22 Jan 2014

The Austrian School (and Rothbardians in Particular): The Only Consistent Anti-Interventionists

Austrian School, Chicago School, Market Monetarism 125 Comments

In the blogosphere’s discussion to the Krugman-Barro flap–which soon enough engulfed Russ Roberts and me–Scott Sumner has (partially) defended Krugman. Sumner too is frustrated with modern conservatives who reject Obama’s fiscal “stimulus” packages, yet do so with rhetoric that would also throw out the need for Fed monetary stimulus. I agree entirely with Scott when he writes:

If conservatives really believe “the real problem is real” then they shouldn’t be contemptuous of “Keynesian economics,” they should be contemptuous of “the entire Keynesian/Milton Friedman strand of economics.” After all, Friedman also thought nominal shocks had long lasting effects on unemployment. But they never add Friedman’s name.

Of course, Scott thinks the solution to this apparent inconsistency is for conservatives to maintain their rejection of fiscal stimulus, but to change their arguments when doing so, in order to leave room for the (alleged) benefits of fine-tuning monetary policy. In Scott’s case, he wants the Fed to do whatever must be done, in order to keep the market’s expectations of the level of nominal GDP growing on target.

Yet there is a different way to resolve the paradox: Conservatives who see the folly of “stimulus” as presented by the likes of Paul Krugman should realize that their objections also apply to the work of Milton Friedman, when it comes to monetary policy. We didn’t need just a little more deficit spending to cure the Great Depression; Hoover’s and FDR’s deficits only made things worse and prolonged the agony.

By the same token, Milton Friedman was wrong to say that the explanation for the Great Depression was an inadequate burst of inflation from the Fed. On the contrary–as the Austrians explain–it was loose monetary policy that caused the boom that collapsed in 1929.

So Scott Sumner is right that the conservatives in Obama’s America often contradict themselves; they use rhetoric against government intervention in the fiscal context that would just as well prove that the Fed should leave the economy alone, too. Scott thinks conservatives need to change their rhetoric. I think the conservatives need to start reading Murray Rothbard, starting with his take on Milton Friedman.

125 Responses to “The Austrian School (and Rothbardians in Particular): The Only Consistent Anti-Interventionists”

  1. Ken B says:

    My eyes! My eyes!

    • Cosmo Kramer says:

      It’s going to be alright. The truth can be blinding.

  2. Lord Keynes says:

    “Conservatives who see the folly of “stimulus” as presented by the likes of Paul Krugman should realize that their objections also apply to the work of Milton Friedman”

    That falsely assumes that all conservatives are basing their critique of Keynesianism on Rothbard, when that does not follow at all.

    If their objections to Keynesianism are based on Friedman’s monetarism, then your whole argument collapses.

    E.g., free bankers and GMU Austrians also have their own coherent NON-Rothdardian critique of other schools of economics, including Keynesians and Rothbardians. The logic of their theory does not require them to accept Rothbard, because they have their own devastating critiques of Rothbard on, for example, fractional reserve banking and monetary disequilibrium.

    Friedmanite monetarists also have a legitimate critique of Keynesians AND Rothbardians. Conservatives who are monetarists are not guilty of any inconsistency in rejecting Rothbard as wrong.

    • skylien says:

      “If their objections to Keynesianism are based on Friedman’s monetarism, then your whole argument collapses.”

      If I understand this correctly, there is no mention of those conservatives by Sumner or Bob. They are not talking of all conservatives who are against fiscal stimulus.

      See: “Sumner too is frustrated with modern conservatives who reject Obama’s fiscal “stimulus” packages, yet do so with rhetoric that would also throw out the need for Fed monetary stimulus. “

    • Andrew Keen says:

      SS: Conservatives should embrace the Fed.
      BM: Conservatives should read Rothbard.
      LK: You’re argument falsely assumes that….

      Where are you seeing a falsifiable argument? It looks like two guys making rhetorical suggestions to me. It seems as though your zeal to contradict this article has negatively impacted your comprehension of it.

      • Major_Freedom says:

        “Even Hayek believed that…”

        “Even Austrian free bankers believe that…”

    • Major_Freedom says:

      Actually it doesn’t take 100% agreement with Rothbard, including agreement with his take on fractional reserve banking, to show that the same folly exists in both Keynesian and Monetarist “stimulus”.

      One can be a MISESEAN, and reject both for the same reasons (distortions to economic calculation, preventing corrections from occurring, wasting resources, shrinking the real sustainable economy from what it otherwise would have been in the long run, etc).

      • Lord Keynes says:

        “One can be a MISESEAN, and reject both for the same reasons (distortions to economic calculation, preventing corrections from occurring”

        And the monetarists can make objections apply to Misesian theory too.

        And you mention “corrections”. You mean a tendency towards market clearing prices and wages?

        And monetarists can answer that real world price and wage rigidities prevent this tendency to market clearing from happening. Therefore even Misesian market solutions do not properly happen.

        • Major_Freedom says:

          “And the monetarists can make objections apply to Misesian theory too.”

          LK, starting your response with “And”, after my response to your assertion that to accept follies in both Monetarism and Keynesianism, one must be “Rothbardian”, either tells me that you thought about it and get it, but won’t state as much, or you are continuing to deceive yourself and won’t even think about it.

          Monetarists can make “objections” to Misesians yes, but this is irrelevant to the content of my response, which is the topic I hope you are clear about.

          “And you mention “corrections”. You mean a tendency towards market clearing prices and wages?”

          By corrections I mean real capital reallocations the overall structure of which is more physically sustainable, i.e. more in line with saving and consuming behaviors, especially time preferences. Unhampered price adjustments facilitate these corrections, for it is hampered price adjustments that caused the capital distortions that are in need of corrections.

          Unhampered price adjustments (call that objective concept whatever you want in the ideal sense, i.e. “tending towards equilibrium”, “equilibrium”, “tending towards clearing”, etc), but it is the real objective acts of uncoerced individuals, i.e. private property enforcement, that would drain the resources from those individuals who would not alter their behavior to be in line with other individual saving/consumption behaviors, and would accumulate resources of those individuals who do.

          The key is allowing individuals to not only set prices in a context of economic freedom in the production, distribution, and competition in real goods, but in the production of money as well. That would enable the producers of money to be subject to the same coordinating forces as the producers of real goods. As of now, the producers of money are not subject to market forces, and as a result, their behavior is disruptive to the producers of real goods. Real goods producers require unhampered prices and interest rates, in order for their behavior to avoid the extent of errors that take place with central banking.

          “And monetarists can answer that real world price and wage rigidities prevent this tendency to market clearing from happening. Therefore even Misesian market solutions do not properly happen.”

          Those monetarists would be wrong. Prices are not rigid. They can and do change. Just because they don’t instantly change (note, that is NOT an accusation that you believe prices instantly adjust), it doesn’t mean they never adjust.

          Monetarists fail to take into account that inflation itself is a major factor that makes prices less susceptible to adjust, because every individual is born into the world, and lives a life, expecting most prices to rise over time no matter what they do, that is, no matter what their economic choices are, no matter what the demand for money happens to be, no matter what time preferences happen to be, and no matter what real productivity happens to be. As a result, needed price adjustments that would otherwise go towards correcting errors, are postponed, delayed, and hampered.

          Prices are more rigid in a world of central banking and government intervention. But they are not absolutely non-rigid in a free market. Free market prices can and do adjust. Individuals who refuse to adjust their asking and bidding prices, will at some point find themselves no longer participating in the division of labor, and would at some point live off the grid as isolated, self-sufficient producers. But then any talk of economic coordination in a division of labor would no longer include those individuals anyway.

          • Lord Keynes says:

            ” As a result, needed price adjustments that would otherwise go towards correcting errors, are postponed, delayed, and hampered.

            lol.. in other words, monetarists would be quite right about the lack of proper price and wage flexibility in the **real world**, as opposed to the imaginary Rothbardian free market where pigs fly and unicorns dance magic jigs.

            • Richie says:

              as opposed to the imaginary Rothbardian free market where pigs fly and unicorns dance magic jigs.

              Please provide a source for this claim.

              • Ken B says:

                Good catch Richie, LK is trying to slip one past us. Unicorns only dance reels.

              • Major_Freedom says:

                I wonder if LK would as forthright in emphasizing the **real world** if the world consisted of totalitarian slavery, and someone mentioned “You know, ending slavery might make us better off.”

                Would LK be there to say “YA SURE! MAYBE IN YOUR ROTHBARDIAN FANTASY LAND OF LEPRECHAUNS!”

              • Tel says:

                His evidence of sticky prices is a bunch of surveys where various businesses were asked how they priced their products, and many said that they applied a markup to costs.

                The problem of surveys being that many people give the most socially acceptable answer. Admitting that you charge as much as the market will bear is not likely to show up in survey results.

                Many did describe their markups as “variable” meaning that prices were variable not sticky but the business will at least ensure some non-zero profit so price will not drop below costs.

                At any rate, commodity prices are self evidently volatile, and if you add a fixed markup to a volatile input cost, you still end up with a volatile selling price. Supermarkets, butchers and green grocers regularly end up juggling how much of the volatility they are willing to absorb, and how much they pass on to their customes.

                Then we have “sale” prices, which appear as required, plus individual staff discretion on discounts. Then there’s tendering which is a whole nother ballbame again, and long term customer loyalty arrangements.

                In a nutshell, there’s plenty of price flexibility.

              • Chris P says:

                @Tel

                It wouldn’t actually surprise me if most (at least small) businessmen didn’t know how to answer that question.

                Case in point. In business school I had a marketing class where we were discussing the introduction of a new product. The professor asked, “Ok now how are we going to determine the price for this product?”

                …. crickets

                Some finally said, “See what others are charging for similar products.”

                “WRONG!”

                “Calculate the cost of production add a few percentage points”

                “WRONG!”

                She literally said, “I can’t believe an entire class of MBA’s doesn’t know how to price a product.”

                Now if that is a class of MBA’s, how do you think your average businessman is going to respond to those surveys.

                Just because they don’t say so in the survey, it doesn’t mean that businessmen don’t adjust prices when faced with a shortage or surplus.

                Of course LK mocked me when I made such a ludicrous assertion.

              • Lord Keynes says:

                “Many did describe their markups as “variable” meaning that prices were variable not sticky”

                That is rubbish. “Variable” mark-up in fact tends to mean that as total average unit costs fall as production rises, the business actually just RAISES its profit mark-up and MAINTAINS its price, but Tel is too ignorant of the literature to know this.

              • Lord Keynes says:

                “It wouldn’t actually surprise me if most (at least small) businessmen didn’t know how to answer that question. “

                So in over a hundred surveys over 70 years in dozens of nations, vast numbers of business people have managed to lie consistently and by some miracle the surveys give consistent results? lol…

              • martinK says:

                LK,

                That is rubbish. “Variable” mark-up in fact tends to mean that as total average unit costs fall as production rises, the business actually just RAISES its profit mark-up and MAINTAINS its price

                So maybe prices aren’t determined by costs after all?

              • Major_Freedom says:

                ““Variable” mark-up in fact tends to mean that as total average unit costs fall as production rises, the business actually just RAISES its profit mark-up and MAINTAINS its price”

                LK, I hope you can see the inconsistent set of arguments you’re making.

                If prices are determined by costs, then if costs rise and fall, then so should prices. If prices do not fall even if costs fall, then that’s no longer prices determined by costs, but by prevailing demand.

            • Ivan Jankovic says:

              If this means that “Rothbardians” believe the prices are infinitely flexible, that’s just nonsense. They believe that prices are just as ‘sticky’ as they should be.

            • Major_Freedom says:

              LK:

              “lol.. in other words, monetarists would be quite right about the lack of proper price and wage flexibility in the **real world**, as opposed to the imaginary Rothbardian free market where pigs fly and unicorns dance magic jigs.”

              It’s funny how you read what I say, take the complete opposite, and then describe that as “in other words.”

              You’re trying to move the goal posts by injecting the word “proper” in front of price and wage flexibility, as if I held YOUR arbitrary conception of what constitutes “proper flexibility” all along.

              In the real world, prices are made more flexible due precisely to inflation. In the real world, eliminating inflation would then increase price flexibility.

            • Major_Freedom says:

              “…where pigs fly and unicorns dance magic jigs.”

              You mean where Keynesianism doesn’t harm innocent people? Do tell…

        • Richard Moss says:

          Murphy is clearly talking about conservativies who think the economic problem is a ‘real’ not ‘nominal’.

          Reread the quote Murphy takes from Sumner’s blog above;

          If conservatives really believe “the real problem is real” then they shouldn’t be contemptuous of “Keynesian economics,” they should be contemptuous of “the entire Keynesian/Milton Friedman strand of economics.” After all, Friedman also thought nominal shocks had long lasting effects on unemployment. But they never add Friedman’s name.

          Even Scott is saying Monetarism won’t help them. Jeez.

      • Ivan Jankovic says:

        Mises was against fractional reserve banking, just as Rothbard, and for the same economic reasons as Rothbard (Rothbard only insisted more on the legal and philosophical aspects of the problem)

        • John says:

          I don’t think you can find any quotes where Mises directly comes out against fractional reserve banking. He was against the government encouraging/backstopping additional lending above what would have occurred on the free market.

          He does approvingly quote an author who says that the free issuance of bank notes would lead to almost no issuance of bank notes.

          FRB is a pretty subtle issue because it is clearly a market outcome but would probably be less pronounced without government involvement.

          • Bob Murphy says:

            John wrote:

            don’t think you can find any quotes where Mises directly comes out against fractional reserve banking.

            Actually you can, John. In TOMC he says it contains the seeds of its own destruction.

            However, there are other places where it sounds like he is fine with it, so long as it occurs in a free banking framework.

            That’s why there is such controversy on “What did Mises think?” because you can find stuff on either side.

            • Cosmo Kramer says:

              Why is this a controversy? In a true free market, one is free to choose where they bank.

              I am against consumption of bread, but am perfectly fine with having a decision to consume or not consume bread. It shouldn’t be banned. Nor should fractional reserve banking.

              Ideally, we could choose different banks(no federal guarantees) or different money.

              • Bob Roddis says:

                This FRB vs NO FRB debate is at most an argument about the viability of a future business model. These models will either work or they won’t.

              • Cosmo Kramer says:

                Exactly… “business model”

            • John says:

              You’re right of course. I should’ve been more clear. What I meant to say was I don’t think he ever said that it should be explicitly banned. Roddis is right that in a perfectly free market, the question would basically be resolved by business competition. If fractional reserve banks could resist overextending themselves, it is easy to see how they could be more profitable than banks that just hold money.

              • Major_Freedom says:

                In the real world, the majority of demand depositors believe they remain the legal owners of the money, and out of those, a majority accept the money being lent out by the bank.

                Which still leaves a large number of people who are behaving as if they are still the owners and that the banks still have the same quantity of money available on demand. That causes significant distortion as well.

              • John says:

                MF,

                If people want to earn interest by putting money into a bank that will lend it like banks do today, why would it be “free market” to stop them? So what if there are economic distortions, it’s a question of freedom. Besides, as Mises points out, the amount of reserves that banks hold in relation to their deposits would probably be much higher in an unregulated system.

              • Major_Freedom says:

                “If people want to earn interest by putting money into a bank that will lend it like banks do today, why would it be “free market” to stop them?”

                My argument refers to those who don’t know, not those who know and accept the banks lending the money.

              • Ken B says:

                The answers from MF and implicitly from Roddis won’t do. Say I buy fresh fruit from a ancap caommunity in a future ancap Florida. Do I know that one of their members lives in a race restricted community, wich my contractual obligations forbid me? No, They answer “Ken, you should ask.” But for FRB they REJECT the answer “Ken, you should ask.”

              • Major_Freedom says:

                Ken B:

                The answers do for the purposes the point being made, but I concede they may not make you feel all warm and fuzzy.

                “The answers from MF and implicitly from Roddis won’t do. Say I buy fresh fruit from a ancap caommunity in a future ancap Florida. Do I know that one of their members lives in a race restricted community, wich my contractual obligations forbid me?”

                You mean we can’t learn of a company turning down all black or all white potential employee applicants? You mean we can’t learn when a community is segregated?

                People are not stupid Ken B. People can and do learn.

                Why is it that whenever a statist defends the state, they always always ALWAYS either explicitly or implicitly view people in general as utterly retarded beings? It’s like the only way to defend shooting at innocent people is if we imagine them being so stupid that they will end up shooting themselves if the state doesn’t shoot them first.

                Ken B, your posts are declining in quality the same as LK. You two are not progressing. You’re stuck.

              • Ben B says:

                Here is the Hoppe, Block, Hulsmann take on why “it should be explicitly banned”.

                “As Hoppe formulated it, “two individuals cannot be the exclusive owner of one and the same thing at the same time.” This is an immutable principle; it is a law of action and nature that no contract can change or invalidate. Rather, any contractual agreement that involves presenting two different individuals as simultaneous owners of the same thing (or alternatively, the same thing as simultaneously owned by more than one person) is objectively false and thus fraudulent. Yet this is precisely what a fractional-reserve agreement between bank and customer involves.”

                “In issuing and accepting a fiduciary note (at a necessarily discounted price), both bank and customer have in fact, regardless of whatever they may believe or think about the transaction, agreed to represent themselves—fraudulently—as the owner of one and the same object at the same time. They have in fact contracted to create additional titles and claims to the same existing quantity of property. In issuing fiduciary notes, they do not—and cannot—bring more property into existence. Indeed, no contract whatsoever can possibly increase the existing quantity of property, but can only transfer (redistribute) existing property from one person to another. The quantity of existing property can only be increased through additional appropriation and production (and a thus enlarged quantity of property can in turn lead to a correspondingly increased number of titles to property). But fractional reserve banking and the issue of fiduciary media, while it does not and cannot increase the amount of property in existence, also does not involve (as all other contracts do) a transfer of existing property or titles to existing property from one hand to another. Neither does the issue and acceptance of a fiduciary note signify a transfer of property from bank to client or vice versa. To be sure, as the result of a fiduciary issue, the distribution of assets and liabilities in the accounts of bank and client is altered. But no existing quantity of property is actually transferred from bank to client, or vice versa, and the total supply of property has remained constant. It is precisely in this sense that it can be said of fiduciary media that they are created out of thin air. They are property-less titles in search of property. This, in and of itself, constitutes fraud, whether according to Rothbard’s definition of the term as “a failure to fulfill a voluntarily-agreed-upon transfer of property” or according to Selgin and White’s own definition of it as “a willful or deliberate deception for purposes of gain.” Each issuer and buyer of a fiduciary note (a title to money uncovered by money), regardless of what he may believe, is in fact—objectively—engaged in a misrepresentation for the purpose of personal gain. The bank and its client have consented to misrepresent themselves as the owners of a quantity of property that they do not own and that plainly does not exist; and whenever they buy an existing quantity of property in exchange for titles to a nonexisting quantity of property, they have become invariably and inescapably guilty of an act of fraudulent appropriation.”

                Excerpt From: Hans-Hermann Hoppe. “The Economics and Ethics of Private Property.” Ludwig von Mises Institute. iBooks.
                This material may be protected by copyright.

            • Ivan Jankovic says:

              He never says that. Even in Human action where he accepts free banking as a the second best, he clearly says that fractional reserve banking per se creates business cycle.

              • Bob Murphy says:

                Ivan, don’t you think I’ve carefully reviewed this stuff? There are passages from TOMC where Mises sounds like he’s cool with FRB. I am partial to anti-FRB so believe me, I was wanting it not to be so.

  3. andrew' says:

    Can too little money hamstring a recovery? I have asked Scott Sumner if too much money (then too little) can cause the boom (then bust).

    • Cosmo Kramer says:

      Nope.

      • Ken B says:

        Can lack of specie increase transaction costs?

        • Major_Freedom says:

          Costs tend to fall (are otherwise lower) when there is less money.

          • Ken B says:

            Abolish money then.

            • Major_Freedom says:

              Money costs Ken B.

          • Andrew' says:

            “Costs tend to fall (are otherwise lower) when there is less money.”

            Not contracts.

        • Cosmo Kramer says:

          Define: “lack”

          • Ken B says:

            Causing higher transaction costs.

            See? I can do praxeology!

            Actually it has been a problem when the smallest unit of specie is too valuable for many day to day exchanges. Imagine the present world with only coins and no coin less than $100. Medieval England had such problems. Barter is of course possible, but represents a higher transaction cost.

            • Major_Freedom says:

              “Actually it has been a problem when the smallest unit of specie is too valuable for many day to day exchanges. Imagine the present world with only coins and no coin less than $100. Medieval England had such problems. Barter is of course possible, but represents a higher transaction cost.”

              The market process is capable of establishing subsidiary currencies the unit value of which is more practical for smaller, day to day transactions. It’s why gold AND silver were used historically as money.

              “Causing higher transaction costs.

              See? I can do praxeology!”

              That isn’t praxeology, that’s just circular logic. Praxeology isn’t circular.

    • John says:

      You have to remember that Sumner only thinks in terms of NGDP. In this sense, Sumner definitely thinks that “tight money” can hamstring a recovery by definition. TIght money he defines as low NGDP. Too much money in his mind only causes NGDP that is too high. Money only plays a part in the boom bust cycle when NGDP goes below it’s average over the last 30 years (about 5%). It has nothing to do with the boom and the bust is just the Fed missing low on NGDP.

    • John says:

      I should be clearer, in Sumner’s view, as long as the central bank keeps Nominal GDP stable, there is no such thing as a boom or a bust. He follows the Efficient Markets Hypothesis so there are no bubbles as long as there is stable NGDP like in 2003-2007. Bubbles only happen after the fact and market prices accurately represent real factors in his worldview. In fact, he usually argues that the central bank letting NGDP fall creates the illusion of a bubble in the past.

      Just reverse how you normally think about cause and effect and you will understand where Sumner is coming from. Up is down and left is right.

  4. Lio says:

    “By the same token, Milton Friedman was wrong to say that the explanation for the Great Depression was an inadequate burst of inflation from the Fed. On the contrary–as the Austrians explain–it was loose monetary policy that caused the boom that collapsed in 1929.”

    Agree with that. Unfortunately, There are still people who think perpetually increasing the money supply is the solution to the problems of the real economy.

  5. Brent says:

    I thought the same thing when I read some Sumner’s piece. Rothbard and everybody following his line of thinking have certainly not been inconsistent – they frequently let Friedman have it.

  6. Wonks Anonymous says:

    I think there’s a problem in determining what constitutes “interventionist” monetary policy. As long as there is a central bank, there’s NO SUCH THING AS NOT DOING MONETARY POLICY.

    • Bob Roddis says:

      If you understand autistic, binary and triangular intervention, there is no ambiguity as to whether there is intervention of not.

      • Bob Roddis says:

        TYPO:

        “intervention OR not”

      • Wonks Anonymous says:

        You’re going to have to elaborate on that.

    • Major_Freedom says:

      Bingo. The threats of violence preventing competition with the Fed if it inflates too much or if it inflates too little, and preventing new money from entering the right pockets first, that is “central banking” as well. Central banking doesn’t just consist of the FOMC and their followers clicking on computer keys, changing the supply and ownership claims of money.

  7. Bob Roddis says:

    On January 23, 1973, the US and North Vietnam signed the Paris Peace Accords which effectively ended the draft for most of my friends and me with low draft numbers (under 125)*. Plus, my college deferment was ending in June so this was an earth moving experience. The Supreme Court legalized abortion the day before. The war was over. I was taking a senior level poly sci course specifically to learn about Rothbard whose reputation horrified me. The texts were “Power and Market” and “Politics in Plural Societies: A Theory of Democratic Instability” by Shepsle and Rabushka. From the latter book, I learned that social democracy in multi-ethnic societies usually leads to ethnic strife and often to ethnic slaughter. So much for social democracy.

    http://tomwoods.com/blog/the-post-911-foreign-policy-fiasco-that-conservatives-cheered/#comment-1212131143

    Further, because of my hostility to social science jargon (yes, even then), most of the ourses I had taken were about the various then-current ethnic conflicts such as East Pakistan, Nigeria/Biafra and Uganda.

    From “Power and Market” I learned about autistic, binary and triangular intervention.

    Having been indoctrinated with all the statist economic denialism of the era, I was initially hostile to the preposterous concept of “firms” providing protection services. However, when explaining these concepts to my commie college friends, I was immediately struck by their complete inability and/or unwillingness to understand the concept of intervention as opposed to the lack of intervention. This was very apparent when trying to explain Kolko and the difference between monopolies arising on the free market vs. the inability to create monopolies on the free market and the elite then employing government regulation instead. It soon dawned on me that NOBODY got it. EVER. (Note that even today, no one can/will differentiate laissez faire from crony capitalism). I soon decided that the hipster commie horde was not that smart after all. That experience and the trauma of the changed world with no draft allowed me to open my mind to Rothbard and pro-market critiques of interventionism that I probably would have resisted otherwise.

    Since then, nothing has changed. Unless one has become a Rothbardian or near–Rothbardian, people just do not start out examining social science events from an intervention/non-intervention analysis. This is why I’m constantly stating that no non-libertarian understands the NAP and no non-Austrian understands economic calculation because as a starting point, one must be able to first imagine free voluntary transactions without intervention. That never happens with our opponents (even the college professors) and you have all seen the carnage that results when you try to explain it to the statists (even in a nice way).

    *Krugman, two years younger than me, had a very high draft number which might explain why he was apparently apolitical until 1999.

    • Major_Freedom says:

      “This is why I’m constantly stating that no non-libertarian understands the NAP and no non-Austrian understands economic calculation because as a starting point, one must be able to first imagine free voluntary transactions without intervention. That never happens with our opponents (even the college professors) and you have all seen the carnage that results when you try to explain it to the statists (even in a nice way).”

      There is a lot of truth to that.

      If one does not grasp non-aggression, then one cannot grasp economic calculation.

      • Bob Roddis says:

        If one does not grasp non-intervention, then one is generally oblivious to the evidentiary fact of intervention as it occurred prior the present moment and one is oblivious to the interventions implicit in one’s policy proposals. It seems like we spend 95% of our time starting from scratch over and over and over explaining to the statists that their proposals necessarily include an instated act of immoral violence or the threat thereof. And around and around we go for decades.

  8. John Becker says:

    Exactly Bob. Sumner among others doesn’t seem to pick up on the fact that what he calls “nominal shocks” or insufficient AD have their roots in dislocations in the real economy. I think that is at the heart of the argument between the Austrian tradition and the Friedman/Keynes aggregative way of looking at the world.

  9. Matt M (Dude Where's My Freedom) says:

    I think modern conservatives operate frequently in environments so openly hostile to their general principles that they are absolutely desperate to find someone, *anyone*, who is both considered “mainstream” AND who, on at least some superficial level, seems to agree with them.

    They flock to Friedman because the establishment generally still promotes, or at least tolerates, his ideas, and because hey – he favored vouchers for schools, so he must be “on our side,” right? Those who play the political game can’t endorse Rothbard – he’s a dangerous anarchist! Even the Cato institute thinks he’s too extreme!

    All you have to do to win over the neocons is agree with them on a couple things, but also (and this is critical), agree with the progressives on enough things that you can still be considered “mainstream” and not an “extremist.” This is why they continue to fall in love with people like John McCain and Mitt Romney over and over again.

  10. Major_Freedom says:

    “I agree entirely with Scott when he writes:”

    If conservatives really believe “the real problem is real” then they shouldn’t be contemptuous of “Keynesian economics,” they should be contemptuous of “the entire Keynesian/Milton Friedman strand of economics.” After all, Friedman also thought nominal shocks had long lasting effects on unemployment. But they never add Friedman’s name.

    I don’t how you can “entirely” agree with Sumner on this. After all, there are conservatives who do indeed “add Friedman’s name.”

    To be sure, there are many conservatives who don’t include Friedman, indeed typically praise his ideas, and those are likely the one’s Sumner is referring to, but the way he says it in a universal sense, and from what I know you know about conservatives who are anti-monetarism, I think your response should be “Wait a minute Scott, while I agree with you in general on this point, there are conservatives (MYSELF!) who are anti-monetarism.”

    • Bob Roddis says:

      MF, I miss your daily polite and patient expositions on the errors of Mr. Sumner. I really do.

      http://www.themoneyillusion.com/?p=17692&cpage=1#comment-205619

      • Major_Freedom says:

        I recently posted a comment on Sumner’s blog. Just for you buddy.

      • John Becker says:

        Hilarious that you were able to pull up that particularly hostile exchange. How did you do that. You must’ve bookmarked it.

    • Bob Murphy says:

      I don’t consider myself a conservative, MF. And Scott presumably has in mind people who read National Review, listen to Rush Limbaugh, etc. I never hear them bashing Milton Friedman for being a commie.

      • Keshav Srinivasan says:

        Bob, you don’t consider yourself a Burkean? Tom Woods does.

        • Ken B says:

          Hmmm. I must say that doesn’t really seem to fit. My guess is that I am a lot more Burkean than Bob. Bob is committed to changing society radically based on a priori theory. I can see the link in his faith in property, but even there he takes a deductive approach to property rights. Wildly unburkean that.

        • Bob Murphy says:

          I mean conservative like this, Keshav.

          • Ken B says:

            Funny, but fundamenot really right. This is about GOP partisans not conservatives.

        • Ken B says:

          I just saw the irony of this. What is Burke’s most famous quote? Yet Bob’s goal in politics is precisely to get good men to do nothing.

          • Major_Freedom says:

            Strictly speaking Ken B, pacifism is “something”.

            In order for Burke’s men to be realistic, they’d have to be dead or in a coma.

            • Ken B says:

              I mean Bob’s Timothy Leary act: don’t vote, drop out. If the government behaves badly just withdraw not oppose. Stand by with you withheld consent in your hand.

              • Bob Murphy says:

                If the government behaves badly just withdraw not oppose.

                Yes Ken B. I imagine the FBI has a list of its most feared opponents. I’m at the bottom of the board, while you’re 3 rungs above, since you might vote a certain way in the next election.

              • Dan says:

                “Yes Ken B. I imagine the FBI has a list of its most feared opponents. I’m at the bottom of the board, while you’re 3 rungs above, since you might vote a certain way in the next election.”

                Hahaha. You’re too funny sometimes.

              • Ken B says:

                You might be interested in politics, but politics is interested in you.

                Paraphrasing.
                :)

      • Major_Freedom says:

        Sorry Murphy, my bad. I thought you considered yourself a conservative who Sumner is referring to, economics-wise.

        • Bob Murphy says:

          No problem, it’s possible Sumner has me in mind. I just get the sense that he more means conservative the way Fox and Jon Stewart use the term.

          • Andrew' says:

            I asked him how he differed with an Austrian version of money illusion and he responded “I’m not an Austrian and read my papers to see how I differ.”

  11. Gary says:

    A few points in defense of Friedman and those who Sumner criticizes, and a bit of a criticism of Sumner.

    1) It is perfectly consistent to say that the massive collapse in the quatity of money in the 1930s that Friedman and Schwartz documented will be destablizing and to also say that “aggregate demand” is not a particularly useful concept. It tends to get lost in much of the blog dialogue that the magnitudes (and sometimes even the direction) observed during the Depression and now are not remotely similar.

    2) It is strange to accuse Friedman of being an intervensionist based on his analysis of the 1930s when one of his arguments was that the Depression would not have happened in the absense of the Fed. Read Tobin’s (not a right winger) review of “A Monetary History”. He says that the point that Friedman most persuasively conveys is that the bank collapses that happened would not have happened in the pre-Fed system of bank suspensions.

    3) Friedman, until the end of his life, wanted the Fed to be replaced by a computer. I suspect the computer would not have kept NGDP on target. Indeed, if you listen to Friedman’s interview on Econtalk, he says his ideal policy (which he says will never happen) is a frozen monetary base!

  12. Max says:

    Rothbardians are also peddling a cure for depressions: regulate traditional banking out of existence. How is that any different? Because it’s strategic, not tactical? Well, Sumner would say his policy isn’t tactical either.

    • John Becker says:

      I consider myself someone who follows in the Mises/Rothbard tradition and I, like David Friedman who comes from a different economic outlook but reaches the same conclusions, say let market competition decide.

    • Andrew' says:

      “Rothbardians are also peddling a cure for depressions: regulate traditional banking out of existence. ”

      This is almost the opposite of reality.

      Governments protect fractional reserve demand deposit borderline fraud. Not protecting this borderline fraud and not externalizing the subsidy is the opposite of regulating them out of existence.

      Now I can’t even be sure if that is what Rothbardians want.

  13. Ivan Jankovic says:

    “Milton Friedman was wrong to say that the explanation for the Great Depression was an inadequate burst of inflation from the Fed.”

    Be careful, Bob: Selgin, Horwitz and other ardent Austrians are going to attack you for “misrepresenting Freidman” and peddling the liquidationist nonsense.

  14. joe says:

    No evidence of loose money during the 1920s. The evidence does support Friedman’s claim that expanding the monetary base ended the recession in 1933. Guess we know why Austrian’s don’t like data.

    St. Louis Adjusted Monetary Base (AMBSL), Monthly, Seasonally Adjusted, 1918-01-01 to 1940-12-31
    http://research.stlouisfed.org/fred2/graph/?g=rhu

    • Major_Freedom says:

      “No evidence of loose money during the 1920s.”

      The monetary base does not comprise the totality of all money. When Austrians talk about the “inflationary 1920s”, they are referring to the aggregate money supply, of which the base is but a component.

      It’s hilarious that in your zeal to spread the lie that “Austrians dont’ like data”, you somehow have found yourself in a position of looking at the wrong data.

      • Bob Roddis says:

        Note also how Joe gets the difference between intervention and non-intervention. Right?

        • Major_Freedom says:

          You mean it’s not theft or murder or rape if 99 people vote yay as against a 100th person?

        • Major_Freedom says:

          Apparently if the state intervenes in money in such a way the history of which might plausibly LOOK like a free market in money, then we can conclude with absolute certainty that intervention in money isn’t having any deleterious effects in the market.

    • Major_Freedom says:

      At any rate, as Salerno wrote:

      “Indeed, we find that from the inception of the monetary inflation in mid-1921 to its termination at the end of 1928, “uncontrolled reserves” decreased by $1.430 billion while controlled reserves increased by $2.217 billion. Since member bank reserves totaled $1.604 billion at the beginning of this period, this means that controlled reserves shot up by 138 percent or 18.4 percent per year during this seven-and-one-half year period, while uncontrolled reserves fell by 89 percent or 11.9 percent per year. Thus Rothbard correctly concluded that the 1920s were an inflationary decade and that it was indeed the intention of the Federal Reserve System that it be so.”

      http://www.fee.org/the_freeman/detail/money-and-gold-in-the-1920s-and-1930s-an-austrian-view/#ixzz2rGRSFwY2

    • RIchard Moss says:

      How in the world is that graph evidence that money was not loose during the 1920′s??

      Oh – I think I’ve seen this before from you (but with employment) – are you looking at the level of the monetary base in 1920 and comparing it to the level in 1930 – and from this concluding there is no evidence of loose money during the 1920′s???

      Gooooood one.

    • John Becker says:

      Austrians don’t dislike data. We dislike the simplistic way you interpret data to back up your theory and then pretend to be neutral and “scientific” about it. The graph does little to make your point in any case. However, I will grant you that FDR’s inauguration corresponded with a monetary expansion that corresponded with the end of “The Great Contraction” from 1929-1932. There was never a robust recovery for the average American consumer until after FDR was dead.

      What you have to keep in mind is that money supply growth and GDP are driven by “real” factors. For instance, falling farm incomes in the Midwest contributed to bank failures that spread through the country and shrank the money supply. The base cause as I see it was the Smoot-Hawley tariff that limited trade opportunities for farmers who depended on exporting crops. It also damaged a lot of other industries which damaged their ability to repay loans which hurt the banking system. By looking at aggregates, you miss the whole damn story.

      How loose money was in the 1920s depends on your definition of loose. If you are defining loose money by inflation then no. If you are defining it by historical standards since we went off gold, then probably also not. However, if you define loose money in the context of the time and the monetary system then it was a period of looser money than the past. The crash of 1929 could have been a typical panic, it was the policy response after the crash that created the Great Depression. Money didn’t have to be much easier in the 1920s than in say the 1900s when there was also a panic in 1907.

    • Andrew' says:

      Now Keynesians are Market Monetarists.

      For fraks sake.

      • Andrew' says:

        The Fed had no evidence of a housing bubble when they only factored in rental equivalents into inflation too.

        And who said Austrians require CPI inflation as an explanation?

  15. Ken B says:

    This boast, and the high fives, explode the pretense Austrian economics is wert-frei.

    • Major_Freedom says:

      Looks like Ken B wants a smackdown just like a former poster who made this same categorical error.

      The high fives among crooked scientists and their employers after their missiles demolish cities does not “explode” any pretense of rocket science.

      Mises explains:

      “For the reference to bias, whether intentional or subconscious, is out of place if the accuser is not in a position to demonstrate clearly in what the deficiency of the doctrine concerned consists. All that counts is whether a doctrine is sound or unsound. This is to be established by discursive reasoning. It does not in the least detract from the soundness and correctness of a theory if the psychological forces that prompted its author are disclosed. The motives that guided the thinker are immaterial to appreciating his achievement. Biographers are busy today explaining the work of the genius as a product of his complexes and libidinous impulses and a sublimation of his sexual desires. Their studies may be valuable contributions to psychology or rather to thymology (see below p. 265), but they do not affect in any way the evaluation of the biographee’s exploits. The most sophisticated psychoanalytical examination of Pascal’s life tells us nothing about the scientific soundness or unsoundness of his mathematical and philosophical doctrines.

      If the failures and errors of a doctrine are unmasked by discursive reasoning, historians and biographers may try to explain them by tracing them back to their author’s bias. But if no tenable objections can be raised against a theory, it is immaterial what kind of motives inspired its author. Granted that he was biased. But then we must realize that his alleged bias produced theorems which successfully withstood all objections.

      Reference to a thinker’s bias is no substitute for a refutation of his doctrines by tenable arguments. Those who charge the economists with bias merely show that they are at a loss to refute their teachings by critical analysis.”

      http://mises.org/th/chapter2.asp

      • Bob Roddis says:

        I thought the theme for the day was understanding the nature of intervention (and thus also understanding the nature of non-intervention). I think there is a good reason to analyze the psychology of people averse to even attempting to understand these basic concepts while, at the same time, they engage in endless name calling.

      • Bob Roddis says:

        Just to be clear, I completely agree with Mises. The fact that an advocate of a position is otherwise a bad person or a fool is not an argument against one of his/her good arguments.

      • Ken B says:

        I see my pithily put point has sailed over the usual heads in the usual way. Gene spells it out in more detail, skipping fewer steps. http://gene-callahan.blogspot.com/2014/01/what-is-this-rothbardian-fetish-about.html

        • Major_Freedom says:

          Your point did not go over my head. Your point is flat wrong.

          Nothing about any Austrian economist’s psychology, motivations, likes, dislikes, proves anything about whether or not Austrian economics is value free. It is value free, period.

          I laughed at “usual heads in the usual way”, as if you’ve actually done what you causally claimed to have done.

        • Major_Freedom says:

          I know you know you’re full of it, because you qualified it with “pithily”.

          That’s code for “I’m BS’ing”

        • Bob Roddis says:

          There’s a difference between a) arguing for the necessity of an intervention and b) avoiding defining what an intervention or non-intervention actually is.

        • Bob Roddis says:

          Samson Corwell wrote:

          They also have the problem with defining intervention.

          Has Mr. Corwell read “Power and Market” and has he bothered to understand autistic, binary and triangular intervention?

          • Major_Freedom says:

            Callahan wrote:

            Milton Friedman, for instance, knew that he was not “consistently anti-interventionist.” That is because he thought being anti-interventionist in all cases was a bad thing.

            Callahan, Samson, and LK are all deluding themselves. They want to convince themselves that being “radically” against intervention, meaning against intervention absolutely, is “a bad thing.”

            Yet they don’t explain why it is a bad thing. They just take it for granted, as if it is so self-evidently true that it must be wrong to think otherwise.

            What they are really attempting to say, without being upfront about it, is that because they personally believe it is moral to kill a single person to save 10 million people, that this proves a state is therefore justified, since, after all, the state initiates force “for the greater good.” Of course, no state on the planet behaves in accordance with their “non-absolute” ethics of violence, but it’s apparently enough to merely point out the absolutism in anarcho-capitalist ethics.

            Yet they contradict themselves. They are proposing an absolutist ideaology, namely, the absolute that THEY KNOW when initiating violence is a good thing and when it is a bad thing. They themselves are eliciting an absolutism. That is why they dislike anarcho-capitalist absolutism. It conflicts with their own.

            They never make it clear exactly when and where and why initiating violence can be a good thing. There is no systematic build up of their frameworks. It’s ad hoc, arbitrary, and designed solely for them to elevate their own selves as absolutes over everyone else.

            Since they each have different conceptions of when and where each of their own desires for initiating violence is justified, they settle on attacking anarcho-capitalist ethics. By attacking anarcho-capitalism, they convince themselves that their own conflicting ethics are on the same page.

            For those looking to make enemies out of innocent people, it’s better to fight the greater enemy anarcho-capitalists, rather than fight each other and other lesser enemies.

            If two people are in a room, and they both believe initiating violence CAN be “a good thing”, one of them will become victimized by the other. Callahan and LK, or Ken B and Samson, in a room will result in “justified” victims. That’s where their absolutist ethics leads. Yet they believe their real enemy are the other type of absolutists, anarcho-capitalists, who will not claim or believe victimization is justified. And that’s precisely why they believe anarcho-capitalism is wrong. It’s because they need and want the victim to intellectually and morally sanction their hostile worldview of an irreconcilable conflict of interest between men.

            Roddis: Samson claims we have trouble defining intervention, because he himself has trouble doing so. He can’t imagine a person being able to explicate it. The hope is that with a fuzzy definition of intervention, it is easier to victimize others with intervention.

            • Ken B says:

              I am increasingly convinced you have a reading comprehension problem. That is the kindest explanation of why you never understand or reply to arguments made against you. Gene made a simple point: Friedman supported intervention in some cases, because he had particular cases in mind. If intervention is right in case X then the claim it is always wrong is wrong. That’s called a counter example, obviously a difficult concept for you.

              • Hank says:

                Market intervention can only HAMPER the market economy, because intervention (BY DEFINITION) means the stopping (by force) of voluntary interactions between adults.

                The market cannot express its maximum efficiency when it is hampered in any way.

                Karl Marx termed it the “anarchy of production”.

              • Buford T Justice says:

                I wouldn’t call it a reading comprehension problem, Ken B. It’s the kind cognitive dissonance often seen in people with a deeply ideological mindset.
                When such people are confronted with information inconsistent with their beliefs, consonance is restored through misperception of the information and denunciation of the purveyor. Major Freedom’s comments remind me of Fidel Castro’s harangues when confronted by facts which undermined his Communist ideology. You must find him very fascinating to spend so much time here. Or is it amusement?

              • Ken B says:

                Buford
                I don’t disagree but I was talking about one particular error MF made there, reading “i have a counterexample” for “everything is a counterexample” .

                As to your question, bit of both. Plus Landsburg is slow these days :)

              • Major_Freedom says:

                Ken B:

                “I am increasingly convinced you have a reading comprehension problem. That is the kindest explanation of why you never understand or reply to arguments made against you.”

                That’s a rather passive aggressive way of saying you are having difficulty making counter-arguments to mine that withstand criticism.

                “Gene made a simple point:”

                I wasn’t responding to Gene’s point. I was responding to your false claim that Austrian economics is not value free.

                Gene can’t save you. The damage was already done.

                Austrian economics, i.e. praxeology, is wertfrei. It does not make any value judgments on what people actually do, it only explains the logical constraints and mental categories of doing as such.

                “Friedman supported intervention in some cases, because he had particular cases in mind.”

                You say this like I am not aware of it. I KNOW that he had cases in mind. But my argument is that he didn’t explicate any principles or premises.

                “If intervention is right in case X then the claim it is always wrong is wrong. That’s called a counter example, obviously a difficult concept for you.”

                This is not the argument I am addressing.

              • Major_Freedom says:

                Buford T Justice:

                “I wouldn’t call it a reading comprehension problem, Ken B. It’s the kind cognitive dissonance often seen in people with a deeply ideological mindset.”

                You have a deeply ideological mindset. Everyone does. An ideology is just a set of ideas. You do have ideas, don’t you?

                You are so typical. Claiming others are ideologues, or adherents of an ideology…and that’s it…as if that alone serves as a refutation of such an ideology..

                You probably don’t even know it, but “ideology” as a pejorative, started, or at least was significantly popularized, with Marx and Engels.

                They were anti-rationalists, and did not agree with the conclusions of economic science. So they rejected reason and called anyone who adhered to a set of ideas THEY disagreed with “idealists” who are suffering under the delusion of one “ideology” or another.

                “When such people are confronted with information inconsistent with their beliefs, consonance is restored through misperception of the information and denunciation of the purveyor.”

                Look in the mirror. When you confront the teachings of economics, your mind goes haywire, because your beliefs contradict what is true by reason.

                “Major Freedom’s comments remind me of Fidel Castro’s harangues when confronted by facts which undermined his Communist ideology. You must find him very fascinating to spend so much time here. Or is it amusement?”

                You remind me of someone who covers up his own inability to make substantive arguments by spewing insults that anyone can make at anyone else without any difference.

                —————–

                Ken B:

                “I don’t disagree but I was talking about one particular error MF made there, reading “i have a counterexample” for “everything is a counterexample” .”

                That isn’t an error I made, because I didn’t do what you claimed I did.

              • Major_Freedom says:

                Ken B:

                To continue holding your hand in trying to help you understand the argument:

                For this comment you made:

                “I don’t disagree but I was talking about one particular error MF made there, reading “i have a counterexample” for “everything is a counterexample” .”

                The reason I responded the way I did, is because Friedman’s belief for when initiating force is justified, is necessarily his own personal opinion. If such opinions are to be valid, which you also believe is the case, which Callahan believes is the case, then it necessarily follows that “personal opinion” is a valid justification for use of force.

                Given that personal opinions are unconstrained by objective premises, it follows that yes, “one counter-example” does indeed lead to “everything is a counter-example.”

                The reason you keep believing I am confused and not reading things right, is because I am usually two or three steps ahead of you. It looks like I am not addressing the specific argument being made, but I’ve already passed it and gone to the subsequent arguments.

                I’m sorry if you can’t keep up, but don’t blame me for that.

              • Major_Freedom says:

                In other words, there is no objective foundation for initiating force against someone.

                Saving the human race? 7 billion lives does not objectively justify one single murder. I know that your mind goes haywire at the thought of humans no longer existing after your dead, but you don’t own the unborn. If the human race gets annihilated, then as an atheist, it should not bother you at all.

                Is it justified for you to initiate force against me to save your own life? Not objectively it isn’t. Does that make you want to respond to me with gasps, guffaws, and insults? I really don’t care. Your inability to state something other than emotional pleading and anxiety does not imply that my argument is wrong or false. I don’t care if you and a million or billion other people “disagree.”

                It is not justified for anyone to initiate force against me. Ever. Not to save themselves, their family, nor a billion or 7 billion people. I choose what happens to my body. If there is an asteroid hurdling towards the Earth, then I, ME, have the objectively established right to decide how valuable the rest of the human race is to ME. If I want the human race to survive the asteroid, then I will pay the price I believe is justified. You don’t decide that for me. I decide that for me.

                You have no argument to make against this. All you have are “FUs” and “I’ll steal from you to save myself, and I dare you to stop me.”

          • Samson Corwell says:

            Has Mr. Corwell read “Power and Market” and has he bothered to understand autistic, binary and triangular intervention?

            I call’em like I see’em.

            • Major_Freedom says:

              Seeing without a proper theory is tantamount to blindness.

              • Samson Corwell says:

                As a person studying physics, I can tell you that that is utter crap.

              • Major_Freedom says:

                I studied physics as well, but I don’t let my mere attendance in physics classes, and studying for the tests, give me any pretensions as to philosophy of science.

                You are saying it’s utter crap not because you’ve actually studied philosophy of science, but because you are inferring that your going through the motions of how subject matter is taught, you have concluded there is no need to think more deeply about it.

                Here’s a hint for you. In physics, the method of empiricism is utilized. This method contains a structure that is not itself derived or established on the basis of empiricism itself.

                The individual first has to have assumed a priori that a constancy in causal relations exists, because the method itself is built that way. You can’t use a blue print to construct itself and claim the blueprint is self-contained and in no need of explanation.

                In economics, which I don’t expect you to understand at this point, past data would be meaningless chaos, and you wouldn’t even be able to make sense of it, unless you have already brought with you an a theory a priori to that specific data that provides you with a structure to understand and parse the chaotic information.

                Your ignorance, combined with a hostility that seems to be grounded on a paranoid belief of displaying a defense against being possibly hoodwinked or tricked, is precisely the reason you are confused about this point.

              • Ken B says:

                I don’t know about “going through the motions” MF. I think Samson is in phase space so he’s just at a point.

                Sumner pegged you I must say.

  16. Major_Freedom says:

    I know that there is an objectively constrained ethics, because the Humean “One cannot logically derive an ought from an is”, self-contradicts when advanced as an argument.

  17. Andrew' says:

    Everyone understands my point, right?

    Krugman wants to adopt Debt Deflation and Market Monetarism, and relabel the parts he like as Keynesianism.

    But he also wants to keep Austrian thought locked in 1928 because he really hates non-intervention.

    • Andrew' says:

      Don’t believe me. Go disprove it.

      • Andrew' says:

        For example, I rarely read Rothbard. But I read an awful lot of Keynesians claiming his non-intervention means he believes “the market will work it out.”

        If Rothbard believed that one can be non-interventionist when from the get-go the government is controlling the money and contracts then he was wrong and I’m sure he would have adjusted his thinking over time.

        http://mises.org/rothbard/agd/chapter7.asp

        “Only if there is no interference, direct or threatened, with prices, wage rates, and business liquidation will the necessary adjustment proceed with smooth dispatch.”

        I take “no interverence” to mean mean ALL INTERFERENCE including implicit bailouts that create too-big-to fail banks and not just interventions to bail out the banks (although there are better interventions available than bailing them out and making the problem worse).

        Bailing out bondholders was not the only way to do it, and in fact was a ham-fisted panicky, chaotic way to try to catch up to something they either caused or at best were completely blindsided by.

        In fact, saving some banks while letting Lehman fail in an ad hoc, disorganized, and unpredictable, flying by the seat of their pants anarchy was probably one of the worst things they could do.

        The fallback position that the cause was a priori de-regulation is questionable as the feds would have to know what to regulate a priori. What evidence does what played out have that either government decided it didn’t like to regulate or that the people who were blindsided (at best) by the crisis could have created the right a priori regulations?

        No, of course, they did completely different stuff. And we still have too-big-to-fail, which is to say we still have implicit bailouts and an implicit subsidy to large banks who are de-diversifying the economy.

        A couple things vulgar regulationists refer to are the Chinese wall and capital ratios. But these aren’t examples of de-regulation, these are dysregulation- a shirking of government to fulfill basic property rights. A Rothbard who wants a 1:1 capital ratio would not likely be pleased with a 30:1 implicit protection by the government. And then making other people in a firm liable for that that 30:1 can barely be called “de-regulation.” I call it dysregulation, which I think is the proper term because it is government intervention into what might emerge as a market regulation discipline, but obviously cannot emerge due to interventions before the bailout, implicit bailouts, and then necessitated bailouts and then badly executed bailouts.

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