09 Nov 2015

Potpourri

Gene Callahan, Potpourri, Tom Woods 28 Comments

==> This is an unexpectedly good episode of the Tom Woods Show. He debates Matt Zwolinski on a basic income guarantee. I went into it thinking it would be like debating whether Kevin Spacey was a better Lex Luthor than Gene Hackman, but actually it was very entertaining.

==> An Austrian tries to assert her property rights when it comes to monetary policy, but the central bank laughs at her desires. A funny story, but I’m also being serious.

==> Gene Callahan concludes that the Messiah can find an arbitrary number of primes.

28 Responses to “Potpourri”

  1. Z says:

    Holy cow, that grandmother is ACTUALLY from Austria.

    • Harold says:

      Yeah, insufficient evidence from the article to say she was an Austrian in the economic sense.

      You would think a will might have been more effective. There was also the savings accounts with lots of money in them.

      It is purely conjecture that she was attempting to prevent the heirs from getting the money.

      • Transformer says:

        I think she was just trying to reduce Austrian NGDP by destroying base money.

      • Grane Peer says:

        Being conjecture doesn’t mean it’s wrong. Old woman with small fortune destroys money shortly after being shuffled off to retirement home. I’m just saying it seems like a good guess.

        Of course she may have thought the money was possessed by a malevolent evil, which was proven by her death and the re-manifestation of the haunted notes.

  2. ax123man says:

    I suspect we will hear more about the grandmother story. Something smells funny and it seems like something relatively easy to investigate.

  3. Harold says:

    Was a copy of “The Armchair Economist” found on the bedside table? Perhaps opened on the page where Landsburg explains that destroying a dollar bill is raising the value of everyone elses dollar by $1.

    • Bob Murphy says:

      I was thinking the same thing Harold. And then Nick Rowe on twitter told me he thought she was giving a gift to the central bank. #)$*#)$*@ market monetarists…

    • Josiah says:

      If destroying a dollar increases the value of everyone else’s dollar by $1, then I have a foolproof moneymaking scheme.

      • Bob Murphy says:

        He means cumulatively, Josiah. I’m going to start calling you Ming the Merciless.

        • Tel says:

          If you believe in a forward Cantillon effect surrounding the point of money injection then by consistency you should also believe in a reverse Cantillon effect surrounding the point where money is destroyed. By that reckoning it would not effect everyone equally but it should cause prices to drop in one region of the economy first.

          I know this isn’t exactly what Josiah was saying, I’m trying to be a little bit nuanced.

          • guest says:

            “If you believe in a forward Cantillon effect surrounding the point of money injection then by consistency you should also believe in a reverse Cantillon effect surrounding the point where money is destroyed.”

            Yup. That’s the bust phase of the business cycle.

            Keynesians think that the Cantillon effect surrounding the beneficiaries of their stimulus means that the economy is suffering, because they think that the health of those beneficiaries indicate the health of the economy, rather than how capable individuals are of satisfying their preferences.

            • guest says:

              Price inflation as a result of monetary inflation (beyond the available specie to back it) is effectively the destruction of money.

              If I have two dollars, and a fire destroys one, that’s effectively the same as if I have two dollars that, tomorrow, buys what one dollar used to buy (price inflation).

              • Harold says:

                “that’s effectively the same as if I have two dollars that, tomorrow, buys what one dollar used to buy (price inflation).”

                I don’t follow that, since tomorrow you would have $4.

                You start with $2, which can but say 2 apples. You destroy $1. You can now buy only 1 apple.

                Instead of destroying a dollar, someone replaces every dollar with 2 dollars. You now have $4, which can buy 2 apples, since they (and everything else) has doubled in price. So there seems ot be a big *if* there. Why would you have the same quantity of money when there is twice as much of it about?

              • Tel says:

                Harold, inflation as practiced will never just cause everyone’s bank account to increase proportionally. The money has to start circulation at some place.

                Otherwise explain what breaks the symmetry between inflation and deflation. All you have with transactions is adding debits and credits, fully symmetrical operations.

              • guest says:

                ” You now have $4, which can buy 2 apples, …”

                (Tel is right that prices don’t increase proportionally.)

                Another way of saying this is that each dollar now buys half as much.

                It’s not the money you want, but the stuff it will buy.

                So, you have to think in terms of goods and services to see what the real economy is doing.

                (When the money is a commodity, you don’t have to do that, since the money, itself, is a good.)

              • Harold says:

                My story of everyone doubling their money is not exact, but neither is the story where nobody gets any of the extra dollars.

                Those that start the re-circulating get an advantage, as prices have not yet adjusted to the extra dollars. But ultimately, the prices surely adjust to exactly balance the new dollars. On average it is not the same as destroying money (as Guest said) but re-distributing the money. Why is that not the case?

              • guest says:

                “Those that start the re-circulating get an advantage, as prices have not yet adjusted to the extra dollars.”

                Right.

                “But ultimately, the prices surely adjust to exactly balance the new dollars.”

                Eventually, yes – provided the printing stops.

                “On average it is not the same as destroying money (as Guest said) but re-distributing the money.”

                Redistribution is functionally equivalent to destroying the purchasing power of some for the benefit of others.

                If a fire destroys a big pile of your bank notes, that’s a bunch of stuff that the next guy is able to buy instead of you.

                The point is the same logical outcome obtains.

              • Harold says:

                If your point is that destruction of money is logically equivalent to creation of money I can see your point. There is the same spending power in total after each event, so each has zero effect other than redistribution.

                Your example fails to illustrate this, because you fail to mention the other person who is equally better off.

                To put it another way, the destruction of your personal dollar costs you $1. To cost you $1 by creating money, there would need to be trillions of dollars created. This is not equivalent.

              • guest says:

                “To cost you $1 by creating money, there would need to be trillions of dollars created.”

                Which has already happened, and is continually in the process of happening.

                It’s called “Quantitative Easing” and inflation targeting.

              • guest says:

                ” There is the same spending power in total after each event, so each has zero effect other than redistribution.”

                In terms of individuals’ preferences for actual goods and services, this is true, and is the only kind of spending power that’s economically relevant.

                People can believe anything they want about the money they hold, but to the extent that it’s trade value has not been derived from its use-value, the profit that’s made through its use comes because of redistribution rather than wealth creation.

                Someone is losing, partially.

            • Tel says:

              Global utility calculation in a world of subjective preferences remains something of an unsolved problem.

              However, no school is completely free of this, not even the Austrians. You want to advocate for some property rights? Well pretty darn impossible to do that without harming anyone in any way. You want laws? Figure out how to do it with 100% agreement of the governed, ain’t gonna happen.

        • Craw says:

          This is the crux of the disagreement between Keynesians and Austrians isn’t it? In an accounting sense this is true. The dollar is a claim on future assets, and destroying my dollar increases everyone else’s share by a total of the amount $1 would have procured me. If assets are unaffected by the burning, and there surely is no direct effect, then the claim is sound. So is that pool of assets indirectly affected by the burning? The Keynesian argument is that the destruction or creation can stimulate or repress activity so can change the size of the pool.

          • Tel says:

            Or in summary, it’s a discussion about:

            * How easily people can be Grubered.

            * How those people will react in the short run if they do get Grubered.

            * How they will in the medium to longer run when inevitably the realize they have been Grubered.

          • guest says:

            “The Keynesian argument is that the destruction or creation can stimulate or repress activity so can change the size of the pool.”

            Austrians recognize this, but “output” is not wealth creation. The pool size doesn’t matter unless consumers both want, and can pay for, it.

            (Aside: Printing paper doesn’t increase anyone’s actual ability to pay, it just manufactures fake claims to existing goods.)

            Keynesian stimulus stimulates the “wrong” production processes, in that consumers haven’t expressed sufficient demand to have justified it.

            Then they complain when a bunch of people with no real wealth to trade, bid up prices in terms of meaningless pieces of paper and then stop spending because it’s becoming increasingly cost-prohibitive to spend on the artificially stimulated sectors of the economy.

          • Transformer says:

            ” The Keynesian argument is that the destruction or creation can stimulate or repress activity”

            Not only Keynesians, but also Monetarists would claim that “the destruction or creation” can affect economic activity. Unless all prices can adjust instantaneously to whatever effects the destruction of $1m has, they are right, at least in the short term. Therefore (from the Keynsian or Monetarist perspective) measures to counteract these effects will have a neutralizing effect, and be beneficial as long as the benefits

  4. Allan says:

    A BIG part of me gets the feeling the central bank intervened as part of both a PR stunt and for a means to provide some amount of a tax receipt for the proper channels.

  5. Bob Roddis says:

    As Mike Norman and his gang always say, these Austrians are morons 🙂

Leave a Reply to guest

Cancel Reply