I refer to types of Fed policy, of course.
In a recent post criticizing the mental gymnastics Bernanke engages in regarding helicopter money, Scott writes:
Or we could just raise the inflation target to 3%.
Or even keep it at 2% and do level targeting. Or NGDPLT. All these epicycles to make helicopter drops work make me dizzy. The simple truth is that monetary policy is all we need if used intelligently, and if not used intelligently (as in Japan pre-2013), even helicopter drops won’t get the job done. So let’s K.I.S.S., and work out fallbacks that don’t require wildly unrealistic assumptions about cooperation between the Fed and a GOP-controlled Congress. Instead let’s simply shift the target slightly (4% NGDPLT anyone?), and perhaps add to the securities that the Fed is eligible to buy.
Yes, by all means, let’s switch from the Fed focusing on (price) inflation and unemployment, and instead have the Fed target the growth in the total amount spent on value-added in each stage of production (to avoid double counting), with a provision of catching up to the constantly rising level, where the Fed turns over day to day operations to a futures market in contracts that can only exist through subsidies from itself, and where the Fed is allowed to buy other types of assets from what is currently legal. Like the man said, simple. None of this newfangled stuff like “printing money and spending it.” (What?!)
==> Carlos was traveling so I republished the audio of my recent talk at the International Students for Liberty Conference on Mises’ contributions. So if you wanted to listen to that but at the gym or something, this is for you…
==> In the most recent Contra Krugman, Tom and I take on the MetLife ruling and “too big to fail.”
…there’s only one Batman.
I looked up this scene for an email joke the other day, and just had to share. Everything about this is hilarious–make sure you see what the writers told kids Batman drinks at the bar. No martinis for Adam West.
Consider the following three statements:
(1) “I’m arranging the magnets on my fridge to say ‘Cruz’ because he can beat Hillary in the general election.”
(2) “Instead of picking a listed candidate, I’m writing in the phrase ‘the choice of the majority’ for the primary, because it would be hilarious if 51% of the other voters did that too.”
(3) “I’m voting for Cruz in the primary because he can beat Hillary.”
I have never heard anyone say (1) or (2), but there are people saying (3). I submit that if you think through why (1) and (2) are nonsensical, you will see why (3) is also.
Gene Callahan sent me this interesting article on Disney and the NFL threatening to boycott Georgia if its legislature passes a religious liberty bill that opponents say discriminates against gay people. The key takeaway:
When you’ve lost Disney and the NFL — that is, when even Disney and the NFL consider “religious liberty” to be a code word for “hate” — you’ve lost, period. Get it straight in your head now, orthodox Christians, Jews, and Muslims: Big Business is the enemy.
There is precious little we can do about it now, but we can at least stop fooling ourselves that the free market is a friend to orthodox religion. It never was, but now, it’s positively hostile.
At the state and local level, there are Republican politicians who are willing to try to protect religious liberty, but they’re getting smashed on the economic front by nationals and multinationals. As angry as I get when GOP pols put economics over moral principle, I can understand it. Don’t agree with it, but understand it. Traditional Christians and other social conservatives face a terrible choice: vote for Democrats, who will gleefully stomp on religious liberty, or vote for Republicans, who will feebly oppose it, then cave, because the business of America is and always will be Business.
If this doesn’t compel conservative Christians to radically rethink their politics, they are so far in the GOP tank that they can’t tell up from down. Reagan is dead, and so is his coalition.
He gave me permission to post here:
I recently viewed a discussion you had about pacifism, and the topic came up: how do we make progress?
I’m an Air Force officer who is currently undergoing a conscientious objector’s application. I’ve thought A LOT about non-violence lately, and have A LOT of opinions about it. One thing I am convinced of is the need for non-violence as a principle of a free society. Violence is used because it’s effective. It’s effective because death settles arguments with utter finality. If we can just remove this finality, we’d have the “wiggle room” to imperfectly stumble through competing standards of law in a polycentric legal marketplace. I’m convinced that we have to treat non-violence as a principle higher even than maybe property rights in many cases. (in that property is useful as a standard when people comprehend and assent to its utility). Okay, this is a longer discussion (how can something be a right, they say, “if you can’t defend it unto death”?)
In any event, I highly recommend the following book: Johnathan Schell’s “The Unconquerable World”. He was a big lefty, but his analysis of power and violence is the best I’ve ever read. If you know military science, you’d understand what I mean when I say that this book is “the sequel to Clausewitz”. Schell discusses the futility of violence in exercising power in a modern context, and a certain almost metaphysical power of non-violence in changing things (no actual metaphysics though, pure political science). There’s a catch though: non-violence is only effective in a certain way. You have to have a certain kind of political organization and active effort for non-violence to exercise power.
What’s most interesting to me about this book is the critical response. Lefties sympathetic to Schell admire his vision but are skeptical of its efficacy. This leads into my diggressant theory that lefties actually love violence if it’s for their team, anyway! I think Shell can be interpreted through a Rothbardian lens, and his principles come alive accordingly.
So, if you haven’t read this book I highly recommend it. Not only for its interesting conclusions about warfare and power, but also its inspiring vision concerning a sort of praxeological method which might be politically useful to our cause. I think the agorists are hitting close to this vision, as is Tom Woods with all his emphasis on marketing skills. The real truth lies, I believe, in finding small pragmatic ways for us to achieve little political victories – something accessible to common man – which serve to fundamentally undermine the state, in aggregate.
I’ll let you read the book, and I think you’ll see what I mean. I think libertarians have been real close to the mark, but we could benefit from a systematized political method here, just to amplify our efforts. A more concrete theory of libertarian political action if you will, so we can get better “synergy”. But also counter the state’s efforts to undermine what we’ve done.
==> Daniel J. Mitchell tries to stay friends with everybody in this post (by linking to Ed Stringham’s work at the end). I really liked the way he flipped the Oliver Wendell Holmes quote about taxes and civilization; check it out.
==> Speaking of Dan, he joined Tom and me on the latest Contra Krugman to discuss whether Obama has had such a great record after all.
==> George Selgin takes on David Graeber.
==> See free-market economists discuss voluntary transactions that occurred during Holy Week but are morally odious (one being the worst in human history). Note that “JC” in the interview is not Jesus Christ.
==> Guys like Don Boudreaux and me have been mad at Krugman for throwing free traders under the bus, when he used to lead the pack. But Thomas Palley gets mad at Krugman for the opposite reason. This part in particular is hilarious: “Even as he [Krugman] tries to slip in to a new skin, the politics remains unchanged. Senator Sanders, the longtime opponent of neoliberalism, is described as irresponsible and feckless. Hillary Clinton, the longtime advocate of neoliberalism, is portrayed as a model of trade policy responsibility.”
In context, Palley is talking about a Krugman column where Krugman had argued that Sanders was being irresponsible for pledging to rip up any existing trade deals that hurt US workers. But, at the same time, Krugman was saying those deal *were* bad for US workers and so President Clinton should think really hard before signing any more.
I finally met Scott Sumner at the APEE conference this week. We shook hands, exchanged pleasantries, and basically were civil human beings. But that will not stop me from making this post. The fate of the US economy hangs in the balance. We must not let personal associations cloud our duty.
In a recent EconLog post Scott wrote:
This post is about the way I think about extreme outliers. It’s very unscientific, but I hope the comment section will help me to better understand this issue.
Suppose you have two variables, X and Y, which are (supposedly) positively correlated. But the very highest value of X is associated with very the lowest value of Y. Or assume the two variables are supposed to be negatively correlated, but the highest value of X corresponds to the highest value of Y. Should that make us suspicious of the alleged relationship?
Suppose you believed that direct democracy led to bad political outcomes, because philosopher kings were much better than mob rule. In that case, how likely it is that the one country with by far the most direct democracy in the entire world, would also be arguably the best governed in Europe, and perhaps the world? Possible, but how likely?
Suppose you noticed that America scores higher on happiness rankings than does Europe, on average. So you developed a hypothesis that social welfare states are less happy. How likely would be that a country which by some measures has the world’s most generous social insurance system, is also the world’s happiest country?
And while we are on the subject, suppose you thought deregulation and privatization made people unhappy. How likely would it be for the world’s most free market economy (excluding level of taxation and government spending) to also be the happiest?
Suppose you thought that the East Asia tiger economies were successful because they rejected the neoliberal agenda coming out of Washington, and instead had state directed development strategies. If that were true, how likely is it that the two very richest East Asian economies would also be number one and two in the world in the Heritage Ranking of Economic Freedom?
Suppose you believed that monetary policy was ineffective at boosting NGDP at the zero bound. In that case, how likely is it that the fastest 4 month stretch of NGDP growth in American history would occur during a period of near-zero interest rates, right after a easily identifiable monetary shock (March-July, 1933).
And while we are at it, suppose you believed that the credit channel explains why growth is slow during and after a banking crisis. How likely is it that the fastest stretch of NGDP growth would occur during a period right after America’s worst banking crisis, and during a period when 1000s of banks were still closed down? Again, not just growth during the financial crisis, but perhaps the fastest NGDP growth ever, during arguably the worst banking crisis ever.
Suppose you thought that inflation was caused by bottlenecks in the economy, and deflation was caused by slack. How likely is it that the price level (WPI) would rise by 20% during a period of 25% unemployment (1933-34)?
And speaking of the zero bound, just how likely is it that the biggest two day stock rally in US history would (just randomly) occur immediately after Hoover announced a proposal to allow the Fed to print more money, for each ounce of gold backing.
Suppose you thought that Mexican-Americans had a propensity to rape and murder. (Hmm, where have we heard that theory?) How likely is it that America’s most Mexican major city (of the top fifty) would also have the lowest murder rate, and perhaps the lowest violent crime rate?
Here’s how I look at it, and I want you to tell me why I’m wrong. If you have only a few observations, then extreme outliers are no big deal—but your study is also not very reliable. If your study includes a large number of observations, the odds of the most extreme value of X and Y being correlated in the opposite direction from the actual relationship seems very low. Am I too suspicious of extreme outliers? What do you think?
You get Scott’s point, right? He’s (of course) being a bit tongue-in-cheek, and saying that these theories are all goofy. He thinks it’s incredibly awkward for the people who hold these theories.
I have one more to add to the list:
Suppose you thought that the Fed’s tight money policy caused the Great Recession. How likely is it that the monetary base grew far, far more from mid-2008 to mid-2010 than in any other two-year period in US history?
P.S. Of course Scott will say, “In this particular case, the growth in the monetary base doesn’t correlate with loose money, even though it normally does. It’s a poor indicator.” Right, but that misses the whole point of Scott’s post. Any defender of any of the theories Scott is mocking can explain those “outliers” on other circumstances too. They sleep soundly at night, thinking themselves good scientists, just like Scott sleeps soundly at night, thinking “tight money” describes 2008-2010.