Krugman: Government Policy Has Always Been at War With the Deficit Scolds
At this point I have whiplash from reading Paul Krugman’s blog. I am swamped with stuff so I won’t document the below claims with links; perhaps I’ll come back and do it for posterity. In any event, for the last several years, Krugman has been complaining:
(1) Europe and the US are engaged in “unprecedented” fiscal austerity. The actual policies these people are implementing are insane. For some reason–perhaps to appease the “invisible bond vigilantes” by summoning the “confidence fairy”–policymakers think they need to bring deficits down “now, now, now,” not realizing that the time for budget tightening is down the road, after we’ve returned to full employment.
(2) What’s even more heartbreaking, is that there is no justification for any of this madness. Intro econ courses teach this stuff. Unfortunately, the Very Serious People (VSPs) have hijacked the debate, abetted by a few prominent economists who should know better: guys like John Cochrane and Casey Mulligan. Krugman has been lamenting that nobody listens to him. He, Brad DeLong, and the other people who have been just hitting it out of the park with their predictions, have zero influence on policy. They have been the Cassandras of the Great Recession.
(3) The CBO just announced that the deficit this year will be $200 billion lower than they thought back in February. This difference in forecast is due to $98 billion in lower total outlays–again, this fiscal year alone–and $105 billion in higher expected revenues. To repeat, this change in the CBO’s forecasts occurred from just February to May. At the same time, officially reported economic growth in the first quarter was 2.5%, which is tied for the 6th best out of the last 8 quarters. The official unemployment rate continues to steadily fall. The Fed is even considering pulling back QE3 because of the surprisingly strong job growth.
(4) Paul Krugman cites this as yet another moral and prediction victory on his part. He explains that cutting the deficit by 25% this year alone proves he has been right all along. Further, the deficit scolds are again shown to be fools. Fortunately, Krugman can explain to us the psychological motivation of these scoundrels. In Krugman’s words:
[T]hink about the personal career incentives of the professional deficit scolds. You’re Bowles/Simpson, with a lucrative and ego-satisfying business of going around the country delivering ominous talks about The Deficit; you’re an employee of one of the many Pete Peterson front groups; and now, all of a sudden, the deficit is receding, and you had nothing to do with it. It’s a disaster! [Emphasis original.]
So I’m really confused at this point. Apparently policymakers have been listening to Krugman all these years, as they slash spending and raise revenues to bring this year’s deficit down 25% in just a few months. And, the economy hasn’t hit an additional hiccup in the face of this unprecedented fiscal austerity, just like Krugman has been predicting.
Murphy, I don’t think this is ever going to end. Krugman is simply not a consistent, rational or even intellectually honest thinker.
Actually, he is consistent. The VSPs didn’t have anything to do with deficit reduction in the sense that they didn’t help pass the Ryan budget, or something else that takes an ax to programs that aren’t even responsible for the long-term deficit projections.
At the same time, the VSPs are responsible because they blocked all efforts to maintain a higher level of G after the ARRA came to pass. In this sense, the deficit reduction following the ARRA was automatic — S&L governments have to run balanced budgets, after all — and the VSPs did nothing to prevent that automatic deficit reduction from occurring. And what Krugman is saying is that “doing nothing” is the same as “implementing austerity” in the post-ARRA period.
Ergo, there’s no inconsistency. People who don’t follow Krugman’s blog, however, might see an inconsistently based on the purposefully selected quotes highlighted above. But this is not a matter of Krugman being inconsistent; it’s a matter or Murphy purposefully selecting Krugman quotes to purposefully misrepresent what Krugman is saying.
So the VSPs are both responsible and not responsible.
You need to appeal to contradictory premises in order to defend Krugman.
Murphy follows Krugman’s blog, and it is precisely his following Krugman’s blog that enabled him to see the inconsistency he noted above.
People who tend to feel a need to defend Krugman’s inconsistency, often purposefully select mutually exclusive positions of Krugman, in order to justify their argument that Krugman’s arguments are not inconsistent.
You’re missing the whole point of this post, which is the connection between reduced deficits on the one side, and employment/output on the other. Murphy correctly identified a blatant inconsistency in Krugman’s writings in this particular respect. To what extent the VSPs are responsible for the deficit is actually irrelevant.
I normally give Krugman the benefit of the doubt when Bob does these kinds of posts and assume that Krugman cannot possible really mean what Bob claims he does,
However this time Bob is spot on. There can be no doubt that Krugman has repeatedly warned of the bad things that will happen if we implement Austerity. Well, we have implemented it and those bad things have not happened. And now it turns out that in Krugman’s eyes it is the very people who were saying this all along who are still the bad-guys here. Incredible.
“Well, we have implemented it and those bad things have not happened.”
The unemployment rate is currently at 7.5% and is likely to end 2013 at a higher level. The economy is still grappling with an output gap of nearly $1 trillion. Millions of seniors are preparing to enter retirement with little other than SS payments to live on. Nearly half of all recent college graduates who found a job in recent years are working in jobs that are not related to what they studied in college. Over the past year, the economy has added an average of 170K jobs per month. If this rate of job growth were to continue indefinitely, we would get back to a normal unemployment rate of around 5.5% sometime in 2017.
Bad things have happened.
“The unemployment rate is currently at 7.5% and is likely to end 2013 at a higher level.”
Unemployment has been falling, and has continued to fall despite the reduced deficits.
“The economy is still grappling with an output gap of nearly $1 trillion.”
Output gaps based on past data are figments of the imagination.
“Millions of seniors are preparing to enter retirement with little other than SS payments to live on. Nearly half of all recent college graduates who found a job in recent years are working in jobs that are not related to what they studied in college. Over the past year, the economy has added an average of 170K jobs per month. If this rate of job growth were to continue indefinitely, we would get back to a normal unemployment rate of around 5.5% sometime in 2017.”
These are not only not the only bad things Krugman mentioned would happen with reduced deficits, but they are all problems made worse by increased government activity at the expense of private market activity.
“Bad things have happened.”
Not employment and output. Those are up. Those are the categories under question here.
Not that I agree with “employment” and “output” being valid measures of economic health.
Mr. Seydl is grad student at LSE, studying economics and philosophy. He appears to have had no contact whatsoever with Austrian School thought or analysis. Therefore, he is unaware that the Austrians refuted and eviscerated the entirety of Keynesianism long before “The General Theory” was published. He also appears unaware that government debt, spending and deficits along with funny money loans are the cause of bad times, not the cure.
http://www.jseydl.com/category/economics/
“Mr. Seydl is grad student at LSE, … He appears to have had no contact whatsoever with Austrian School thought”
Even I know enough to find this amusing.
” He appears to have had no contact whatsoever with Austrian School thought or analysis.”
A bit like you, then, bob, since you tell us that you don’t understand a basic Austrian concept like a market clearing price:
” I do not like the term “market clearing prices”. I don’t use it and I do not think it is particularly helpful in understanding reality. When I see the term used, my reaction is always “WTF are you actually trying to say”? “
http://mikenormaneconomics.blogspot.com/2013/05/daniel-little-what-about-marx.html?showComment=1369144674917#c9135395801097278615
LK, relying on his “fixpice” example, has been vanquished.
http://tinyurl.com/nngjk6l
Or like you LK, someone who has still not grasped the very basics of Austrian principles and purposely ‘misunderstands” them the way an evangelical will with basics of the theory of evolution.
I also like the way that Say’s Law goes right over your head because you know it destroys all of Keynesian jibberjabber.
LK claims that Austrian analysis has been refuted because, in the real world, businesses may cut production and employment but not prices in a changing environment. He insists that Austrians predict that the only possible outcome is for prices to be slashed and thus the Austrians been refuted. That is monstrously dishonest and downright stupid. We all know how pathetic that line of argument is and I have no need to go back and forth about it a zillion more times on Bob Murphy’s blog.
http://tinyurl.com/p7lhy3m
Missing word above:
He insists that Austrians predict that the only possible outcome is for prices to be slashed and thus the Austrians HAVE been refuted.
” He insists that Austrians predict that the only possible outcome is for prices to be slashed and thus the Austrians been refuted. “
False. I don’t say that.
I say the Austrian theory requires flexible prices by human action for its ideal and prescriptive view of how economic coordination should be achieved by equating demand with supply in its ideal free market world.
The real world, however, in fixprice markets generally equates supply with demand by direct output and employment adjustments.
But you are ignorant of that too.
LK, that is not true. “administered price” or “control over price” theory has been completely refuted by austrians (Rothbard, Hazlitt, Haberler [he is not SO austrian], Greaves, specially Shapiro and others) since at least 1959. It has a lot of theoretical problems and the empirical “evidence” is far from being conclusive.
Here are the details
http://econo-miaytuya.blogspot.com.ar/2013/05/old-inflated-inflationary-fallacies-i.html
and here
http://econo-miaytuya.blogspot.com.ar/2013/05/old-inflated-inflationary-fallacies-ii.html
I say the Austrian theory requires flexible prices by human action for its ideal and prescriptive view of how economic coordination should be achieved by equating demand with supply in its ideal free market world.
The real world, however, in fixprice markets generally equates supply with demand by direct output and employment adjustments.
But you are ignorant of that too.
I don’t deny your example and submit that it is completely consistent with Austrian analysis. “Flexible prices” are just one aspect of what free people might do with their freedom. Your attempt to shoe-horn that as somehow mandatory into Austrian analysis is dishonest.
LK has a new blog post wherein he seems, after all these many many years, to finally have some grasp of the concept of economic calculation.
http://socialdemocracy21stcentury.blogspot.com/2013/05/kirzner-on-hayek-on-prices.html
Sensing the obvious fatal danger to the Keynesian hoax, he attempts to extract the concept of “price” from what, how much of what, the quality and/or location of what is actually being sold. He also ignores the obvious fact that if your goods do not sell, that is a signal that your prices, quantities, qualities, and/or styles etc…. are not what consumers want to buy, you may need to alter one or all those factors to be successful, or quit the business and join the circus. This analysis is not complicated nor is it obscure. Like all Keynesians and “progressives”, he finds it necessary to distort our position.
“Your attempt to shoe-horn that as somehow mandatory into Austrian analysis is dishonest. “
That is comical, especially as you cite my post where it is quite clear that both Kirzner and Hayek see prices as the ideal and necessary transmitters of knowledge by being moved by human action towards their market clearing levels, to achieve ideal Austrian economic coordination.
But you have denied that for ages now. Especially in your stock Hayek quote.
You’ve been on a steep, painful and not to mention embarrassing learning curve recently, roddis.
PRICES ARE THE NECESSARY TRANSMITTER OF KNOWLEDGE. They might tell you to make a whole lot less of the same stuff at the same price if you intend to “clear the market” of what you have made and still make a profit.
It’s that complicated, smart guy.
“They might tell you to make a whole lot less of the same stuff at the same price if you intend to “clear the market” of what you have made and still make a profit.”
No, roddis, demand signals do that.
Prices in fixprice markets generally remain unchanged when demand changes. Therefore they are not the “necessary transmitters of knowledge” in these cases at all.
You’ve inadvertently proven the point above.
No, LK. The 40,000 units you made but didn’t sell had a “realized” price near $0. Which was a signal. HELLO! DON’T MAKE SO MUCH OF THIS STUFF! YOU PROBABLY CAN’T SELL IT! MAYBE YOU SHOULD CUT PRODUCTION AND EMPLOYMENT AND MAKE LESS OF IT!
In normal times, I would not believe anyone would be making this dumb argument. But we are dealing with Keynesians.
This reminds me of not-so-long-ago when LK was trying to tell us that the “socialist calculation debate” had nothing to do with the ABCT and economic miscalculation.
I’m wondering what is worse, a) Krugman and the rest ignoring us and suppressing our analysis or b) LK’s dingbat hair splitting.
“The 40,000 units you made but didn’t sell had a “realized” price near $0. Which was a signal.”
No, roddis, in the hypothetical example the 40,000 were added to the company’s inventory and sold for the normal administered price in later periods, as production was cut.
The failure of people to buy them in the earlier period was a DEMAND signal.
No LK, you’re confused and missing the point.
The argument that prices are a necessary transmitter of knowledge is not refuted by examples of businesses not reducing their prices in the face of a reduced nominal demand.
Those prices are still necessary transmitter of knowledge, in the case of not cutting prices, the information concerning costs of production, expected future nominal demand, and how high of a price consumers are willing to pay *per unit of good produced*.
LK:
“in the hypothetical example the 40,000 were added to the company’s inventory and sold for the normal administered price in later periods, as production was cut.
The failure of people to buy them in the earlier period was a DEMAND signal.”
No LK, it was not a failure of demand. It was a failure of being able to sell the goods in question at a profitable price, which means the investor made pricing errors.
People don’t pay nominal demand for goods. They pay prices for goods. The nominal demand is an accounting abstraction that totals up the independent prices that separate people pay for the same goods.
Hypostatization is your error.
“Those prices are still necessary transmitter of knowledge, in the case of not cutting prices,
No, they are not. Demand signals have transmitted the knowledge about how much to produce.
Furthermore, the fixprices necessarily mean demand is not being equated with supply to clear markets in the ideal
Austrian vision of economic coordination by flexible prices moved by buyers and sellers in their trades.
“No LK, it was not a failure of demand. It was a failure of being able to sell the goods in question at a profitable price, which means the investor made pricing errors.”
According to Austrian theory, it was a pricing error, so that the business should have adjusted prices downwards to clear the market.
But fixprice businesses do not do this.
Thanks for proving my point.
“Demand signals have transmitted the knowledge about how much to produce.”
Only if by “demand signals” you mean to say “the price was not at the correct amount to clear the market, so a surplus of goods remains”.
“According to Austrian theory, it was a pricing error, so that the business should have adjusted prices downwards to clear the market.”
Austrian theory does not say that the only way for a business to deal with a pricing error is to adjust price. Supply side adjustments are easily permitted by Austrian theory.
It’s clear you don’t even understand what you are attempting to “refute”. Your religious devotion to Keynesianism is, frankly, simply entertainment for anyone with a brain.
“Austrian theory does not say that the only way for a business to deal with a pricing error is to adjust price. “
Correct.
Flexible prices moved by human action to clear markets is the ideal and prescriptive Austrian view of how to achieve economic coordination, just as I said above.
LK:
“According to Austrian theory, it was a pricing error, so that the business should have adjusted prices downwards to clear the market.”
No LK, there are no *prescriptive* courses of action in Austrian theory. Austrian theory does not predict or assert that businessmen *ought* to reduce their prices, or that they *should* have sold at lower prices.
“But fixprice businesses do not do this.”
Yes they do, they just do it over a period of time that differs from what statists itching to use violence can tolerate.
Fixprice markets are not markets where the prices *never* change. Where a hamburger is going to be offered for $5 and only $5 and nothing but $5 forever more.
“Fixprice” is a misnomer. Prices are not actually fixed. The “fixed” comes into play for the same reason “fixed costs” come into play. They are treated as “given” in a particular pricing model, after which other components are treated as flexible, in the model, that explains the overall price fluctuation.
Fixprice markets are just another term for markets that set prices differently than MR=MC models would predict. Businesses that don’t reduce prices when your model expects them to reduce prices, does not mean that the prices never change, or can’t change.
They can and do change, on the basis of either cost prices falling, or if the business owner decides to sell at a loss to earn enough revenues to fulfill his obligations.
Fixprice markets are not markets where prices are in fact fixed. You’re letting the term “fix” confuse you.
“Thanks for proving my point.”
Your point is not proven by anything I say, let alone what economics has to say. I am not the standard. Reason is the standard.
LK:
“Flexible prices moved by human action to clear markets is the ideal and prescriptive Austrian view of how to achieve economic coordination, just as I said above.”
This is again the same error. Austrian economics is not prescriptive. Austrian theory does not at all hold that coordination *ought* to take place on the side of prices only. Nor does it hold that flexible prices is any “ideal” market outcome.
Flexible prices are prices that do not remain the same forever. That includes ALL prices. Within this universally valid price flexibility, individuals take either less time or more time to change those prices.
For prices that are determined primarily by the costs of production, such as most manufactured goods, these prices change on the basis of costs changing. Cost prices in turn are determined by either costs of production again (if the costs consist of purchasing manufactured components and materials), or they are determined by direct supply and demand (such as raw materials sold in wide, “price taker” type markets).
If a business owner does not cut prices, it is usually because he does not want to incur a loss, because his costs are too high to justify the price cut. Or, it could be for some other reason.
Your silly worldview is so incredibly crude. This is essentially your thought process, made clear to everyone here:
Austrian morons, to the extent that they don’t believe prices instantly change, hold that prices changes are the only coordinating mechanism available to reduce unemployment and increase production. But considering how these Austrian morons haven’t learned the concept of fixprice markets, they are ignorantly claiming that prices can fall anywhere and everywhere there is a surplus. But in the “real world”, business owners sometimes refuse to make prices as flexible as those Austrian morons say is ideal and secretly hoping and wishing was the case, to shut up the Post Keynesians.
But because Post Keynesianism is closer to the “real world”, they know that ONLY an increase in nominal demand can do what Austrian morons say that price flexibility is sufficient in doing.
LK, you’re hopeless. You continue to remain ignorant of Austrian theory. And why? Because instead of trying to understand it, you are rather setting up a straw man conception of it, and then searching for quotes and other passages either taken out of context, or misunderstood completely, and then you claim that because such passages can potentially be made consistent with that straw man, you want us to believe you understand Austrian theory.
Good lord, with that kind of intellectual dishonesty, it’s no wonder you remain ignorant.
“No LK, there are no *prescriptive* courses of action in Austrian theory. Austrian theory does not predict or assert that businessmen *ought* to reduce their prices, or that they *should* have sold at lower prices.
Austrians do urge action on the basis of their theories.
The alternative is that no Austrian has ever urged or prescribed a course of economic action in human history.
No doubt MF will never demand or urge any action whatsoever in the future of the basis of this absurd statement.
“Austrians do urge action on the basis of their theories.”
No, they urge actions on the basis of their ethics. Their economic theory assists in this regard.
Strictly speaking, an “Austrian” can only recommending specific courses of action GIVEN that people want to accomplish certain ends, such as reduced recessions, reduced painful reallocations of labor, etc.
For example, an Austrian who urges an end to central banking is doing so not because Austrian theory per se says to end it, but rather because they think it is the best course of action to take given a particular desired goal that Austrian theory cannot say is prescriptively good or bad.
“The alternative is that no Austrian has ever urged or prescribed a course of economic action in human history.”
No, that’s a false dichotomy. You’re conflating individuals who call themselves Austrians, with Austrian theory.
Austrian theory doesn’t tell someone to End the Fed. It only explains the consquences of it, and it’s up to ethics to decide which are the goals worth pursuing.
“No doubt MF will never demand or urge any action whatsoever in the future of the basis of this absurd statement.”
It isn’t absurd. You’re just not understanding what has been told to you umpteen times already.
“No, they are not. Demand signals have transmitted the knowledge about how much to produce.”
No, it transmits the knowledge of what particular lines to invest in, given capital is scarce.
Prices coordinate independent producers, not “demand”. Demand AND supply must be considered.
“Furthermore, the fixprices necessarily mean demand is not being equated with supply to clear markets in the ideal
Austrian vision of economic coordination by flexible prices moved by buyers and sellers in their trades.”
Yes it does, it just takes longer than what you statists itching for violence are willing to tolerate.
Fix price markets are not markets where prices never change.
Prices here can change, on the basis of either cost prices changing, or on the basis of selling at a loss. Sellers won’t keep their inventory forever. At some point, they’ll sell at a lower price if need be.
Flexible prices does not mean prices change instantaneously. It means that they can change if humans want to change them.
Fixprice markets are just markets where MR=MC price models can’t explain the actual price formations.
Austrian theory doesn’t hold price changes as “ideal” form of coordination. Just that it provides indispensible information for coordination.
“they urge actions on the basis of their ethics. Their economic theory assists in this regard.
Strictly speaking, an “Austrian” can only recommending specific courses of action GIVEN that people want to accomplish certain ends, such as reduced recessions, reduced painful reallocations of labor, etc.”
Precisely — like flexible wages and prices to clear markets?
You’ve done nothing but proven my point.
“Precisely — like flexible wages and prices to clear markets?”
No, not like “flexible prices to clear markets”. That is a descriptive explanation of what takes place in a free market.
Even “fixprices” change. “Fixprices” don’t stay the same forever. There is no historical example of a free market price that has remained fixed since the beginning.
Fixprices are just prices that are not determined by MR=MC pricing models, and that don’t change as quickly as what you statists itching for violence are willing to tolerate, that’s all.
“Fixprices” are not directly addressed by Austrian theory, because orthodox Austrian theory doesn’t accept cost plus profit pricing. It holds that supply and demand are always the determining factors.
I myself hold Austrian price theory to be a special case, not a universal case. If we re-introduce what the classicals knew long ago, about cost plus profit pricing, then we can see that supply and demand are the ultimate factors, but not always the direct proximate factors.
Either way, whether one thinks supply and demand are the direct factors or not, it is still true that non-market driven money distorts the information and thus the coordinating force that prices convey, so it turns an imperfect situation even worse.
And no, this is not refuted either by “idle resources” or adding an “s” to natural interest rate.
Your “point” has been refuted every which way LK.
It’s interesting to see you running victory laps all by yourself after all the competitors have already gone home, and the few of us left in the stands are pretending that you are still in the race.
@LK:
“Austrians do urge action on the basis of their theories.
The alternative is that no Austrian has ever urged or prescribed a course of economic action in human history.
No doubt MF will never demand or urge any action whatsoever in the future of the basis of this absurd statement.”
As wertfrei Austrian economists — Rothbard, Mises, MF, Roddis and others — use praxeological analysis to describe the effects of various governmental actions. As humanitarians and libertarians (but I repeat myself), but not as economists, they advocate for policies that promote peace, freedom and prosperity. If they were proponents of war, slavery and immiseration they would join the economic interventionists – Keynes, Krugman, Stiglitz, LK, Edward and many, many others – in advocating policies that enable bloody conflict, that justify interference with mutually beneficial voluntary relationships, that cause the boom/bust cycles and that prevent or at least postpone true recovery.
Hayek wasn’t hired for his economics at the LSE.
The only reason the unemployment rate is going down is so many people have been unemployed for so long they no longer count. I know of several people in that position. So they say the rate is dropping, but that is because there are fewer people in the workforce than at any point in more than 30 years. It’s been falling like a rock throughout Obama’s administration – it started downward at the end of Bush’s Admin but has been pretty much straight down for the last 5 years…
Of course it’s just going to get worse as we are firmly following Europe down the path to where it just isn’t cost effective to start a business or hire anyone in this country.
Of course Krugman is an idiot who doesn’t grasp economics 101… None of them understand if you penalize the creation of jobs, economic growth dies… It isn’t rocket science, it’s very simple…
Exactly.
Unemployment is going down, and employment is also going down. Figure that one out.
Why don’t Keynesians take credit for true Keynesian economies like North Korea and Zimbabwe? They want credit for government intrusion on market economies but somehow fully controlled economies don’t count? Has any Keynesian ever dared ponder that maybe these mixed economies grow not because of the Keynesian intrusions into their economies, but in spite of it? What is their reasoning for the failure of command economies that their master believed were more efficient and necessary for his type of economics?
Because Keynes did not support planned command economies or communism.
Nor do Keynesians.
Skidelsky:
“unlike the Webbs, he [sc. Keynes] could never think of Soviet Russia as a serious intellectual resource for Western civilisation. In the 1920s he had said that Marxism and communism had nothing of scientific interest to offer the modern mind. The depression did not alter his view. Russia ‘exhibits the worst example which the world, perhaps, has ever seen of administrative incompetence and of the sacrifice of almost everything that makes life worth living …’; it was a ‘fearful example of the evils of insane and unnecessary haste’; ‘Let Stalin be a terrifying example to all who seek to make experiments.’”
(Skidelsky, R. J. A. 1992b. John Maynard Keynes: The Economist as Saviour 1920–1937, Macmillan, London. p. 488).
Keynes’ policy prescriptions are, by his account, best suited in command economies.
“The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory.” – John Maynard Keynes, Foreword to the 1936 German Edition of the General Theory
So “General Theory” means there has to be a General in Charge…
Alfred Marshall, on whose Principles of Economics the education of all contemporary English economists has been based, took particular pains to call special attention to the relationship of his thought to that of Ricardo. His work consisted for the most part in stuffing the law of limited use [Grenznutzen] and the law of substitution into the Ricardo tradition, and his theory of production and of consumption as a whole—contrary to his theory of producing and distributing a given production—has never been laid open. I am not certain whether he himself ever perceived the need for such a theory. but his immediate successors and disciples surely have abandoned it and evidently never perceived its absence. I was educated in this atmosphere. I have taught these doctrines myself and it was only in the course of the last decade that I became aware of their inadequacy. In my own thought and development, this book, therefore, presents a reaction, a transition and a disengagement from the classical English (or orthodox) tradition. How I have stressed this and the points in which I deviate from the recognized doctrine has been regarded by certain circles in England as extremely controversial. But how could someone educated in English economic orthodoxy, who was even once a priest of that faith, avoid some controversial emphasis, if he becomes a protestant for the first time?
I can, however, imagine that all this may concern the German readers somewhat differently. The orthodox tradition which reigned in the England of the 19th century never had such a strong influence on German thought. In Germany there have always been important schools of economics which strongly questioned the adequacy of classical theory for the analysis of contemporary events. The Manchester School as well as Marxism, have, after all, stemmed from Ricardo—a conclusion that need cause surprise only when superficially considered. But in Germany there has always been a majority of opinion which adhered neither to one school nor the other.
However, it can hardly be contended that this school of thought ever established a theoretical counter-structure, nor did it ever attempt to do this. It has been skeptical and realistic, satisfied with historical and empirical methods and results which reject a formal analysis. The most important unorthodox discussion on the theoretical level has been that of Wicksell. His books (until recently not available in English) were available in the German language; one of his most important was in fact written in German. His successors, however, were mainly Swedes and Austrians; the latter linked his ideas in with a substantially Austrian theory, and thus in reality actually brought them back to the classical tradition. Germany thus has—in contrast to her custom in most fields of science—contented herself for a whole century without a dominant and generally recognized formal theory of economics.
I may, therefore, perhaps expect to meet with less resistance on the part of German readers than from English, when I submit to them a theory of employment and production as a whole which deviates in important particulars from the orthodox tradition. But could I hope to overcome the economic agnosticism of Germany? Could I convince German economists that methods of formal analysis constitute an important contribution to the interpretation of contemporary events and to the shaping of contemporary policy? It is, after all, a feature of German character to find satisfaction in a theory. How hungry and thirsty German economists must feel having lived all these years without one! It is certainly worthwhile for me to make the effort. And if I can contribute a single morsel to a full meal prepared by German economists, particularly adjusted to German conditions, I will be satisfied. For I must confess that much in the following book has been mainly set forth and illustrated in relation to conditions in the Anglo-Saxon countries.
The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state [eines totalen Staates] than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory. Since it is based on fewer hypotheses than the orthodox theory, it can accommodate itself all the easier to a wider field of varying conditions. Although I have, after all, worked it out with a view to the conditions prevailing in the Anglo-Saxon countries where a large degree of laissez-faire still prevails, nevertheless it remains applicable to situations in which state management is more pronounced. For the theory of psychological laws which bring consumption and saving into relationship with each other, the influence of loan expenditures on prices, and real wages, the role played by the rate of interest—all these basic ideas also remain under such conditions necessary parts of our plan of thought.
I would like to take this opportunity to thank my translator, Mr. Waeger, for his excellent effort (I hope that his vocabulary at the end of this book will prove useful beyond its immediate purpose), as well as my publishers, Messrs. Duncker & Humblot, whose enterprising spirit ever since the days sixteen years ago when they published my Economic Consequences of the Peace has made it possible for me to maintain my contact with German readers.”
http://factsandotherstubbornthings.blogspot.co.uk/2010/07/keyness-foreword-to-german-edition-of.html
More adventures of Lord Keynes, the Black Knight. It’s just a flesh wound.
http://www.youtube.com/watch?v=zKhEw7nD9C4
Next week something bad will happen, and it will all be our fault again.
A re-post of something I just put up at the money illusion:
I am well and familiar with what Austrians would say about “inflationists” like Friedmanites and Keynesians, who would simply prolong the agony. It sounds like something a VSP would say, it sounds virtuous and noble, while casting Keynesians and Monetarists and monetary drunkards.
And it would be wrong.
There are so many things wrong with Misean Rothbardian Austrian theory. Lets start with the simplest, the universal nature of the recession as opposed to a concentrated one in the capital goods industries, which you would expect from the “capital misallocation story.” The fact that there is no stable natural rate of interest. That it would be unstable even in an ancap society, so market interest rates are always deviating from time preferences, which renders the concept useless. (By the way, which time preferences should you use, unmolested as they would be in an ideal ancap society without FRB? Your own? Your nation, the world’s? Crickets) The fact that when the bust happened, prices fall, as opposed to rise, which you would expect to see if their were a shortage of “bricks” in that overused bricklayer analogy.
The tiresome fact is that Austrians are always predicting disaster, and crow about it when they are proven right as with Peter Schiff (Even a stopped clock is right twice per day) This brings me to another thing I detest. The lack of predictive power. In science, prediction goes hand in hand with explanation. The fact that Austrian theory has very limited predicative power renders it useless.
The fact that Austrians believe inflation is theft, which is ludicrous nonsense. Theft is when someone steals your actual goods, not when their relationship to other goods is altered. It would be like saying that iphone 4 users are “harmed” when more of them are made, or worse, when the iphone 5 comes out. (Austrians usually get out of this by saying that you don’t pay taxes in iPhones) This is true, but consider the mandatory nature of legal tender laws, they only deal with debt. You are not obligated to accept greenbacks if someone is paying you in a cash transaction. The coercion here is minimal)
The fact that Austrian hardcore and “austerian” opposition to even monetarist measures to fight recessions means in effect that they are allying with those who want MORE INTERVENTION. As scott says, countries that follow hard money regimes tend to go socialistic
The fact that Austrians have no appreciation for the horrendous nightmares that can arise from a recession, namely charismatic tyrants. Tight money did indeed help Hitler rise to power. (It was not the only factor, but it was an important one) And tight money today is helping radical parties in Europe flourish. Only a kantian absolutist lunatic would deny it.
Now, all of this isn’t to say that there are no responses to this among Austrians. there are. But they are long, endless, streams of verbal diarrhea (much like my rant, but I needed to get that off my chest for a looong time! 🙂 ) and absolute unconvincing gibberish.
Useless rant. Nothing original here.
It is a good place to start because now that you have demonstrated you have no idea what capital goods even are, or what their purpose is, it has saved me the effort of figuring out the rest of whatever you were on about.
On what basis would the effect of capital misallocation remain concentrated only in the industry that makes those capital goods?
“On what basis would the effect of capital misallocation remain concentrated only in the industry that makes those capital goods?”
That’s exactly what the ABCT says: the industries producing capital goods experience misallocation of resources.
Better read your Austrian theories sometime, Tel, before you’re exposed as ignorant of basic Austrian concepts, like roddis.
Hey Lord Eugenics, re-read what Tel wrote. You are the ignorant one, you fool.
“That’s exactly what the ABCT says: the industries producing capital goods experience misallocation of resources.”
Woosh.
Read what he said again. Tel asked on what basis would the effects of capital misallocation be concentrated only in the capital goods sector.
Austrian theory does not hold that the effects of misallocation are concentrated only in the capital goods sector. The effects of misallocation spill over into the consumer goods and labor markets.
And Edward never said that these (alleged) misallocations in the ABC theory will ONLY occur in the “capital goods sector. ”
He said:
Lets start with the simplest, the universal nature of the recession as opposed to a concentrated one in the capital goods industries,
There is no “only” there. Tel has misrepresented his position.
“He said:
Lets start with the simplest, the universal nature of the recession as opposed to a concentrated one in the capital goods industries,”
Right, and what does the phrase “as opposed to” mean in this context, Lord Eugenics?
So you misrepresented Austrian theory, on the basis of Tel misrepresenting Edward’s claim.
OK, I’ll accept the weaker position and ask the question again.
On what basis would the effect of capital misallocation remain significantly concentrated in the industry that makes those capital goods?
It does? Maybe a “thought experiment” would help:
Let’s suppose a farmer is considering buying a big new tractor to help plough her field. So the farmer looks around to borrow some money. For some strange reason the government has got itself involved in the auto industry and they offer our farmer a ridiculously generous trade in on her old 1960’s tractor, plus they offer to lend money at excellent terms, with the small requirement that the farmer should buy two luxury sports cars instead of one tractor.
Attracted by this deal the farmer does buy the sports cars, zooms around and doesn’t do much farming.
So what problems does this cause for the auto industry? Well, they really don’t care whether they assemble tractors or sports cars, so their business looks the same either way. Now that government is helping them find customers, they are happy.
How is the farmer doing? Well, she’s filling up her new sports car when she meets a hot guy at a truck stop, he turns out to be running a green business pumped by government loans and the next morning he offers to marry her, and put up highly profitable (and highly subsidized) windmills all over her farm. She will never need to drive a tractor again. Brilliant!
You know I started out with the aim of trying to show how bad misallocation of capital can be, but everyone comes out happy here. Can you see anyone who gets hurt by this?
Edward:
Your post is clearly the product of fear and ignorance, not reason and understanding. And it contains the same errors you always write about whenever you engage Austrian theory.
“I am well and familiar with what Austrians would say about “inflationists” like Friedmanites and Keynesians, who would simply prolong the agony. It sounds like something a VSP would say, it sounds virtuous and noble, while casting Keynesians and Monetarists and monetary drunkards.”
“And it would be wrong.”
Actually…
“There are so many things wrong with Misean Rothbardian Austrian theory. Lets start with the simplest, the universal nature of the recession as opposed to a concentrated one in the capital goods industries, which you would expect from the “capital misallocation story.” The fact that there is no stable natural rate of interest. That it would be unstable even in an ancap society, so market interest rates are always deviating from time preferences, which renders the concept useless.”
Two errors here.
1. You have defined your way into recession to be an aggregate problem, instead of understanding what a recession actually is. Recessions cannot include consumption problems, because we know via reason that the desire to consume and the desire for more wealth, is practically infinite. Reason itself is associated with curiosity, extensions of knowledge over the world, and thus our physical power over the world. This is what economists call productivity, or output. No matter how much wealth people have, there is always a desire for more wealth than what exists. Now, the error you make rests with interpreting this and trying to make sense of the real world, where you have to reconcile that with the obvious empirical truth that sometimes people want and desire more wealth, but they are unable to acquire it. *They don’t have the money*. This superficial truth, when approached by Monetarists and Keynesians, is treated as “the” problem. The problem is not enough money to buy all the goods. This error of cognition is due to not fully grasping the implications of resource scarcity. At all times, resources are scarce, and so humans have to make choices as to which finite means they will utilize to achieve which finite ends. The problem of recessions is not that there is not enough money to purchase consumer goods at the prices asked. The problem is that investors misjudged which consumer goods would be more valuable than others. When these errors are realized across the economy, Monetarists and Keynesians view the subsequent aggregate rise in money holding times, and fall in aggregate spending, to be “the” cause for why there is unemployment and declines in output. But this is confusing the effects of the cause, for the cause itself. The rise in cash holding times and consequent fall in aggregate spending are effects of the problem of capital and labor misallocation. Monetarists and Keynesians don’t grasp this because their models lack a sufficient capital component. They can only see aggregates. As an analogy, the Monetarist and Keynesian would see a dead body, and conclude that they died because their whole body suddenly stopped living. Austrians on the other hand would notice that they died because of cancer in their lungs, and that the whole body dying is an effect of this, not a cause itself.
If you study recessions adequately, by including inter-temporal capital theory, you will fnd that recessions as a means (capital and labor) problem, not a means plus ends (consumption) problem. Overall consumption is never problem, so long as humans act. When total consumption spending falls, it is because the wrong means were utilized, and hence the wrong consumer goods were produced. The problem of means is a problem of physical unsustainability. That is why the errors are eventually realized, either through timid central banks who refuse to accelerate inflation indefinitely to stave off the correction indefinitely, which leads eventually to monetary breakdown, or through actual physical scarcity asserting itself whereby no amount of money printing can overcome it.
For some philosophical or psychological reason, virtually all Monetarists and Keynesians, because the theory itself derives from Plato and Plotinus, with the declaration that limitation is intolerable and must be transcended, they don’t want to accept resource scarcity. Deep down their theory tells them that resource scarcity can be reduced by increasing the production of green pieces of paper. Getting resources “moving” again, getting labor “working” again, to produce “something.” No regard whatsoever for the technicalities of capital, scarcity, or time preference. This magic step is where Monetarists say “EMH!” and where Keynesians say “Multiplier!” It’s just supposed to happen. Don’t know how. It doesn’t matter. As long as the statistics say increased “employment” and increased “output”, that’s all that matters. Even if the capital structure is on an unsustainable path. Let future politicians and future central bankers deal with it.
2. The fact that there is no stable natural interest rate does not imply that it would be a problem then “even in a free market”, interest rates would deviate from natural interest rates. The natural interest rate in Austrian theory is the difference in valuation individuals place on future goods relative to present goods, or, perhaps more accurately, further into the future goods relative to nearer in the future goods. This is the natural rate in Austrian theory. It isn’t measurable. It is psychological. The interest rates on loans is but a side-effect of natural interest. There is no way that natural interest rates can “equal” nominal interest rates on loans. This does not make the concept of time preference “useless”. It means you can’t approach time preference the way you approach visible phenomena. It has to be understood. In a free market, nominal interest rates on loans would tend to *reflect* actual time preferences. They don’t have to be “equal”. They can’t be equal. When Austrian say that central banks bring about booms and busts through lowering interest rates “below” natural rates, what they mean is that central banks bring about booms and busts through lowering interest rates below what natural interest rates in general would have manifested in nominal interest rates on loans specifically. Contrary to it being “useless”, it can give us an explanation for why it is that so many independent producers, and independent investors, who do not deal directly with each other, suddenly find their projects to be in error at the same time. Or, another way, why so many individuals misjudged each other’s future money holding times. Monetarism and Keynesianism do not, indeed cannot, explain why money holding times should suddenly rise (and thus why money expenditures should suddenly fall), such that the central bank is now tasked with the obligation to fix this “sudden” turn of events by accelerating its inflation relative to before.
“(By the way, which time preferences should you use, unmolested as they would be in an ideal ancap society without FRB? Your own? Your nation, the world’s? Crickets)”
This is a silly question. That’s why you’re hearing crickets. (Or maybe it’s the crickets dancing about in your empty head, I’m not sure).
The time preference that is to “be used”, is the difference in valuation between future and present goods for all individual market actors. These valuations are not observable. They are understood. Each individual’s time preference is manifested in unique differences between their own investment and consumption. Each individual consumes a portion of resources, and saves and invest in the production of new resources. If you earn wages, and you consume everything, you are required to be supported by sufficient real savings and investment by others. If they stopped saving and investing, you’d be forced to start producing for yourself, which requires saving and investment on your part.
In a division of labor, with many independently producing individuals, who are each responsible for a portion of total economic output, they must be in coordination with each other in some way. We can’t have producers on one side of the country who make nails, to be making too many or too little nails given the production of wood planks on the other side of the country, and vice versa. Too many nails, and not enough wood, will result in nail surpluses, and vice versa. If on the other hand a single omniscient universal mind produced everything, then he/she/it would know how many nails to produce relative to wood planks, and would allocate scarce resources and labor to both in a sustainable way that would enable both sets of labor to continue working over time. But we live in a world with finite human minds, where people operate in almost total ignorance of each other’s desires and wants. The only source of information that can enable individuals communicate with other their own “status” of specific production, is through the price system. It is not perfect. It is not magic. It is messy. It is stubborn. It is relentless. But it’s the best we have given that we all produce independently of one another.
What happens when central banks take control of the economy’s money supply, is that it changes relative prices and interest rates *apart* from what would have resulted from market actor’s consumption and investment, the people who are responsible for producing all of our goods and services. [Yes, all. This includes the goods needed by government to “provide” others with “protection”. Guns, bullet proof vests, buildings, police cars, tanks, etc, all require resources produced in the market. The government is a consumer, not a producer.]
So what happens when central banks take control of the money, is that instead of money production itself being driven by the same coordinating market forces as nails and wood, such that money production is extended and contracted according to actual preferences of individuals, the central bank, because it is not constrained to profits and losses, it almost always ends up creating too much or too little money. Typically too much, because market actors would likely not seek out green pieces of paper for indirect exchange uses.
The central bank thus distorts the coordinating force that money prices help bring about. So instead of something like a small housing bubble in a free market, the solution of which requires only some reallocation of labor and resources, we instead see giant housing bubbles that soak up more labor and resources that have to be painfully reallocated later on.
The price system isn’t perfect. Nothing human related is perfect. But it’s the best we have, and government intervention into it *makes it worse*.
“The fact that when the bust happened, prices fall, as opposed to rise, which you would expect to see if their were a shortage of “bricks” in that overused bricklayer analogy.”
That analogy is used so much because the lesson of it continues to go over your head.
No, it does not follow from a shortage of bricks that prices of bricks must fall, nor does it follow that prices of bricks must rise. You are thinking temporally when you should be thinking counter-factually. The past prices of bricks are not a determinant of future prices of bricks. The determinant is human knowledge and preferences at the time prices are set. If those prices happen to be lower or higher than the recent past, then so be it. The new prices are not “supposed” to be higher or lower than they were in the past, in Austrian theory.
Busts are typically accompanied by rising cash holding times, and thus a reduced spending over time. This puts downward pressure on prices. But not all prices. Some prices could rise, while others fall.
“The tiresome fact is that Austrians are always predicting disaster”
This is false. Austrians are not always predicting disaster. Austrian theory is not a predictive science. It doesn’t make predictions. Austrian theory holds that IF a central bank artificially lowers interest rates to be below that which would have resulted from pure time preferences, THEN an unsustainable boom will be unleashed with an inevitable correction later on as either the physical scarcity wall is hit, or if central bankers refuse to accelerate inflation to infinity, and bring about a correction sooner, whichever comes first.
“and crow about it when they are proven right as with Peter Schiff (Even a stopped clock is right twice per day)”
So even when Austrians do the non-Austrian thing and make a prediction, and are proven right, then they’re broken clocks. This is just you getting mad at the theory, not the predictions themselves.
“This brings me to another thing I detest. The lack of predictive power. In science, prediction goes hand in hand with explanation. The fact that Austrian theory has very limited predicative power renders it useless.”
So I guess mathematics and formal logic are useless as well. After all, neither make predictions of the empirical world either.
The thing I detest about people like you is how much you detest human reason. There are two components of knowledge, object *and* subject. You ignore the subject. You believe the subject is unnecessary, or at least arbitrary and burdened, unless it adheres to a self-contradictory epistemology in positivist-empiricism. It is simple anti-rationalism rearing its ugly head in discourse.
Can a physicist scientifically predict his own future path of learning, via positivist-empiricist experimentation?
Can a chemist scientifically predict, before he learns through experimentation, the nature of various chemicals?
If you stopped and thought about it for more than the 1 second you have given it thus far, you will realize that there is some phenomena in the universe that cannot be scientifically predicted a priori. The phenomena that cannot be scientifically predicted, is knowledge (and thus actions influenced by such knowledge) itself. Learning is an action. Action is what cannot be scientifically predicted. And, if you thought about it a little further, you will realize that to the extent our actions are influenced by our knowledge, it follows that if knowledge is a priori scientifically unpredictable, then ipso facto so is our behavior to the extent it is influenced by knowledge.
And if you thought about yet still further, you will realize that economics is the study of that very subject matter. Economics studies the production of wealth through a self-understanding of ourselves as knowing and learning entities who learn over time and cannot scientifically predict our own futures.
It is the Austrians who have it right on this. Contrary to you being justly feeling “detested” at Austrians refusing to scientifically predict what cannot be scientifically predicted, it is precisely you who should feel detested at yourself for not realizing you can’t scientifically predict your own future knowledge and thus you can’t scientifically predict your own future actions influenced by such knowledge.
“The fact that Austrians believe inflation is theft, which is ludicrous nonsense.”
The unjust transfer of real wealth that results from inflation is what is the theft. It is theft because the inflation system is grounded on naked aggression, not defense against aggression. Transfers of wealth grounded on aggression is theft by definition.
It is not the inflation itself that is theft. Although it is sometimes communicated that way for rhetorical purposes, which non-academic people like you focus on.
“Theft is when someone steals your actual goods, not when their relationship to other goods is altered.”
You are ignoring the fact that when a seller receives devalued money, by law, he is being deprived of purchasing power through coercion, not consent. He cannot raise his prices arbitrarily to counter-act this, because he is deprived of the knowledge that only a free market price system can deliver. Coercion against others forces the individual seller to be deprived of the benefits that would have otherwise accrued to him.
“It would be like saying that iphone 4 users are “harmed” when more of them are made, or worse, when the iphone 5 comes out. (Austrians usually get out of this by saying that you don’t pay taxes in iPhones)”
It would not be “like” saying that at all.
It would be “like” me threatening you with violence if you, Edward, do not pay me 50% of your income, in only Major_Freedom dollars. And oh, I also threaten you with violence if you print off Major_Freedom dollars yourself. Only I can print them. So I will give you a “choice.” If you want to “stay”, then you have to pay me 50% of your income in Major_Freedom dollars to me, which means whatever you produce, you are going to have to sell enough of it to procure yourself with enough Major_Freedom dollars to pay me. If you “stay”, but you refuse to pay me what I demand, then I will deem you a free loader and criminal, kidnap you, throw you into a cage, where you will likely be sexually assaulted.
THAT is what our monetary system is “like.” Not your silly iPhone nonsense.
“This is true, but consider the mandatory nature of legal tender laws, they only deal with debt. You are not obligated to accept greenbacks if someone is paying you in a cash transaction. The coercion here is minimal)”
False. Even if you only earn gold, you still have to pay taxes in the state’s money. The state will tax you the “equivalent” in dollars. Thus, you are right back into the dollar system, having to sell off your goods for worthless state paper, solely, and I mean solely, to avoid being kidnapped, and thrown into a cage. Not because you actually value them. You can try to convince yourself that you value them, but if everyone else other than you acquired more freedom, and did not have to pay taxes in dollars only, then suddenly your valuation of dollars would likely plummet, since every time you went into a store, or an employer’s office, you would be asked to pay in something other than dollars, and that means your valuation of them in exchanges would not be as high as it is now, where you are coerced like a barnyard animal in a free range farm, beliving he has freedom.
“The fact that Austrian hardcore and “austerian” opposition to even monetarist measures to fight recessions means in effect that they are allying with those who want MORE INTERVENTION.”
“As scott says, countries that follow hard money regimes tend to go socialistic”
After they have gone soft money you mean.
As Scott fails to realize, central banking and inflation is a move towards socialism, not away from it. As Hulsmann has explained, central banking inevitably leads to either hyperinflation, or economic socialism.
Socialism is government ownership and/or control of the means of production. Central banking *is* a socialist institution. To claim that central banking is necessary to prevent socialism is like saying you need to murder in order to stop murder.
Germany went socialist not because of hard money, but because of hyperinflation, and a dozen other reasons, from philosophical fascism that was already widespread in the 19th century, to the Treaty of Versailles that had the German people blamed for the great war, to the rising nationalistic furvor, and many other reasons. To blame free market money by connecting the subsequent deflation after prior hyperinflation for the rise of socialism in Germany, is not only intellectually dishonest, but vicious and dangerous in its implications.
“The fact that Austrians have no appreciation for the horrendous nightmares that can arise from a recession, namely charismatic tyrants.”
No, it is precisely you inflationists who have no appreciation for the horrendous nightmares that can arise from BOOMS that lead to recession.
It’s amazing to behold. Here you are complaining that Austrians are “always” predicting disaster, which doesn’t unfold. But you are so dense that you can’t even realize that the boom is the problem, so you can’t point to the healthy growth statistics and growing employment statistics and say that Austrians don’t know what they’re talking about.
Austrians can’t win with you no matter what they say. If they try to educate you, during a boom, about the horrendous nightmares that are inevitable after the boom, you say they can’t predict and are wrong. And even if they stopped predicting disaster, you’d still say they’re terrible people, because now they didn’t take horrednous nightmares from recessions seriously enough.
To quote Chandler: I mean really, can you *be* any more ignorant and unfair?
“Tight money did indeed help Hitler rise to power.”
Tight money after….what, free market money? Or hyperinflated state money?
Deflation was necessary to continually enforce a state currency regime. They couldn’t keep hyperinflating to infinity. Monetary calculation would have become logistically impossible. Deflation was necessary after the prior hyperinflation.
Thus, the core problem was the central bank and hyperinflation, not the subsequent deflation. Without the prior hyperinflation, subsequent deflation would have been unnecessary.
“(It was not the only factor, but it was an important one) And tight money today is helping radical parties in Europe flourish. Only a kantian absolutist lunatic would deny it.”
Tight money in Europe? This was after loose money in Europe during the mid to late 1990s and 2000s. The ECB could not keep accelerating inflation given resource scarcity, or else they would go the route of Weimar.
The tight money now is a consequence of loose money in the past. There is more money now in Europe than at any point in the past when you didn’t claim money is loose. There is more than enough money to clear the market, but the problem is that loose money twisted and distorted the economy so much, that tremendous painful readjustments are necessary.
This is all because of your central bank God. This has nothing to do with free markets, Austrian theory, or laissez faire ethics. While you boeheads are chasing your own tails, blaming others for your malfeasence along the way, while you continue to blame the non-existent free market for the problems you yourselves have created, you are bringing yourselves, by your own recognizance, to the very outcomes you dread most.
You will have only yourselves to blame. Austrians are 100% innocent. None of what Austrians wanted has transpired. Not even in “austerian” Europe.
What you call “austerity” is what Austrians call a rise in taxes and necessary deflation after a prior inflation.
What you call “tight money” is a tragic nightmarish joke.
“Now, all of this isn’t to say that there are no responses to this among Austrians. there are. But they are long, endless, streams of verbal diarrhea (much like my rant, but I needed to get that off my chest for a looong time! ) and absolute unconvincing gibberish.”
Your post was one epic failure.
Why do you bother?
Do you really think you’re some sort of economist because you can regurgitate stuff you’ve read in books and spout ignorant nonsense about other people’s views?
What are you trying to achieve here?
“Why do you bother?”
For the reason you don’t.
“Do you really think you’re some sort of economist because you can regurgitate stuff you’ve read in books and spout ignorant nonsense about other people’s views?”
No. I think I am an economist because I can think for myself, read more books that disagree with my views than agree, and then write clear, meanginful, beneficial arguments on this blog, and show how your views, and the views of people like you, are not only wrong, but socially dangerous.
What are you trying to achieve here?
you are a seriously delusional individual.
He bothers so that people like myself, who haven’t taken the time to learn as much as he has, can see just how empty and ignorant some of these posts are.
When people like yourself make these one line posts calling people names, sure even I can see that it is because you have nothing of intellectual significance to offer.
However, when people like Edward write such a long diatribe above, it is much more difficult for me to asses the merits of all the various points he is trying to make.
Major Freedom’s replies help greatly in that manner. I think they must seem very good to you, as well, for them to cause you to feel such discomfort as to weigh in in an attempt to discourage him!
You are seriously confused such that you regard superior ideas as delusional.
Quote of the day!
” that means your valuation of them in exchanges would not be as high as it is now, where you are coerced like a barnyard animal in a free range farm, believing he has freedom.”
richie,
thank you for proving my point 🙂
You’re welcome. Next time when you type something that means nothing, take up less space.
Edward,
Since you so badly want someone to engage with you, here’s my take.
I suggest you reread your tirade and concentrate on sections starting with the words, “The Fact That…”
…and consider whether you are about to call upon some universally-established state of the universe, or if perhaps you are just trying to make highly contentious, completely unproven notions into established reality by sheer force of saying so.
In other words, take time to consider The Fact That your argumentative style is both false and obnoxious.
“Edward,
Since you so badly want someone to engage with you, here’s my take.”
Didn’t you read what I said? I just wanted to get something off my chest. And don’t want your engagements that badly, i’m just morbidly amused by some of the views of the people here. Its like being unable to tear your eyes away from a train wreck, or to keep watching equally catastrophic.
As for my language, we’ll, I’m being purposefully obnoxious to get a rise out of people. Austrians, while not the same as contemporary “austerians” are part of the same group of people whose policies would produce enormous suffering and misery. We’ve already seen how bad “austerians” have made things. I shudder if the Bob Roddis/Major Freedom types were put in charge
Well at least you admit you are a troll. Thank you.
Lets start with the simplest, the universal nature of the recession as opposed to a concentrated one in the capital goods industries, which you would expect from the “capital misallocation story.”
Overconsumption during the boom (a more universal effect) is a well established aspect of Austrian analysis and one of the many points always ignored and distorted by critics.
Had the critics seriously studied the original sources in which ABCT is expounded, they would have learned that it is not an “overinvestment” theory at all. In fact, Mises, Rothbard and, somewhat less emphatically, Hayek argued explicitly that “overconsumption” and “malinvestment” were the essential features of the inflationary boom. In their view, the divergence between the loan and natural rates of interest caused by bank credit expansion systematically falsifies the monetary calculations of entrepreneurs choosing among investment projects of different durations and in different stages varying in temporal remoteness from consumers. But it also distorts the income and wealth calculations and therefore the consumption/saving choices of the recipients of wages, rents, profits and capital gains. In other words, while the artificially reduced loan rate encourages business firms to overestimate the present and future availability of investible resources and to malinvest in lengthening the structure of production, at the same time it misleads households into a falsely optimistic appraisal of their real income and net worth that stimulates consumption and depresses saving. 16 The Quarterly Journal of Austrian Economics 15, No. 1 (2012)
Although overconsumption is caused directly by what may be called the “wealth” or “net worth” effect, it is financed by the increase in the money supply and, later in the boom, the drawing down of cash balances as inflationary expectations take hold. on the real side, the increase in the prices and profitability of consumer goods diverts factors from higher stages to consumer goods’ industries, thereby restricting the supply of resources available to add to or even replace the stock of capital goods. This is what Austrian economists call “capital consumption,” which is a pervasive feature of the boom. Far from being the essence of ABCT, overinvestment is thus logically ruled out by it—the boom results in the production of fewer not more capital goods. Mises (1998, pp. 546–547) vividly described the nature and implications of overconsumption:
“It would be a serious blunder to neglect the fact that inflation also generates forces which tend toward capital consumption. one of its consequences is that it falsifies economic calculation and accounting. It produces the phenomenon of imaginary or apparent profits…. If the rise in the prices of stocks and real estate is considered as a gain, the illusion is no less manifest. What make people believe that inflation results in general prosperity are precisely such illusory gains. They feel lucky and become open-handed in spending and enjoying life. They embellish their homes, they build new mansions and patronize the entertainment business. In spending apparent gains, the fanciful result of false reckoning, they are consuming capital. It does not matter who these spenders are. They may be businessmen or stock jobbers. They may be wage earners….”
Rothbard (2000, p. 30) also emphatically rejected the overinvestment explanation of ABCT on essentially the same grounds as Mises, referring to it as a “misconception… given currency by Haberler’s famous Prosperity and Depression.” According to Rothbard (2004, p. 993):
“Superficially, it seems that credit expansion greatly increases capital, for the new money enters the market as equivalent to new savings for lending. Since the new “bank money” is apparently added to the supply of savings on the credit market, businesses can now borrow at a lower rate of interest; hence inflationary credit expansion seems to offer the ideal escape from time preference, as well as an inexhaustible fount of added capital. Actually, this effect is illusory. on the contrary, inflation reduces saving and investment…. It may even cause large-scale capital consumption. “
After discussing the falsification of capital accounting and resulting overstatement of profits caused by inflation, Rothbard
(2004, pp. 993–994) concluded:
“Inflation, therefore, tricks the businessman: it destroys one of his main signposts and leads him to believe that he has gained extra profits when he is just able to replace capital. Hence, he will undoubtedly be tempted to consume out of these profits and thereby unwittingly consume capital as well. Thus, inflation tends at once to repress saving-investment and to cause consumption of capital.”
“A Reformulation of AustrianBusiness Cycle Theoy in lightof the Financial Crisis” by Joseph T. Salerno
http://mises.org/journals/qjae/pdf/qjae15_1_1.pdf
The fact that there is no stable natural rate of interest. That it would be unstable even in an ancap society, so market interest rates are always deviating from time preferences, which renders the concept useless. (By the way, which time preferences should you use, unmolested as they would be in an ideal ancap society without FRB? Your own? Your nation, the world’s? Crickets)
I have no idea what this is supposed to mean. Interest rates are prices that either work or do not work as the participants anticipate. People will learn what are the correct rates through trial and error. Such is life.
Austrian predictions of the housing crash:
http://www.lewrockwell.com/block/block168.html
“Austrian predictions of the housing crash:”
are grossly overrated:
http://socialdemocracy21stcentury.blogspot.com/2011/12/austrians-predicted-housing-bubble-but.html
In 2005, Krugman admitted that the Fed had created a housing bubble and that it wasn’t surprising because…
“After all, the Fed’s ability to manage the economy mainly comes from its ability to create booms and busts in the housing market.”
http://www.nytimes.com/2005/05/27/opinion/27krugman.html
The “argument” was that Austrian cannot predict, not that others can too.
“are grossly overrated”
Grossly overrated relative to what?
Everyone and everything is “grossly overrated” relative to some hypothetical higher standard.
Your comment is saying zippo other than “Pffft”
“I shudder if the Bob Roddis/Major Freedom types were put in charge”
We don’t want to be in charge. That’s what is lost on you. The problems you are writing about are caused by people being in charge at all.
Nobody should be in charge of money. Money should be open to competition in a free market.
Nobody should impose draconian measures on innocent civilians to bail out foreign lenders who keep the local power structures intact. You call that austerity and lump in the Austrians like a fool.
I shudder to think the tyranny that would transpire if Edward the statist were put in charge.
There’s no such people as “austerians”, it’s a made-up word, made up by Keynesians to have a go at the Austrians. Seriously, they even admit as much, look it up.
For that matter, when a Keynesian says “austerity” they don’t mean what the dictionary defines as “austerity”, in fact they don’t mean anything, because they refuse to define the word in Keynesian usage. It’s nothing more than a BS bogeyman used to confuse the ignorant (i.e. the TV news media).
In 2002 Krugman said that,
“Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”
http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html
In 2005, Krugman admitted that the Fed had created a housing bubble and that it wasn’t surprising because…
“After all, the Fed’s ability to manage the economy mainly comes from its ability to create booms and busts in the housing market.”
http://www.nytimes.com/2005/05/27/opinion/27krugman.html
But by 2010 Krugman completely changed his story and tried to absolve the Fed by saying…
“These considerations suggest that it would be wrong to attribute the real estate bubble wholly, or even in large part, to misguided monetary policy.”
http://www.nybooks.com/articles/archives/2010/sep/30/slump-goes-why/?pagination=false
And then by 2012 Krugman started flat-out lying about what he said in the past by claiming he “never bought the story” that the Fed was the cause of the Housing Bubble. I guess it was the other Paul Krugman at the NYT who wrote that column in 2005.
http://www.youtube.com/watch?v=KrfRS07CAHc ( video: 32:40 mark )
And most recently Krugman has said that the housing bubble was “just one of those things that happens” every once in a while.
http://www.youtube.com/watch?v=PD-EWxl_s4o&feature=plcp
“the increase in the prices and profitability of consumer goods diverts factors from higher stages to consumer goods’ industries, thereby restricting the supply of resources available to add to or even replace the stock of capital goods”
notice how rothbard is making up a new theory here and essentially flipping what the older Austrians said.
I was under the impression that credit expansion LENGTHENS the production structure, by making it seem like there are more real savings than are actually available, thus stimulating the CAPITAL goods industries, and not necessarily the consumers.
Rothbard and you have essentially just had an original thought. Great! But its still wrong. It isnt only Consumption goods that flourish during a boom, its the whole economy. If it were really true that capital goods were being overconsumed, one would expect to see some sign of it DURING THE BOOM. But instead we see rising profits all around.
The Austrian fanatics are like Buddhist and Hindu mystics, or if you will, charcters in the matrix who insist that this world is an illusion. Show them mountains of empirical evidence, and they’ll say, “it doesn’t matter, its all the machines, or an evil demon, or something.” At first it might be interesting, then it gets annoying, because no matter what you say, they’ll always have a convenient explanation. That’s not science. Its mysticism.
You guys, extraordinary claims require extraordinary evidence. Occam’s razor. The burden of proof rests on you to disprove the simple and obvious fact that a recession or depression results from everyone hoarding cash at the same time+ sticky prices
I was under the impression that credit expansion LENGTHENS the production structure, by making it seem like there are more real savings than are actually available, thus stimulating the CAPITAL goods industries, and not necessarily the consumers.
You thought that because you desperately want to believe that Austrian analysis is untrue (like all of the rest of its “critics”). Like LK, all you can do is take various statements out of context and twist them. The Mises quote is from “Human Action” the English version of which came out in 1949. I have the 1963 edition which I bought in 1977. It explains what I have stated over and over and over: Funny money loans make EVERYONE think that they are richer than they really are and they behave as such. They are spending illusory savings which they do not actually own or have at their disposal. I went to the original source (Human Action) for a more extended version of the same quote. Mises basically anticipates equity loans and a flight into real values (real estate):
It would be a serious blunder to neglect the fact that inflation also generates forces which tend toward capital consumption. One of its consequences is that it falsifies economic calculation and accounting. It produces the phenomenon of illusory or apparent profits. If the annual depreciation quotas are determined in such a way as not to pay full regard to the fact that the replacement of worn-out equipment will require higher costs than the amount for which it was purchased in the past, they are obviously insufficient. If in selling inventories and products the whole difference between the price spent for their acquisition and the price realized in the sale is entered in the books as a surplus, the error is the same. If the rise in the prices of stocks and real estate is considered as a gain, the illusion is no less manifest. What makes people believe that inflation results in general prosperity is precisely such illusory gains. They feel lucky and become openhanded in spending and enjoying life. They embellish their homes, they build new mansions and patronize the entertainment business. In spending apparent gains, the fanciful result of false reckoning, they are consuming capital. It does not matter who these spenders are. They may be businessmen or stock jobbers. They may be wage earners whose demand for higher pay is satisfied by the easygoing employers who think that they are getting richer from day to day. They may be people supported by taxes which usually absorb a great part of the apparent gains.
Finally, with the progress of inflation more and more people become aware of the fall in purchasing power. For those not personally engaged in business and not familiar with the conditions of the stock market, the main vehicle of saving is the accumulation of savings deposits, the purchase of bonds and life insurance. All such savings are prejudiced by inflation. Thus saving is discouraged and extravagance seems to be indicated. The ultimate reaction of the public, the “flight into real values,” is a desperate attempt to salvage some debris from the ruinous breakdown. It is, viewed from the angle of capital preservation, not a remedy, but merely a poor emergency measure. It can, at best, rescue a fraction of the saver’s funds.
” One of its consequences is that it falsifies economic calculation and accounting. It produces the phenomenon of illusory or apparent profits. “
All dependent on the assumption of an economy with no idle resources, and the imaginary natural rate of interest to clear the capital goods markets, as well as the assumption of a general flexprice economy.
But like virtually all Austrian blockheads Mises never understood the concept of fixprice businesses, and how most prices do not rise in response to increases in demand.
Output will be directly increased in response to demand increases.
Output will be directly increased in response to demand increases.
What a deep thought. People make stuff to sell when there are people who want to buy it. Who knew?
We’ve eviscerated your pathetic “fixprice” example, your last gasp.
Give it up. You’ve lost.
“We’ve eviscerated your pathetic “fixprice” example, your last gasp. “
lol… what, you now don’t think they exist? Next you’ll tell us that imperfect competition doesn’t exist, or some such rubbish.
Oh, and still have no idea what market clearing prices are, do you? Still Ignorant of basic Austrian concepts?
“what, you now don’t think they exist? Next you’ll tell us that imperfect competition doesn’t exist, or some such rubbish.”
Fixprice markets don’t prove what you think they prove.
“All dependent on the assumption of an economy with no idle resources, and the imaginary natural rate of interest to clear the capital goods markets, as well as the assumption of a general flexprice economy.”
False on all counts.
“But like virtually all Austrian blockheads Mises never understood the concept of fixprice businesses, and how most prices do not rise in response to increases in demand.”
If there is an increase in demand, that you observe, and there is no supply increase, that you observe, then you have just proved to yourself that prices must be higher. You just explained a mathematical necessity.
“Output will be directly increased in response to demand increases.”
This assumes resources are infinite.
What is a fixprice? Can someone show me a price of something that hasn’t changed in 40 years? 100 years? If it does change, then how can it be called a fixprice? This concept doesn’t pass the smell test. I hope Keynesianism isn’t based on this idea. It’s already based on long ago refuted concepts and violates the most of the laws of economics. I hope fixprice isn’t another pillar of Lord Keynes statist advocacy.
Edward:
“notice how rothbard is making up a new theory here and essentially flipping what the older Austrians said.”
“I was under the impression that credit expansion LENGTHENS the production structure, by making it seem like there are more real savings than are actually available, thus stimulating the CAPITAL goods industries, and not necessarily the consumers.”
The core of ABCT is relative price distortions due to central banks. The orthodox ABCT was explained via an unsustainable lengthening of the productive structure, but this was primarily due to the fact that consumer lending was not as widespread in the 1910s when Mises first discovered ABCT.
Today, consumer lending is very widespread. Credit expansion that goes to the financing of consumer goods brings about a distortion to the capital structure that is different content-wise, but the same form-wise, as credit expansion going to financing capital goods.
Instead of the economy being “stretched” at the capital goods stage only, in one direction, thus depriving the consumer goods and first order capital goods stage of necessary resources, there is instead a “stretching” at the consumer goods stage, thus depriving the “middle” capital goods stages of necessary resources.
If credit expansion goes to both capital and consumer goods, the economy gets “stretched at both ends”, thus depriving the middle stages of necessary resources.
“Rothbard and you have essentially just had an original thought. Great! But its still wrong.”
No it isn’t. It’s right.
“It isnt only Consumption goods that flourish during a boom, its the whole economy.”
Not in equal amounts it isn’t. Some stages get stretched further than others. You keep thinking aggregatively, when you should be thinking industry to industry in a relative way.
“If it were really true that capital goods were being overconsumed, one would expect to see some sign of it DURING THE BOOM. But instead we see rising profits all around.”
Rising profits are what cause the capital consumption. Of course you won’t see capital consumption via declining profits during the boom!
Your “test” is silly.
“The Austrian fanatics are like Buddhist and Hindu mystics, or if you will, charcters in the matrix who insist that this world is an illusion.”
You inflationists are like baby killers.
“Show them mountains of empirical evidence, and they’ll say, “it doesn’t matter, its all the machines, or an evil demon, or something.”
Empirical history does not communicate anything on its own. Empirical history has to be understood, and understanding requires theory. Your theory is wrong. The empirical evidence is 100% on the Austrian theory’s side. You just don’t accept this because you want to believe that your theoretical interpretation of past data, is somehow past data alone speaking for itself.
You don’t even recognize the fact that your interpretation of empirical history is your theory making an appearence, using the history as an “excuse”, for lack of a better term.
The mountains of historical data is fully and completely consistent with Austrian theory.
“At first it might be interesting, then it gets annoying, because no matter what you say, they’ll always have a convenient explanation. That’s not science. Its mysticism.”
Your theory is mysticism. You believe in mommy and daddy government, to solve your problems, to watch over you, to make everyone’s lives better off through initiating force against innocent people.
For the statist inflationist to call anarcho-capitalists “mystics”, is like Hitler calling Ghandi a tyrant.
“You guys, extraordinary claims require extraordinary evidence.”
The evidence has already been provided. Many times. The evidence is self-reflective reasoning that can only be refuted or proven by theory itself. Empirical economic history is unique. No laws of economics pop out of history without a subject to understand it.
Austrians have provided all the evidence you could ever require. It’s up to you to learn it.
“Occam’s razor. The burden of proof rests on you to disprove the simple and obvious fact that a recession or depression results from everyone hoarding cash at the same time+ sticky prices”
Occam’s razor doesn’t compel us to ignore explaining why so many people would suddenly desire to hold money for longer periods time than before, nor would it compel us to ignore explaining to what extent inflation itself exacerbates downward price stickiness.
I have no idea what this is supposed to mean. Interest rates are prices that either work or do not work as the participants anticipate. People will learn what are the correct rates through trial and error. Such is life”
The discrepancy between the “natural rate” and market rates, is one of the key parts of Austrian theory. If the market rate (presumabely fiddled with by FRB) is beneath the natural one, there will be a boom and if the market rate is above the natural one, there will be a bust.
My point is that even in the absence of FRB market rates and natural rates are always changing. They are never in synch. That means booms and busts will happen without FRB
“I have no idea what this is supposed to mean. Interest rates are prices that either work or do not work as the participants anticipate. People will learn what are the correct rates through trial and error. Such is life””
To be clear, Interest rates are not prices of money. People are not selling money in exchange for interest. They are selling an ability to purchase goods in the present time, in exchange for a reduced ability to purchase goods in the future.
“The discrepancy between the “natural rate” and market rates, is one of the key parts of Austrian theory. If the market rate (presumabely fiddled with by FRB) is beneath the natural one, there will be a boom and if the market rate is above the natural one, there will be a bust.”
You continue to misunderstand “natural rates”.
“My point is that even in the absence of FRB market rates and natural rates are always changing. They are never in synch. That means booms and busts will happen without FRB”
Government intervention in the form of central banks makes it worse.
“To be clear, Interest rates are not prices of money. People are not selling money in exchange for interest. They are selling an ability to purchase goods in the present time [money], in exchange for a reduced ability to purchase goods in the future [interest]”.
lol.
Roddis I think I somehow missed that 2005 one. That is jaw-dropping.
http://consultingbyrpm.com/blog/2009/12/krugman-did-identify-the-housing-bubble-in-2005.html
Ha ha if I forgot I read it, maybe Krugman forgot he wrote it?
“So what happens if the housing bubble bursts? It will be the same thing all over again, unless the Fed can find something to take its place. And it’s hard to imagine what that might be. After all, the Fed’s ability to manage the economy mainly comes from its ability to create booms and busts in the housing market. If housing enters a post-bubble slump, what’s left?”
haha… so is Krugman hinting he may be a closet Austrian?
I am sure Daniel will be along shortly to explain away the 2005 quote.
Maybe, maybe not.
🙂
There are brand new Krugman quotes we can use to further smack him around. First, he claims that the economy is a machine. Then he claims that before Keynes, nobody bothered to inquire why the excesses of the boom gave rise to bad times or what should be done when they do. Right. NO ONE ever thought about that.
a) “By contrast, Keynesian economics rests fundamentally on the proposition that macroeconomics isn’t a morality play—that depressions are essentially a technical malfunction. As the Great Depression deepened, Keynes famously declared that “we have magneto trouble”—i.e., the economy’s troubles were like those of a car with a small but critical problem in its electrical system, and the job of the economist is to figure out how to repair that technical problem.”
b) “Keynes’s masterwork, The General Theory of Employment, Interest and Money, is noteworthy—and revolutionary—for saying almost nothing about what happens in economic booms. Pre-Keynesian business cycle theorists loved to dwell on the lurid excesses that take place in good times, WHILE HAVING RELATIVELY LITTLE TO SAY ABOUT EXACTLY WHY THESE GIVE RISE TO BAD TIMES OR WHAT YOU SHOULD DO WHEN THEY DO [emphasis added]. Keynes reversed this priority; almost all his focus was on how economies stay depressed, and what can be done to make them less depressed.”
http://www.nybooks.com/articles/archives/2013/jun/06/how-case-austerity-has-crumbled/?pagination=false
Of course Krugman would phrase it as “relatively little to say”, rather than “nothing to say”, so that he can comfortably ignore Mises’ Theory of Money and Credit from 1912, as well as works as far back as 1749 with Turgot’s explanations of how changes in money can affect interest rates.
“Rising profits are what cause the capital consumption.”
WTF????????????
Up is down.
Down is Up.
The moon is made of green cheese
The world is flat. (Literally)
The sky is red. (Anyone who insists otherwise is on drugs)
Fairies exist.
So do the greek gods.
LOL
“WTF????????????”
OK, I’ll slow this down so that you can understand.
Capital consumption is a real phenomena. It is the literal using up of capital goods without replacing them.
Capital consumption can occur when inflation artificially increases profits, because the artificially increased profits can influence investors and consumers into believing they are wealthier in real terms than they really are. This leads to insufficient replacement of used up capital goods in the production process, since, after all, we save and invest now so that we consume more in the future.
This occurred during the recent housing boom. Mortgage borrowers and lenders believed that they were wealthier than they really were. They used their homes as credit machines to finance their consumption. People whose productivity did not justify homeownership, could live in homes because of the artificial profitability in housing construction due to the Federal Reserve System’s credit expansion throughout the 1990s and especially during the 2000s. Instead of saving and working sufficiently to replace the used up capital, a substantial quantity was consumed and not replaced. Kitchen refurbishing, cars, vacations, plasma TVs, etc, a debt financed consumer bonanza.
This was not sustainable. This is what is meant by illusory wealth. It is was brought about by the artificial nominal goosing that central banks unleashed.
what a load of drivel.
What an empty comment that can be rejected as easily as it was made.
“then I will deem you a free loader and criminal, kidnap you, throw you into a cage, where you will likely be sexually assaulted.”
You have a weird, scary obsession with rape and sex. Are you into BDSM?
I pity your girlfriend, or wife. Or boyfriend. (LOL)
Way to ignore the point because it demolishes your worldview, and instead awkwardly retreat to red herrings that make it easier for you to appear on the moral high ground.
Apparently you don’t want to accept that if you do choose not to pay taxes, those things will likely happen to you. Sorry to burst your rainbows and sunshine mommy and daddy government view.
” To claim that central banking is necessary to prevent socialism is like saying you need to murder in order to stop murder.”
Umm.. sometimes you do genius. Not murder, but killing in self defense.
Bob Lefevere doesn’t cut it in this world.
“Umm.. sometimes you do genius. Not murder, but killing in self defense.”
The force initiated to impose central banking is not a defense against existing violence, genius. It is an introduction of coercion where none existed before.
See how sloppy your thinking is? You cannot even identify the fact that central banking is grounded on an initiation of violence, not a defense against existing violence.
And when you are faced with having to understand it, you make incoherent statements that yes, we do need to murder in order to stop murder, but oh, by murder I really mean killing in self-defense.
“where none existed before”
You live in your own parallel imaginary universe.
You misunderstand. I don’t mean there was zero violence everywhere in all contexts. I mean there was zero violence initiated by group X against those who imposed the dollars system back on group X in self-defense.
The imposition of taxes on innocent people was not in self-defense.
yeah I guess you’re trapped in the US, can’t get out, poor little oppressed major freedom trapped in the usa having to pay taxes. so sad.
Poor little oppressed Jew. Complaining about the gas chambers when he could have just left the country.
Poor little oppressed Black. Complaining about the plantations when he could have just left the country.
You think like a tyrant.
You think like a spoilt brat.
as if there’s any equaivalence between gas chambers, slavery, and paying US taxes. What a pathetic mind you have.
The equivalence of tax, slavery and oppression is equivalence in power structure. Of course tax can be small or large, and slavery can be cruel and punishing, or masters can sometimes be very good to their slaves.
Strangely enough, the German government (pre war) was very interested in assisting Jews moving out of Germany into Israel, and their logic was that Germany was for Germans, and Israel was for Jews and that was the natural order of things.
Even stranger, it was high German taxes that discouraged the Jews from leaving. Of course, the tax I’m talking about was a punitive exit tax. The German government was happy to see Jews leaving the country, but they absolutely were not going to accept any wealth leaving the country in the hands of those Jews.
Where did they get the idea of an exit tax from? Well Marx and Engles, in The Communist Manifesto propose:
The National Socialists were working from the philosophy handed down to them.
We are seeing capital controls creeping back in, as more and more people try to move their money somewhere safe (presuming a safe place exists). We are slowly moving down a well trodden path.
Another spoilt brat, who thinks that daddy not letting him go to the mall is “like nazism”.
I go to the mall any time I wish (not often I admit) but this has absolutely no relation to the history of 20th Century Europe.
You might note I have engaged the issues here, while you offer nothing more than half-baked personal attacks. Pretty lame even for a Keynesian I must say.
apparently you don’t know what a metaphor is.
Nazism and slavery have about as much to do with paying US taxes as they do with daddy not letting you go to the mall. Only someone who thinks like a spoilt brat would consider them to be equivalent.
“The equivalence of daddy not letting me go to the mall, slavery and oppression is equivalence in power structure. It’s not fair! Wah wah wah!”
Spoilt brat pseudo-logic.
Your juvenile moralizing is contemptible.
Yawn. Originality is not one of your strongest qualities, eh? By the way, are you going to offer a rebuttal, or are you just going to sling insults, thinking that makes you superior?
Imbeciles immediately refer to nazis, gas chambers, and slavery when talking about taxation. What more is there to say? There is no serious discussion to be had with people who think like over-indulged children.
So, in other words, you don’t have a rebuttal. That’s what I thought. I didn’t believe you had the intellectual capacity, and you proved me correct. Thank you for your kindness.
Better than thinking like a tyrant.
I think most sane people would rather be around spoiled brats than tyrants.
full quote:
“as if there’s any equaivalence between gas chambers, slavery, and paying US taxes. What a pathetic mind you have”
I didn’t claim they were equal.
Richie, my boy, what do you actually have to say? Taxation is a bit like nazi gas chambers? Do you really want to lower yourself to that level? Is that what your education taught you – to think like a confused, ignorant, and angry little child?
“major freedom”:
“I think most sane people would rather be around spoiled brats than tyrants”.
I guess spoilt brats enjoy the company of other spoilt brats… you can moan to each other about evil daddy tyrant and his tyranical ways… It’s so unfair!
full quote:
There is no direct comparisons being made between gas chambers and taxation.
It’s your taunting that is being focused on here. You are taunting victims of aggression (taxation) who dare identify it as such, the same way nazis taunted their victims.
Apparently critical thinking is not your strong suit. Not sure what is.
“As for my language, we’ll, I’m being purposefully obnoxious to get a rise out of people. Austrians, while not the same as contemporary “austerians” are part of the same group of people whose policies would produce enormous suffering and misery.”
It’s nice to know you’ve got the Krugman talking points down pat and are letting others dictate what you think.
My favorite part is when he said “As scott said”, as if Sumner’s theory isn’t full of holes and inconsistencies.
It’s full of drastically less inconsistencies and holes than yours
Except I spent the better part of last year exposing all of his theory’s holes and inconsistencies. It’s why he ended up completely ignoring me.
His theory, and your theory, are irrational, self-contradictory, violence advocating gobbledygook, founded on a total ignorance of economic calculation, total ignorance of rationalism, and hatred/resentment at the real world of scarcity and limitation.
Someone please tell me that LK is really just a poser going around doing a cartoonish parody of a Keynesian, because as misguided and wrong as I believe they are, it’s still hard for me to believe they’re actually that frickin’ ignorant of reality.
I can’t be bothered with this rubbish. You guys are ridiculous. “Major Freedom” who knows nothing but seems to think he’s some sort of great thinker because he can regurgitate other people’s opinions, and then the rest of you… what can I say. What a sad joke.
You know nothing. You spew rubbish. You are a joke. I got no time for you. Except what I am typing on this blog. Because I’m angry. For some unknown reason. And I want you to know about it. So that you validate me in some way.
oh aren’t you a clever little boy major freedom.
OK, fine, you’re clever, full quote.
Stop crying now?
“are grossly overrated:”
The fact of the matter is that 99% of Austrians saw it coming and only a very small share of the Keynesian/Marxist crowd (the dwindling few still barely attached to reality) did.
The biggest Keynesian mouthpiece of all, Paul Krugman, is ON RECORD begging for a housing bubble as a solution to the problems that came about in the aftermath of the tech bubble.
Capital consumption is a real phenomena. It is the literal using up of capital goods without replacing them.
Capital consumption can occur when inflation artificially increases profits, because the artificially increased profits can influence investors and consumers into believing they are wealthier in real terms than they really are. This leads to insufficient replacement of used up capital goods in the production process, since, after all, we save and invest now so that we consume more in the future.
Capital goods and consumer goods are interconnected in the economy. An increase of one leads to an increase in the other. The “debt financed consumer bonanza” as you call it, represented OVER-investment, not malinvestment. because it wasn’t only housing that boomed, it was all sectors connected to housing, and even sectors barely connected at all.
There is no mystery in the Keynesian Monetarist explanation. of the boom. If a bust is by definition a rising demand for cash plus sticky prices, -> less demand for real goods and services, than a boom is the reciprocal, less demand for pure cash, more demand for real goods and services. Financing income and production with more liabilities . There is no mystery here
But If what you were saying were true, homebuilders would have faced serious shortages of raw materials, dramatically increasing their costs, and reducing their profit MARGINS net net.
Now you might argue that the commodity bubble in 2008 was just that. That would be a serious argument to make. Except, we have commodity shortages for reasons other Federal Reserve manipulation. Farm subsidies. Environmental bans on drilling. SUPPLY side negative restrictions by the government
Naturally, your phony and dishonest “analysis” must ignore and suppress the concept of economic calculation, how the false prices induced the obvious and ubiquitous behavior we see that leads to booms and busts. Everything that happened in the world leading up to the housing bust consists of people acting upon the false signals of the false prices of the fiat funny money system.
Please point to one single historical anecdotal event that is inconsistent with people being misled by the adulterated prices caused by funny money.
“Capital goods and consumer goods are interconnected in the economy.”
Yay vague platitudes.
“An increase of one leads to an increase in the other.”
Haha, no. An increase in consumer goods does not cause an increase in capital goods. An increase in capital goods causes an increase in consumer goods. If consumer goods are produced, that uses up resources that did not, could not, go into the production of capital goods.
Capital goods and consumer goods are unidirectional. More consumer goods leads to fewer capital goods, and more capital goods leads to more consumer goods.
“The “debt financed consumer bonanza” as you call it, represented OVER-investment, not malinvestment. because it wasn’t only housing that boomed, it was all sectors connected to housing, and even sectors barely connected at all.”
No, it represented MAL-investment, because the resources that went into housing, COULD have went into other lines that were sustainable, or less unsustainable.
Yes, many sectors “boomed”, but that doesn’t mean general over-investment. You are still not thinking counter-factually.
In general, there is no limit to how much consumer goods people desire. But there is a limit to how much saving and investment they are willing to do to statisfy that desire, and hence a limit to how many resources each industry can absorb.
The widespread investment that actually occurred, was accompanied by an exact and equally offsetting, but unobserved under-investment in other projects. It is not controversial that many or even most identifiable industries experienced increased investment. What matters is the relative allocation between the sectors. A total rise in investment is perfectly reconcilable with partial relative over-production of some goods and partial relative underproduction of other goods.
“There is no mystery in the Keynesian Monetarist explanation.”
Yes there is. The mystery is why so many people suddenly desired to hold money for longer periods than before. This is a mystery to you, which is precisely why you are relegated to having to explain it away via “animal spirits.” It is just another way of saying “We have no idea.”
“If a bust is by definition a rising demand for cash plus sticky prices, -> less demand for real goods and services, than a boom is the reciprocal, less demand for pure cash, more demand for real goods and services.”
This is not an explanation of why these events transpire.
“But If what you were saying were true, homebuilders would have faced serious shortages of raw materials, dramatically increasing their costs, and reducing their profit MARGINS net net.”
No, that does not follow. Homebuilders could have not faced any shortages, because the resources were diverted from yet still other possible projects, which resulted in shortages of resources there instead of housing.
And housing construction profit margins did decrease.
“Now you might argue that the commodity bubble in 2008 was just that. That would be a serious argument to make. Except, we have commodity shortages for reasons other Federal Reserve manipulation.”
Irrelevant. The point is that Federal Reserve manipulation *makes things worse.* That’s all we are saying, along with the detailed explanations of why.
We are not saying that without a central bank, it will be all sunshine and roses, perfect production, and zero unemployment.
“Farm subsidies. Environmental bans on drilling. SUPPLY side negative restrictions by the government”
So let’s increase government intervention to solve the problems caused by government intervention, right?
A total rise in investment is perfectly reconcilable with partial relative over-production of some goods and partial relative underproduction of other goods.
Similarly, as I’ve explained to LK 27 times before, it is possible for the planet to experience “market clearing prices” for the 25 boom years leading up to the crash.
It is also possible, indeed likely, that booms based on funny money can take place even when there are resources not being used as of this moment and workers not working at this moment.
It is not the case that only 100% of the working population and 100% of all investors can be deluded by the price signals from inflation. Less than 100% of the population can be so deluded, and because they are responsible for the investments and production, there is no good reason to believe why ABCT doesn’t apply. Sure, the orthodox theory was explained given full employment, but that doesn’t there are no price distortions with less than full employment.
Inflation primarily affects already employed people. The effects on the unemployed are secondary.
The fundamental problem of LK’s worldview is that he conceives of the economy as some sort of machine, divorced from separately thinking and acting individuals. So he believes that if there are idle resources and unemployed labpor, then increasing the money supply won’t be price inflationary, as if the economy is some water tank where levels below the maximum can be reached by pouring more water into the tank.
LK, Krugman (see the quote from the NY Review of Books) and all Keynesians see a lost and broken mechanical world just awaiting that magical exogenous wizard (them) to get it spinning again.
http://www.nybooks.com/articles/archives/2013/jun/06/how-case-austerity-has-crumbled/?pagination=false
Austrian analysis has no role for them. Upon hearing that, their heads explode.
Ultimately, and they may not get this yet, but it’s because they aren’t the mechanical world itself that upsets them. The world is broken because it’s not them.
Of course, other independently thinking individuals are lumped in with this broken mechanical world, which is why they try to seek mechanical answers that can only be imposed from above by the state.
“The fundamental problem of LK’s worldview is that he conceives of the economy as some sort of machine, “
All that boils down to is saying you think economies exhibit certain regularities. Yes, they do.
But while Austrians are guilty of conceiving the “economy as some sort of machine” in wholly unrealistic ways, Keynesians are not.
The Austrian ideal world view of economies requires a flying unicorn world of market clearing interest rates, flexible prices adjusted to market clearing levels, a unique Wicksellian natural rate of interest, capital goods that don’t have malleability and substitutability, a Say’s law fantasy world, the truth of the ridiculous gross substitution axiom, etc. etc.
But no doubt MF and roddis love living in a fairy tale land. Presumably MF is king and roddis his court jester..
“All that boils down to is saying you think economies exhibit certain regularities. Yes, they do.”
No, they do not. History is unique.
“But while Austrians are guilty of conceiving the “economy as some sort of machine” in wholly unrealistic ways, Keynesians are not.”
Austrians don’t even conceive of the economy as a machine at all. Keynesians are unrealistic precisely because they do.
“The Austrian ideal world view of economies requires a flying unicorn world of market clearing interest rates, flexible prices adjusted to market clearing levels, a unique Wicksellian natural rate of interest, capital goods that don’t have malleability and substitutability, a Say’s law fantasy world, the truth of the ridiculous gross substitution axiom, etc. etc.”
All of this was refuted as nonsense. You’re just repeating what you have already been corrected over.
There is no prescriptive world in Austrian theory.
Humans do set prices that tend to clear the market.
Austrian theory does not require a “unique” natural interest rate. It can have as many natural interest rates as there are individuals.
It is precisely Austrian theory that argues not to regard capital as homogeneous and capital and consumer goods as interchangeable, which Keynesianism does.
Say’s Law is true. Keynes misunderstood it.
Etc. etc
“But no doubt MF and roddis love living in a fairy tale land. Presumably MF is king and roddis his court jester..”
It is precisely you who lives in a fantasy world. A fantasy world where magical unicorn Kings and Queens can initiate force against innocent people and make their lives better off. Where these Kings and Queens have omniscient knowledge and can know what interest rates ought to be, what spending ought to be, and what price levels ought to be. That uncertainty and subjective expectations somehow don’t apply to these Kings and Queens.
Fantasy world? It’s your world.
Austrians on the other hand recognize that individuals act, and that there is no such thing as superior centralized knowledge.
“No, they do not. History is unique. “
So therefore we have no reason whatsoever to think an ABCT will EVER happen again?
After all history “is unique.”
You utter clown.
“Austrians on the other hand recognize that individuals act,”
Yes, I’m sure no other economists in human history have ever understood that economic phenomena are dependent on human beings and human actions.
“More consumer goods leads to fewer capital goods, and more capital goods leads to more consumer goods”.
So more capital goods leads to more consumer goods which leads to fewer capital goods. Right…
LK:
“So therefore we have no reason whatsoever to think an ABCT will EVER happen again?”
CORRECT!!!!!
We can’t know for 100% certainty whether the future will consist of central banking, government intervention, and exacerbated booms and busts.
“After all history “is unique.”
That’s right.
“You utter clown.”
What happened to “non-ergodic systems such as economies” and “the problem of induction is particularly acute” LK?
LOL
“Yes, I’m sure no other economists in human history have ever understood that economic phenomena are dependent on human beings and human actions.”
No other economic school of thought GROUNDS its principles and theories on individual action, except Austrianism.
It makes no difference if non-Austrian schools pay lip service to human actions. What matters is what they intellectually derive from it.
“So therefore we have no reason whatsoever to think an ABCT will EVER happen again?”
CORRECT!!!!!”
lol.. better break the sad news to all other Austrians!
This is priceless. We now have MF saying that there is no reason WHATSOEVER to think ABCs will ever happen again.
No doubt we now also have no reason WHATSOEVER to think that
(1) human beings will continue eating in the future,
(2) will continue breathing,
(3) will continue buying any consumer
goods,
(4) that capitalists will
continue chasing profits,
(5) that the law of demand will not suddenly be false 2 seconds from now
(6) that capital will stay heterogeneous
(7) that Knightian uncertainty will not just vanish tomorrow
(8) that all axioms of praxeology will not suddenly be false, so that all inferences of praxeology will also therefore be false.
—-
Congrats, MF. You just destroyed Austrian economics. It fell apart before our eyes.
But no doubt you’re constantly performing thousands of empirical checks very minute to make sure your thousands of Austrian
house of cards ideas and theories are still true in the real world!!
LK:
“lol.. better break the sad news to all other Austrians!”
No Austrian is permitted to predict the future.
They can only explain that IF central banking exists, and IF it sets artificially low interest rates, THEN such and such occurs.
This is not a prediction, it is an explanation of prevailing and past phenomena.
“This is priceless. We now have MF saying that there is no reason WHATSOEVER to think ABCs will ever happen again.”
I didn’t claim that. I said we cannot scientifically predict future human actions, and that encompasses everything, from central banking, to credit expansion, to investment, to malinvestment, to corrections.
We can’t scientifically predict whether or not central banking will exist in the future. We can guess, and our guess may be right 999 times out of 1000. But there is no law of nature that mandates central banking.
“No doubt we now also have no reason WHATSOEVER to think that:….”
All the rest of your post is just confusion derived from your initial confusion above.
All history is unique.
No, you imploded when you wrote that piece of stupidity.
It is no surprise that you are running away from it now.
“No, you imploded when you wrote that piece of stupidity.”
No, I didn’t. Economic history is in fact unique.
There is zero contradiction between that statement and the statement that we cannot scientifically predict future human choices such as central banking, boom and bust, and corrections.
“It is no surprise that you are running away from it now.”
I am not in any way shape or form running away from anything. You just completely misunderstant the difference between theory and history.
I stand by everything I have said. I am not backing down from anything I said. It is fully consistent.
Theory -> Human action constraints -> ABCT -> a priori analysis -> not empirical.
History -> Human preferences and specific actions -> a posteriori analysis -> empirical.
The argument that we cannot scientifically predict if ABCT will come to pass historically is not the same thing as the theoretical argument that IF certain choices and actions are made, THEN such and such are the reasons why we observed such and such.
LK, your mind is so warped that you’re more interested in gotcha comments than you are with understanding.
I suggest you read Mises’ “Theory and History” as well as “Ultimate Foundation of Economic Science.”
These will educate you on the difference between theory and history in economics.
Your mind is confused because as a positivist you think history and theory are interchangeable. And note that by “theory” it is not meant the positivist definition of “empirically falsifiable hypothesis.” It means the a priori concepts that logically precede experience.
“>“All that boils down
> to is saying you think
> economies exhibit
> certain regularities.
> Yes, they do.”
No, they do not. History is unique. “
By that comment you have denied that “economies exhibit certain regularities”.
You have committed yourself to denying that regularities exist, and as I said, now must explain why:
(1) human beings will continue eating in the future,
(2) will continue buying any consumer
goods,
(3) why capitalists will
continue chasing profits,
(4) why capital will stay heterogeneous
etc. etc.
—-
And if there are no “regularities ” and all history is unique, then why are these things all observable “regularities” in the past?
Clown.
““All that boils down to is saying you think economies exhibit certain regularities. Yes, they do.”
No, they do not. History is unique. “
You have committed yourself to denying “economies exhibit certain regularities ” by this comment. Now you’re running away from it.
I repeat: do you deny that there are ANY regularities at all in economic history? No occurrences of the same general type of business cycle ever (e.g., ABCT)? No pursuit of profit?
If your idiot view were true, then presumably there have never been any multiple occurrences of Austrian business cycles in the past too! Only 1 Austrian business cycle can ever have happened in history.
Because, after all, history is unique! lol!
Tex writes “Humans do set prices that tend to clear the market.”
Tex also denies economies show reularities.
Tex, you need to discuss this with Tex.
or Captain_ Freedom, or Sage_Advice, or Waaah, or George, or Pete, or David, or Christof, or Pete PetePete, etc.
LK:
“By that comment you have denied that “economies exhibit certain regularities”.
Of course. “Regularities” are mere perceived accidents of history, not necessary truths of human action as manifested in the economy in the sense that certain regularities heretofore observed must always occur as laws of nature.
“You have committed yourself to denying that regularities exist, and as I said, now must explain why:”
“(1) human beings will continue eating in the future”
Human beings will not necessarily continue eating forever into the future as a law of nature. I don’t need to “explain” your hypothesis; your empirical prediction, as if it were indeed a law of nature.
“(2) will continue buying any consumer
goods”
See above.
“(3) why capitalists will
continue chasing profits”
See above.
“(4) why capital will stay heterogeneous
etc. etc.”
See above.
“And if there are no “regularities ” and all history is unique, then why are these things all observable “regularities” in the past?”
For the same reason that oriental despotism existed in the past, until it didn’t.
For the same reason why monarchy existed in the past, until it didn’t as it gave way to democracy.
For the same reason why me choosing to eat a ham sandwich every day for lunch, such that you observed me to have eaten one everyday for 364 days, does not by itself imply that there is a scientific law of nature that compels me to eat another ham sandwich for lunch tomorrow.
“Clown.”
You mad?
“You have committed yourself to denying “economies exhibit certain regularities ” by this comment. Now you’re running away from it.”
No, I am not running away from anything.
“I repeat: do you deny that there are ANY regularities at all in economic history?”
Economic history, for the second time, is 100% unique. Any similarities you observe over time, are not scientific regularities that will always exist into the future forever more.
It could be true that at least 50% of the human population has always eaten food at least once a week. We could observe this to have occurred 200,000 years into the past. But this does not mean that economic history contains laws of nature that manifest in people eating as a regular occurrence.
“No occurrences of the same general type of business cycle ever (e.g., ABCT)? No pursuit of profit?”
ABCT is a theory, it isn’t a historical claim, so you can’t include it in a list that contains among other things, the pursuit of profit.
“If your idiot view were true, then presumably there have never been any multiple occurrences of Austrian business cycles in the past too!”
Non sequitur.
“Only 1 Austrian business cycle can ever have happened in history.”
Each business cycle is unique, but if the same related choices are made, then the outcomes are explainable buy ABCT.
——————-
Ken B:
“Tex writes “Humans do set prices that tend to clear the market.”
“Tex also denies economies show reularities.”
This isn’t a regularity. It assumes price setting is already taking place. It is declaration of what occurs *given* you have stated humans are setting prices. It is not a law of nature that humans engage in a trade against money.
“Tex, you need to discuss this with Tex.”
Don’t know what you mean by “Tex.”
I think the confusion here is over the actual meaning of “regularity”.
When I hear the argument that “there exists regularities in economic history”, that to me is an “ongoing” argument. It is telling me that there are laws of nature that manifest themselves in humans performing certain behaviors over time. This is what I reject.
What I don’t reject is if you said something like “From the date May 26th, 0 AD to the date May 26th, 2013 AD, there has been a regularity in humans eating food.”
I am almost certain this is what you had in mind when you said there *exists* regularities in economic history. You were thinking of a definite past time period, and observing that in that time period, food was regularly eaten by most people.
Sure, I can see why you thought I said something crazy wonky. But that isn’t what I was talking about.
For the last time, I am not Major_Freedom. You all sound like conspiracy nutters. Leave my name out of this discussion.
MF statement 1:
“All that boils down to is saying you think economies exhibit certain regularities. Yes, they do.”
No, they do not. History is unique.
MF statement 2:
“Regularities” are mere perceived accidents of history
And now MF violates the law of non contradiction and denies regularities exist, but then later assets that they do exist.
All normal for someone devoid of logic and basic reasoning skills.
LK, these two statements are not contradictory, because as I explained, “regularities” are something I consider to be ongoing, as a law of nature, where “regularities” to you are the accidents of past history between definite time periods.
Regularities do not *exist* for human action, even if for 200,000 years in the past, up until yesterday, you learned that “most humans” ate food at least once a week or whatever.
Economic history *is* unique. It does not follow from me eating a ham sandwich 364 days in a row leading up to today, that I will eat one tomorrow as well, and one every day from then on. You can’t infer that me eating a ham sandwich *is* a “regularity”.
Statement 1 in context is that there are no constancies in human action, such that economic history is unique and the past does not determine today’s actions in a scientifically predictable way.
Statement 2 in context is that while we can identify “regularities” as *you* understand regularities, say from 2000 AD to 2013 AD we learned that “most people” ate food at least once a week or whatever, it does not follow from this that there *exists* regularities in economic history, such that economic history is not unique and the past does determine today’s actions in a scientifically predictable way.
Nuance, LK.
“Statement 1 in context is that there are no constancies in human action, such that economic history is unique and the past does not determine today’s actions in a scientifically predictable way.”
So there is no scientific evidence that humans have digestive tracts, require food to live and that the propensity to eat is biologically determined?
There is nothing in science to scientifically predict that human beings will continue eating food in the future under these biological causes?
And don’t change the argument will a stupid fallacy of equivocation by implying this refers to humans eating some specific food. We not talking about humans eating eating “ham sandwiches”, but food generally.
How fascinating that “Tex” suddenly turns up right at a convenient time to deny that he is MF, even though there was no sign of him on this thread before.
If we’re lucky maybe Captain_ Freedom, Sage_Advice, Waaah, George, Pete, David, Christof, or Pete PetePete might mysteriously appear too!
And by what process did you observe the sectors that would have boomed if that money had not been channelled into housing?
“Austrians can’t win with you no matter what they say. If they try to educate you, during a boom, about the horrendous nightmares that are inevitable after the boom, you say they can’t predict and are wrong. ”
Of course you can win, and the one place which is the most likely candidate for quasi-Austrian is actually…….
China.
Here you have a country with a mal-invested capital structure, geared towards exports and investment, rather than domestic consumption.
But the distortion doesn’t come from the Chinese central bank, alone. It comes from fiscal policy, wasted infrastructure spending, SOEs and so on. We can SOE’s with soft budgets turning out projects that no people want in real time. We can see empty malls, empty city complexes. It isn’t “unobservable” (What utter nonsense! Mysticism… I tell you)
So even when Austrians are right… they are still wrong, and they miss the point
“Of course you can win, and the one place which is the most likely candidate for quasi-Austrian is actually…….
China.”
Austrian theory does not make empirical predictions for “when” booms lead to busts.
“Here you have a country with a mal-invested capital structure, geared towards exports and investment, rather than domestic consumption.”
“But the distortion doesn’t come from the Chinese central bank, alone.”
So distortions come from central banks then? We’re done.
Can you find an Austrian who claims that central banks are the one and only thing that government does to interfere with the economy?
Rothbard regularly mentioned that central banks work hand and glove with governments, not the least of which being a last resort buyer of government bonds. If the Fed ever stops buying US treasury paper the interest rates would be ballistic (ask Greece) so the Fed needs the government to continue financial oppression, and the government needs the Fed to support their spending addiction.
“Naturally, your phony and dishonest “analysis” must ignore and suppress the concept of economic calculation, how the false prices induced the obvious and ubiquitous behavior we see that leads to booms and busts. Everything that happened in the world leading up to the housing bust consists of people acting upon the false signals of the false prices of the fiat funny money system.
Please point to one single historical anecdotal event that is inconsistent with people being misled by the adulterated prices caused by funny money.”
Gibberish.
As usual from Bob
There it is. “Edward” won’t and can’t provide an example.
Often, when one conducts research, you may need to pay your subjects for their time. With Keynesians, you don’t have to search them out or pay them for them to give the world a free demonstration of their hysterical inability to think and/or analyze.
That’s a major reason why Keynesians seek government power. It’s the main group of people willing to hire them.
Nobel Prize winning economists are promoted to writing blogs on news websites to ignorant readers.
That’s a deep thought. Loud mouth bossy types impervious to logic or facts. Ready made government bullies.
No no no, we say that those people have a keen sense of “duty”, and/or “class solidarity”, and/or “social conscience.”
“Ready made government bullies” just sounds too…accurate and offputting to their sensibilities.
You can’t argue with success.
It’s only gibberish to you because you don’t understand it.
“We can SEE state owned enterprises with soft budgets, turning out stuff that consumers don’t want..” “We can SEE that in real time
Austrian see a hammer and mindlessly think everything is a nail. No subtlety, nuance, differences in a situation, nothing
Keynesians see a broken spaceship, and think repeatedly hitting it with a hammer will fix it.
No subtlety, no nuance, and no understanding of economic calculation.
Edward isn’t a Keynesian. He is a monetarist.
But dense and puerile minds find the difference difficult to grasp.
No fundamental difference. I put them in the same group, just like Edward did here.
It is precisely why you won’t criticize him, why you think he’s right, and why you are defending him.
It’s because his core fundamentals are the same as yours.
Those of us who look below the surface, can notice when two seemingly different theories are derived from the same principles in fact where the different assumptions are so inconsequential so as to be bickering over people’s hair color.
Aggregate demand as the source of economic growth.
Statism.
Central planning of money and spending.
Treaters of symptoms of recessions, exacerbating the causes of recessions.
Keynesians and Monetarists are interchangeable to economists.
Bad link.
http://consultingbyrpm.com/blog/2013/05/krugman-government-policy-has-always-been-at-war-with-the-deficit-scolds.html#comment-64852
lol… So you can call Edward a “Keynesian” because you feel free to re-define “Keynesian” in whatever way you like? Just as you redefined “immediately to mean “any time whatsoever”.
Sheer genius at work.
No, not “redefining.”
Through recognizing the similarities so outnumber the differences so as to regard them, from an economist’s perspective, as interchangeable.
I didn’t actually call Edward a Keynesian, BTW. I could have responded to him by prefacing it with “Monetarists see a broken spaceship…” and it would have been equally valid.
It’s why you won’t criticize Edward.
“Edward isn’t a Keynesian. He is a monetarist.”
That still makes Edward and yourself, Lord Eugenics, brothers.
Related in certain ways, yes.
That does not mean there are no differences. Even important differences.
E.g., Rothbard rejected even the minimal state. Mises did not. Yet they were both Austrians.
So therefore I must be justified in calling Rothbardians evil “statists”! (if we follow MF’s logic). After all you’re both Austrians!
That makes no sense.
If someone is a Rothbardian, they’re anarchist.
You can call Rothbard and Mises “Austrians”, just like I can call both you and Edward “Keynesians.”
Mises was an anarchist BTW, if you pay close attention to what he wrote.
Mises wrote:
“The right of self-determination in regard to the question of membership in a state thus means: whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts, make it known, by a freely conducted plebiscite, that they no longer wish to remain united to the state to which they belong at the time, but wish either to form an independent state or to attach themselves to some other state, their wishes are to be respected and complied with. This is the only feasible and effective way of preventing revolutions and civil and international wars. … However, the right of self-determination of which we speak is not the right of self-determination of nations, but rather the right of self-determination of the inhabitants of every territory large enough to form an independent administrative unit. If it were in any way possible to grant this right of self-determination to every individual person, it would have to be done.”
This makes Mises an ideological anarchist. He held that “technical considerations” prevented this from working, but that is only because he didn’t really delve into it intellectually. He would have learned how it is technically feasible.
If we could harness all of the energy LK expends on behalf of hair-splitting, we could power a city.
Actually LK, I’m a neo monetarist, or a market monetarist, but thank you for clarifying this dense and puerile minds.
🙂 🙂 🙂
You are an inflationist, just like LK. LK also likes to have the government strongarm its way into markets as well. That’s the difference. Just a matter of degrees.
You both detest human liberty and think people like you need to be in charge to manage all of us. That is your core belief, which is why LK can’t argue against slavery or eugenics if it can be shown to be beneficial to some aggregate statistic. His idol loved the idea, even though he was a fat, ugly man with no notable traits worthy of preserving.
Razer, you are a complete fool. You don’t even have MF’s intelligence . While he is crazy, he at least presents his arguments in a pseudo-intellectual parody of logic. You and bob roddis don’t even have that. All Roddis can do is whine endlessly about economic calculation and funny money and all you can do is bask in MF’s reflected “glory”. So why don’t you go over to his home and service him like the real person you are.
All you seem to be able to do is not understand economic calculation.
Or put together a rebuttal to challenges put towards you.
Neo-monetarism is an inevitable outcome of insisting on monetarism in a world where all arbitrary rules of money printing are eventually perceived as ineffective by its own proponents.
If NGDPLT were ever implemented, then Goodhart’s law would eventually manifest itself and Neo-neo-monetarism, or post new monetarism, would have to arise.
Then maybe one day we can live in the logical consequence of continued monetarism, where we can all work for a state-banking elite directly.
Then no more evil and horrific unemployment.
“AustrianS”
Og Og Ug Bug.
“So distortions come from central banks then? We’re done.”
LoL I said that distortions don’t come from China Central Bank ALONE. It helps by indirectly financing government projects. Its not the greatest factor.
“I said that distortions don’t come from China Central Bank ALONE. ”
I know what you said. It’s too late.
You just conceded that distortions come from central banks. That’s what it means to say that distortions don’t ONLY come from central banks.
If I said “You aren’t the ONLY person ignorant of economics”, that would imply you are ignorant of economics.
If you say “Central banks aren’t the ONLY distorter of economic calculation” (which is true, because regular thugs and criminals also distort it), then it follows that central banks are distorters of economic calculation.
It’s done. You can go home with your tail between your legs now.
“It’s done. You can go home with your tail between your legs now.”
LOL.
Unfortunately, with few exceptions, they never do that. They just keep repeating the same tired drivel and making the same assertions over and over again as it somehow makes what they’re saying true or helps convince themselves that they’re right. Evidently we’re dealing with some fairly insecure and petty people here.
The best part is that it’s all on record on the internet.
Their claims are going to eventually be regarded by most people as horrible, just like how we view past generation’s views on racism, slavery, and women’s rights as horrible.
That’s why I love that Krugman has been so prolific in his writing. Yeah, it’s annoying as heck right now for him to have such a bullhorn, but eventually, when his and their egregious and shameful train of thought is exposed for what it really is, there won’t be any hiding from those statements and almost limitless examples of stupidity and disregard for their fellow man.
It speaks to his rank dishonesty and penchant for propaganda that Krugman has managed to weasel his way out of very much condemnation over some of the outlandish (and provably false and destructive) comments he’s made in recent years.
I think by weaseling out, you mean what most of his supporters believe.
He didn’t actually succeed. Epic failure is written over his entire post-economics days.
I’m still holding out hope that he’s publicly scorned/shamed and no longer invited anywhere near the Sunday morning talk shows or given any other semi-popular forum as a mouthpiece. Like it or not, he still has a lot of people’s ear, deluded and misguided as they may be.
Mr stubborn as a mule rider, I think you’re transferring your own traits to Me. And I never said central banks can’t distort economic calculation. Even k’s and m’s admit that. But they do it by following their own discretion and help facilitate inflationary disasters on the upside and deflationary ones on the downside. They don’t do it the Austrian way.
Also mf, I realized the roots of your delusion. You are stretching opportunity cost and counter factual reasoning into infinity, rendering the concepts meaningless. That’s why you assert that even when the whole economy is booming, it still takes away resources from projects that MIGHT have taken place. WHAT projects??
It would be like me saying that we would be all better of if the industrial revolution had occurred in Ancient Rome. Maybe in an alternate universe. But in this universe, such fancy stretches credulity to its limit.
And what traits would those be?
“insecure and petty people here.”
lol you just described yourself
You sure about that? Do you even know the definitions of “petty” and “insecure”?
This was me. I sent it on my iphone and forgot to post my name
“Good, you’ve pinpointed it. Step two is washing it out.”
My apologies to the blog administrator for the “GTFO” comment earlier.
In my defense, the commenter seemed to be befuddled as to why he was even attempting to participate here, so I was only trying to show him the door. Will use more decorum in the future.
I’m about to go off and hike in the woods under the assumption that the freezing weather will keep down the level of bugs and so I hit iTunes one last time. And look what miraculously downloaded into my computer:
http://scotthorton.org/2013/05/24/52313-robert-p-murphy/
My problem with Krugman is less his POV than how he dishonestly argues it, as described accurately here and in other places as a “heads-I-win-tails-you-lose” strategy. There’s continuous talk about comparing predictions, but that’s one I made a few years back that’s turned out 100% correct. I knew Krugman would try and carve out a position where he could try and vindicate himself no matter what. Argue for billions and billions more in stimulus, and if things somehow remain murky, he can always cry, “See, I said to do more!!!” And if things start looking a little better without all that added stimulus, he can still say, “See, they did something and now we’re better of for it!!!” What’s the point of even bothering to argue with someone so intellectually and morally bankrupt?
I seriously wouldn’t even bother with Krugman anymore. He’s proven himself to be a complete waste of time.
I haven’t read every comment on here, which I probably should have, so this point was probably made already. Krugman says Europe has implemented crippling austerity, which has sent the European nations back into a recession. Krugman says that the US has not implemented the same sort of austerity because the Obama administration blocked it, but also has not engaged in sufficient fiscal stimulus to generate a strong recovery. Instead, the US has been experiencing a luke warm recovery which has been enough to start to reduce the deficit, along with the sequester and other deficit cutting measures. As a number of economists have recently noticed, the recent deficit cutting does now appear to be slowing the economy.
Whether one agrees with this or not, this I think is what Krugman has been saying, more or less.
When I see 200 comments, I know Lord Keynes has been here.