Consulting by RPM || Free Advice Blog

Murphy Interviewed by Woods on Peter Schiff Show

Tom is hosting The Peter Schiff show right now, and they are having me on at 11am Eastern. I think you can listen live here.

Krugman Acquitted of One Count of Perjury, Brought Up on New Charges

OK I want to prove that I am a fair guy, so first let me say that Krugman in this Bloomberg video didn’t deny that the Fed caused the housing bubble. If you start playing the video around 19:35, it’s clear that the interviewer is asking about federal government programs like Fannie Mae and the Community Reinvestment Act, and Krugman says “the feds” (plural) didn’t cause the housing bubble. I bring this up because a lot of my readers in the comments thought this was a total smoking gun proving Krugman is a big fat liar, since Krugman has been on record saying the Fed (not the feds) caused the housing bubble.

However, Krugman in this blog post says:

But an interesting parallel struck me here: I wonder whether the people who go on and on about the much smaller loss at Solyndra, the case that launched a thousand hearings, will get comparably worked about on this case [JP Morgan’s $2 billion trading loss–RPM] (actually I don’t wonder — they won’t).

The obvious objection is that the government lost money on Solyndra, but hasn’t (yet?) on JPMorgan. But that’s less true than meets the eye. Solyndra was a small part of a broad program of loan guarantees, which inevitably ran the risk of loss — otherwise those guarantees wouldn’t have been worth anything, would they? And it was the only loss.

OK so it’s that part I put in bold that is problematic. Beacon Power had received a large taxpayer-backed loan (and perhaps a loan itself, I need to review the details before I write this up formally) and went bankrupt last year. This was a huge deal in these circles; people were saying it was the next Solyndra. At the time, Beacon settled with the Department of Energy, saying it would sell its plant in order to raise the money to pay back its loan.

Well, back in February they found a buyer, and in this news report a DOE official estimates taxpayers will get back 70 cents on the dollar.

So, do Krugman fans want to explain to me the sense in which Solyndra already lost taxpayers money, but Beacon Power didn’t? Are you willing to say, “OK Krugman was just wrong on this point, nobody’s perfect,” or is there some loophole I’m missing?

(I’m asking partly because I am indeed going to write up this episode formally, and I want to cover possible objections.)

Sen. Rand Paul Gets in Trouble Again

The Facebook outrage of the day is now because of this inappropriate joke:

Look, my view here is the same thing as with his dad’s newsletters: This was a joke in poor taste. Does Rand Paul hate gay people? Well, he says he doesn’t, and here he’s “preaching to the choir”; these aren’t his after-the-fact explanations offered up on CNN.

I also can’t help but point out that a lot of the people who are flipping out over Rand Paul’s remarks on Facebook, were also flipping out over Obama’s flip-flopping and dumb justifications too.

Do you think that Rand Paul would have made this remark about someone who had consistently been for gay marriage for the last decade, and whose justification was “equal rights before the law” or something like that? Of course not. The reason Rand Paul attacked Obama is that Obama’s justification is self-evidently silly pandering. He is making the statement for political reasons, and he knew he had to come up with some official justification so he cited the Golden Rule. That is absurd, just like the Facebook supporters of gay marriage were pointing out last week.

Jesus Is Consistent With the Old Testament God

In church today the pastor read a statement from a theologian that astounded me. (BTW I know at least one guy who goes to my church also reads this blog, so it should go without saying that I am criticizing this particular point without malice. I like the sermons, I just sometimes think they say things that aren’t quite right.)

We were discussing the parable of the shepherd finding a lost sheep and the pastor read from a Christian scholar who had said (I’m paraphrasing) something like, ‘To the Jew of Jesus’ day, maybe if a sinner came crawling back to God and begged forgiveness, God would have had mercy. But never in a million years would God have gone out looking for lost sinners to redeem.’ In other words, we are supposed to infer that this was an innovation of Christianity.

But that strikes me as crazy. The single most important theme of the Old Testament (it seems to me) is that God continually forgives His wretched and straying people. He approached Abraham, Moses, and the prophets. Off the top of my head, I can’t think of a single “important” Old Testament character who wasn’t courted by God; the only one that is arguable is Jacob (who wrestled to obtain a blessing).

The psalms are full of tributes to God’s abundant mercy and forgiveness.

And consider the book of Hosea: God literally orders a guy to marry a prostitute, and to go out and bring her back home after she leaves him to return to prostitution, as a metaphor for God’s relationship with Israel and its swooning over foreign idols.

I think there is sometimes a tendency for Christians to exaggerate the innovations of Jesus. For example–not that my pastors would ever have made such a basic mistake–I myself used to think that when Jesus summed up the Law and Prophets by saying love the Lord your God with your whole heart, mind, and soul, and love your neighbor as yourself, that Jesus was a brilliant guy who took a bunch of specific rules from the Old Testament and unified them under two brand new principles. Sort of like the Einstein of morality.

The only problem with my neat little theory, is that both of those rules were in the Old Testament (here and here).

Don’t get me wrong, Jesus is “a nice guy” of whom I am not afraid, whereas the God who sent plagues on Pharaoh is scary and you don’t want to get on His bad side. But actually as Christians we believe they are the same PersonGod, and furthermore you can see the fire in Jesus’ ire for the religious hypocrites, not to mention what He does in Revelation. Going the other way, the God of the Old Testament is harsh at times but He’s not really like a spiteful god from Greek mythology, the way atheist critics sometimes claim. He is full of compassion, love, and mercy, and is constantly trying to get the nation of Israel to do what is in their best interest.

My Response to Nordhaus on “Global Warming Skeptics”

Back in March economist William Nordhaus wrote a long essay in the New York Review of Books in which he took on the “global warming skeptics,” and in particular 16 scientists who had written a WSJ op ed urging caution before embracing government measures to limit greenhouse gas emissions.

Today IER put up my detailed response. The two pieces get into some fairly technical issues, but I hope I managed to keep everything understandable to the reader who is willing to sit down and read both articles. If you’re interested in the economics of climate change, these two articles are worth reading. Nordhaus is a world-renowned pioneer in the field, whereas I am (to my knowledge) the only person with a journal critique of his policy conclusions, from a free-market perspective. (There are interventionists who have criticized Nordhaus on the grounds that his approach is far too timid in its recommendations for a carbon tax.)

One thing I will draw your attention to, is that (I must say) Nordhaus is very misleading when he reports on the economics literature modeling the potential damage from climate change. I won’t go so far as to say he intentionally misled his readers, but that almost certainly was the result. Here is Nordhaus discussing the state of the literature:

The question here is whether emissions of CO2 and other greenhouse gases will cause net damages, now and in the future. This question has been studied extensively. The most recent thorough survey by the leading scholar in this field, Richard Tol, finds a wide range of damages, particularly if warming is greater than 2 degrees Centigrade. Major areas of concern are sea-level rise, more intense hurricanes, losses of species and ecosystems, acidification of the oceans, as well as threats to the natural and cultural heritage of the planet.

Now when I first read that, my Spidey Sense was tingling. I was familiar with Tol’s work, and remembered progressive bloggers biting his head off, because his work showed that global warming was beneficial (on net) for decades. So I went and looked up the very survey article that Nordhaus is citing, and guess what? Tol shows that the majority of economic analyses do indeed find net benefits from global warming, up through 2 degrees Celsius, and only after that point do (most of) the models start moving into net harm territory. Furthermore, coupled with the IPCC’s estimates, this crossover point probably won’t happen for another 50 – 60 years.

So tell me, in light of that, if Nordhaus did his readers justice when he said: “The question here is whether emissions of CO2 and other greenhouse gases will cause net damages, now and in the future. This question has been studied extensively. The most recent thorough survey by the leading scholar in this field, Richard Tol, finds a wide range of damages, particularly if warming is greater than 2 degrees Centigrade.”

Lastly, David R. Henderson and David Friedman both discuss my post. They are interested because they each had talked about Nordhaus too (here’s Henderson and here’s Friedman).

Potpourri

* I have been saving up posts on the alleged “austerity” over in the UK and Europe, but the news is moving fast and I’d better just send you to the relevant links. So first of all, here is Tyler Cowen showing an awesome graph from Veronique de Rugy detailing nominal government spending in various countries. Not surprisingly to readers of Free Advice, the alleged poster child of austerity–the UK–is just about the worst example one could pick. (And by “one” I mean “Paul Krugman.”) People bit Tyler’s head off in the comments, but he doubled down in this subsequent post, basically saying, “I admit there might be more to say on this issue, but so far, nobody has said it.” Don’t be intimidated Tyler. (Seriously: The people in the comments at his first post are throwing up all sorts of sand, none of which detracts from the basic point Veronique was making. They might as well have said, “Oh, but your chart is in annual figures! In the real world spending is done daily.”)

* No idea at this point how I stumbled upon this news report on “Million Dollar Voices,” but it’s kind of neat. I’m sure there’s a lesson about the division of labor and population growth in there, somewhere.

* Here’s the interview Charles Goyette did for Carlos and me in April’s Lara-Murphy Report.

* Ralph Raico sent me this article on karaoke. (A sentence I never thought I’d blog.) I must disagree, however, when the alleged experts in the article caution people not to do “Hey Jude.” Perhaps that’s true in general, but not at Mises U:

NOTE: The above video is, to my knowledge, the only one in existence where I didn’t say, “Jeez, I swear I sounded better in person than that iPhone would suggest.”

A Question on the Controversy Over North Carolina’s Amendment

I am surely going to regret posting this, but hey nobody said you could stay on the cutting edge of the blogosphere by playing it safe…

So in the small society (and I use the term loosely) of my Facebook friends, people were very angry about the North Carolina amendment prohibiting gay marriage. One of the particular jokes, though, upon reflection is a bit odd.

So first, the joke: Flying around my “news feed” were several variations of a poster, showing a guy saying:

OK, that’s funny and I probably chuckled the first time I saw it. But why is it funny? Clearly, the only reason is that even the people pushing the poster around agree that barring first-cousin marriage is somehow more understandable than a state barring marriage between homosexuals.

OK, so where do that get off with that judgment? It can’t be because of the danger to children, since the proponents of gay marriage have made it abundantly clear that arguments about procreation are invalid. And it sure can’t be because, “Most people think first cousin marriage is unnatural and icky”–I have numerous FB status updates from various people yesterday, saying what they think about that kind of stance.

There are currently 25 (I counted fast, don’t quote me) states that prohibit first-cousin marriage. Isn’t this a monstrous violation of individual liberty? If two cousins love each other and want to spend their lives together, why should a state government have anything to say about it?

As most readers of this blog know, I am a Bible-believing Christian but also a pacifist who doesn’t endorse any form of the State apparatus as a way of achieving social objectives. So I obviously don’t think the government should have anything to do with telling people whom they can and can’t marry.

Yet I really do think this indignant reaction–pointing out that North Carolina allows first cousins to marry but not homosexuals–is interesting. For example, imagine if the NAACP launched a poster campaign after the Trevor Martin shooting that said, “Florida: A State Where You Get More Jail Time For Shooting an Illegal Than a Black Citizen.” Would civil rights activists have thought that was funny? I doubt it, because they would have been just as horrified if Zimmerman (in their minds) targeted and killed an illegal immigrant in cold blood.

So again I point out: Every single argument I have seen for gay marriage on FB, would also show that it is monstrous for States to prohibit first cousins from marrying. Thus, why was that joke about North Carolina funny, to the people who are really outraged by the amendment?

At This Point Paul Krugman Is Just Playing With Us About Housing

OK so let’s refresh everyone’s memory. Back in 2002, Paul Krugman infamously wrote in a NYT article:

The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Now when this quote (from 2002) somehow got resurrected years later by his critics, Krugman denied that he had ever called for a housing bubble. He mocked the idea; this was just another smear by his critics.

That always seemed a bit of a weak defense to me, in light of his quote. (And by all means, go read his full article if you’ve never done so. The only way Krugman can defend himself, it seems to me, is to say, “Hey, I didn’t think Greenspan would be able to do it! So I wasn’t really calling for it.”)

The real kicker, though, was that in 2006, Krugman seemed to admit that there had been a housing bubble, that Greenspan had caused it, and that Greenspan had been right to do so (with caveats). I saw “seemed to admit,” because again, the English language has different rules when it comes to Krugman’s past writings, or so we are told by him and his fans. Anyway, here’s the relevant excerpt from an October, 2006 blog post, where Krugman is fielding questions from readers:

Neeraj Mehra, Amritsar, India: Mr. Greenspan has done a disservice to the nation by creating the housing boom. As a layman-observer, that’s the lingering thought I’ve had. Your article reaffirms it.

The question I have is this: Did he do the right thing — acting morally by engineering a housing boom, more as a bridge loan, until something else showed up at the horizon to shore up the economy — because he didn’t have a choice, or did he undertake a path of mere political expediency? And, that’s a question that’s nagging me for a while.

Would appreciate it if you could shed some light.

Paul Krugman: As Paul McCulley of PIMCO remarked when the tech boom crashed, Greenspan needed to create a housing bubble to replace the technology bubble. So within limits he may have done the right thing. But by late 2004 he should have seen the danger signs and warned against what was happening; such a warning could have taken the place of rising interest rates. He didn’t, and he left a terrible mess for Ben Bernanke.

But now we’ve got something even more recent, and it’s not talking about the past. It’s talking about what the Fed should do right now. And there’s no longer Paul McCulley to hide behind.

From Ezra Klein’s May 4, 2012 interview with Paul Krugman:

[Ezra Klein:] I’m very pessimistic about Congress deciding to do anything serious anytime soon. But I think there’s more possibility for movement at the Federal Reserve. So if Bernanke really decided to pull a Professor Bernanke, if he could do whatever he wanted, how much could the Fed do? What kind of improvement in the unemployment rate could Fed policy lead to?

[Paul Krugman:] That’s wildly uncertain. Partly because you do see that getting credibility on that commitment to future inflation is an iffy thing. Worth trying, but an iffy thing. The great thing about fiscal policy is that it has a direct impact and doesn’t require you to bind the hands of future policymakers. And there’s the problem that the main channel through which interest rates affect the economy is housing. Are we ready for a housing boom? Maybe. It looks better than it did a few years ago, because we have less housing overhan[g]. So it might do the trick. But it might not. I don’t really have a number on it.

If I didn’t have several assurances from Krugman that that’s not what he was saying back in 2002, I would think he was saying the same thing right now: That yes, if the Fed could get people to generate a boom in housing, then it would pull the economy out of recession, but aww shucks it doesn’t seem like that will be possible at this time.

OK Krugmaniacs, tell me how I’m totally misreading him out of spite.