17
Jul
2014
Krugman’s Kontortions on France
I really wasn’t looking to ding him; I was just doing background to give context to Veronique de Rugy’s interview with Tom Woods. But as I summarized on Twitter: “Krugman: French economy in ’13 shows tax hikes not bad. French economy in ’14 shows austerity awful.” Details here.
Example #34,785,339 that economics is a priori, not a posteriori.
For the theory that “Belgium is doing relatively better because they didn’t have a federal government to impose a “stimulus” which would have hampered recovery” is totally consistent with the data as well.
The same empirical history that is consistent with two theories cannot possibly be the final arbiter over which theory is wrong.
ClaimAustrian: “Belgium is doing relatively better because they didn’t have a federal government to impose a “stimulus” which would have hampered recovery”
ClaimKeynesian:“Belgium is doing relatively better because they didn’t have a federal government to impose an “austerity” which would have hampered recovery”
Empirical history is showing both theories to be correct. Both opposing theories cannot be correct in this case, the history isn’t proving or disproving either one of them.
Because empirical history is not telling the correctness of either, it cannot be used as a basis to determine economic theories in general. Hence, knowledge that proceeds from observation or experience cannot be used to formulate theories.
These theories instead my rely on reasoning or knowledge that proceeds from theoretical deduction rather than from observation or experience.
Is this the summary of what MF said?
Yes.
However…….I submit that we can examine an historical event or period and make an objective determination regarding how much funny money there was, how much freedom there was to use private property, to make contracts and to associate etc….
Further, if there is evidence of a bubble resulting from FRB or funny money, we can definitively state that the bubble was not caused by “unconstrained laissez faire capitalism” because we can determine objectively if such a regime existed or not.
Agreed. That isn’t a “however” though, because those arguments are themselves empirical, historical arguments about quantities and qualitities of facts. Empiricism as a method works.
http://krugman.blogs.nytimes.com/2014/02/23/the-myth-of-german-austerity/
Germany is in the business of giving German taxpayer’s money to other countries, in the form of “bailout” payenrs. Think about this, what would you normally call a persion who gives away money? Generous, charitable, decent, stupid? Yeah, I know, the individual members of the German government didn work for that money, the German people did… but the German people voted in Angela Merkel with a substantial majority knowing she fully intended to keep giving away their money, so most of them must want to keep doing it.
Letś look at Greece, the country attempted to spend its way out of recession for about two years, then hit the wall facing a point where the Greek government could not borrow, nor was it able to collect taxes, but despite the lack of income they had great plans for spending. Let us attempt a simple intelligence test. Did the splurge of German money to the Greek Government:
[A] force them to spend less
[B] allow them to spend more
???
Think about this one carefully. It really is deep and complex.
“Think about this, what would you normally call a persion who gives away money? Generous, charitable, decent, stupid?”
Uh…. austere? Right?
We have big problems in France thanks to all of krugman’s socialist friends (I include people like Sarkozy). Around 40 years of bad (socialist) policy. To make matters worse, Krugman wants to give us advice. All the french like me need is the reverse of what Krugman says. Please, keep your bad advice for your country. I do not want mine to become like Greece.
By the way, I would like to drill down into Krugman’s definition of what “Austerity” is. Lately he has been using the formal measurement “Change in structural budget balance, as percentage of GDP”. What does this mean exactly? Where does it come from?
OK, I’ll start with “budget balance” which means government budget of course (the whole world is made of government budgets, Keynesians can safely ignore everything that happens outside of government). A balanced government budget will result in a “budget balance” of zero. A government that spends more than its income will show a negative ΅budget balance΅, which is also known as a government budget deficit. Those small handful of governments that spend less than their income are running a surplus and that would show a positive “budget balance”.
Simple enough? Try it this way (get some physics envy into ya):
Government savings/debt is the base quantity (measured in money, but more conveniently shown as percentage of GDP). Government budget balance is the first derivative of government savings, but since no government has any savings, we have a negative saving (i.e. a debt) and typically a negative first derivative (i.e. the debt is getting bigger).
Next step is the “structural budget balance”, so we need to separate structural from cyclic. This would presume that the people taking statistics fully understand the business cycle, the obvious objection being that nobody actually does, and if anyone did they would be rapidly making themselves very wealthy with countercyclic investments. In order to battle onwards, ignore that objection, put it out of your head and just believe that magic gnomes have solved the business cycle question. After you remove the cyclic component you get left with the structural component. So what the “structural” part means is the long term trend, the established way of doing things, rather than just a temporary shock.
Look at this in terms of a business overdraft. From a short-term perspective there will be payments coming in and bills to be paid and these may swing the overdraft this way or that way. It’s entirely expected that an overdraft account would experience a lot of volatility, that’s why you got the overdraft in the first place. However, if the long-term trend of the first derivative of your overdraft balance is negative (i.e. the balance is trending downwards) then you have a structural deficit. You are sliding slowly and surely into debt. That example is just to get a handle on what Krugman is talking about here, with his definition of “Austerity”.
But wait, there’s one more step to get you all the way into the Krugmanesque. He is talking about “Change in structural budget balance” which is the second derivative of government savings. That is to say, the rate at which you are slowly but surely sliding into debt is itself changing. I think Steve Keen calls this “debt acceleration” but I’m too lazy to look up the link. So if you reduce the rate at which you go deeper into debt (long term, structural), that’s Krugman’s definition of “Austerity”.
Since Krugman believes austerity is bad, Krugman is presumably suggesting governments should increase the rate at which they are going into debt in order to solve economic problems (not temporarily, this should be structural, a permanent increase in debt acceleration). Think about the implications of what he is proposing here.
http://www.debtdeflation.com/blogs/2014/01/08/secular-stagnation-iii-minus-the-irony/
This is where Steve Keen looks at concepts like “Debt Acceleration” and how this affects other parts of the economy. He looks at private debt (gosh, there’s a world outside government), anyhow that’s the reference for use above.
1. Do you think Krugman actually believes this stuff?
2. Keen gets his nose right up to the truth (Austrian analysis) and never sees it. I suppose he would not have been offered his new job in England if he could see the truth. Or admit he sees it.
3. OMG. He’s two years younger than me, just like Krugman and Bernanke.
4. I never knew that the famous tag team of Murphy and Callahan wrote a review of Keen’s book “Debunking Economics”.
I prefer to think that he has a different perspective. He comes from a background studying Marx, he is aware of Austrian analysis.
Agreed. If you read his recent articles the tone has changed significantly, especially his attitude toward debt. Almost like payment provides an incentive, but that would imply the economics profession gets the answer they are paid to get. By gum! That would imply the entire science profession gets the answer they are paid to get. Hmmmm….
Is this really a Kontortion ?
Krugman is against austerity. He claims that Belgium has had less austerity, and is performing better than France.(that did have austerity). This seems consistent.
However if you have to have austerity then Krugman prefers that it is delivered by tax hikes rather than cutting spending on benefits programs. He claims that France is doing no worse or maybe better by following his favored austerity than other countries that followed the kind he didn’t like. Again this seems consistent.
I assume he thinks that if France had been more like Belgium (no tax hikes or cutting of spending) it would have done even better.
Where is the inflation? Where is the dollar collapse? Where is the stock market collapse? How much longer do we have to wait?
The (price) inflation can be seen by looking at records of past prices, such as stocks, bonds, commodities, and real estate.
A dollar collapse has not yet happened.
Ditto.
Don’t know, I cannot scientifically predict future human knowledge or preferences. Neither can you.
I submit that the “hyper inflation is imminent” prediction is based upon very specific predictions of what certain people are likely to do in a specific situation. It is based upon the idea that the government will run out of goodies to pass out and will instead pass out funny money to buy the goodies and that the populace won’t know the difference or even the cause of the shortage. It is a possible scenario but is grounded upon a specific set of presumed facts.
lol. more than that, by your own harebrained views, you can’t even know if Austrian economics will be true 10 seconds from now, or tomorrow or at any time in the future:
“There are no predictions in Austrian economics. None. Zero. Nada. …. Austrian theory makes no predictions of what humans will learn and do in the future. In fact, it is precisely Austrianism that argues it is impossible.”
http://consultingbyrpm.com/blog/2014/03/potpourri-188.html#comment-301632
LK can we know if the Pythagorean Theorem will be true next Tuesday? Note that I’m not asking, “Does the physical universe seem Euclidean?” No, I’m asking if the theorem itself will be true next Tuesday.
Bob Murphy,
All analytic a priori propositions and analytic pure mathematical statements are necessarily true, but they do not give you eternal, necessary truth about the real world.
Take one example: a priori probability. This is really an analytic a priori system of pure mathematics, and whenever we speak of the objective necessary probability of rolling a 1 in a fair game of dice, we are speaking merely of abstract dice and rolls of the die.
If you take any real world die and roll of the die, you cannot be sure that the probability of rolling a 1 is always necessarily 1 in 6. Why? Because any real world die might be loaded or the game somehow fraudulent and so on. You need empirical evidence to ascertain whether the die is fair and game not crooked. But knowledge a posteriori does not yield epistemic certainty, only extreme probable truth at best.
See here:
http://socialdemocracy21stcentury.blogspot.com/2014/05/the-epistemic-types-of-probability.html
After ages and ages of pointing out the basic issues here to you, you appear to be incapable of even understanding pretty standard ideas in modern analytic philosophy.
LK, you missed Murphy’s point.
The question is whether any future observed plane right triangle can ever disprove the Pythagorean theorem.
And a priori synthetic propositions like those logically deduced from action, do in fact provide us with neccesarily true knowledge about the real world of action. After ages and ages of pointing THAT out to you, you seem to be incapable of very standard ideas in a priori synthetic philosophy.
“LK can we know if the Pythagorean Theorem will be true next Tuesday?
And to answer your question: yes, all analytic a priori propositions and analytic pure mathematical statements are necessarily true, and necessarily true today, tomorrow or in the past.
But the necessary truth of an abstract analytic pure mathematical system does not help or support the kind of Misesian apriorism in economics that you’re trying to defend.
The necessary truth of a priori synthetic systems like praxeology do help us and do support Misesian a priorism in economics.
LK:
If Misesian a priorism in economics does not tell us necessarily true propositions in economics, then you should be able to prove it without presupposing the content of those propositions in your proof.
So far, in all your comments and rhetoric, you have not done this. But one would expect that you would have by now. Why wait so long? What are you waiting for? Now is your opportunity to disprove those propositions without utilizing the content of them.
And here you go Bob Murphy: you want to encourage a high standard of debate and intelligence in your comments section??
Then answer bob roddis:
” And while you are at it, explain why unsustainable bubble prices are not “market clearing prices” before the bubble pops.”
http://consultingbyrpm.com/blog/2014/07/krugmans-kontortions-on-france.html#comment-730963
Does it embarrass you that a man who abuses Keynesians and progressives almost on a daily basis here as “commies” can make a statement that ignorant and stupid?
Is this the face of Rothbardian Austrianism you want your opponents to see?
I didn’t see Roddis calling you a “commie” until you just pointed it out.
So yes, Roddis, please don’t call LK and his peers “commies.”
LK:
Technically you did not answer Roddis’ question.
LK:
Ask yourself this:
Can you, LK, engage in any purposeful behavior without incurring any costs? Can you for example disprove the logical categories of action such as costs that Misesians claim are necessarily true for all action, without being necessarily constrained to those categories?
Do you honestly believe that the incurrence of costs in actions is a hypothetical that requires continuous empirical testing in order to know that actions incur costs? In other words, do you honestly believe that it is POSSIBLE to engage in an action that incurs no costs whatever? If we assume for argument’s sake that it is possible, then what would that even look like such that you recognize it if and when it occurred? Surely if you claim something is possible, you at least have to have the mental capacity to know when that possible event occurs.
LK:
You mentioned some time ago that you admit that you cannot a priori rule out the possibility of true synthetic a priori propositions without contradicting yourself. You explained your rejection of true synthetic a priori propositions by way of an argument to the effect of “It is highly, highly unlikely, given past empirical observations.”
You may not understand it at this time, but that belief is supportive of knowledge of synthetic a priori true propositions.
If you some day deeply inquired into the nature of true synthetic a priori knowledge, then you should be able to figure out that true synthetic a priori statements are the “least probable”, “least likely” statements out of all possible statements. For consider. Reality is what it is and nothing else, right? Reality is a single set of what we can call “truths”. Reality, in “this” universe, is as far as we can ever know, unique.
But despite this, our minds nevertheless have a certain degree of freedom in having an ability to wander, to develop conceptions that are “wrong” vis a vis reality. We can be wrong about reality as it is in many, many ways. Out of all possible thoughts, true thoughts are extremely rare. In fact, there is nothing we can ever know as more rare, than true thoughts about reality.
Given these considerations, we can surmise that out of all previously held thoughts, true synthetic a priori thoughts would be extremely unlikely in the statistical probability sense.
Rather than concluding from past events and data, i.e. past thoughts, that true synthetic a priori propositions are likely non-existent, as per your assessment, I conclude the exact opposite, namely, that it is not unexpected that true synthetic a priori thoughts would be statistically dwarfed by the total of all (historical) thoughts.
Reasoning a posteriori cannot expose flaws of a priorism, and reasoning a priori cannot expose flaws in a posteriorism. But, what a priorism can do is expose the flaws in other a priori thought, and it can be a priori known that all a posteriorism is itself grounded on a priorism. All a posteriori experimentation cannot even begin, cannot even be known as taking place, before there is self-knowledge of the experimenter as an experimenter, i.e. as an actor. The experimenter must know prior that they are striving to achieve a goal, and will have to use certain means, etc.
A posteriorism cannot possibly be the ground of knowledge, because it is itself a creation of an existing actor who is self-aware and has knowledge of themselves.
I wasn’t going to rile up LK and induce a visit, but now that he’s here….recall that he is MR. EMPIRICAL:
all this is like arguing about how many angels can fit on the head of a pin: ultimately, it is of very little interest to AN EMPIRICAL ECONOMICS CONCERNED WITH THE REAL WORLD, rather than unrealistic abstract models.
http://socialdemocracy21stcentury.blogspot.com/2014/07/john-hicks-on-hayeks-business-cycle.html
An empirical economics concerned with the real world would take into account all of the central bank holdover nonsense from WWI that Stockman and others have described in detail.
Recall their formal proof of the failure of the “free market”:
That’s logical…..
Claim #1: We commies are “scientific” and only deal with actual evidence and events.
Claim #2: The free market has never existed.
THEREFORE….
From the actual existing factual evidence, we know the free market cannot work.
and
Claim #1: We commies are “scientific” and only deal with actual evidence and events.
Claim #2: The free market has never existed and can never exist.
THEREFORE….
From the actual existing factual evidence, we know that most economic problems in the world are the fault of the free market.
Except your argument is straw man.
Explain. And while you are at it, explain why unsustainable bubble prices are not “market clearing prices” before the bubble pops.
” And while you are at it, explain why unsustainable bubble prices are not “market clearing prices” before the bubble pops.”
Why don’t you ask Bob Murphy that question?
Seriously, if Mr Murphy has even a shred of interest in creating a high standard of debate in his comments section, let him explain to you how ignorant you are of basic Austrian theory.
Let him explain to you why housing prices in an asset bubble cannot be market clearing prices where there is a supply and demand equilibrium in that market.
I’d be willing to create a group page on Facebook for you two, and anyone else that wants to repeat this same conversation for the 1,000th time, as long as you guys promise to never discuss it again on this site.
For the record, I don’t care whatsoever about “market clearing prices”. If my example is wrong as LK says, will some Austrian explain why and I’ll never mention it again. If my example is right, then tell LK to never bring it up again. That should take 3 minutes.
For the record, I don’t care whatsoever about “market clearing prices”. If my example is wrong as LK says, will some Austrian explain to me why and I’ll never mention it again. If my example is right, then tell LK to never bring it up again. That should take 3 minutes and then we’re done forever.
What does it matter? Email Dr. Murphy or some other Austrian economist for their opinion if it means that much to you.
I just don’t understand why you guys feel the need to snipe at each other on nearly every post. I mean, 90% of the time you guys argue about things that aren’t even relevant to the OP.
It’d be one thing, too, if you were both just trying to understand where each other were coming from, or something along those lines. But, clearly, you two despise each other, and just want to have a war of insults over and over again.
I’d just like to see a cease-fire on this site at least. Plenty of other sites, including his, for flame wars.
I find LK and Bob Roddis’ back-and-forths and citations to be extremely helpful.
I would prefer to see them free to engage each other as they have been doing.
How many posts have you written now, attacking Krugman? Seek help.
What type of deformed personality defends liars and frauds and attacks those who seek to expose them?
How many posts have you read of Murphy attacking what Krugman wrote?
You are seeking help.
Just curious, “GreyWorm”… do you have a specific criticism of Bob Murphy’s statement on France vs. Belgium?
First, as I’ve documented before, the Belgian government has persistently spent less money than the French, had lower deficits, and cut spending/deficits much more in 2010. So no matter how you slice it, the Belgians engaged in less of Krugman’s “medicine,” and took it away faster, than the French. Had the Belgium economy crashed in 2011, we can be quite sure Krugman would have blamed their “anarchy” for the irresponsible spending cuts so soon into a fragile economic recovery.
We’re all dying to see your analytical brilliance. Show us.