaceful in a market context, i.e. “sit back and do nothing”, while evil or misguided oligopolists, colluders, and baby killers set a price not in line with MR=MC theory. You see, when such price fixing activity occurs, and we “sit back and do nothing”, unemployment can rise and output can fall. It is thus moral for some people, and a particular group of people, i.e. the state, to initiate coercion and bring about more “demand” so that this “problem” can be solved.

              If we don’t do this, then we will be acting immorally, because “letting” people lose their jobs is immoral, and letting resources sit idle for more than X minutes is also immoral.

              But don’t tell LK this. He wants to believe that preventing declines in employment and output, via violence, is purely scientific and implies no morality whatsoever.

        • Lord Keynes says:

          “Not only that, but your Keynesianism boils down the ethical argument that systematic centralized violence is justified, because the alternative is, in your mind, morally worse. “

          lol.. you actually just proved my point in this comment.

          • Major_Freedom says:

            “you actually just proved my point in this comment.”

            You just proved mine.

      • Major_Freedom says:

        You have never once defeated me in an economics dispute, BTW.

  39. Edward says:

    “The state forces dollars by taxing in dollars.”

    I never knew you agreed in part with the MMTers MF!

    Lets drum up a little problem with the MMT position. When the MMTers say that taxation in dollars forces the acceptance of dollars, they might be partially right, but consider, it isn’t that income taxes and sales taxes, are demanded as “tribute. ” In other words Yyou have to pay no matter what, a certain sum in dollars every year. No, for income taxes, only if you earn certain brackets in money every year. For real estate, if you own your own home, for sales taxes, if you buy good priced in dollars. In other words, it isn’t taxation per se, but legal tender, which only “forces” people to discharge their obligation IN REGARDS TO DEBTS, (which you can avoid) that explains fiat money. Also counterfeiting laws. The rest is due to externalities, due to social convenience. Who are you to condemn the personal preferences of other people

    But I do wonder, Lord Keynes, what would happen if you performed a social experiment and said fiat money was legal tender for public debt only. What do you, or any other person on this blog, think would happen?

    • Major_Freedom says:

      “I never knew you agreed in part with the MMTers MF!”

      That knowledge precedes MMT.

      “Lets drum up a little problem with the MMT position. When the MMTers say that taxation in dollars forces the acceptance of dollars, they might be partially right, but consider, it isn’t that income taxes and sales taxes, are demanded as “tribute. ” In other words Yyou have to pay no matter what, a certain sum in dollars every year. No, for income taxes, only if you earn certain brackets in money every year. For real estate, if you own your own home, for sales taxes, if you buy good priced in dollars. In other words, it isn’t taxation per se, but legal tender, which only “forces” people to discharge their obligation IN REGARDS TO DEBTS, (which you can avoid) that explains fiat money. Also counterfeiting laws.”

      Without taxes, there would be no need to accept dollars. Convention and convenience would almost certainly gradually eliminate dollars from wider circulation, through individual choice.

      “The rest is due to externalities, due to social convenience. Who are you to condemn the personal preferences of other people”

      Now that’s fake outrage. Coming from a statist. Feigning outrage over violating other people’s choices. Your hypocrisy abounds.

      There is no problem with the individual accepting a good without coercion. The problem is when you and your ilk want to force your preference for yourself, on others as well, against their own wills when it comes to their own persons and property. That’s where the libertarian draws the line.

  40. KP says:

    This article is a joke. That’s the only critique it’s worthy of.

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