01 May 2013

Krugman’s Botched Inflation Call and Scary Other-Country Reference

Inflation, Krugman 254 Comments

Ideally someone else would make this post, since it will seem petty and defensive coming from me, but sometimes you look inside yourself and realize that you are the only one who can get the job done.

Anyway, I think it’s fair to say that Paul Krugman has been running around for a good two years with variants of the following (which are my words, but very much in the spirit of what he’s been saying):

[FAKE PAUL KRUGMAN QUOTE]: I can’t believe the shameless dogmatism of these right-wingers. Ever since the crisis unfolded, they’ve been trotting out scary-looking charts of the monetary base, predicting huge surges in [price] inflation, and even saying the US was headed the way of Zimbabwe. Well, history has shown them to be totally wrong. And yet, even though their model spit out erroneous predictions about inflation, they continue with the same policy recommendations that they were giving in the beginning. It’s really astounding to behold.

I’m not even going to bother citing the above; Krugman has obviously been making that type of case repeatedly for years now.

In this context, let’s review a Krugman post from February 2010 when he wrote:

Now, the measurement issue: we’d like to keep track of this sort of inflation inertia, both on the upside and on the downside — because just as embedded inflation is hard to get rid of, so is embedded deflation (ask the Japanese)…

The standard measure tries to do this by excluding the obviously non-inertial prices: food and energy. But are they the whole story? Of course not…Hence the growing preference among many economists for measures like medians and trimmed means, which exclude prices that move by a lot in any given month, presumably therefore isolating the prices that move sluggishly, which is what we want.

And what these measures show is an ongoing process of disinflation that could, in not too long, turn into outright deflation:

Japan, here we come.

So in conjunction with that chart, Krugman is clearly predicting that the line will keep falling, perhaps even crossing into negative territory, and then will stay down there indefinitely. That’s what happened in Japan, after all: According to this website, over the last 20 years Japan’s CPI has been virtually flat. (This more official-looking site shows Japan’s annual CPI increases have been slightly negative, typically, for the last decade.)

So, how did Krugman’s prediction pan out? Is it true that the Cleveland Fed’s measures of yr/yr median and trimmed CPI kept falling, perhaps even going into negative territory, and then stayed there for years on end? Here’s the chart from the Cleveland Fed (Krugman’s source):

Oops. Krugman’s prediction totally blew up in his face about 7 months later. Rather than falling into negative territory, and not even just staying at its current level, both of the “core” inflation measures roughly tripled more than doubled, jumping back up to almost their pre-recession levels.

In light of his model’s bad inflation predictions, what did Krugman do? Well just recently, when linking to this old post, Krugman explained, “(In that post, I worried about deflation, which hasn’t happened; I’ve written a lot since about why).”

Now if memory serves, Krugman back in early 2010 favored massive government and Fed stimulus to prop up aggregate demand, because we were headed into Japanese-style deflation. When it turned out he was totally wrong about that prediction, he then began calling for— Oh.

Look, I’m not being coy here. If we only cared about the one specific measure of, “Which economist gave his readers a more accurate guess as to what the government’s official CPI numbers would be, over the next five years?” then Krugman was less wrong than me. But he was wrong, and he didn’t even get the direction right.

Yet that’s fine, in Krugman’s book. He’s a scientist, after all. He can still offer the exact same policy recommendations, because he’s “written a lot since” his erroneous worries, tweaking his story about downward wage rigidity blah blah blah.

In contrast, the people warning of large price inflation are supposed to hang up their keyboards and go fishing. They aren’t allowed to say, “Hmm, maybe paying interest on excess reserves, or the situation in Europe, or the effects of ObamaCare, might be contributing to the surprisingly large demand to hold cash…” Nope, that would just be grasping at straws on their part, a ridiculous inability to admit they were wrong about how prices would behave.

254 Responses to “Krugman’s Botched Inflation Call and Scary Other-Country Reference”

  1. Ken P says:

    Thanks Bob, I feel vindicated. I posted on his blog that IOER, the Europe situation and reserve requirements played a role in keeping inflation numbers down. I didnt bring up Obamacare because I didnt thinkabout how Iit resukts in cash holding. I didn’t bother bringing up the distortions to the caoital structure caused by fed mortgage buying. One of my biggest pet peeves is the myth of “the wealth effect”.

  2. Yosef says:

    Bob, you write “Now if memory serves, Krugman back in early 2010 favored massive government and Fed stimulus to prop up aggregate demand, because we were headed into Japanese-style deflation. When it turned out he was totally wrong about that prediction, he then began calling for— Oh.”

    Umm, didn’t Krugman call for massive government and Fed stimulus because a drop in aggregate demand would lead to massive unemployment and a drop in production? Sure, he thought we might also have disinflation possibly leading into deflation. But those were not the reasons he called for massive stimulus. As in, wasn’t the order or Krugman’s arguments “Hey, without massive government stimulus we will have a huge recession, mass unemployment and suffering. Also, a drop in aggregate demand will lead to disinflation, and possibly deflation, which is bad because the burden of debt increases.” So yeah, he was wrong about the deflation bit, but it wasn’t why he called for stimulus.

    (Also, in contrast to some of the price inflation people Krugman has mocked, Krugman has never said “Oh we really have deflation, the statsitics are just being manipulated! Just wait, they can’t hide it forever”)

  3. Dan says:

    I started smiling as soon as I saw your fist link, betting that it would be a classic cheesy clip, and you didn’t disappoint. The Last Dragon, awesome!

  4. Tel says:

    Now if memory serves, Krugman back in early 2010 favored massive government and Fed stimulus to prop up aggregate demand, because we were headed into Japanese-style deflation. When it turned out he was totally wrong about that prediction, he then began calling for— Oh.

    I think we have to be a bit fair to Krugman in that he called for massive government and Fed stimulus, in order to avoid deflation, and he got massive stimulus, and it does look like the deflation was successfully avoided. We got some inflation, but not spectacular inflation. Krugman got what he asked for, he should be happy.

    In an environment where the Fed can make large and seemingly arbitrary interventions, precise predictions are pretty much impossible. I kind of agree with Krugman on the point that if there had not been government intervention, we would have seem more deflation. I don’t think there’s anyone disputing the basic concept that printing money encourages inflation… not even Krugman. The question mark hangs over which way the general tendency of the economy is drifting at the moment.

    I might point out that there have been plenty of other massive government interventions above and beyond simple money printing. Many more people are on food stamps now. Fannie and Freddie needed to be nationalized when they crashed so badly that they needed to call on the guarantees that government had (strangely) offered them. The Fed is directly propping up the mortgage market. Government continues to find industries to prop up and places to spend more money. The entire student loan market has been pumped up the whazoo. New wars have started in the Middle East. Americans are spooked over gun control and are purchasing guns like there’s no tomorrow.

    Why even bother applying standard economic rules in a system that is screwed up from multiple directions simultaneously?

    Hmm, maybe paying interest on excess reserves, or the situation in Europe, or the effects of ObamaCare, might be contributing to the surprisingly large demand to hold cash…

    Yeah, and Obama Care too, and all sorts of “green” initiatives.

    • Bob Murphy says:

      Tel wrote:

      I think we have to be a bit fair to Krugman in that he called for massive government and Fed stimulus, in order to avoid deflation, and he got massive stimulus, and it does look like the deflation was successfully avoided. We got some inflation, but not spectacular inflation. Krugman got what he asked for, he should be happy.

      OK, but:

      (a) By Feb 2010 Krugman already had a good idea of what the Fed had and would be doing. He still said we were headed to Japan.

      (b) Krugman said he wouldn’t want anybody other than Ben Bernanke at the helm, so he can’t complain about the Fed’s policies.

      (c) Krugman just recently reaffirmed his view that monetary policy has no traction at the zero lower bound, because gosh it’s so hard to alter future expectations.

      (d) If you give Krugman that out, then I can just say, “Well, thank goodness we had unprecedented austerity the last few years! That’s why we avoided the Zimbabwe outcome.” Right?

      • Scott H. says:

        Isn’t it obvious then? If Krugman erred anywhere it was his underestimation of the Fed’s capabilities at the zero bound. This is even more obvious by the example we are living right now. Sequester cuts? Europe in shambles? Obama tax hikes kicking in? This is a Keynesian nightmare, and, yet, employment is improving. The stock market is going up. Sentiment is mildly improving. This shouldn’t happen in a Krugman universe where the Fed is powerless.

        Fine. But now we’ve got Sumner’s head swelling up like a balloon.

      • Scott H. says:

        Do I even need to mention Japan?

  5. Daniel Kuehn says:

    Now wait a minute Bob – if you say “I was wrong because the demand for money is really important right now” I think that’s exactly what people are expecting of you. They may still mock references to Obamacare. That one is a little gratuitous. We can fight about that. But yes, that’s exactly what people are saying: admit money demand is the principle story in a depression.

    What else do you think they want you to admit?

    Krugman made revisions to his worldview to account for the fact that we have low inflation rather than deflation. He spent a lot of time over the last couple years rethinking that.

    Isn’t that exactly what a scientific approach would do?

    • skylien says:

      “money demand is the principle story in a depression.”

      Which (high money demand) is caused by a huge overhang of bad debt in the system, and people try to avoid to be the greater fool and suffering the write off, which is why they hide in cash in the first place… So I would argue bad debt is the principle story in a depression.

    • Bob Roddis says:

      Krugman made revisions to his worldview to account for the fact that we have low inflation rather than deflation. He spent a lot of time over the last couple years rethinking that.

      The traditional Rothbardian view, reflected empirically in the Great Depression, is that “Inflation” often will flow into a bubble and/or specific lines of investment and not the CPI. In 2009, I assumed that there were not be significant late 70s-like CPI inflation because most of the new funny money would be going into propping collapsing asset prices which should have been allowed to collapse. I also assumed that the super-low interest rates would cause years and years of bad times (didn’t Bob Murphy predict that too?). I certainly did not predict that the Fed would pay the banks not to lend. Further, I did not predict that the American people (generation E) would react as the Eloi and allow the funneling of so much wealth to the financial elite without the Fed/Feds making an attempt inducing more loans to the non-elite. I assumed that the American people would have complained more. Or at least complained the slightest bit without taking it all like cowards. The complaining would have prompted more lending and more CPI inflation.

      Both predictions in 2009 of significant CPI inflation and/or propped up asset prices is completely consistent with Austrian analysis. There is NOTHING to revisit or rethink other than using the episode as an example of the level of outrages the authorities might perform and that “the masses” will tolerate.

      • Ken P says:

        This is pretty close to the dominant model in my mind, especially the distortion of the capital structure by force feeding housing. (I’m guessing that’s the bubble you are referring to). Housing prices are pretty high by historical income/housing ratios, despite the fact that building costs have dropped. To me, economics is largely about efficiency and I dont see it as progress in efficiency for people to pay a larger percentage of their income on housing.

    • Bob Murphy says:

      DK wrote:

      Now wait a minute Bob – if you say “I was wrong because the demand for money is really important right now” I think that’s exactly what people are expecting of you. They may still mock references to Obamacare. That one is a little gratuitous. We can fight about that. But yes, that’s exactly what people are saying: admit money demand is the principle story in a depression.
      What else do you think they want you to admit?

      Are you kidding me Daniel? They want me to say, “Running big deficits and expansionary monetary policy are good policies right now.”

      • Ken P says:

        It sounds like everyone agrees that there is high money demand and that it is keeping inflation from occurring in the face of fed printing.

        If you wanted a policy approach to ease money, wouldn’t it make more sense to lift policies that are restricting it rather than creating opposing policies?

        I see current policy like having people push on opposing sides of a car and saying “Don’t worry it’s not going anywhere!” At some point something will let go.

    • Rob Rawlings says:

      “Krugman made revisions to his worldview to account for the fact that we have low inflation rather than deflation. He spent a lot of time over the last couple years rethinking that.”

      Daniel,

      Genuine question as I am not a regular reader of Krugman’s blog: What were the reasons he gave why we didn’t get deflation ? He clearly thinks we are in a liquidity trap where no amount of money creation will increase inflation which is why he thinks that monetary policy is effective. I assume that this would also prevent monetary policy preventing deflation ? If so then does he see the lack of deflation as down to fiscal policy or just luck that the demand for money stopped increasing ?

    • Major_Freedom says:

      “Krugman made revisions to his worldview to account for the fact that we have low inflation rather than deflation. He spent a lot of time over the last couple years rethinking that.”

      Why hasn’t DeKrugman completely abandoned their entire worldviews, the way they wanted Murphy to do so, on the basis of incorrect predictions, that all three individuals have made?

      DeKrugman hasn’t made any revisions to their beliefs concerning government spending, or inflation, or the drivers of economic progress. Those are all the same. What they have changed are what I like to call humblebrags. Seemingly admitting one was wrong, but implicitly at the same time complimenting oneself. E.g. “I underestimated just how right my theory is.” “I made the mistake of believing politicians are just as intelligent as me.”

      DeKrugman believes that incorrect predictions are not sufficient to abandon Keynesianism, but are sufficient to abandon Austrianism. The irony is that Austrianism doesn’t even make empirical predictions.

      What DeKrugman are doing, I think, are psychologically projecting. They take all the self discomfort and self resentment that comes with making incorrect predictions, and dumping it all on Austrian economists. Sort of like how a gay Republican can be the loudest critic of other people’s “alternative” lifestyles. Their own clinging to Keynesianism despite making prediction errors, are communicated to others as “Austrians are dogmatists who won’t change their theories.”, i.e. won’t change them into Keynesian theories like mine.

    • Matt Tanous says:

      “admit money demand is the principle story in a depression.”

      Uh.. the only “admission” here is the fact that money demand was higher than those expecting high price inflation expected. It’s always been known that unusually high demand for money can temporarily slow price inflation, as the price rise occurs when the money is starting to cycle through the economy.

      That doesn’t make it the “principal story in a depression”. In fact, it would have been an entirely unrelated factor if the “powers that be” had not acted so ridiculously with the money printing and the bailouts and everything. Including the uncertainty created by Obamacare. (Wherein my poorer friends are now all “how the hell am I going to get insurance? this is stupid!”)

  6. Bob Roddis says:

    Krugman wrote “Fine Austrian Whines” 2/20/13:

    Substance aside — not that substance isn’t important — Austrian economics very much has the psychology of a cult. Its devotees believe that they have access to a truth that generations of mainstream economists have somehow failed to discern; they go wild at any suggestion that maybe they’re the ones who have an intellectual blind spot. And as with all cults, the failure of prophecy — in this case, the prophecy of soaring inflation from deficits and monetary expansion — only strengthens the determination of the faithful to uphold the faith.

    It would be sort of funny if it weren’t for the fact that this cult has large influence within the GOP.

    http://krugman.blogs.nytimes.com/2013/02/20/fine-austrian-whines/

  7. Bob Roddis says:

    Krugman wrote “On Not Learning Continued” 12/31/12:

    Robert Murphy replies to Brad DeLong, and DeLong is not happy — for good reason. But I think there’s also a broader point.

    Brad’s ire reflects Murphy’s apparent belief that his failed inflation forecast is OK because we just so happen to have faced a huge deflationary downdraft that offset the inflationary impact of Fed expansion. As Brad says, if that’s right, we should be hailing Ben Bernanke for preventing a catastrophic deflation, not attacking him for doing too much. Indeed, if you believe that there are lots of shocks of this magnitude, you should be a big supporter of activist monetary policy.

    My broader point, however, involves Murphy’s main argument, which is “Well, some Keynesians got their unemployment predictions wrong, so there.”

    What’s wrong with this line of attack? Two things, actually.

    First, it’s really important to distinguish between fundamental predictions of a model and predictions that an economist happens to make that don’t really come from the model.

    http://krugman.blogs.nytimes.com/2012/12/31/on-not-learning-continued/

    2009 Austrian predictions about what the Fed would do in the ensuing years didn’t really come from a model, just guesstimates about what actions authorities would be taking. So, according to Krugman, they are excusable, right? Further, it is clear that Krugman has no familiarity with the Austrian notion of funny money propping up asset prices. Or anything else Austrian other than alleged failed inflation predictions from 2009. This all sounds just like another episode of Krugman’s dishonest and dishonorable behavior entitled “On Not Learning, Continued”.

    • Major_Freedom says:

      Notice the bait and switch from Krugman. Even if Murphy can be excused for making a personal prediction that doesn’t pop out of any Austrian model, the “main point” remains that prices did not fall, so praise Bernanke and poo poo Murphy.

      Krugman is constantly switching contexts, never staying on one topic enough to expose his own ineptitude.

  8. Bob Roddis says:

    In “On Not Learning, Continued”, Krugman continues:

    In short, some predictions matter more than others.

    Beyond that is the question of how you react if your prediction goes badly wrong.

    The fact is that while Keynesians predicting a fast recovery weren’t really relying on their models, the failure of that fast recovery has nonetheless prompted quite a lot of soul-searching and rethinking. It is now standard, in a way that it wasn’t before, to argue that recessions that follow financial crises have a very different time path of recovery from other recessions, and that debt overhang, in particular, poses special problems.

    So Keynesian thinking has evolved in important ways; we’ve learned from our mistakes (where by “our”, as it happens, I don’t exactly mean “my” — I expected a slow recovery all along; but the actual event has nonetheless led me to substantial rethinking). The fundamental concepts of demand-side slumps and the importance of the zero lower bound remain, but there’s a lot of further refinement that changes the way we think.

    Has there been anything comparable on the Austrian/Austerian side? Not that I can see. All I see are excuses — hey, we would have had inflation except for the Europeans, or something. And to return to Brad’s point, there doesn’t even seem to be any consideration of the implications for policy if in fact things like a debt crisis on the other side of the Atlantic can suddenly triple the apparent demand for high-powered money.

    Being willing to learn matters. Unfortunately, that willingness seems absent from many people who consider themselves economic experts.

  9. Wonks Anonymous says:

    Krugman doesn’t seem to be making that strong of a prediction.

    • Major_Freedom says:

      …because it turned out wrong.

    • Bob Murphy says:

      Wonks Anon wrote:

      Krugman doesn’t seem to be making that strong of a prediction.

      Yes, I suppose maybe he and Robin were just taking a trip to Japan the following day, and I misread him.

      • Transformer says:

        If the prediction is meant to be :

        “And what these measures show is an ongoing process of disinflation that could, in not too long, turn into outright deflation:”

        Then the use of the word “could” means that its not really a prediction at all.

  10. Bob Roddis says:

    I quoted Krugman supra:

    Brad’s ire reflects Murphy’s apparent belief that his failed inflation forecast is OK because we just so happen to have faced a huge deflationary downdraft that offset the inflationary impact of Fed expansion. As Brad says, if that’s right, we should be hailing Ben Bernanke for preventing a catastrophic deflation, not attacking him for doing too much. Indeed, if you believe that there are lots of shocks of this magnitude, you should be a big supporter of activist monetary policy.

    Why why why? Keynesians: Please explain why it is so important for the authorities to distort prices from what real people will actually and voluntarily pay to some other artificial price?

    • Rob Rawlings says:

      Bob,

      I am not a Keynesian but I can see the logic in the view that increasing the supply of money to match an increase in demand is an optimization over expecting all other prices to change every time money demand changes. I think that in a world of free banking an “elastic” money supply would develop spontaneously. In a world of central banking we rely on the authorities to adjust the money supply and they do a horrible job.

      However effectively calling on the fed to freeze the money supply even when this is likely to lead to ugly outcomes seems a weird policy to me.

      • Major_Freedom says:

        “I am not a Keynesian but I can see the logic in the view that increasing the supply of money to match an increase in demand is an optimization over expecting all other prices to change every time money demand changes. ”

        Inflation of the money supply increases prices from what they otherwise would have been. Prices would have to change if inflation of the money supply is going to be considered to “work”.

        Moreover, the desire for scarce resources always outstrips the ability to produce them. There is no such thing as a single, society wide “demand for money” (holding), that manifests an optimal “offset” inflation of the money supply to “accommodate”, such that “prices don’t have to change”.

        For one thing, money is not the desired ends, but what money can eventually buy (consumer goods). If you understand the desire for holding money to be a desire for purchasing power, not just money for the sake of money, then you will realize that people want a particular sum of money relative to prevailing (and expected) prices. They want (what can be generally described as) a ratio.

        Also, every time an individual desires to hold more money, it is required that someone else desires to hold less money, and vice versa. That means there can’t be an increase in money holding without inflation of the money supply. Thus, the desires among individuals to hold money are actually insufficient justifications for increasing the quantity of money. The actual way people communicate their desire for more money, is on the side of relative profit and loss between money production, and goods production, in a competitive market. It is not communicated through falling aggregate spending and rising cash holding times.

        If everyone wants to hold more money than they own, then what is happening is that everyone is communicating a desire for increased purchasing power. More real goods and services increases purchasing power of money, not more money. If everyone wants more money, what they are actually wanting is a greater ability to purchase goods and services. Inflation of the money supply can’t accomplish this, because inflation will increase prices from what they otherwise would have been, which of course decreases the individual’s ability to purchase goods and services.

        Thus, seemingly paradoxically (to those who view more money as an in itself, i.e. those who have desires in line with central bankers), if aggregate spending suddenly falls, and cash holding times suddenly rise, then people may very well be communicating to you and each other that there are insufficient real resources, not insufficient money.

        This makes sense in relation to ABCT. Austrians argue that recessions are caused by malinvestment, i.e. too much invested in certain lines and not enough invested in other lines. This latter insufficiency is why cash holding times increase (and why aggregate spending falls). Individuals are communicating to investors to produce more goods that are currently insufficient, and they will continue to hold onto their money until those goods are ready. And guess what? The very market forces that are brought about by increased cash holding times, send the very signals investors need to learn to produce more of the insufficiently produced goods.

        Aggregated thinking minds completely misunderstand this whole process, because they look at aggregate output and employment, and go into hysteria whenever those aggregates decline, completely overlooking the dynamic, micro level coordinating forces within.

        The only reason Keynesianism has “some logical sense” to you, is because you are already predisposed to the same aggregated thinking and so you find some affinity with other aggregate doctrines. You believe that free banking will do a better job “managing” the various aggregates. Where are the micro considerations?

      • Ken P says:

        I would add the problem of debt, which makes deflation problematic. Otherwise, money is just a yardstick. It’s like trying to improve your gas mileage by switching to the metric system. I dont buy the “price expectations lead to lower demand” concept. I still buy computers. Keynsians seem to ignore the natural time preference people have.

        • Major_Freedom says:

          Keynesians are making a mountain out of a molehill. They’ll focus on the temporary, fleeting time period of a DELIMITED adjustment in cash preference that arises from a new price inflation trend (from positive to negative), and present that fleeting moment in time as some sort of universal, all encompassing, perpetual, UNLIMITED tendency of holding more and more cash for long and longer periods of time until spending falls to zero.

          Of course, in the real world, even if there is a rise in cash preference that comes from living in a world of 2% price deflation, as opposed to 2% price inflation, it would be delimited. Instead of people holding 5% of their assets in cash, they may hold 10% in cash, or whatever. There isn’t any reason for a continued, perpetual, constantly growing rise in the demand for money holding that arises from 2% annual price deflation, any more then there is a constant, perpetual constantly declining demand for money holding that arises from 2% annual price inflation.

          • Lord Keynes says:

            “For one thing, money is not the desired ends, but what money can eventually buy (consumer goods). If you understand the desire for holding money to be a desire for purchasing power, not just money for the sake of money, “

            False. Money can provide direct utility in and of itself by reducing anxiety, fear or uncertainty about the future.

            Even Hoppe agrees:

            “Because money can be employed for the instant satisfaction of the widest range of possible needs, it provides its owner with the best humanly possible protection against uncertainty. In holding money, its owner gains in the satisfaction of being able to meet instantly, as they unpredictably arise, the widest range of future contingencies. The investment in cash balances is an investment contra the (subjectively felt) aversion to uncertainty. A larger cash balance brings more relief from uncertainty aversion. ”
            Hans-Hermann Hoppe, “‘The Yield from Money Held’ Reconsidered,” Mises Daily, 14 May, 2009, http://mises.org/daily/3449

            • Major_Freedom says:

              “False. Money can provide direct utility in and of itself by reducing anxiety, fear or uncertainty about the future.”

              False. Money that provides “direct” utility by reducing anxiety, fear, or uncertainty, is in fact indirect utility relating to one’s future purchasing power.

              It is the same category of indirect utility that one experiences by holding an “income earning” capital asset. The present utility that one experiences knowing that one has an asset that can provide future consumption benefits, is an indirect utility, not a direct one.

              Nobody would hold money as an end if they knew that the money itself would have zero purchasing power beyond their subjective time horizon. It’s why people tend not to seek to hold more Deutchmarks to reduce their anxiety, fear, and uncertainty. It’s because they know Deutchmarks have little to no future purchasing power relating to consumption. The absence of indirect utility relating to future consumption is why they are not sought after (other than the rare instances of people collecting them as a means to sell them later on).

              Hoppe is not describing holding money as an end in itself. He is relating it to future consumption (ends).

              The anxiety, fear, and uncertainty, are anxieties, fears, and uncertainties relating one’s own future ability to procure consumer goods.

              For suppose that an individual who is anxious, fearful, and uncertain about the future, who lived on a deserted island, were given an inheritance of real wealth, such as (portable) mansions, luxury cars, roads, all the (non-perishable) food they could ever eat, clothing, and on and on, then there would be far less need to hold more money. It might be zero need to hold money.

              On the other hand, if someone were given a huge sum of paper currency, in a world with such little purchasing power (say they lived on the same deserted island) that the paper currency itself is worth virtually nothing in real terms, then their anxiety and fears and uncertainty would not be any less.

              In short, the reason why holding money can reduce anxiety, fear, and uncertainty, has to do with the prevailing and expected future purchasing power of money in terms of ends, i.e. consumption.

              Having mansions, cars, food, clothing, and so on, give direct utility in themselves. The fears and anxiety all relate to these ends. Having money does not give direct utility. It’s indirect utility akin to owning income earning assets.

              You’re misreading Hoppe.

            • Lord Keynes says:

              The fact that money has purchasing power or the power to extinguish debt or taxes does not in any way refute the observation that it has direct utility.

              One can compare the direct utility that money delivers with the utility provided by a fire alarm: imagine you buy a fire alarm and install it correctly in your home. You may never have a fire in your whole life, and the fire alarm may never in fact go off. Yet the ownership of a working fire alarm nevertheless provides direct utility: it gives you satisfaction or pleasure in diminishing your fears that a fire may occur at night in your house without your knowing or waking up in time.

              Money’s direct utility works in the same way: it diminishes our fear about the future. You can hold $1000 in your home or wallet your whole life without spending it and it will provide direct utility.

              • Major_Freedom says:

                “The fact that money has purchasing power or the power to extinguish debt or taxes does not in any way refute the observation that it has direct utility.”

                The fact that money is earned so as to procure future consumption ends, DOES refute the false observation that money has direct utility.

                “One can compare the direct utility that money delivers with the utility provided by a fire alarm: imagine you buy a fire alarm and install it correctly in your home. You may never have a fire in your whole life, and the fire alarm may never in fact go off. Yet the ownership of a working fire alarm nevertheless provides direct utility: it gives you satisfaction or pleasure in diminishing your fears that a fire may occur at night in your house without your knowing or waking up in time.”

                You just made an argument that proves my point. Fire alarms have present utility because it is indirect utility. The direct utility is being able to consume in the future without burning to death.

                The satisfaction experienced from having a fire alarm relates to the direct future consumption utility of the home (if the fire alarm is installed in the home), or it relates the indirect utility of owning a capital asset (office, etc) which is itself indirect utility relating to future consumption as well.

                “Money’s direct utility works in the same way: it diminishes our fear about the future.”

                Money does not have direct utility when it is earned to diminish fears relating to FUTURE consumption.

                “You can hold $1000 in your home or wallet your whole life without spending it and it will provide direct utility”

                Not if you knew it has, or expect to have, zero purchasing power relating to consumption.

              • Lord Keynes says:

                “Fire alarms have present utility because it is indirect utility. The direct utility is being able to consume in the future without burning to death.”I

                It is not indirect, but direct, by reducing your fear or anxiety about the future.

                “Money does not have direct utility when it is earned to diminish fears relating to FUTURE consumption.”

                It does direct utility .

                And your emphasis just on consumption is also misplaced.

                It could be used to repay debt or taxes or fines.

              • Major_Freedom says:

                “It does direct utility .”

                That doesn’t even make sense.

                If what you meant to say is “It does have direct utility”, then you’re still wrong and repeating it over and over again won’t make it true.

                If there was no house as a consumer end, or place of business as an indirect means to acquiring a future consumer end, then the fire alarm would not derive any (indirect) utility. It is because of the direct utility experienced consuming the home (or indirect utility experienced using a place of business) that the fire alarm has indirect utility.

                “And your emphasis just on consumption is also misplaced.”

                No it isn’t. Consumption is the ends to which means are directed.

                You are fallaciously asserting some direct, i.e. final, utility can be experienced through a means that only has value because of its dependency on the subjective end.

                “It could be used to repay debt or taxes or fines.”

                Repayment of debt…so that one has an opportunity to consume more in the future, as opposed to have the lender take the claim for that future consumption, through either collateral delivery, which is itself either consumption or capital (means to future consumption).

                It’s very easy to see that the utility experienced holding money is indirect, not direct. Suppose someone had $10000 in cash. If for whatever reason the supply of money expanded, then purchasing power of that money will fall, and the allegedly direct utility of reducing fear and uncertainty, would also decline.

                There is a difference between you having $10000 in cash while everyone receives an additional sum of money, and you having a house or food or other consumer good for your own consumption, while everyone else receives an additional supply of consumer goods as well for their own consumption. Your fear and uncertainty here will not be any less, because the real consumer goods you own are providing you with direct utility.

                Not so with money. If a person holds $10000 in cash to reduce their fear or uncertainty, then their fear and uncertainty will be increased if everyone else came into ownership of more money. Why? Because money provides indirect, not direct, utility.

            • Matt Tanous says:

              “Money can provide direct utility in and of itself by reducing anxiety, fear or uncertainty about the future.”

              This is indirect utility. It can only reduce anxiety, fear or uncertainty because it can provide utility as a medium of exchange.

        • Lord Keynes says:

          “I dont buy the “price expectations lead to lower demand” concept.”

          Debt deflation does.

          • skylien says:

            Debt deflation is just another phrase for liquidating bad debt, which has to be done anyway. A loss is loss and cannot be turned into a profit.

            The only thing you can do is to try to spread the losses as far as possible or/and delay its write off. Yet this has its own consequences. Like even more bad debt, false price signals, increasing moral hazard etc..

            • Major_Freedom says:

              Just like an individual criminal is immoral, but a criminal gang writ large is moral (government), so too is it the case with LK that individual debt default is moral, but “widescale” debt defaults is immoral.

              The grey area in between the individual and the community is where LK flips logic and reason upside down. All statists do this.

              • Lord Keynes says:

                M_F has no understanding of what debt deflation even is.

                In his ridiculous world view, cutting wages and prices is the solution to economic recession/depression to restore the tendency towards market clearing prices/wages.

                Except cutting wages when nominal debt remains fixed is just a recipe for inducing mass bankruptcy, since the real burden of debt servicing will soar as wages are cut.

              • Anonymous says:

                LK has no understanding of what debt deflation is.

                In his ridiculous world view, cutting wages and prices is not the solution to economic recession/depression to restore the tendency towards market clearing prices/wages.

                Yes, cutting wages when nominal debt remains fixed is a recipe for inducing mass bankruptcy, but that liquidation IS the cure, since the nominal claims (interest and principal) are relating to projects that are not physically sustainable.

                LK wants everyone to believe that a healthy capitalist economist contains zero bankruptcies.

                LK wants everyone to believe that the market process of exchanging private property subject to profit and loss, doesn’t contain losses.

                LK wants everyone to fear bankruptcies as inherently evil, when in reality they are a healthy cure to malinvestment.

                LK takes a refusal to cower in fear and refusal to seek monopolists to delude us with funny money, as some sort of evidence that one does not understand the economics of debt deflation.

                LK is smuggling in an implicit value judgment of “We ought to prevent bankruptcies using coercive monopoly funny money regimes.”

                LK’s base morality is exposed once again after his economics are revealed as fallacious.

              • Major_Freedom says:

                I posted my response anonymously by mistake, so when Murphy accepts my response, you’ll see it.

                In short, you’re smuggling in an implicit ethical claim that bankruptcies ought to be prevented by coercion from monopoly funny money activity, after your economics have been revealed as fallacious.

              • Lord Keynes says:

                No, I am not even assuming any ethical judgement at all.

                I am correcting demonstrating why your economic argument in favour of downwardly flexible wages and prices as an actual solution to depression does not yield the recovery you think does in economic terms.

                To the credit of other Austrians, they are well aware of the reality of debt deflation.

                E.g., even the GMU Ausrians recognise its the reality

                http://www.coordinationproblem.org/2009/11/is-the-debtdeflation-theory-of-depressions-as-insightful-as-has-been-suggested.html

                Of course, no doubt we will hear the no true Scotsman fallacy again as you complain that GMU Austrians are not really Austrian at all, but evil statist thugs, or some such garbage.

              • Lord Keynes says:

                “cutting wages when nominal debt remains fixed is a recipe for inducing mass bankruptcy, but that liquidation IS the cure, since the nominal claims (interest and principal) are relating to projects that are not physically sustainable.”

                In a depression when there are vast idle resources, idle capital stock and many unemployed workers, all capital projects base don debt are “physically sustainable, are they”!

                We are witness to pure genius here.

              • Major_Freedom says:

                “No, I am not even assuming any ethical judgement at all.”

                Yes, you are. You are advocating for the ethical rule that states, “If there are bankruptcies, then people OUGHT to engage in non-market activity to prevent it.”

                “I am correcting demonstrating why your economic argument in favour of downwardly flexible wages and prices as an actual solution to depression does not yield the recovery you think does in economic terms.”

                But it does. The bankruptcies are not divorced from the laissez-faire argument. You’re pretending that bankruptcies, because they occur in the laissez-faire solution, are somehow a surprise.

                Not so.

                Falling wages rates and prices, AND liquidation of bad debt, are all components of the laissez-faire solution which sees a tendency towards full employment and output.

                Falling prices and wage rates, coupled with liquidation of bad debt, are all, but not exclusively, components of economic recovery.

                You’re not pointing out any incorrect economic thinking on my part. Depressions are cured by, among other things, liquidation of bad debt, i.e. bankruptcies.

                “To the credit of other Austrians, they are well aware of the reality of debt deflation.”

                To refuse to cry that the sky is falling when debt is defaulted on, to refuse to advocate for inflation to stop healthy bankruptcies, to refuse to hamper recovery by claiming that bankruptcies are somehow not a part of recovery, does NOT imply that I “do not understand debt deflation.”

                I just do not adhere to the same immoral framework as you, which is that if bankruptcies occur, then people OUGHT to engage in coercive activity to stop them.

                You’re not merely pointing out the imaginary notion that you’re correcting my arguments on what constitutes getting out of depression.

                “E.g., even the GMU Ausrians recognise its the reality”

                Even them? Even X believes this. Even Y believes that. This is appeal to authority.

                “Of course, no doubt we will hear the no true Scotsman fallacy again as you complain that GMU Austrians are not really Austrian at all, but evil statist thugs, or some such garbage.”

                I am not here trying to define what constitutes an Austrian or non-Austrian response to bankruptcies. Austrian economics is value free. I am talking purely of the economics of it. During depressions, falling prices and wage rates, AND bankruptcies, subject to private property rights are, among other phenomena, components to economic recovery.

                It does not follow that because bankruptcies may lead to temporary increases in unemployment, that bankruptcies are therefore not a component of economic recovery and getting out of depression, any more than claiming that because the realization that one has only 40k bricks as opposed to 50k that one thought one had, and the corrections that occur during the reaction to this, which may include layoffs and rise in unemployment, somehow implies that changing course and reallocating capital and labor to new uses is also not a part of economic recovery and getting out of bad projects.

                “cutting wages when nominal debt remains fixed is a recipe for inducing mass bankruptcy, but that liquidation IS the cure, since the nominal claims (interest and principal) are relating to projects that are not physically sustainable.”

                “In a depression when there are vast idle resources, idle capital stock and many unemployed workers, all capital projects base don debt are “physically sustainable, are they”!”

                You said idle resources twice. Resources includes capital.

                The idle resources, and unemployment, are a reflection of the fact that their prior employments were not in line with actual individual consumer preferences. The increase in idleness and unemployment, after being malinvested by previous inflation, are very much a part of the cure process.

                “We are witness to pure genius here.”

                You dodged the point, and asked rhetorical questions to replace the emptiness in your economics.

  11. Rob Rawlings says:

    “Also, every time an individual desires to hold more money, it is required that someone else desires to hold less money”

    Why ?

    • Major_Freedom says:

      Because money is scarce, not unlimited.

  12. Bob Roddis says:

    We are all aware of the problem of “debt deflation”. It is always the result of the Keynesian bust. Without the Keynesian boom and bust, there is no such problem. The (one time) solution would be modification of debts in bankruptcy on a case-by-case basis so that the amount owed is changed to approximately the equivalent in repriced goods and services as was intended by the parties. This is now prohibited for a claim secured only by a security interest in real property that is the debtor’s principal residence because “the masses” are spineless and oblivious. The bank created the loan out of air with funny money and the banks have been made whole 5x by the government. But it’s illegal to force a mortgage note modification on them and the debtor must pay back the bank in money actually earned by them and because us peons do not have access to a “printing press”.

    11 USC 1322(b)(2) states:

    (b) Subject to subsections (a) and (c) of this section, the plan may—

    (2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims;

    http://www.law.cornell.edu/uscode/text/11/1322

    • Lord Keynes says:

      “It is always the result of the Keynesian bust. Without the Keynesian boom and bust, there is no such problem. “

      Debt deflation existed long before central banks or Keynesian fiscal policy.

      E.g., Australia in the 1890s.

      Of course, being ignorant of history is the stock in trade of Rothbardianism.

      • Ken B says:

        “Australia in the 1890s”

        John Maynard Keynes 5 June 1883 – 21 April 1946

        Thus are you refuted! All economic ills flow from one source LK …

      • Bob Roddis says:

        We’ve been over Australia in the 1890s 27x before, LK. They had a 40% reserve requirement right?

        And a little birdie told me The Classical Gold Standard Era was a Myth.

        http://socialdemocracy21stcentury.blogspot.com/2013/03/the-classical-gold-standard-era-was-myth.html

        zzzzzzzzzzzzzzzzzzzzzzz

      • K.P. says:

        I think he meant “Keynesian” in a broader manner – government meddling in general – and not necessarily a particular Keyenesian policy.

      • Bob Roddis says:

        Here’s a quote from a paper with a relatively positive view of the free banking era, which nonetheless notes the systemic collapse of 1893

        Australia provides a textbook example of free banking in practice. One writer on the subject commented that in Australia “the legal framework with which banks operated was perhaps the least restrictive of any on
        record” (Dowd 1992).Butlin (1953),commented that “there was no
        tender law, no central bank, no legal control over the total volume of bank loans, and only a very primitive control by the banks themselves through a loosely applied rule of thumb (cash reserves should be to one-third the sum of deposits and notes) concerning reserves against all liabilities”.

        the 1840 Colonial Bank Regulations issued by British Treasury governed colonial banking. The requirements included that: capital should be a determinant amount and must be fully subscribed; total debts must not exceed three times the paid up capital and that all notes were to be payable on demand in specie at the place of issue. Failure to pay on demand for a total of 60 days in any year entailed forfeiture of incorporation. Personal liability for bank shareholders was capped at an amount equal to twice capital and loans against real estate, shops or merchandise were to be prohibited. Amendments to the regulations in 1846 limited the note issue to the amount of paid up capital.
        Banking was not substantially affected by the regulations, however. For example, the restrictions on total debt and note issue were largely ignored (Butlin 1986). Likewise, banks found loopholes around the prohibition on lending for land (Pope 1989). In practice, Australian colonial banks were allowed to raise the limits on note issue by including coin and bullion in paid-up capital. Over time, even this stricture was relaxed; by 1856 the Bank of Australasia secured a licence to print private notes up to the value of three times its specie and bullion holdings. Reserve requirements were easily met as “double counting” was permitted: reserves used to back the note issue were simultaneously used to provide liquidity in the event of a deposit withdrawal. Rules limiting total indebtedness were also no threat because deposits were excluded.
        This freedom of note issue was, however, accompanied by strong liability provisions. In most colonies by the late 1860s, shareholders had unlimited liability for their note issue (Pope 1989).

        Source is OPTIMAL REGULATION OF ELECTRONIC MONEV: LESSONS FROM THE “FREE BANKING” ERA IN AUSTRALIA
        by
        THOMAS A. ROHLING AND MARK W. TAPLEY*
        Economic Papers: A journal of applied economics and policy

        Volume 17, Issue 4, pages 7–29, December 1998

        http://critiquesofcollectivism.blogspot.com/2011/02/john-quiggin-on-abct.html?showComment=1298001476947#c6188943951814638041

  13. Bob Roddis says:

    LK is again citing the very confused and/or dishonest Steve Keen. LK writes:

    At the rotten heart of neoclassical economics (even the New Keynesian models) is the notion that, if only prices and wages were flexible enough, the economy would converge back to full employment equilibrium.

    http://socialdemocracy21stcentury.blogspot.com/2013/04/steve-keen-on-instability-at-heart-of.html
    Keen writes:

    A defining feature of mainstream economic modelling is the belief that the economy is stable: given any disturbance, it will ultimately return to a state of tranquil growth. Mainstreamers argue over how fast this will happen: Chicago/Freshwater /New Classicals argue it adjusts instantly, while Saltwalter/New Keynesians say it will take time because of ‘frictions’ in the economy’s adjustment processes. But they both take the innate stability of the economy for granted, and this belief is hard-coded into their mathematical models.

    Note that both LK and Keen are oblivious (purposefully or not) to the impairment of economic calculation induced by the Keynesian/monetarist “solutions”. Further, neither prices nor wages are or can be “flexible”. People who negotiate prices and wages can be either flexible or inflexible, reasonable or not, intelligent or not. The “economy” is not mechanical nor does it lack or require “traction” or “momentum” especially from an external source. It does not require an omniscient third party to instill “flexibility” into inanimate concepts such as wages and prices. Absent some government bailout or subsidy, necessity will be the mother of invention and people will become amazingly flexible and reasonable in their negotiations, even though 99% of the “shocks” they must endure and resolve are caused by Keynesian policies in the first place.

    • Lord Keynes says:

      “Note that both LK and Keen are oblivious (purposefully or not) to the impairment of economic calculation induced by the Keynesian/monetarist “solutions”.”

      No, it is you who are unaware that supply and demand are equated by quantity signals in most markets, not flexible prices. The prices are not distorted way from some universal imaginary set of market clearing prices (even if such prices even exist in all markets) because most businesses do not even set them that way.

      The whole Austrian “economic calculation” fantasy is founded on plain and pure ignorance of actual real world economies.

      • Bob Roddis says:

        If a quantity changes, then its price per unit changes, right? Prices are set to maximize as much profit as possible. It does not matter if most businesses set prices by bobbing for apples or throwing darts if that maximizes profits.

        What the hell are you even talking about?

        • Ken B says:

          Not necessarily. Costs drop or demand rises and more are sold at the same price is the claim LK is making. I am not sure in terms of looking for the Langrange multipliers that that make a difference but it might if the new production involves “idle” resources. If you deny that any resource is “idle” but give only non falsifiable tests for that then LK might have a point here.
          I am not taking sides on this btw.

        • Lord Keynes says:

          Quantity changes = changes in employment and quantity of output, not prices.

          Not very good at understanding basic Keynesian concepts, are you roddis!

          • Bob Roddis says:

            I repeat, if quantity changes without an overt corresponding price change, then the underlying unit price has in fact changed, right?

            • Lord Keynes says:

              “underlying unit price “?

              If this is supposed to mean the sales price of one good, then no.

          • Bob Roddis says:

            One still does not know what to make or how much to charge unless and until someone buys whatever amount from you at whatever price they actually pay. You cannot know that for sure unless and until it happens, regardless of how many times it has happened before. LK’s hairsplitting is his M.O., but still pathetic.

            • Lord Keynes says:

              lol… So :

              (1) year 1: a business sells 100,000 units;

              (2) year 2: only 60,000 are sold, with monthly sales failing in last months, though prices are not cut;

              (3) year 3: in first quarter production is cut to 20,000 units (instead of 33,000 as in year 1), with a number of workers fired, though prices are not cut, and excess capacity is available to meet any extra demand.

              They sell 21,000 in Q1, with an extra 1,000 made by quickly using excess capacity.
              ———-

              This sort of thing happens in the real world all the time: quantity of produced goods is changed to match demand, prices are not changed.

              • Bob Roddis says:

                So freakin’ what? It’s a message from God. Sell your stupid business, learn to sing and dance and become a cabaret entertainer.

              • Lord Keynes says:

                Impeccably argued!

                We have a new nobel prize winner here.

                And there would be no need to sell the business. The business would still be profitable.

                The “economic coordination” that goes on in the real world is not
                the fantasy world Austrian economic calculation you require with universally flexible prices adjusted to market clearing levels.

              • Bob Roddis says:

                I HAVE NEVER SAID “PRICES ARE FLEXIBLE”. Or that Austrian theory is based upon “PRICES ARE FLEXIBLE”. See above.

                Reducing the amount made and sold without changing its price is simply an example of economic calculation. You nitwit (Bob Murphy, I just couldn’t help it).

                Obviously, you cannot sell stuff that people won’t buy and you sure can’t sell stuff for long that costs more to make than you can get for it. So what? Funny money and unpayable debt sure don’t solve those normal problems of existence in this universe.

              • Lord Keynes says:

                “I HAVE NEVER SAID “PRICES ARE FLEXIBLE”. Or that Austrian theory is based upon “PRICES ARE FLEXIBLE”.

                So … you are saying you are utterly ignorant of basic Austrian concepts?:

                “The characteristic feature of the market price is that it equalizes supply and demand. The size of the demand coincides with the size of supply not only in the imaginary construction of the evenly rotating economy. The notion of the plain state of rest as developed by the elementary theory of prices is a faithful description of what comes to pass in the market at every instant. Any deviation of a market price from the height at which supply and demand are equal is – in the unhampered market – self-liquidating.”

                (Mises, L. von. 2008. Human Action: A Treatise on Economics. The Scholar’s Edition. Mises Institute, Auburn, Ala. 756–757).
                ———-

                Perhaps you should read more Mises, bob?

              • Major_Freedom says:

                Self-liquidating. Do you know what that means? It means that supply and demand are not exactly an ERE.

                Mises held it to be a faithful description of what comes to pass in the market, but not identical to the market itself.

                In other words, if a price is not optimal from the perspective of the seller and/or buyer, the prices that prevail appear as self-liquidating, because if they’re “wrong”, meaning if they are incurring avoidable losses, then there is an incentive for sellers and buyers to change them.

                It doesn’t mean ERE is always present.

              • Ken B says:

                LK, they simply refuse to admit that any company could rationally act this way despite the fact that many do all the time.

                Bob R would be on stronger ground if he argued that said production changes ALSO involved price discrimination via various sales channels — which also DOES happen all the time. And that reall does mean a price cahnge.

              • Major_Freedom says:

                Ken B:

                “LK, they simply refuse to admit that any company could rationally act this way despite the fact that many do all the time.”

                There is nothing any company could ever do that would refute what I said. It is a fact that whatever prices a seller sets, the same market forces due to actual, real world consumer activity, would present themselves.

                LK just doesn’t understand pricing theory. He is using fallacious, arbitrary models of pure and perfect competition, MR=MC, instantaneous price changes, and other anti-real world, i.e. irrational, standards.

                The laissez-faire argument is not that the ERE is achievable. It is not that prices will instantaneously adjust to eliminate (temporary) local surpluses and shortages. It is not that depressions can never occur, that unemployment can never occur, that reduced output can never occur.

                It is only that introducing violence makes whatever bad situation worse, because violence prevents/hampers/eliminates reason.

              • Bob Roddis says:

                LK, they simply refuse to admit that any company could rationally act this way despite the fact that many do all the time.

                I’ve never “admitted” nor “denied” that companies might act this way. It’s totally dishonest to suggest or imply that either MF or I have implied that companies could not act this way in a voluntary setting. It’s also a dumb argument.

                Bob R would be on stronger ground if he argued that said production changes ALSO involved price discrimination via various sales channels — which also DOES happen all the time. And that reall does mean a price cahnge.

                I’ve never “admitted” nor “denied” that companies might act this way.

                What I have said is that people will tend to make whatever changes are necessary to make sales, whether that be changing the price, the volume, the quality or going out of business and becoming a cabaret singer. These “problems” can be solved by free people engaging in voluntary activities free of thuggish bureaucrats backed by SWAT teams diluting the funny money supply or engaging in government spending and debt and the can be best accomplished when the Keynesian horde is not distorting the pricing process.

  14. Edward says:

    “Why why why? Keynesians: Please explain why it is so important for the authorities to distort prices from what real people will actually and voluntarily pay to some other artificial price?”

    WHO SAYS IT’s a “DISTORTION?” Maybe its what real people want. Maybe the “artificial” thing to do is to let prices fall, to let demand deflation continue, let unemployment soar to 40%, millions of people get thrown from their homes, and put America at risk because people are so desperate they’ll listen to any charismatic would be dictator that comes along. Even if the Austrian story WERE true, don’t you think having a fed and a relatively free liberal democracy with “distortions” (Again, if you can’t hold up a non distortion baseline, if you cant predict, than your theory is insignificant ) is better than living under a totalitarian terror?

    Its like when I read certain things about Rothbard, and why neo-confederates supported the confederacy. Tariffs. I kid you not! Tariffs! As if tariffs and mercantilism were a bigger evil than the evil of slavery!. No sense of practical perspective at all! (And then there is that letter that Rothbard wrote to the dixie partt in the 1950′s. Disgusting) That was when I started to recover from Austrianism. Or at least the Mises-Rothbard kind

    • K.P. says:

      That last part seems to be out of the blue.

      • Ken B says:

        It sounds like a cri de coeur from a man who followed a false god until the scales fell from his eyes.

        • Richie says:

          Yep, similar to when I left Keynesianism and discovered the Austrians.

        • K.P. says:

          Really?

          As I read it as someone who just wanted to smear the Austrian School regardless of substance or relevance.

          The cry of “racist” or even “neo-confederate” is usually a good way to do that.

          • Ken B says:

            You don’t think the bit “I started to recover from Austrianism” means he stopped finding Austrian ideas so entrancing?

            Richie has it right. This is how people react when they get disenchanted with ideas.

            • K.P. says:

              Doesn’t matter as the Confederacy ( and Neo-Confederates) has nothing to do with Austrian ideas.

              • Ken B says:

                Of course it matters. I described it as a cri de coeur not as a fair characterization. The guy who made the statement agrees it’s a cri de coeur. You denied it was.
                So of course the actual wording of what he said, which makes plain that my readfing of it is correct matters. When discussing what people said, what they said matters.

              • K.P. says:

                My point had nothing to do with his passion, just pertinence. Of which, I think we agree, there wasn’t any.

              • Ken B says:

                We agree Austrianism need not involve accepting neo-confederate twaddle you mean? Yes we agree on that. There is some overlap in the people in those groups but there is no logical connection between the two. There is no logical connection between being a Keynesian and likng Lawrence Welk either.

    • Bob Roddis says:

      If people want something, they will buy it. Why doesn’t Occam’s razor apply here? The simple irrefutable truth is that you can’t read people’s minds but you can know what they paid for something. It’s like the Copernican system and it explains everything. Keynesianism ignores the obvious simple explanation, then is 50x more complicated but the elipses in their ptolemaic model are like what happens when you let the air out of balloons.

    • Bob Roddis says:

      A “non-distortion” baseline is merely enforcement of the NAP and general English common property, personal and contract rights. It’s not that complicated to examine historical transactions on a case by case basis to determine if they were impacted by violent interventions. You’ve made the traditional garbage LK argument which is just another Keynesian attempt to destroy well known and well understood concepts.

      Even though Detroit has an annual murder rate of 40 per 100,000 and murder will probably never be eliminated, it is still possible to define murder and determine on a case by case basis if a murder or other violent intervention has occurred. You garbage obfuscationism will not change that.

    • Bob Roddis says:

      Tariffs, huh?

      “Edward” not only has no understanding of the concept of economic calculation, he has no knowledge of Lincoln, who said in his famous (actually, not so famous) first inaugural address (and which was somehow missing from the Spielberg movie):

      I understand a proposed amendment to the Constitution—which amendment, however, I have not seen—has passed Congress, to the effect that the Federal Government shall never interfere with the domestic institutions of the States, including that of persons held to service. To avoid misconstruction of what I have said, I depart from my purpose not to speak of particular amendments so far as to say that, holding such a provision to now be implied constitutional law, I have no objection to its being made express and irrevocable.

      Further, Lincoln made it clear that he really didn’t care what the southern states did so long as long as they did not interfere with the Feds collecting tariffs in the south:

      In doing this there needs to be no bloodshed or violence, and there shall be none unless it be forced upon the national authority. The power confided to me will be used to hold, occupy, and possess the property and places belonging to the Government and to collect the duties and imposts; but beyond what may be necessary for these objects, there will be no invasion, no using of force against or among the people anywhere.

      http://www.bartleby.com/124/pres31.html

      The south may very well have seceded because of slavery, but Lincoln invaded the south to collect tariffs. This was the mainstream view of the Civil War course I took in college in 1971 back when we had the much more realistic New Left analysis of the US government and not the throne-sniffing stuff we endure today.

    • Major_Freedom says:

      “WHO SAYS IT’s a “DISTORTION?”

      It’s not who, it’s what. The what is the fact that individual preferences in the market are not able to be fully manifested in prices, because of the non-market inflation component. The distortions are called distortions because they don’t reflect voluntary, uncoerced preferences, subject to private property rights.

      “Maybe its what real people want.”

      What a stupid comment. It implies there are real people and fake people in the world. Real doesn’t mean “I want violence from monopoly institutions.”

      People do not want to be deceived. They want to believe things that are sometimes not true, but they don’t want to be purposefully lied to.

      Imagine we find a secret letter written by Keynes saying that he lied the entire time, that he was laissez-faire, and that he didn’t believe anything he wrote, and knew it was garbage. His followers, do you think they would appreciate that?

      “Maybe the “artificial” thing to do is to let prices fall, to let demand deflation continue, let unemployment soar to 40%, millions of people get thrown from their homes, and put America at risk because people are so desperate they’ll listen to any charismatic would be dictator that comes along.”

      Ah yes, the old tried tested, and falsified dogma that Nazis came to power because of deflation.

      “Even if the Austrian story WERE true, don’t you think having a fed and a relatively free liberal democracy with “distortions” (Again, if you can’t hold up a non distortion baseline, if you cant predict, than your theory is insignificant ) is better than living under a totalitarian terror?”

      Can you say FALSE DICHOTOMY?

      You’re fear mongering.

      “Its like when I read certain things about Rothbard, and why neo-confederates supported the confederacy. Tariffs. I kid you not! Tariffs! As if tariffs and mercantilism were a bigger evil than the evil of slavery!”

      100 years from now your ilk are likely going to be ridiculed as believing that free banking (peace) is a worse evil than central banking (violence).

      “No sense of practical perspective at all!”

      Violence isn’t practical! It destroys people’s practical solution making.

      “(And then there is that letter that Rothbard wrote to the dixie partt in the 1950′s. Disgusting)”

      Worse or better than Keynes’ advocacy of eugenics, his enti-semitism, and his advocating a communist takeover of all investment in the economy? Did that turn you off of Keynesianism? Of course not! Why? Because you’re only using ad hominem tu quoque as an excuse to deny Austrian economics principles!

      Look up ad hominem tu quoque. It’s your entire rant in a nutshell.

    • Ken P says:

      The original distortion was all the housing subsidies put in place by the government to begin with that pushed the average home to income ratio to unsustainable levels. Now the fed is trying to reestablish those distorted home prices on the backs of savers who would be receiving higher interest, pension plans for the same reason and future home buyers who will be stuck with overpriced homes. The crazy thing is the same policy makers restrict loans, while asset prices are at a low and dole out easy money to the banks and other highly qualified who gobble up the real estate and sell it off when the bubble is reinflated.

    • MR says:

      Dismissing the complexity of the Civil War and treating it as a good v. evil affair may make the whole thing easier to explain, but is a fundamentally flawed approach that can lead intelligent folks astray.

      Slavery is, and was, an evil. The North did not fight the South to end slavery.

      There was no evil monolith ‘the South’. I’ll recommend Freehling’s Road to Disunion for a review of the many South’s that existed. The Union went on to commit genocide against Natives, locked up Japanese and treated Filipinos quite poorly so there is no reason to attribute righteousness to the North or the Union.

      The common denominator for these atrocities is an authoritarian central Govt. The South did not invade the North and try to coerce free states into becoming slave states. Nor did the North invade the South for the purpose of ending slavery. The North invaded to keep the Union whole and try to eliminate the right to secede. Had the South won there would not be slavery today.

      That’s not to say the CSA would have been any better in terms of human rights, but a smaller Govt, with the ability to withdraw the consent to be governed, is desirable.

      While cheering on the South isn’t much more than Lost Cause sentimentality, at this point, understanding the nature of the conflict in a non-cartoonish way is always worthwhile.

      It was the power of the State that systematized slavery in America. Without the 3/5ths clause there is no Union. When the State expanded the scope of its power, as was the case with the LA purchase, the nature and balance of the original compact was altered.

      Slave Power was needed to protect the South against an abusive and more populous North, this is seen in the Tariff of Abominations that you dismiss above.

      When the State decides it can expand at will and threatens to overwhelm a minority population by watering down their voice you can expect the minority people will recognize that they have lost their self-determination and will react accordingly.

      If the Civil War were about ending slavery, why did US Grant own slaves up until the 13th amendment? Why did the Emancipation not apply to loyal slave States? Why did the Ebenezer Creek tragedy unfold the way it did? Why did Lincoln, a man who would suspend habeas corpus and who believed in re-colonization up until his death, utter so many atrocious things like:

      “We think slavery a great moral wrong, and while we do not claim the right to touch it where it exists we wish to treat it as a wrong in the territories, where our votes will reach it.”

      “I have no purpose, directly or indirectly, to interfere with the institution of slavery in the States where it exists. I believe I have no lawful right to do so, and I have no inclination to do so.”

      “If I could save the Union without freeing any slave I would do it, and if I could save it by freeing all the slaves I would do it; and if I could save it by freeing some and leaving others alone I would also do that.”

      “I will say then that I am not, nor ever have been in favor of bringing about in anyway the social and political equality of the white and black races – that I am not nor ever have been in favor of making voters or jurors of negroes, nor of qualifying them to hold office, nor to intermarry with white people; and I will say in addition to this that there is a physical difference between the white and black races which I believe will forever forbid the two races living together on terms of social and political equality.”

      “If as the friends of colonization hope, the present and coming generations of our countrymen shall by any means, succeed in freeing our land from the dangerous presence of slavery; and, at the same time, in restoring a captive people to their long-lost father-land, with bright prospects for the future; and this too, so gradually, that neither races nor individuals shall have suffered by the change, it will indeed be a glorious consummation.”

      Only ideologues try to boil down the Civil War into good v. evil.

    • Razer says:

      What’s scary is Edward is no less ignorant than the average statist/Keynesian on the street. He sounds like an ignorant crank but he’s not much different from even the ‘learned’ Keynesians.

      Also notice the telling use of words like ‘let’ where his desire for control come through crystal clear and his inability to imagine that the people he wants to control might not desire it. Put him back 150 years and he’d be pining on how the slave was lucky to be a slave since he had a roof over his head and three squares a day and full time employment. What else could the slave really want?

      • Lord Keynes says:

        “What else could the slave really want?”

        To be freed by government intervention?

        Oh wait, for the cultist Rothbardian that might be violating the “rights” and “property” of slave owners, wouldn’t it!

  15. Edward says:

    ” Absent some government bailout or subsidy, necessity will be the mother of invention and people will become amazingly flexible and reasonable in their negotiations, even though 99% of the “shocks” they must endure and resolve are caused by Keynesian policies in the first place.”

    Unless you MANDATE that debt be downward flexible, and the government passes a law that says all prices must fall equally be the same amount by which NGDP falls (If nominal spending falls by 10% all prices must fall by that amount also.)
    THe other option is you need to create mass bankruptcy and see unemployment rise to 40%-50% before workers are so DEMORALIZED they’ll accept wage cuts, Then, you’ll start to see recovery. When people go into new hoovervilles and star to live in tents around formerly wealthy cities because they can’t afford anywhere else.

    The second option is economic hell on earth. The first option, ironically is the only way demand deflation can proceed without pain. Ive never seen any austrian endorse it and with good reason. It requires more intervention, much more than if you simply conduct expansionary monetary policy. The champions of “freedom’ are calling for a solution that is more draconian, more authoritarian, than what the monetarists and the Keynesians are proposing

    • Lord Keynes says:

      Well said.

      • Major_Freedom says:

        So it’s OK to ground one’s arguments on morality, when the morality happens to be consistent with LK’s.

    • Bob Roddis says:

      The entire “problem” is caused by some form of funny money creation/FRB and today via fiat funny money dilution. The problem is caused by you interventionist/inflationists you should feel great shame. “Debt deflation” is horrible and is why inflationism and Keynesianism must be elimintated. I’ve proposed a one time CASE BY CASE solution which would never again be needed once we have competitive currencies.

      • Lord Keynes says:

        lol.. The attempt to create an inflexible money supply would itself induce deflation and debt deflation, as well as limit investment credit and strangle economic growth.

        Roddis would create the exact same problems with his “deftationism”.

        • Bob Roddis says:

          No reason in the world to believe that people are so stupid and pig-headed that they could not resolve that “problem” without artificial distortions of prices caused by Keynesians.

          • Lord Keynes says:

            They resolve the problem of creating a workable monetary and banking system by producing credit money and an endogenous, elastic money supply, just as in fact happened under the gold standard and through history in all develop capitalist economies.

            Of course, roddis has a vivid imagination or perhaps by some special power (magic?) just *knows* people would never so stupid as to use credit money, even though that is actually what they have done again and again, and for 1000s of years, probably since ancient Mesopotamia.

        • Major_Freedom says:

          “The attempt to create an inflexible money supply would itself induce deflation and debt deflation, as well as limit investment credit and strangle economic growth.”

          No, it would prevent debt inflation in the first place.

          Limiting credit in nominal terms is not synonymous with limiting credit in real terms.

          Just because there will likely be less nominal credit, it does not follow that worthwhile projects that require loan financing, won’t get financed. The loan amounts will just be less. But because credit expansion is less, so is the rate of monetary growth, which means prices and wage rates will be lower too. So the real value of the now smaller loans won’t be reduced.

          You’re completely ignoring prices, holding them constant, and then imagining the size of the credit pool shrinking, totally oblivious to the fact that prices and wage rates would be lower.

    • Major_Freedom says:

      “Unless you MANDATE that debt be downward flexible, and the government passes a law that says all prices must fall equally be the same amount by which NGDP falls (If nominal spending falls by 10% all prices must fall by that amount also.)”

      Debt doesn’t have to be MANDATED downward flexible. Individuals don’t need to be told to default on debt, thus making the debt contract worthless (after contractual recompense).

      “THe other option is you need to create mass bankruptcy and see unemployment rise to 40%-50% before workers are so DEMORALIZED they’ll accept wage cuts, Then, you’ll start to see recovery. When people go into new hoovervilles and star to live in tents around formerly wealthy cities because they can’t afford anywhere else.”

      And who will live in the original houses? The mortgage lenders (owners) are going to just keep them vacant for millions of years hence? Or will the prices FALL for homes as well? OMG! Price deflation!

      “The second option is economic hell on earth. The first option, ironically is the only way demand deflation can proceed without pain. Ive never seen any austrian endorse it and with good reason. It requires more intervention, much more than if you simply conduct expansionary monetary policy. The champions of “freedom’ are calling for a solution that is more draconian, more authoritarian, than what the monetarists and the Keynesians are proposing.”

      False. Intervention in general is a choice just like inflation in particular. It does not require “more” intervention. Violence is not automatic. Well, some of you might believe it is automatic because it seem to come automatic in your minds. But not all of us are heartless thugs.

    • Razer says:

      Edward, you’re not trying perpetuate the myth that deflation will cause its own viscous cycle whereby people will stop consuming because they expect lower prices thereby cause prices to drop lower and the cycle continues.

      The fact that you’re reading this post demolishes that silly idea. I’ll let you work out the logic of that statement for yourself. Also why do you also make statements like, “you must” and other statement that demand control of humans? Why do I never see you ever endorse concepts like free choice? I can only guess that we must all accept what you’d like for us, right? Because you know what’s best for each human, even though this knowledge is impossible to have.

  16. Edward says:

    “It sounds like a cri de coeur from a man who followed a false god until the scales fell from his eyes”

    Indeed. Then I discovered Milton Friedman. I discovered that you didn’t have to be insane, or a dogmatic religious fanatic, in order to be a libertarian.

    • Major_Freedom says:

      You mean you found a reason for your non-libertarian dogma to be called libertarian, to actual libertarian’s faces.

      Communist money production simply isn’t libertarian.

      • Ken B says:

        “dogmatic religious fanatic,”

        You are right to be offended MF. I don’t think you are religious.

        • Major_Freedom says:

          “…you didn’t have to be insane…”

    • Razer says:

      Friedman was an articulate advocate of Libertarian ideas, just like Jefferson was. But he Friedman believed, up until he wised up near the end of his life, in the state control of money production, which is a coercive at and at odds with “Free to Choose” so you can’t call him a Libertarian. Just like Jefferson wasn’t a Libertarian since he was a slave owner.

      Near the end, Friedman probably could be called a Libertarian as he recanted his earlier beliefs about central banking. You obviously didn’t learn much from him since you don’t even know that inflation is a monetary phenomenon. You are at the Mike Sax level of economic understanding, which is somewhere in the negative range. You need to grasp just a few principles before it can be said you actually understand ANYTHING about economics.

  17. Edward says:

    Thanks LK.

    I know we disagree on other things but we certainly agree on this

    • Major_Freedom says:

      You agree with state violence against innocent people. Everything else follows.

  18. Edward says:

    “So freakin’ what? It’s a message from God. Sell your stupid business, learn to sing and dance and become a cabaret entertainer.”

    Lol, They’re all out of business too. Your hard money policies have destroyed them

    • Lord Keynes says:

      And created mass unemployment. And probably destroyed the banking system too.

      But, hey, presumably bob can engage in some kind of “economic calculation” at abandoned factories.

      :)

      • Major_Freedom says:

        “And created mass unemployment. And probably destroyed the banking system too.”

        Unemployment and bankruptcies are components of healthy economies.

        It does not follow that because switching from an erroneous plan, to a different plan, brings about temporary labor and resource idleness, that switching away from erroneous plans is somehow not a component of economic recovery.

        Capitalism without losses isn’t capitalism.

      • Razer says:

        North Korea and Zimbabwe are perfect examples of Keynesian science. Why don’t you crow about those Keynesian success stories? Keynes himself said that totalitarian regimes are ideally suited for his advocacy. No pesky markets and free choice to get in the way of his ‘science.’ He even marveled at efficiency of the soviet system and hypothesized that they would easily outpace the economies of the West because of all that scientific control they had over their economy.

        Funny how the Keynesians never want credit for the failures of what are truly Keynesian economies.

        • Lord Keynes says:

          I didn’t think it was possible, but you appear to be even more ridiculous than MajorFreedom.

          Keynesianism presupposes that most production of goods is done privately, so how is a command economy like North Korea a “perfect example of Keynesian science”?

          Sounds like you have no idea what Keynesianism even is.

          • Major_Freedom says:

            “Keynesianism presupposes that most production of goods is done privately, so how is a command economy like North Korea a “perfect example of Keynesian science”?”

            Read the preface to the German Edition of The General Theory, written by Keynes himself:

            “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 [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.”

            Keynes’ theory is most easily adapted to totalitarianism because the core of the theory itself is perfected, in practise, in totalitarianism. In other words, the ideal society presupposed by Keynes’ theory, is a totalitarian one.

            Keynes’ advocacy of the “euthanasia of the rentier”? The “socialization of investment”? Hello?

            You’re utterly clueless of the very theory you’re peddling, and you’re pretending it is some sort of tradition in liberalism.

    • K.P. says:

      Is blaming hard money policies really a thing now?

    • Major_Freedom says:

      Then they were malinvestments. Wasteful activity as opposed to gainful activity. Wealth consuming instead of wealth generating.

      Hard money destroys systematic tendencies towards bad investments throughout the economy.

  19. Bob Roddis says:

    I’m going to bookmark this post with the comments because we have just another example of how LK and the horde of Keynesians do not understand economic calculation. Otherwise, we’ve hit another dead end with them.

    Bob Murphy:

    Heh this is actually funny. I had always assumed Roddis was being unfair when accusing LK–who has read a ton of Hayek–of not knowing the Austrian concept of economic calculation. But, based on LK’s angry retort, turns out Roddis was right./i>

    http://consultingbyrpm.com/blog/2012/09/tom-woods-keeps-krugmans-feet-to-the-fire.html#comment-45198

    • Lord Keynes says:

      So you are saying that universal flexible prices moving towards their market clearing levels are not a fundamental part of the Austrian notion of “economic calculation”?

      Sounds like you do not understand basic Austrian concepts there, roddis.

      “prices … are generated by the market process and serve as the data for economic calculation. These are realized prices; or, in other words, they are the actual outcome of the historical market process at each moment in time and are determined by the value scales of the marginal pairs in each market. They are, therefore, also market-clearing prices the establishment of which coincides with a momentary situation, what Mises calls the ‘plain state of rest’ (PSR), in which no market participant, given his existing marginal-utility rankings of goods and money and knowledge of prevailing prices, can enhance his welfare by participating in further exchange.”

      (Salerno, Joseph T. 1993. “Mises and Hayek Dehomogenized,” Review of Austrian Economics 6.2: 113–146. at p. 121).

      • Bob Roddis says:

        Can the rest of you believe this? THIS is the refutation of economic calculation?

        year 1: a business sells 100,000 units;

        year 2: only 60,000 are sold, with monthly sales failing in last months, though prices are not cut

        I get it! The Austrians never ever thought about the fact that people have to want to buy what you sell. If you can sell one widget for $1, then you can sell a trillion too! And who cares about quality? Or even what the thing is or what it is supposed to do? Oh, the market doesn’t work like that? Austrianism has been refuted!!!

        It’s taken over 3 years to drag this out of LK, but it was worth it.

        • Lord Keynes says:

          Why not answer the question? Instead of running away from it with the obvious fear that this comment shows?

          Are you saying that universal flexible prices moving towards their market clearing levels are not a fundamental part of the Austrian notion of “economic calculation”?

          • Bob Roddis says:

            What I am saying is that your example of unit prices staying the same while quantities sold decrease is nothing more than an outcome of economic calculation and which does not refute Austrian analysis in any way, shape or form, nor does it suggest that laissez faire must give way to interventionism, Keynesian or otherwise.

            • Lord Keynes says:

              Are you saying that universal flexible prices moving towards their market clearing levels are not a fundamental part of the Austrian notion of “economic calculation”?

              But Mises thinks so:

              “The characteristic feature of the market price is that it equalizes supply and demand. The size of the demand coincides with the size of supply not only in the imaginary construction of the evenly rotating economy. The notion of the plain state of rest as developed by the elementary theory of prices is a faithful description of what comes to pass in the market at every instant. Any deviation of a market price from the height at which supply and demand are equal is – in the unhampered market – self-liquidating.”

              (Mises, L. von. 2008. Human Action: A Treatise on Economics. The Scholar’s Edition. Mises Institute, Auburn, Ala. 756–757).

              Notice how Mises says:

              “The characteristic feature of the market price is that it equalizes supply and demand.

              Note how it is “market price “, not quantity adjustment.

              Congratulations, bob roddis, you have now demonstrated behind any shadow at all of a doubt that you utterly ignorant of basic Austrian concepts.

              Any time you accuse anyone else of that, all we have to do is link you comments above.

              • Bob Roddis says:

                Right. Year one, sell 100,000 units. Year two, sell 60,000 units. The other 40,000 sold for $0.

                It’s like a message. Don’t make stuff you can’t sell.

                You can’t be serious about this line of argument.

              • Lord Keynes says:

                Afraid of answering one tiny question are we??

                Afraid it will destroy your credibility completely?

                You should be.

                We both know you’ve been totally destroyed here.

                Are you saying that flexible prices moving towards their market clearing levels are not a fundamental part of the Austrian notion of “economic calculation”?

              • Bob Roddis says:

                People can see that A is selling X number of widgets for $Y (since people cannot read the mind of A or his customers). An entrepreneur thinks he can make them cheaper and better and sell them for less. So he does. If he’s right, he makes a profit. If he’s wrong, he doesn’t. The object is to make something at a market clearing price that makes a profit. People are going to TEND to make stuff that “clears the market” and makes a profit. Otherwise, their business might be sold off in a market clearing liquidation sale. This is not obscure, hidden, secret or opaque.

                You really are dense, as well as dishonest, aren’t you?

              • Major_Freedom says:

                LK, it is precisely you who is getting destroyed. Again.

              • Lord Keynes says:

                Are you saying that flexible prices moving towards their market clearing levels are not a fundamental part of the Austrian notion of “economic calculation”?

              • Major_Freedom says:

                “Are you saying that flexible prices moving towards their market clearing levels are not a fundamental part of the Austrian notion of “economic calculation”?”

                Flexible has a different meaning in Austrianism than it does in your caricature of Austrianism.

                Flexible does not mean instanteneous price changes to every single change in individual preferences and spending activity.

              • Lord Keynes says:

                “Flexible does not mean instanteneous price changes “

                And I did not assume it did. This is your straw man.

                So you are saying that buyers and sellers adjusting prices in a non-instantaneous manner, but flexibly over time in trades and thereby moving them towards their market clearing levels is a fundamental part of the Austrian notion of “economic calculation”?

              • Major_Freedom says:

                “And I did not assume it did. This is your straw man.”

                No, it isn’t. That is in fact your standard for what constitutes flexibility. You have made this perfectly clear over and over again, in your prior posts.

                Your memory is terrible. Don’t you remember your attempt to falsify Say’s Law, by claiming that since spending has to occur “immediately” after earning money in order for Say’s Law to be true, that it can’t be true because individuals always wait a positive amount of time after earning money, before they respend it?

                Well, you’re doing the same thing with prices and the time of adjustment. Flexibility to you means instantaneous. If any positive period of time goes by, and prices don’t change, then you rabble on about fix price markets, inflexibility this and inflexibility that.

                “So you are saying that buyers and sellers adjusting prices in a non-instantaneous manner, but flexibly over time in trades and thereby moving them towards their market clearing levels is a fundamental part of the Austrian notion of “economic calculation”?”

                LK, I read the entire thread. Try not to repeat the same question in fourteen different locations. It’s cluttering the blog. I answered this the first time you asked.

              • Lord Keynes says:

                “If any positive period of time goes by, and prices don’t change, then you rabble on about fix price markets, inflexibility this and inflexibility that.”

                Patently false and just further proof of your dishonesty.

                Fixprice markets are about business setting prices by means of costs of production plus profit markup.

                The empirical data shows that, depending on the type of market, prices can remain unchanged from 3 months to a year, despite changes in demand, and even then the changes are driven by costs of production or changes to the profit markup, not attempts to adjust prices to clear markets.

              • Lord Keynes says:

                “I answered this the first time you asked.”

                Really. And where have you given a straight answer?

              • Major_Freedom says:

                “Patently false and just further proof of your dishonesty.”

                It’s not false.

                “Fixprice markets are about business setting prices by means of costs of production plus profit markup.”

                I am the one who taught you that.

                Costs are a function of past prices paid for means of production. Prices for means of production can change going forward, which changes costs going forward, which enables sellers to change selling prices and earn profits.

                “The empirical data shows that, depending on the type of market, prices can remain unchanged from 3 months to a year, despite changes in demand, and even then the changes are driven by costs of production or changes to the profit markup, not attempts to adjust prices to clear markets.”

                That is the same thing as clearing markets. Not changing prices, and changing prices, are both components of tendencies towards clearing markets.

                Lack of price changes is not in itself sufficient for there being a lack of a tendency towards clearing.

                And what difference does it make that “some markets” have prices that don’t change for 3 months to a year? Price flexibility does not mean all prices must change with a frequency of no fewer than once a year.

                Flexibility and inflexibility are actually human grounded concepts. They are not “out there”, “in” prices themselves.

                Prices being flexible is another way of saying that humans change prices when they expect to gain from doing so, relative to not changing those prices. It does not mean that prices themselves have an inner nature that makes them change at a certain frequency.

                See, the overall problem with your entire approach to economics, and Austrianism in particular, is your proclivity to treating the economy the way a chemist treats chemicals in a lab. You’re trying to find understanding of economic activity by observing economic data, and you’re trying to find some relationships between economic concepts through observations.

                But you can’t do that for economics. Economics is a study of us humans. You have to think self-reflectively, and at the same time, infer the inward reflection in other human beings as well.

                Price flexibility is not actually a property of price ratios. It is a manifestation of human action.

                “Really. And where have you given a straight answer?”

                Whenever you get upset at it. :)

          • Razer says:

            Why don’t you take on the basic proposition behind economic calculation instead of insisting on this mental judo and word twisting?

            Sack up and take it on if you aren’t secretly frightened of having to admit you’re worldview is rubbish?

            In fact, Bob, I would like to take on Austrian Economics on their own merits. I am not afraid to logically examine the premises my own theory is built on. I am not a coward like Keynesians and all other inflationists.

            And I bet I put up a better attack on Austrian concepts than any Keynesian or Monetarist ever has even though I’m just a laymen.

  20. Edward says:

    Smack down! Good job LK.

    • Lord Keynes says:

      Thanks, Edward.

      Even more interesting is bob roddis’s comment here:

      “I HAVE NEVER SAID “PRICES ARE FLEXIBLE”. Or that Austrian theory is based upon “PRICES ARE FLEXIBLE”.

      http://consultingbyrpm.com/blog/2013/05/krugmans-botched-inflation-call-and-scary-other-country-reference.html#comment-63037

      Wow. That is quite an admission.

      I mean all these years.. what was bob roddis even talking about complaining of prices being *distorted* by evil Keynesians or monetarists, if he thinks Austrian theory is not based on flexible prices? lol

      • Richie says:

        Awwww how sweet! LOL

      • Bob Roddis says:

        You cannot help your proclivity to distort, can you, LK?

        Further, neither prices nor wages are or can be “flexible”. People who negotiate prices and wages can be either flexible or inflexible, reasonable or not, intelligent or not. The “economy” is not mechanical nor does it lack or require “traction” or “momentum” especially from an external source. It does not require an omniscient third party to instill “flexibility” into inanimate concepts such as wages and prices. Absent some government bailout or subsidy, necessity will be the mother of invention and people will become amazingly flexible and reasonable in their negotiations, even though 99% of the “shocks” they must endure and resolve are caused by Keynesian policies in the first place.

        http://consultingbyrpm.com/blog/2013/05/krugmans-botched-inflation-call-and-scary-other-country-reference.html#comment-63001

        • Lord Keynes says:

          “People who negotiate prices and wages can be either flexible or inflexible, reasonable or not, intelligent or not”

          That people set prices is already implied and understood by me when I say you think “prices are flexible”.

          You’ll have to do better than spin desperate straw man arguments like this.

          So you can’t use your straw man again:

          Are you saying that buyers and sellers adjusting prices flexibly in trades and thereby moving them towards their market clearing levels are not a fundamental part of the Austrian notion of “economic calculation”?

          Even more afraid now?

          • Major_Freedom says:

            “That people set prices is already implied and understood by me when I say you think “prices are flexible.”

            Prices are set by choice. They are flexible when choices are constrained to the forces of other individual preferences subject to private property rights, i.e. market forces.

            Flexible prices just means that individuals tend to want to seek gains and avoid losses, and when the opportunity presents itself to offer or bid prices that are different from prevailing prices, new prices are set. And then same process repeats. New information, new preferences, new bid and ask offers, new prices.

            “Are you saying that buyers and sellers adjusting prices flexibly in trades and thereby moving them towards their market clearing levels are not a fundamental part of the Austrian notion of “economic calculation”?

            You are equivocating the term flexible. Flexible means something different in Austrianism than it does in your straw man caricature of Austrianism. Flexible prices does not mean prices instantly adjust every single moment in time there is a change to someone’s preferences. In Austrian economics, flexible prices means that prices will remain fixed for a period of time, but then change, and then remain fixed again, and then change again, and so on, as individual subjective preferences constrained to gains and losses in the division of labor, are reflected in maximally gainful and minimal loss inducing prices.

            Everything in Austrian analysis is constrained to the category of individual human action. Action is not infallible. Action is not all knowing. Human action occurring is the same thing as saying humans are not infallible and not omniscient.

            If you changed your preferences, and it is reflected in your spending, it does not mean that my ask and bid offers will instantly change on this side of the world. But your activity still has some effect on the real world, which changes it in some way, and I have to learn of those changes and how I can take advantage of the new circumstances first, before I will ACT in relation to your activity.

            But I can still say that there is a tendency for me to adjust my ask and bid offers, given the circumstances of the world around me, to enable me to seek the most gains and avoid the most losses. If I make a mistake, then I will change my actions if the mistake is constrained to constant causality. If I expect to make a mistake using means X in a context of millions of other humans acting, then I will avoid using means X. If I expect to maximally gain using means Y instead, then I will use means Y.

            This seeking of gains and avoidance of losses is what grounds the tendency of prices to be flexible, but not flexible in the silly way you understand it, which is from an irrational standard of human omniscience and infallibility.

            • Lord Keynes says:

              “Flexible means something different in Austrianism than it does in your straw man caricature of Austrianism. Flexible prices does not mean prices instantly adjust every single moment in time there is a change to someone’s preferences. In Austrian economics, flexible prices means that prices will remain fixed for a period of time, but then change, and then remain fixed again, and then change again, and so on, as individual subjective preferences constrained to gains and losses in the division of labor, are reflected in maximally gainful and minimal loss inducing prices.”

              Great.

              So you are saying that buyers and sellers adjusting prices in a non-instantaneous manner, but flexibly over time in trades and thereby moving them towards their market clearing levels is a fundamental part of the Austrian notion of “economic calculation”?

              Yes or no?

              • Major_Freedom says:

                “So you are saying that buyers and sellers adjusting prices in a non-instantaneous manner, but flexibly over time in trades and thereby moving them towards their market clearing levels is a fundamental part of the Austrian notion of “economic calculation”?”

                Every time you try to understand Austrian theory, you have to have in your mind individual purposeful behavior as the root cause.

                So read your paragraph again, but this time with individual action in mind.

                Then, include tendencies towards market clearing prices for money production itself, in a context of private property rights subject to profit and loss not only on real goods production, but money production as well, and you’d have the general basics of why market prices for goods and market prices for money tend towards clearing, where action comes to an end.

                But as stated, you would still have to understand WHY this tendency occurs. It cannot be understood mechanistically, as if the economy is a giant machine or object that just has to have its dials and knobs adjusted this way and that by macro-level power institutions, i.e. states, so that it runs the way Austrians say it runs.

                The price trajectories in the historical adjustment process cannot be ascertained a priori. They are only knowable through being borne out of the market process itself.

              • Lord Keynes says:

                So your answer is a qualified “yes”?

              • Major_Freedom says:

                Did you not read what I wrote?

              • Lord Keynes says:

                Yah, red herrings, straw man arguments and an evasion of giving straight answers, which is your operating procedure.

              • Major_Freedom says:

                “Yeah, red herrings, straw man arguments and an evasion of giving straight answers, which is your operating procedure.”

                Gotcha. You don’t like being refuted all the time.

      • Bob Roddis says:

        Also, I have tended to prefer the using the phrase “the terms of transaction” as opposed to “price” because it is a broader concept than mere “price”. LK and his Keynesians are now giggling like 2nd graders who just learned the word “titties” because the key concept that they refuse to understand is that “the terms of transaction” are unknown unless and until the transaction actually occurs and because those “terms of transaction” cannot be known in advance by the central authority. As Hayek has said in a quote repeatedly distorted by (drumroll) LK.

      • Razer says:

        LK, are you trying to say people’s preferences are not subjective? Are you even aware of Austrian concepts? I haven’t seen you address the basics yet.

        • Lord Keynes says:

          I am well aware of Austrian concepts, unlike the lame and evasive Bob roddis.

          Yes, value in the sense of the pleasure, utility, or happiness derived from a consumption good is subjective.

          That fact is in no way in conflict with Keynesian theory.

          • Bob Roddis says:

            You obviously understand nothing, you miserable liar. Your example of the ever decreasing sales volume with unchanged prices just demonstrates how effective price signals really are. The “solution” of you cement-headed Keynesians to this non-problem would be to create a real problem by seeking to steal someone else’s purchasing power so that people who really didn’t want or couldn’t afford to buy the same quantity as last year would still by buying that stuff with new funny money instead of allowing society to move on to different goods and lines of production that people actually want at prices they will actually pay without using stolen purchasing power.

            • Lord Keynes says:

              “You obviously understand nothing, “

              Easy way to settle this!:

              So you are saying that buyers and sellers adjusting prices in a flexible way in trades and thereby moving them towards their market clearing levels is NOT a fundamental part of the Austrian notion of “economic calculation”?

              Yes or no?

              Willing to answer? Or will continue to run and hide like the terrified coward you are?

              I bet the latter.

              • Bob Roddis says:

                Economic calculation is based, in part, upon people observing what products and services are successfully exchanged and on what terms in voluntary transactions. This includes consumer goods, capitals goods, parts of capital goods, interest rates etc…

                As I have explained to you at least 27x in the past, transactions in an artificial and unsustainable Keynesian boom will be at “market clearing prices” which will provide misleading information.

                I fail to see the central importance of “market clearing prices” as opposed to successful and unsuccessful prices and distorted and undistorted prices. Anything that has actually been sold has been sold for a “market clearing price”. People are going to tend to offer goods and services at prices which will result in a successful and profitable transaction. The key point is that these transactions be free of coercion and fraud which will distort the information that might be obtained from the transaction. Keynesian policy injects coercion, theft and fraud into all transactions employing diluted monopoly funny money and distorts the information resulting from “market clearing prices”.

                What exactly are you after here? This is not brain surgery and no one is hiding anything.

                As always, you’ve been routed but still want to split some more hairs for your cement-headed groupies with more misleading crap.

              • Lord Keynes says:

                “Anything that has actually been sold has been sold for a “market clearing price”. “

                That is a most incredible error.

                You have now shown us you do not even understand the meaning of market clearing price.

                You are utterly ignorant of basic Austrian concepts.

                This post will be proof of that in the future.

              • Bob Roddis says:

                A market clearing price is the price of goods or a service at which quantity supplied is equal to quantity demanded, also called the equilibrium price. Another market clearing price may be a price below equilibrium price to stimulate demand.[citation needed]
                In simple terms, this means that markets tend to move towards prices which balance the quantity supplied and the quantity demanded, such that the market will eventually be cleared of all surpluses and shortages (excess supply and demand).

                http://en.wikipedia.org/wiki/Market_clearing

                Do you have some other double secret version of this strange term? It’s really such a stupid term and I am always hesitant to use it. Maybe someone makes a bunch of stuff and no one wants it. Whatever. Solution? Don’t make any more of it. It’s a message.

                Hell, people on the positive end of a forced income stream get pretty inflexible about giving up their income stream. I’m thinking of slave owners and public employee unions. Those folks aren’t very flexible and neither are their “prices”. So what? The issue is always between voluntary behavior and transactions compelled at the point of a gun.

                As deeply dense and as dishonest as you are, the point you think you are making is always rather obscure.

              • Lord Keynes says:

                So you’re saying that you are utterly ignorant of basic Austrian concepts?:

                “The characteristic feature of the market price is that it equalizes supply and demand. The size of the demand coincides with the size of supply not only in the imaginary construction of the evenly rotating economy. The notion of the plain state of rest as developed by the elementary theory of prices is a faithful description of what comes to pass in the market at every instant. Any deviation of a market price from the height at which supply and demand are equal is – in the unhampered market – self-liquidating.

                (Mises, L. von. 2008. Human Action: A Treatise on Economics. The Scholar’s Edition. Mises Institute, Auburn, Ala. 756–757).

                Your statements above give absolute and final proof of your ignorance of Austrian theories of economic calculation.

              • guest says:

                He did say that the solution to having a surplus of something that no one wants is to stop producing it.

                Isn’t that self-liquidation?

    • Major_Freedom says:

      Seeing what you like to read isn’t equivalent of what you’re reading to be a “smackdown.”

      • Bob Roddis says:

        100,000 units selling for $1 means a total price of $100,000 for the item. 60,000 units selling for $1 means a total price of $60,000 for the item. The lower price and quantity demanded for the output were information signals which a central planner cannot replicate..

        MF, in your professional opinion, are LK and the rest of these Keynesians dense, dishonest or both?

        • Major_Freedom says:

          I think being dense is what got them to the position where they have to be dishonest in order to protect their denseness.

          • Bob Roddis says:

            Whatever else we have learned about them, they JUST DO NOT WANT THE AUSTRIAN ANALYSIS OF REALITY TO BE TRUE. All of them appear to be this way. They are totally committed to and emotionally invested in a big banker funny money scam for inexplicable reasons. We can psychoanalyze them until the end of the universe for the source of that emotional investment, but the fact remains that no amount of fact or reason will shake their obsession.

          • Bob Roddis says:

            For the record, I would love for the Keynesian version of reality to be true. If it were in fact moral and good for society, I could really get off on bossing people around. In fact, the more picky picky laws, the more jobs for lawyers.

            I guess I’m slightly emotionally invested my kids not living in a Mad Max Post Keynesian world (the real meaning of “Post Keynesian”).

  21. Edward says:

    MF

    “And who will live in the original houses?

    A lot of them will be abandoned and vacant. some will be sold but only to the richest percentage of people.

    ” The mortgage lenders (owners) are going to just keep them vacant for millions of years hence? Or will the prices FALL for homes as well? OMG! Price deflation!”

    You assuming that home prices will fall to match or surpass the fall in people’s incomes. That isn’t necessarily the case

    • Major_Freedom says:

      “A lot of them will be abandoned and vacant. some will be sold but only to the richest percentage of people.”

      Uh huh, that makes sense. Home owners will keep their homes unoccupied until rapture. No incentive to rent them out or sell them at lower prices. Nope. They will own unoocupied homes…forever…because prices are sticky….

      WHERE ARE THE INFLATIONIST SAVIORS???

      “You assuming that home prices will fall to match or surpass the fall in people’s incomes.”

      Demand and supply? What are those?

  22. Edward says:

    “Unemployment and bankruptcies are components of healthy economies.
    It does not follow that because switching from an erroneous plan, to a different plan, brings about temporary labor and resource idleness, that switching away from erroneous plans is somehow not a component of economic recovery.
    Capitalism without losses isn’t capitalism.”

    We’re not talking about temporary unemployment caused by supply shocks or technological advancements like the internet here. (At least I am not) When the entire economy implodes that is a different story. I noticed you didn’t deny that it is the threat of starvation that ultimately compels workers to accept lower wages. Is that moral? You also didn’t deny that unemployment going up to 40-50% might be away to do away with sticky wages.

    We (LK and me) are not the thugs here. Nor are we supporters of violence. Its you, endorsing a economic policy that will send the economy unnecessarily straight to hell in the short run, putting liberty in danger by creating desperate crowds willing to listen to charismatic would be tyrants, that supports violence

    • Major_Freedom says:

      “We’re not talking about temporary unemployment caused by supply shocks or technological advancements like the internet here.”

      I wasn’t talking about temporary unemployment caused by “supply shocks” divorced from non-market monetary manipulation.

      I was talking about temporary unemployment caused by voluntary transacting and abstentions from voluntarily transacting, i.e. subject to private property rights, after it is learned that capital investment projects, however numerous and however widespread, are unsustainable and cannot be completed.

      “(At least I am not) When the entire economy implodes that is a different story.”

      Notice how you go from the small (individual firm bankruptcies) to the large (“implosion”), without realizing that healthy bankruptcies can occur on any scale.

      “I noticed you didn’t deny that it is the threat of starvation that ultimately compels workers to accept lower wages. Is that moral?”

      You noticed I didn’t deny? What kind of warped rhetoric is that? Do I have to explicitly deny I am a rapist to you, before you will be convinced I am not a rapist? And that if I didn’t so explicitly deny it, that you have a legitimate reason to conclude I am one?

      I hold immoral activity to be activity that consists of individuals initiating violence against other individual persons or property. I do not consider it immoral to refuse to harm myself in order to benefit random strangers. I do not consider it immoral to protect people from initiations of violence. I do not consider it immoral to protect people from those who are claiming that their violence is justified on the basis that it will help other people’s self-interest.

      We are not our brother’s keepers.

      Humans are faced with the same choice. Produce or starve. Starvation is what ultimately compels everyone to reduce their prices from infinity. Even the wealthiest person in the world (in terms of real wealth) cannot charge $100 trillion for their goods or their labor, because if they did, nobody would buy their goods, and that rich person would not be able to acquire what he needs. Only if they had a large enough supply of food that would last the rest of their lives, can they charge $100 trillion for their goods and labor, and avoid starving to death.

      But for the great bulk of people, who do not have lifetime supplies of (non-perishable) food, they cannot charge arbitrarily high prices, sell nothing, and live off their lifetime food supply. Everyone in this scenario has to lower their ask prices from infinity, to what the market can afford, if they want to sell.

      “You also didn’t deny that unemployment going up to 40-50% might be away to do away with sticky wages.”

      Again with this “you did not deny” nonsense. I notice you are not actually engaging my positive arguments, and you are instead going off onto red herrings about what I am *not* saying. Do you think that is a fair way to debate someone?

      To answer your question, sure, and 99% might do it too. What’s your point? Where is the justification for inflicting violence on innocent people? You still have not given any reason. People losing their jobs doesn’t imply they have a right to become, or seek the help of, criminals.

      The relentless desire to seek gains and avoid losses will lead to a maximally rapid price and wage adjustment. If individuals agreed to wage rates that are 40%-50% below yesterday’s rates, overnight, then unemployment would likely last one day.

      Unfortunately however, we live in a world with people imposing by force, i.e. violence, what you only verbally spew on this blog in a pretentious fashion, namely, all kinds of activities that hamper other people’s ability and/or willingness to adjust prices downward. From welfare, to minimum wage laws, to union activity, to inflation expectations being engrained in people’s pricing behaviors, there are so many interventions that prevent individuals from more quickly agreeing to prices that tend towards clearing the markets. To quote Paul Krugman, yes, it is indeed force backed “soup kitchens” that delay the recovery and can cause lengthy recoveries.

      “We (LK and me) are not the thugs here.”

      Oh yes you are. You are thugs, because you are positively, consciously, and without remorse or moral scruples, advocating for initiating violence against innocent people’s persons and property.

      Thugs sometimes fail to understand themselves to be thugs. It happens. It’s happening to you.

      “Nor are we supporters of violence.”

      So you’re both anarchists? Give me a break. Stop BS’ing. It’s transparent.

      “Its you, endorsing a economic policy that will send the economy unnecessarily straight to hell in the short run, putting liberty in danger by creating desperate crowds willing to listen to charismatic would be tyrants, that supports violence.”

      It is precisely you thugs who are calling for a violation of people’s liberties in your alleged goal here to stop violations of people’s liberty!

      You’re contradicting yourself. You are actually claiming that to secure people’s liberty, you have to violate their liberty.

      And no, “our” policies will help people, because it will finally enable them to solve their own problems in a rationally informed way, as opposed to being deceived through state imposed inflation, which will only put society one step closer to monetary breakdown.

      You people are utterly clueless about the nature of money and the economy. You have no idea that non-market money and the market, cannot both co-exist forever. One will have to eventually give way to the other. Redoubling of the efforts to delay correction, through the very thing that caused the problems in the first place, i.e. non-market inflation, you people are setting the economy up for an even greater crash later on.

      2008 was as bad as it was precisely because your ilk did not do what we recommended back in the early 2000s. Instead of letting the Nasdaw bubble and recession be fixed by market means, the fed did what your ilk wanted, which was to reinflate an even greater bubble to replace the last one.

      You got your way again in 2008, and so the pain during the next crisis is going to be even worse.

      You are taking the world down to a path of pain and destruction, all because you’re so afraid of temporary unemployment, you think the world is going to come to an end. Your economics are garbage because you are using emotion, not reason.

      • Bob Roddis says:

        Inexplicably, the statists can never grasp the fairly simple concepts of either economic calculation or the non-aggression principle. My first introduction to Rothbard was “Power and Market” which was assigned in class in 1973 when I was a McGovernite commie. The book used to be a free standing book, not a part of MES.

        I thought the first chapter was completely bizarre, “DEFENSE SERVICES ON THE FREE MARKET”.

        The second chapter on “FUNDAMENTALS OF INTERVENTION -Types of Intervention” I easily understood. It made perfect sense WHETHER YOU AGREED WITH THE NECESSITY OF THE INTERVENTION OR NOT. Autistic, binary and triangular intervention. As I explained these terms to my commie friends, they either could not or would not grasp the concepts. I decided then that they were hysterical cement-heads and at that point I determined that they didn’t know what they were talking about. After this revelation, I was open to Rothbard’s arguments which I will admit I was not initially in any manner. To this day, it is impossible to find a statist who can or is willing to grasp the violent nature of interventionism just as they cannot or will not grasp economic calculation.

        http://mises.org/rothbard/mes/chap14.asp

        • Major_Freedumb says:

          No wonder you’re such a bitter fruitcake, Bob. Grow up for once and stop worshiping a false God that isn’t coming back from the dead anytime soon.

          • Major_Freedom says:

            “…stop worshiping a false God…”

            Says the statist.

    • Lord Keynes says:

      Edward, all M_F arguments ultimately reduce to pseudo-moral ones, because he’s defeated time and again in economic arguments.

      His sole economic argument below — that depression means that capital projects must have been “unsustainable and cannot be completed” — is just proof of his lack of connection to any reality.

      • Razer says:

        Proof for this assertion? And what’s constitutes a psuedo-moral argument? Your hero was a eugenics supporter? What is your moral opposition to eugenics given your advocacy of ends justify the means and for the good of the many type thinking?

        And why is it you never seem to be able to comprehend simple Austrian concepts. You sound like the theist who always ‘misunderstands’ evolution and, even when corrected, comes out with the same ‘misunderstanding’ every time there’s a debate. You also get schooled in your own brand of economics by MF, which I find hilarious.

      • Major_Freedom says:

        LK, all of your arguments reduce to pseudo-moral claims. Unemployment OUGHT to be reduced by non-market coercion. Output OUGHT to be increased by non-market coercion. The state OUGHT to not let individuals cooperate in the free market process.

        You have not disproven the theory that depressions are characterized by unsustainable investments.

        Denying the nature of depressions is just proof if your inability to understand reality.

  23. Edward says:

    Oh by the way, you DIDNT falsify the fact that Chancellor Bruning’s hard-money austerity poilcies caused the Nazis to come to power.

    And I’m not really a Keynesian, I’m a Friedmanite

    • Major_Freedom says:

      “Oh by the way, you DIDNT falsify the fact that Chancellor Bruning’s hard-money austerity poilcies caused the Nazis to come to power.”

      I don’t have to. Historians already have.

      Nazism required many things to occur simultaneously, one of which was the crushing hyperinflation during the early 1920s. By the time of deflation in the early 30s, national socialism was already the dominant philosophy.

      “And I’m not really a Keynesian, I’m a Friedmanite”

      No fundamental difference. Both aggregate doctrines. Both exclude temporal capital theory. Both believe aggregate demand is the source of prosperity. Etc.

  24. Edward says:

    ” No incentive to rent them out or sell them at lower prices. Nope. They will own unoocupied homes…forever…because prices are sticky….
    WHERE ARE THE INFLATIONIST SAVIORS???
    “You assuming that home prices will fall to match or surpass the fall in people’s incomes.”
    Demand and supply? What are those?”

    No buyers… Supply and Demand mismatch, imperfect information hello!?

    • Major_Freedom says:

      “No buyers… Supply and Demand mismatch, imperfect information hello!?”

      No buyers….at any price?

  25. Edward says:

    “We’re not talking about temporary unemployment caused by supply shocks or technological advancements like the internet here. (At least I am not) ”

    Or regular business failure

    • Major_Freedom says:

      Haha, no true scotsman.

      “Regular” business failures just means “failures I arbitrarily permit.”

      Unscientific gobbledygook.

  26. Edward says:

    “It is precisely you thugs who are calling for a violation of people’s liberties in your alleged goal here to stop violations of people’s liberty!
    You’re contradicting yourself. You are actually claiming that to secure people’s liberty, you have to violate their liberty.”

    Read john Locke second treatise on government. You really are a utopian fool aren’t you?You’re a reverse Marxist. I hold that in an imperfect world, sometimes, one has to choose the least of all evils, or the best of all limited choices in a given situation. Sometimes, we imperfect humans accomplish the opposite of what we intend We’re the ones always lecturing progressives about unintended consequences so we should be mindful of them. So yes, given a choice between a smaller versus a larger violation of liberty, I’ll choose the smallest one. Legal tender laws are the equivalent of a pin prick. would love it if we lived in a world where the NAP is obeyed by everyone but we don’t so don’t kid yourself. Also, don’t take on this smug, sanctimonious tone regarding violence- as if you wouldn’t use it to defend your rights. Although I worry, you’re the type of mindless absolutist who in an economic depression, would shoot a starving child because he wandered onto your property by accident.
    Im a tri-utilitarian, (life, liberty, and eudaemonia) and not shamed to admit it. At the same time, I hold that limited government is better than no government, because anarchism can oftentimes devolve in corporate city-state dictatorships. Is it force or fraud if 100% of the people, all the time, tacitly consent to what the government is doing in a certain situation. I repeat if you don’t like paper money, send yours to me, stop being a hypocrite.

    Why, did it take so long for Nazi ideology to penetrate if it was the 1923 hyperinflation that caused it.? If the hard money policies weren’t pursued, than Nazis would not have had a strong showing in 1933. Its as simple as that.

    • Major_Freedom says:

      “Read john Locke second treatise on government.”

      Already did.

      Read Bastiat’s “The Law.”

      Read Gustave de Molinari’s “The Production of Security”.

      Read Lysander Spooner’s “The Constitution of No Authority.”

      Read Rothbard’s “For A New Liberty.”

      Read Hoppe’s “The Economics and Ethics of Private Property.”

      Read Murphy’s “Chaos Theory.”

      “You really are a utopian fool aren’t you?”

      If you want to change the world from what it is, you’re an Utopian.

      “You’re a reverse Marxist.”

      You’re a halfway Marxist.

      “I hold that in an imperfect world, sometimes, one has to choose the least of all evils, or the best of all limited choices in a given situation.”

      I hold that evil is a choice.

      “Sometimes, we imperfect humans accomplish the opposite of what we intend We’re the ones always lecturing progressives about unintended consequences so we should be mindful of them.”

      Then why are you mimicking them?

      “So yes, given a choice between a smaller versus a larger violation of liberty, I’ll choose the smallest one.”

      False dichotomy.

      “Legal tender laws are the equivalent of a pin prick. would love it if we lived in a world where the NAP is obeyed by everyone but we don’t so don’t kid yourself.”

      OK, so let’s rape and steal from everybody, since we can’t 100% eliminate rape and theft.

      Good job.

      “Also, don’t take on this smug, sanctimonious tone regarding violence- as if you wouldn’t use it to defend your rights.”

      I do and I will. Deal with it.

      “Although I worry, you’re the type of mindless absolutist who in an economic depression, would shoot a starving child because he wandered onto your property by accident.”

      Mindless violence is your solution?

      “Im a tri-utilitarian, (life, liberty, and eudaemonia) and not shamed to admit it.”

      Cool story, thug bro.

      “At the same time, I hold that limited government is better than no government, because anarchism can oftentimes devolve in corporate city-state dictatorships.”

      You mean states? Anarchism is statism? What kind of mental gymnastics does it take to get from anarchy to anti-anarchy? Inquiring minds like to know.

      Monopoly minarchist states are what devolve into dictatorships. See Greece and Rome.

      “Is it force or fraud if 100% of the people, all the time, tacitly consent to what the government is doing in a certain situation.”

      Does rape really exist if 100% of every receiver of sex consents to it? Is it really theft if 100% of every disposer of wealth consents to it? Is it really something other than utopianism to imagine 100% of the world agreeing to the same group of people to be their security and protection?

      Speaking of utopianism.

      “I repeat if you don’t like paper money, send yours to me, stop being a hypocrite.”

      I repeat, you’ll first have to get your mommy and daddy government to stop threatening innocent people with violence if they dare choose not to pay taxes in paper money.

      As long as I have to pay taxes in paper money to avoid being thrown into a cage, to be likely sexually assaulted, then I am coerced into seeking dollars in exchanges, which means I cannot get out of the dollar system without being violated.

      I’m not a hypocrite, you are. I do not hold the contradictory position of being against initiations of force (individual to individual “citizen”) but at the same time be in favor of initiations of violence (states to “citizens”). You are a hypocrite calling others hypocrites in order to deflect attention away from your hypocrisy.

      I double dog dare you to point out where there are contradictions in my arguments, and where I am preaching something that I refuse to practise.

      “Why, did it take so long for Nazi ideology to penetrate if it was the 1923 hyperinflation that caused it.?”

      Dictatorships are not formed overnight. There needs to be a fertile ground that is able to accommodate it. In Germany’s case, there was an existing tide of fascist philosophy carried over from the mid to late 19th century (Fichte, Carlyle, Nietzsche, etc). There was an existing wave of anti-semitism. There was an existing nationalistic furvor. There was an ideology of ethnic superiority, as Germany happened to consist of many pseudo-independent nation states whereby ethnicity was used to justify “unionization” of the German people, to change the world, etc. There was an existing resentment towards the world as the German people were compelled by foreign powers to pay for war reparations after WW1, which put tremendous financial strains on the country.

      So much had to happen at the same time for fascism to rise in Germany. To pin it all on falling prices is clearly an example of intellectually dishonest propagandizing.

      “If the hard money policies weren’t pursued, than Nazis would not have had a strong showing in 1933. Its as simple as that.”

      If it weren’t for the “soft money” policies prior, there would have been no need for hard money policies later on. Thus it was soft money, not hard money, that has more of the blame.

      Your argument is akin to ignoring the fact that it was alcohol that made a person experience a headache, which was the proximate reason for why they got flustered and angry and got into a car accident. One could blame the hangover, but an honest person would blame more of the drinking.

  27. Edward says:

    “Haha, no true scotsman.
    “Regular” business failures just means “failures I arbitrarily permit.”
    Unscientific gobbledygook.’

    It means any business that fails during a boom because customers didn’t like its products, you fool.

    • Joseph Fetz says:

      Well, first define a boom, then describe why the business failed as a result. Obviously, businesses fail all of the time, so what is so special about those who fail during a boom?

    • Major_Freedom says:

      “It means any business that fails during a boom because customers didn’t like its products, you fool.”

      That’s what happens when “customers” hoard money for longer periods of time, which you identify as “widepsread bankruptcies.”

      You’re contradicting yourself yet again. If “regular” business failures encompass all the occasions by which customers do not buy the products, then every depression would be “regular” bankruptcies that do not justify non-market violence even in your own worldview.

      Too funny.

  28. Edward says:

    “Dictatorships are not formed overnight. There needs to be a fertile ground that is able to accommodate it. In Germany’s case, there was an existing tide of fascist philosophy carried over from the mid to late 19th century (Fichte, Carlyle, Nietzsche, etc). There was an existing wave of anti-semitism. There was an existing nationalistic furvor. There was an ideology of ethnic superiority, as Germany happened to consist of many pseudo-independent nation states whereby ethnicity was used to justify “unionization” of the German people, to change the world, etc. There was an existing resentment towards the world as the German people were compelled by foreign powers to pay for war reparations after WW1, which put tremendous financial strains on the country.”

    There has been anti-Semitism since the beginning of the Jewish people. . Nietzche by the way, has been misunderstood in his relationship to fascism. Fascist ideology existed everywhere, including the U.S. It didn’t crystallize except in Germany , and Japan. (and spain and argentina, but thats different) Hyperinflations Existed since the Continental Congress. and I never said that hard money and deflation was the “ONLY” thing, only the driving catalyst especially in Germany. If the policy was not pursued and the economy recovered in time, if the Weimar Republic defaulted on its debt, (illegitimate debt to begin with since it wasn’t only Germany’s fault that WWI started) and the proper policies war taken, than there would have been nothing to blame the Jews for, and the German people wouldn’t have cast their protest vote for Hitler

    • Major_Freedom says:

      “There has been anti-Semitism since the beginning of the Jewish people.”

      With vastly different extents throughout cultures and history. It was particularly pronounced in Germany in the mis to late 19th and early 20th centuries.

      “Nietzche by the way, has been misunderstood in his relationship to fascism.”

      Irrelevant. If communism arose in Russia on the basis of a misunderstanding of Marxism, it doesn’t mean Marxism isn’t a cause for communism in Russia.

      What matters is how people perceive the philosophy, if we are going to identify reasons for why certain social forms arose over others.

      “Fascist ideology existed everywhere, including the U.S.”

      It was far more pronounced in Germany.

      “It didn’t crystallize except in Germany , and Japan.”

      And Austria for a time.

      “(and spain and argentina, but thats different)”

      Not really.

      “Hyperinflations Existed since the Continental Congress.”

      So has tyranny.

      “and I never said that hard money and deflation was the “ONLY” thing, only the driving catalyst especially in Germany.”

      Every one thing conceptually divorced from everything else, in relation to fascism in Germany, can be identified as “catalysts.”

      Hyperinflation was a catalyst. Without it, there would have been no need for reduced inflation, i.e. “hard money”, later on.

      “If the policy was not pursued and the economy recovered in time, if the Weimar Republic defaulted on its debt, (illegitimate debt to begin with since it wasn’t only Germany’s fault that WWI started)”

      Again, illegitimate or not, that’s irrelevant to whether it was a cause.

      “and the proper policies war taken, than there would have been nothing to blame the Jews for, and the German people wouldn’t have cast their protest vote for Hitler”

      The people were already supporting Hitler during the 1920s. He was gaining power at that time.

  29. Edward says:

    “That’s what happens when “customers” hoard money for longer periods of time, which you identify as “widepsread bankruptcies.”
    You’re contradicting yourself yet again. If “regular” business failures encompass all the occasions by which customers do not buy the products, then every depression would be “regular” bankruptcies that do not justify non-market violence even in your own worldview.
    Too funny.”

    ;-) I see I have to spell things out for you like a two year old.A regular bankruptcy would be a travel agency that gets put out of business during the 90′s. Or… pets.com. A Business failure OCCURRING in normal or boom times, where the rest of the economy isn’t in the toilet

    • Major_Freedom says:

      “I see I have to spell things out for you like a two year old.”

      Interesting way of dealing with having your contradictions revealed to you. Can’t say I am surprised a statist would use the same rhetoric that abusive authority figures use on their younger victims. Did your parents use that language with you?

      “A regular bankruptcy would be a travel agency that gets put out of business during the 90′s. Or… pets.com. A Business failure OCCURRING in normal or boom times, where the rest of the economy isn’t in the toilet”

      You just smuggled in your own personal value judgments as to what constitutes good and bad businesses. If you believe a business is bad, and it goes bankrupt, then that’s OK. But if a business goes bankrupt and you believe it is good, then it is not OK. You’re a closet tyrant and you don’t even know it. There is zero reference to other people’s preferences.

      And your nonsense is not a definition of regular business failures as opposed to “irregular” ones, by the way. Lists of events that satisfy the meaning of a word are not definitions of that word.

      It would be like defining cats as “my pet, and my neighbor’s pet, but not my boss’ pet, and not my barber’s pet.” These are just lists. They are not definitions.

      The concept of “economy in the toilet” is subjective and vague. That’s where you flourish. In vague terminology that isn’t made concrete.

      If a bad business fails during “normal times”, due to customers refusing to purchase the products, then it doesn’t matter if one person does this, or millions. It’s still customers refusing to purchase products they don’t want.

      “Economy in the toilet” is begging the question, because that is what you set out to prove is the case by virtue of business failures. You can’t use the very business failures under discussion as a definition for “irregular” business failures!

      There is no such thing as an economy in the toilet abstracted away from the actual business failures and successes. Toilet economies ARE business failures.

      Try again.

  30. Edward says:

    “You mean states? Anarchism is statism? What kind of mental gymnastics does it take to get from anarchy to anti-anarchy? Inquiring minds like to know.
    Monopoly minarchist states are what devolve into dictatorships. See Greece and Rome.
    “Is it force or fraud if 100% of the people, all the time, tacitly consent to what the government is doing in a certain situation.”
    Does rape really exist if 100% of every receiver of sex consents to it? Is it really theft if 100% of every disposer of wealth consents to it? Is it really something other than utopianism to imagine 100% of the world agreeing to the same group of people to be their security and protection?”

    One hundred percent of the people in the United States use paper dollars for one reason or another, and I bet they don’t even think about the tiny, eenie-weenie, infinitesimally small amount of unfortunate coercion involved. Id say that pretty much covers tacit consent right there.

    (What is it with you and rape? Do you like rough sex with your girlfriend? :-\ )

    As to how anarcho-capitalism might devolve into corporate dictatorships, think about it for a moment. Ever heard of the historical phenomena of company towns?

    • Major_Freedom says:

      “One hundred percent of the people in the United States use paper dollars for one reason or another, and I bet they don’t even think about the tiny, eenie-weenie, infinitesimally small amount of unfortunate coercion involved.”

      That’s ridiculous. Tiny? It’s global in scale. It’s huge.

      Serfs during feudalism didn’t fully understand their coercion until they were educated by more educated individuals, who tought them that they did not deserve such treatment.

      Libertarianism is a freedom CREATING philosophy. It unmasks existing tyranny that was not perceived as such prior.

      But of course, there are millions of people who do know that statism is coercive, and not just a “tiny” coercion, but enough to fight revolutions over.

      “Id say that pretty much covers tacit consent right there.”

      You don’t know if others consent until you ask them.

      And even if 99.9999% of the people “consented”, that is no justification whatsoever to impose it on the other 0.0001%.

      “(What is it with you and rape? Do you like rough sex with your girlfriend? :-\ )”

      What’s with you and violence? Did you get abused by your parents or older siblings growing up?

      “As to how anarcho-capitalism might devolve into corporate dictatorships, think about it for a moment. Ever heard of the historical phenomena of company towns?”

      You mean places that people voluntarily sought, due to it being a step up from their current circumstances?

      Or do you mean slavery towns where people were kidnapped and forced into them, and prevented from escaping by force?

      Company towns are not dictatorships if they are voluntary.

      Terrible example.

      Have you ever heard of “democratic” Greece devolving into dictatorships?

  31. Edward says:

    The Weimar hyperinflation lasted from1921-1924, you’re saying that the effects were felt ten years later down the line?!
    “The people were already supporting Hitler during the 1920s. He was gaining power at that time.”

    They were but his power ended when the hyperinflation ended, and there was a relative period of normalcy lasting till the 30′s

    • Major_Freedom says:

      “They were but his power ended when the hyperinflation ended, and there was a relative period of normalcy lasting till the 30′s”

      False. His power kept growing the whole time, gaining more and more popularity. The people wanted a “strong leader” to bring them to the promised land.

      • Lord Keynes says:

        ” His power kept growing the whole time, gaining more and more popularity.”

        No, it didn’t. Hitler’s and Nazi power in general as measured by votes and seats in the Reichstag fell significantly during the 1920s:

        “the Nazi Party was catapulted to national importance in the Reichstag elections of September 1930. After receiving 6.6 percent of the popular vote, or 32 Reichstag seats, in May 1924, the Nazis had won only 2.6 percent of the popular vote, or 12 Reichstag seats, in the elections of May 1928. In September 1930, they increased their support to 18.3 percent, for 107 Reichstag seats.”

        Peter Hoffman, German Resistance to Hitler, p. 10.
        ___________

        M_F is devoid of any understanding of history, just as he is devoid of any understanding of economics.

        • Major_Freedom says:

          “No, it didn’t. Hitler’s and Nazi power in general as measured by votes and seats in the Reichstag fell significantly during the 1920s:”

          Votes are insufficient to gauging the influence and power of individuals in any society.

          You’re eliciting a dogmatic democratic extremism.

          Your history is as terrible as your economics.

    • Major_Freedom says:

      “The Weimar hyperinflation lasted from1921-1924, you’re saying that the effects were felt ten years later down the line?!”

      Of course. It was the hyperinflation that lead to the perceived necessity to deflate later on.

  32. Edward says:

    ““They were but his power ended when the hyperinflation ended, and there was a relative period of normalcy lasting till the 30′s”
    False. His power kept growing the whole time, gaining more and more popularity. The people wanted a “strong leader” to bring them to the promised land.”

    True. if you were right he would have come to power in the 20′s but he didn’t

    “The Weimar hyperinflation lasted from1921-1924, you’re saying that the effects were felt ten years later down the line?!”
    Of course. It was the hyperinflation that lead to the perceived necessity to deflate later on.’

    Are you f***king serious?!?! THE HYPERINFLATION WAS ENDED by 1924 and the german economy was growing again,

    • Major_Freedom says:

      “if you were right he would have come to power in the 20′s but he didn’t”

      No, that’s not necessary. Historically, we observed hyperinflation and then inevitable deflation. Those are what were required, observationally.

      “Are you f***king serious?!?! THE HYPERINFLATION WAS ENDED by 1924 and the german economy was growing again,”

      Are you for shnizzle? The after-effects of hyperinflation were nowhere near the end.

      As a comparison, we are now, in 2013, still experiencing people’s reactions to 9/11. We are now still experiencing people’s reactions to the increased housing market interventions throughout the 1990s.

      You are arbitrarily stopping the chain of influences at 1924, obviously so as to paint the early 1930s deflation as a deux ex machina.

  33. Edward says:

    “You mean places that people voluntarily sought, due to it being a step up from their current circumstances?
    Or do you mean slavery towns where people were kidnapped and forced into them, and prevented from escaping by force?
    Company towns are not dictatorships if they are voluntary.
    Terrible example.
    Have you ever heard of “democratic” Greece devolving into dictatorships?”

    I have of course. the last part is possible. But you can’t tell me that George Pullman was an effective king in his company town.

    • Major_Freedom says:

      “I have of course. the last part is possible. But you can’t tell me that George Pullman was an effective king in his company town”

      Were the inhabitants voluntary participants? Or were they kidnapped and enslaved?

  34. Edward says:

    WAS NOT effectively a king

    • Major_Freedom says:

      What is inherently wrong with company towns?

  35. Edward says:

    They were trapped. Pullman, like some dictator, cut wages but arrogantly refused to lower their rents. The wildcat strike began as a peaceful means to get Pullman to compromise. He didn’t. And then President Cleveland sent his goons to break up the strike

    • Major_Freedom says:

      They were trapped? As in, Pullman threatened them with violence if they chose to leave?

    • Major_Freedom says:

      “MORE DEBT INFLATION TO SOLVE THE PROBLEM OF TOO MUCH DEBT!” – Keynesian mantra mumbled every morning.

  36. Edward says:

    I know Carnegie’s stooges threatened unuion workers. I dont know enough about Pullman, I hope to learn more. but given the fact that he called Grover Cleveland to break things up, then yes, he threaned them with violence, I think he thought nothing of it, the prick. Amd besides even if he didnt threaten them with OVERT violence, it is still violence to let an innocent man die of starvation when you can help him at none to little cost to you. Its called depraved indifference

    • Major_Freedom says:

      What were the unionized workers threatening to do?

      “Amd besides even if he didnt threaten them with OVERT violence, it is still violence to let an innocent man die of starvation when you can help him at none to little cost to you. Its called depraved indifference”

      Yet more contradictions.

      No, it is not “violence” to abstain from good samaritanism. If it were, then poor Africans would have a right to initiate force against you for you refusing to help them. But then if that force is justified, then you could not use force to defend yourself, lest you initiate force yourself. But then you would be in a contradictory position of claiming that it is both justified and unjustified to initiate force.

      Also, costs are subjectively determined. If an individual decides he would incur more costs to help a starving person, than to do something else, then those are the relevant costs, not your opinion.

      Otherwise, I could argue that you yourself, because you’re “letting” impoverished African children die, where you could easily save the life of at least one child, for as little as the price of a cup of coffee per day, you would be initiating violence, and so it would be justified for me or whoever else to use “defensive” force against you, so that you pay up.

      In fact, every individual on the planet who didn’t help this starving child, would be guilty of a crime. But then who is justified in enforcing the punishment, given that the punishers are just as guilty as those being punished?

      Depraved indifference is a vicious and absurd ideology that is nothing but a sanction of violence should anyone claims to desire more than he has.

      Letting others die is not murder, because the cause of the death is hunger, a biological imperative, not the actions of the supposed guilty.

      What you are doing is writing an open ended blank check on the lives of others, as long as some people in the world are starving.

      Again, WE ARE NOT OUR BROTHER’S KEEPERS.

      You have no right to harm others to help yourself, even if you’re starving to death. You ought to die with dignity and don’t bring others down with you.

  37. Edward says:

    My god you truly are a mindless imbecile!!!! I keep assuming you know things , so I don’t Spell out my assumptions. Well then let me spell it out for you you selfish prick. Depraved indifference applies only in emergency situations. It is not a blank check. Also the cost cannot be more than one can beaten. Costs are subjectively but also objectively determined. They are objectively determined by ones abilities and power money, training, etc. I would not be expected to alleviate hunger completely in Africa because I don’t have the money needed. But I do have the money to help one person, which I do do. I sponsor a child for $25 a month. In third world countries, that goes a long way. A fat man who can’t swim is not morally obligated to jump in an ocean to save a drowning girl. ( he might be obligated to call for help though) but an Olympic swimmer IS. If there are sharks in the ocean., the Olympic swimmer has the right to not jump in because his life is just as valuable. On the other hand, an armed navy Seal…

    Are you starting to get the picture now? Has it become Clear for you?

    • Lord Keynes says:

      Edward, M_F’s operating procedure is to shun any real debate, post red herrings, straw man arguments, or just invent whole new definitions for English words.

      Witness his absolute genius on my blog when, after losing an argument on Say’s law, he decided that he could literally redefine “immediately” in any sense he wanted at all:

      “Other than the misleading word “immediately”, which can be taken to mean any time at all, since the standard for “short” and “long” periods of time is not objective but subjective, how is that statement idiotic?”

      http://socialdemocracy21stcentury.blogspot.com/2011/12/say-repudiated-says-law.html?showComment=1322756770135#c6195980368215469925

      In the crazy world of M_F, words can have any meaning he attaches to them.

      • Major_Freedom says:

        I do not shun real debate. I shun your method of debating, which is constantly filled with red herrings, straw man, and misunderstandings of the very theories you’re criticizing.

        You lost the Say’s Law debate.

        Yes, using undefined terms such as “immediately” does mean you can use any time period you want. It just has to depend on the context. In certain contexts, 1 year can be anything from long term to the very short term to the immediate.

        The fact you can only criticize what is in actuality a sematics argument, just proves how empty your economic arguments are upon the most superficial of analyses.

        • Major_Freedom says:

          One could define “immediately” an infinite number of ways. Is it defined to be within 1.00000000000045 minutes? Or 1.000000000000456 minutes?

          You can pick any time you want, within conventional boundaries of course.

          Any time you want does not mean any time in any context.

  38. Edward says:

    And F**k dying with dignity. If I’m dizzy and have a stomach ache, and my wife and children do as we’ll from the hunger, and I break into the mansion out of town that has food, and I se a refrigerator and pantry filled with TONS of perishables and non-perishablesyou can bet you rothbardian ass I’m going to take all I can get so that I an my family can survive. Odds are anyway that the rich dude has more than enough to even stay rich after I robbed him

    • Scott D says:

      Lifeboat situations are designed to put differing ethical and value systems into conflict to test their reasonable limits. If you are starving, stealing food is a rational act, and any libertarian theory of justice should take mens rea into account and not seek punitive damages, only restitution.

      Wouldn’t the ethical thing to do would be to pay the rich man back what you stole from him as well as any damages incurred from your break in? If I’m reading you right, you seem to think you should just walk away, secure in the knowledge that “he has more than enough” and therefore owed you what you took from him.

    • Major_Freedom says:

      You just admitted you are not interested in having reason settle disputes, nor in rational convincing and argumentation. You have admitted that you want obedience to your violence, nothing more.

      Why did you pretend to be anything other than a thug who would steal if it suits him?

  39. Edward says:

    You might as well assert the right to walk by a man tied
    To a railroad track, and you have a knife in your pocket you can easily cut though the ropes at no risk to yourself. The train is far away but you can hear it coming. To not act, to walk by deaf to his pleas is to be a party to that mans murder, just as surely as if u had put him there yourself. You disgust me!

    • Major_Freedom says:

      Then you are a murderer, because there are people dying, that you could have saved, and yet you did not save them.

  40. Edward says:

    I’ve been in conditions where I didn’t have enough food, and let me tell all of u, it isn’t fun

    • Major_Freedom says:

      Neither is being robbed.

      Why should anyone put your concerns above their own, given that you have admitted you would steal from people if you felt like it?

    • guest says:

      I’ve been in conditions where I didn’t have enough food …

      It doesn’t help that the government prevents people from feeding you:

      Bloomberg’s Don’t-Feed-The-Homeless Dictate Shows The Real Goal Of Government Control
      http://cnsnews.com/blog/scott-holleran/bloombergs-dont-feed-homeless-dictate-shows-real-goal-government-control

      Or that it disincentivizes production:

      Rockwell’s Thirty-Day Plan
      http://www.lewrockwell.com/rockwell/30-day-plan.html

      DAY SEVENTEEN: Centrally planned agriculture, as imposed by Hoover and Roosevelt, is repealed: there are no more subsidies, payments-in-kind, marketing orders, low-interest loans, etc. Farm prices drop. Entrepreneurial farmers get rich. Welfare farmers go into another line of work. The poor eat like kings.

      Or that it incentivizes unsustainable projects:

      Boom, Bust, Dust
      http://mises.org/daily/3181

      The First World War then set off a series of events that would lead to disaster. The dry-land farmers had enjoyed prosperity, working the land and growing wheat with the benefit of new machinery that made them wondrously productive. Then the Turkish navy kept Russian wheat from making its way to Europe and the federal government told farmers to produce more wheat to win the war. And produce they did; from 1917 to 1919, the number of acres put into wheat production increased 70 percent. And why not: the government guaranteed a price of $2 per bushel.

      But when the war ended, the price collapsed and there was no one to buy the mountains of grain left rotting in the sun. The debts incurred to buy equipment and property still had to be paid, so farmers continued to plow up the grassland in hopes that the price of wheat would rebound. By 1931, 33 million acres in the Great Plains had been plowed. But farmers could only sell the wheat for half what it cost to produce the golden grain, if they could find buyers at all. And then the winds came.

  41. Edward says:

    In the case of me robbing a rich guy to save my family. I hope you realize it goes without saying I exhaust all other options first

    • Razer says:

      I have a hard time believing this. Those that thirst for violence/coercion usually (always is probably a more accurate word but I’ll be generous) resort to violence/coercion long before exhausting all other options. Just like those who believe in the supernatural accept a supernatural explanation long before exhausting all other non-supernatural explanations.

    • Major_Freedom says:

      Oh how moral of you.

      Anyone can claim to have exhausted other options, by choice, and then claim theft is justified.

  42. Economic Therapist says:

    Edward, your view of our obligations to each other is certainly more humane than M_F, whose morals are so divorced from those of a social animal that he ought to consider living as a hermit on a desert island. I hope you realise, however, that it is better to let people define their obligations for themselves, possibly using the power of shame or censure, than giving governments the power to impose them.

    • Richie says:

      LOL

    • Major_Freedom says:

      Violence is not more humane than peace.

      Depriving people of their property by force is not more humane than abstaining from such force.

  43. Edward says:

    LK,
    Good point,

    Evomic therapist,
    Absolutely! Notice
    I said moral and not legal obligation

  44. Edward says:

    “Economic” therapist

  45. Edward says:

    “The cost cannot be more than one can bear.”

    Sometimes I hate automatic spellcheck :-)

    • Razer says:

      Why do violence advocates always feel the need cast doubt on the morality of those that don’t advocate violence? Edward, you are pro violence, we get it. But you will never be more moral than someone that rejects violence.

      What I’ve never heard you even mention is voluntary helping of people. Instead, you assume anti-violent types WILL NOT help others. In fact, the Libertarian is already the most humane (he recognizes it’s always wrong to harm others) and is the most likely to help his fellow human beings. He just does not believe two wrongs make a right and you can’t rob from Peter to give charity to Paul.

      Sorry, but you lose, yet again, and you’re understanding of cause and effect is so sloppy that you really are a perfect argument against empirical thinking. I still believe your level of thinking, as backward and ignorant as it is, is no worse than the most enlightened Keynesian thinking around (you’re easily a match for Nobel Laureate Keynesians like Krugman, imo), which frightens me to no end.

    • guest says:

      Edward,

      You believe that fiat money has a pin prick of inconvenience (paraphrasing), but it is actually the source of imperialism:

      War and the Fed | Lew Rockwell
      http://www.youtube.com/watch?v=Tl9lS5k7H5M

      On Friedman, this might interest you:

      Neoconservative David Frum Hearts the Fed
      http://www.youtube.com/watch?v=1d1rcaX-lzU

  46. Steve J says:

    As a regular reader of both Krugman and Krugman haters it kind of amazes me just what passes for Krugman being wrong. We’re still having trouble reaching the 2% inflation target yet Krugman was wrong about inflation… Guys you have to admit Krugman’s been pretty good on predicting the outcomes of this crisis. Arguing against it at this point just makes me believe Krugman more.

  47. guest says:

    We’re still having trouble reaching the 2% inflation target …

    Already covered:

    The Illusions of Hedonics
    http://mises.org/daily/1873

    Most of what appears like an objective standard of measurement in economic statistics is a deeply flawed endeavor to measure the non-measurable. As the price statistician must admit, there is no meaningful way to measure the “price level”. At best, it is changes of the price level that can be constructed. But even with these changes, the measurement is flawed, because one cannot measure something, when both, the measurement rod and the object of measurement, are subject to change.

    The price statistician constructs a basket of products in order to measure the changes of the value of money. He claims that this basket is representative. But he cannot ignore the fact that the composition of this basket changes over time. Some products become obsolete, other products get modified and new goods and services appear. So he will change the composition of the basket. By this procedure, however, he implicitly changes also the units of measurement.

    Peter Schiff – The Fed Unspun: The Other Side of the Story
    http://www.youtube.com/watch?v=zdB9I79BQRI#t=1h20m12s

    So Where’s the Inflation? Tom Woods Talks to Mark Thornton
    http://www.youtube.com/watch?v=n0RusrwYsRE#t=5m16s

  48. Anonymous says:

    Ideally someone else would make this comment, since it will seem petty and defensive coming from me, but sometimes you look inside yourself and realize that you are the only one who can get the job done. You still owe replies on the OLG models Bob.

  49. Edward says:

    Razer,

    you are an absolutist imbecile, just like major freedom. To you and him, the world is divided not only into simple, but SIMPLISTIC categories, devoid of any nuance,subtleties or exceptions.

    Let me spell it out for you with an example.

    Suppose you see a man or woman crossing the street without looking, and a car is quickly coming to meet them.

    Do you

    A. Reach forward and grab him, pulling him back from the street just to save his life. thus violating his bodily liberty in the present to save it in the future,

    or B. Take the major freedom route, and watch passively as he gets hit by a car and dies.

    I rest my case

    • guest says:

      Suppose you see a man or woman crossing the street without looking, and a car is quickly coming to meet them

      Not for government to decide.

      And the person has a right to be upset that I violated his rights, if he so chooses.

      Ingrate? So what; Stop acting like we have a right to impose ourselves on other people.

      Now suppose that the roads were private and the road-owner’s property rights were protected such that people had to obey the owners’ speed limit?; Or that the road owner placed the walkways above or below the road?

      If the threat of getting a ticket can dissuade people from driving recklessly, then the threat of being taken to court for violating a private road-owner’s rights will do the same, and without violating anyone’s rights through prior restraint.

      The state also claims to give pedestrians the “right of way”, thereby giving them a false sense of security, whereas were the roads private that may not be the case, and people would know better than to walk across the road nonchalantly.

      And then there’s been the experiments with getting rid of traffic lights, which has had some success with reducing accidents:

      Monderman (1of10) – Drachten Eye Contact
      http://www.youtube.com/watch?v=Xo3KWHqmDhA

      Drachten – Traffic experiment
      http://en.wikipedia.org/wiki/Drachten#Traffic_experiment

      The state is a burden when it comes to roads. It exacerbates problems instead of opting to enforce private property rights.

    • Major_Freedom says:

      You are advocating for a simple, black and white world: If it suits me, I will harm others. That’s it.

      My morality does not obligate people to refrain from helping people who are about to get run over. It’s obvious you have no clue what morality you’re even criticizing.

      My morality states that one is not obligated to help, not that one is obligated to not help.

      If someone wants to help, then it’s permitted in my morality. If someone does not want to help, then my morality does not call for violence against that person.

      Refraining from helping people cannot be considered immoral lest the entire world of man be immoral all the time.

      Morality depends on people having a choice.

      Your morality condemns man and they have no choice but to be immoral. Your morality is not a morality at all, but simply a desire for your own naked aggression against others, who are all guilty of immorality for not helping some random person somewhere in the world.

  50. Edward says:

    Scott D

    You’re right in a sense.,

    Bu tin my example I didn’t spell my meaning out clearly enough. I already went to the rich man and begged him for a job, and he took the MF route and refused. thus condemning me and my family to starvation and death. AGAIN ALL OTHER OPTIONS ARE EXHAUSTED. This is an extreme emergency situation.

    Have any of you guys ever seen the movie Far And Away with Tom Cruise and Nicole Kidman? There’s a scene where Cruise and Kidman are wandering the streets of New York, begging for food. They come across a well to do guy unloading his carriage, Cruise’s character starts to help him, saying “please sir, I’ll work for food.”
    The bastard yells in reply “go away!” I don’t hire Irish!”

    Guys like that DESERVE to be robbed blind.

    • Richie says:

      With a comment like this, guys like you deserved to be ignored so hard, you’ll begin to doubt that you even exist.

    • guest says:

      Have any of you guys ever seen the movie Far And Away with Tom Cruise and Nicole Kidman?

      Your man, Lincoln is responsible for Tom and Nicole’s poverty:

      Cherokee Outlet – Loss of Cherokee control

      Loss of Cherokee control

      After the Civil War, the United States required a new peace treaty (see Reconstruction Treaties) with the people of the Cherokee Nation due to their alliance with the Confederacy:[2] The new treaty (ratified on July 19, 1866) allowed the United States government to dispose of the land in the Cherokee Outlet:

      Another Big Lincoln Lie Exposed
      http://lewrockwell.com/dilorenzo/dilorenzo211.html

      I will say then that I am not, nor ever have been in favor of bringing about in any way the social and political equality of the white and black races, that I am not nor ever have been in favor of making voters or jurors of negroes, nor of qualifying them to hold office, nor to intermarry with white people; and I will say in addition to this that there is a physical difference between the white and black races which I believe will forever forbid the two races living together on terms of social and political equality. And inasmuch as they cannot so live, while they do remain together there must be the position of superior and inferior, and I as much as any other man am in favor of having the superior position assigned to the white race.

      ~ Abraham Lincoln, Debate with Stephen Douglas, Sept. 18, 1858, in Abraham Lincoln: Speeches and Writings, 1832-1858 (New York: Library of America, 1989), pp. 636-637.

      These are the words of the real Lincoln, who was as much a white supremacist as any man of his time. In fact, he was a much more extreme white supremacist than most, for he advocated “colonization” or the deportation of black people from America for his entire adult life.

      Plan on Seeing the Movie ‘Lincoln’? Keep This in Mind…
      http://www.lewrockwell.com/orig13/rossini4.1.1.html

      Thomas DiLorenzo on Spielberg’s “Lincoln” (Part 1)
      http://www.youtube.com/watch?v=tfliZYSRDlE

      And, no, nobody deserves to be robbed blind. Tom and Nicole are not entitled to other people’s possessions.

      See also this:

      Race and Economics
      http://lewrockwell.com/williams-w/w-williams95.1.html

      During the 1930s, there were a number of federal government interventions that changed the black employment picture. The first was the Davis-Bacon Act of 1931, which mandated minimum wages on federally financed or assisted construction projects. During the bill’s legislative debate, the racial objectives were clear. Rep. John Cochran, D-Mo., said he had “received numerous complaints … about Southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South.” Rep. Clayton Allgood, D-Ala., complained: “Reference has been made to a contractor from Alabama who went to New York with bootleg labor. … That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.” Rep. William Upshaw, D-Ga., spoke of the “superabundance or large aggregation of Negro labor.” American Federation of Labor President William Green said, “Colored labor is being sought to demoralize wage rates.”

    • Scott D says:

      Edward,

      Your arguments all seem to basically devolve to testing extreme cases of a principle and saying, “Aha! This combination of hypothetical factors results in a person’s death, therefore it is unjust!”

      Let me try to formulate a principle from your arguments. Since no one really addressed your drowning person example, let’s say that person A has an obligation to save the life of person B who is in harm’s way if person A could reasonably save person B with less than a 25% risk that person A will die in the attempt.

      So, if the risk to A is 25% or greater, meaning that, in at least 1 of 4 cases of similar circumstances, A dies, then A has no legal obligation to save B. However, if the risk to A is less than 25%, failing to attempt to save B will have him brought up on murder charges. Saving someone when the risk is 25%+ is permitted, but you get no additional reward or incentive for doing so. We’ll add the additional restriction that A must be aware of B’s circumstances and must have the means and the time to respond to B’s peril. The new principle is codified into law.

      Now, what kinds of perverse incentives have we just created?

      1. A person can, at any time, force another person to give out money or food aid by failing to earn enough money to buy food, giving B the ability to send A to prison if A fails to answer B’s call for “help”. Drug addicts will latch onto anyone with wealth enough to cover their basic needs while they chase the money for their next hit.

      2. Faced with the prospect of life imprisonment for inaction, someone who isn’t qualified to try to help someone might make the attempt anyway, even if that attempt is useless and possibly dangerous.

      3. Medical professionals, law enforcement, and military personnel will be hit particularly hard by this new law. Triage will take on a whole new importance and the supply of and standards for medical care will begin to drop as doctors must focus all of their time and effort on terminal cases or face the potential of criminal prosecution. Having the capacity to competently defend others from violence greatly increases your obligations to others, and with each officer held personally responsible for the safety of others, rather than the entire police department, you are always and everywhere on duty.

      I think that I have reasonably demonstrated the potential for injustice that could be created. Your problem is that you are trying to legislate good values, which is a fool’s cause. Empathy, compassion, and generousity are (and should be) seen as noble and desirable characteristics. But when you pass a compulsory law to try to mimic these qualities, you create only a negative incentive. Self-interested people with means will inevitably be preyed upon by self-interested people without means.

      That is why libertarian theories of justice primarily focus on negative rights. You cannot murder. You cannot steal (or commit fraud). Limiting your system of justice to stopping actions that actively and directly cause harm to others prevents people from manipulating that system to purposefully cause harm (often to another’s benefit).

      All of this discussion, however, should be carefully divorced from the question of ethics. Is it ethical to stand by while a drowning person dies, if the risk to you is minimal? The answer to that is “no”, whether you are speaking from a utilitarian/consequentalist view, a deontological one, or from virtue ethics. I think that your biggest problem is a conflation of normative ethics with justice. Try to thoughtlessly combine the two and you end up corrupting both.

  51. Edward says:

    WITHOUT ever being payed back

  52. Edward says:

    I add in a caveat,

    that shouting “watch out”, will take too much time, and by the time the uncareful pedestrian looks to you, and then at the onrushing car, the car will have struck him

  53. Edward says:

    “And the person has a right to be upset that I violated his rights, if he so chooses.”

    You saved his life, you fool

    • guest says:

      But the state likely put me into the predicament in the first place!

      I don’t want your nanny state. Now get out of my way! LOL

    • guest says:

      Do you want to hold my ding-a-ling while I go to the bathroom, so I don’t contaminate other people in violation of their “right” to health care, or something?

      I bet you’d try to penalize me if I didn’t voluntarily pay for people to do that, wouldn’t you? “Everyone in; Nobody out.”

      ROFL.

      I’m just having fun, now. But, MAN, what the hell is wrong with you people?

    • Ken B says:

      Edward, the thing you need to understand about this crew is this. They believe there is one and only clearly and provably correct form of property rights, and that there is no need or justification for any law except those property rights, which can be and must be enforced only by private gangs.

      • guest says:

        Ken B, there are no legitimate laws which do not derive from individual rights.

        On what basis could someone claim legitimate authority over another without their consent to a contract?

        Our views on law follow logically from the principle of self-ownership (or, if you prefer, the principle that no one has a right to make you their slave):

        The Law by Frédéric Bastiat
        http://www.constitution.org/cmt/bastiat/the_law.html

        If every person has the right to defend—even by force—his person, his liberty, and his property, then it follows that a group of men have the right to organize and support a common force to protect these rights constantly. Thus the principle of collective right—its reason for existing, its lawfulness—is based on individual right. And the common force that protects this collective right cannot logically have any other purpose or any other mission than that for which it acts as a substitute. Thus, since an individual cannot lawfully use force against the person, liberty, or property of another individual, then the common force—for the same reason—cannot lawfully be used to destroy the person, liberty, or property of individuals or groups.

        Such a perversion of force would be, in both cases, contrary to our premise. Force has been given to us to defend our own individual rights. Who will dare to say that force has been given to us to destroy the equal rights of our brothers? Since no individual acting separately can lawfully use force to destroy the rights of others, does it not logically follow that the same principle also applies to the common force that is nothing more than the organized combination of the individual forces?

        The Philosophy of Liberty
        http://www.youtube.com/watch?v=muHg86Mys7I

        (The 2nd link is pretty good, except for the “time” component, which was unnecessary and confusing, the way they did it.)

      • Major_Freedom says:

        “…which can be and must be enforced only by private gangs.”

        This is not true. Libertarians hold that security and protection can be provided by any individual whatever, on a voluntary basis. They don’t need to be in a “gang”.

        Gangs, colloquially speaking, typically *impose* (involuntary) control over a certain territory, i.e. other people’s land property, against their will. They also typically require “initiation” which requires its members to violate someone’s property rights.

        You’re being intellectually dishonest by trying to convince Edward that libertarianism calls for security and protection by “gangs”.

        Why are you purposefully trying to delude Edward? Did you want to score points with him for some reason? Did you need him to be deluded so that he can remain a stupid voter who will continue to support statism, which is your goal? To use him the way a witchdoctor uses goons to do their dirty work?

  54. Jim Hodge says:

    We see two opportunities in the system of free enterprise. We must get businesses hiring again. Jimhodgeallquest.com

  55. Edward says:

    “Edward at
    You might as well assert the right to walk by a man tied
    To a railroad track, and you have a knife in your pocket you can easily cut though the ropes at no risk to yourself. The train is far away but you can hear it coming. To not act, to walk by deaf to his pleas is to be a party to that mans murder, just as surely as if u had put him there yourself. You disgust me!

    Reply
    Major_Freedom at
    Then you are a murderer, because there are people dying, that you could have saved, and yet you did not save them.”

    You really are a fanatic, aren’t you. Not only are you a fanatic, you’re a STUPID IGNORANT one as well.

    For the second time, I can’t be expected to help save everyone in the world, because I don’t have Superman’s abilities. I can only be expected to save one person when it is in my power to do so

    • Major_Freedom says:

      “You really are a fanatic, aren’t you. Not only are you a fanatic, you’re a STUPID IGNORANT one as well.”

      Aww, did I hurt your feelings, you murderer (by your own account)?

      “For the second time, I can’t be expected to help save everyone in the world, because I don’t have Superman’s abilities. I can only be expected to save one person when it is in my power to do so”

      Murderers aren’t murderers because they murder every last person in the world. Murderers are murderers because of the individuals they murder, which can range from 1 on up.

      By your account of things, you are a murderer because there are individuals in this world who have died, despite the fact that you yourself could have saved those individuals, because it only requires very little cost to you, as little as the price of a cup of coffee per day.

      The fact that you would prefer to abstain from helping those particular individuals, makes you, by your own account, a murderer.

      Saving one person from death IS in your power, and yet you choose not to exercise it. A single person has died in the world because you refused to sent just pennies a day to keep them fed.

  56. Edward says:

    I do help, I give 25$ to sponsor a child every month. I also donate to help secure vitamins for poor children in Africa. You’d be surprised at how difficult it is to find trustworthy charities that are focused on saving lives. If you find one, let me know, and I’ll be happy to donate some more.

  57. JohnK says:

    too many comments to read, but I”m hoping lots of people pointed out that Krugman was pointing to a trajectory, begging that something would be done in order to avoid it. We had LSAP2, MBS reinvestment, MEP1, MEP2, date-based guidance for the federal funds rate, LSAP3 MBS, LSAP3 Treasury, outcome based guidance for the fed funds rate…….

    I read your article to read “Krugman was saying inflation was falling in a worrying way and as such suggested massive fiscal and monetary policy responses…. and look what happened when there was significant monetary policy action!!” … I am happy to read smart critiques of krugman, but this written in the exact same way but with a different conclusion seems to totally support his position, no?

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