That was the headline on this BBC story, so I naturally clicked on the link. I was imagining a really really heavy beetle that smacked into the hull, knocking the guy who was doing his Leonardo DiCaprio impression into the icy sea. But that seemed absurd, so my second thought was that a motorist died while driving his Volkswagen off a bridge and into a cruise ship.
The real story is far more conventional.
* If you have never really gotten into the economics of climate change, and want an accessible introduction, here you go.
* If you have been laying awake at night, worrying that the depression of 1937-38 proves the success of Keynesianism, here you go. An excerpt:
In any event, Hoover’s last fiscal year was FY 1933, which ran from July 1, 1932, to June 30, 1933. (Roosevelt was sworn in on March 4, 1933.) Unemployment in 1933 averaged 25 percent. But, as Romer told us in the block quotation above, the unemployment rate fell rapidly once Roosevelt took over and cranked up the spending.
Yet look at the relatively insignificant increase in deficits. In the rock-bottom FY 1933, the deficit was 4.5 percent of GDP. In the first three years of the New Deal — when Romer says the economy illustrated the success of (modest) Keynesianism — the deficit averaged 5.1 percent of GDP.
Isn’t that a rather subtle result? Romer and the other Keynesians are claiming that the timid 4.5 percent deficit under Hoover, allowed the economy to sink into the worst Depression in US history, with monthly unemployment rates above 25 percent. Yet by bumping up the deficit’s share of the economy by a mere 60 basis points, FDR was able to achieve the most spectacular turnaround in US history.
Phew! State Governments Pledge Not to Implant Microchips Against Your Will *Unless a Judge Orders It
I recently became aware of the theory that the elites behind the scenes ultimately want to put microchips in all of us. When I first heard it, I laughed out loud because I thought it was so dumb.
HARRISBURG – Invasion of privacy is an issue that really gets under State Rep. Babette Josephs’ skin.
That’s why the Philadelphia Democrat introduced a bill, passed unanimously last week by the House, that would ban the forced implantation of computer chips in humans.
Conjuring Orwellian images, Josephs worries the identification devices – the size of a grain of rice – could lead to a real-life Big Brother nightmare.
“I’m doing, I think, what the legislature does too little of,” she said. “This is a problem on the horizon, and I want to address it before it becomes a societal disgrace.”
Though the technology hasn’t debuted in Pennsylvania, VeriChip, a company in Florida, received federal Food and Drug Administration clearance in 2004 to market the implanted microchips, which were tested on 200 Alzheimer’s patients.
Injected into the triceps, the chips have unique 16-digit codes and GPS capabilities that allow nursing homes to find wandering patients.
“I think it’s really horrible that we want to chip them like barcoded packages of meat,” said Kim Sultzbaugh, a research specialist who helped Josephs write the bill.
California, North Dakota, and Wisconsin have enacted laws similar to the ban Josephs is proposing.
Note that the ban is not as airtight and straightforward as one might have hoped:
Josephs said electronic ankle bracelets could keep track of someone in a less-invasive manner.
But for some “murderers, killers, and rapists,” ankle bracelets won’t do the trick, said State Rep. Dan Moul (R., Adams).
Moul amended Josephs’ bill to allow chips to be implanted by court order. The bill also would allow the chips to be implanted in Guantanamo Bay detainees who end up in Pennsylvania.
“Terrorists could take that ankle bracelet off with a saw and strap it to a dog and let them run around,” Moul said. “We need to know if these people are returning to the war to fight against America.”
I see it clearly now. I don’t know how long it will take, but at some point it will be routine for average Americans to have their newborns implanted with a microchip that allows government officials to track their movements and purchases. And then, when I say, “The conspiracy nutjobs were right!! Wake up people!!” the response will be, “Oh give me a break, this isn’t due to a conspiracy. This is just typical government overkill. There are lots of legitimate reasons that consumers wanted these products. Occam’s Razor, my friend. We don’t need to assume Masons are behind this.”
[CHIP:] Krugman completely misinterprets the science on Americans’ response to heat waves. He said:
[KRUGMAN:] Temperature increases on the scale predicted by the M.I.T. researchers and others would create huge disruptions in our lives and our economy. As a recent authoritative U.S. government report points out, by the end of this century New Hampshire may well have the climate of North Carolina today, Illinois may have the climate of East Texas, and across the country extreme, deadly heat waves — the kind that traditionally occur only once in a generation — may become annual or biannual events.
In other words, we’re facing a clear and present danger to our way of life, perhaps even to civilization itself. How can anyone justify failing to act?
[CHIP:] Well, how about this justification—the hottest places in the U.S. are the ones which experience the fewest number of deaths during heat waves. We have shown this on repeated occasions (in the scientific literature, see references below) in research that I have been involved with examining the relationship between excessive heat and human mortality. Not only did we show that the nations hottest (both in terms of temperature and humidity) cities, for example, Phoenix, Dallas, Houston, Tampa, Miami, have the lowest incidences of heat-related mortality in the country, but that in major cities all across the country, the population has grown less sensitive to heat waves even as urban temperatures have increased over the past four decades or so (Figure 1).
Clearly, what is happening is that as high temperatures become more commonplace, we better incorporate them into our daily lives—through better access to air-conditioning, community awareness programs, heat watch/warning programs, improved medical technologies, and just plain common sense. And, as has been shown in examples from Chicago (Palecki et al., 2001) and France (Fouillet et al., 2008), these adaptations can take place quickly. It is the rare and unexpected heat wave that kills people, not the common ones. So Krugman’s meant-to-scare example about “deadly heat waves” runs counter to the best science on the subject.
OK this will be my last post on this topic. Robert Wenzel struggles on, even though Stefan Karlsson has further demonstrated the untenability of Wenzel’s position. Wenzel is spending 95% of his time trying to show that my arguments sound like the Keynesian position that Rothbard attacks in his treatise. I’m not going to get into that dispute. I don’t think Rothbard would agree with what Wenzel is saying, but it would take too long to make my case.
I think that I have demonstrated the problems with Wenzel’s approach. He has never really answered that challenge. But let me here take up his implicit (explicit?) claim that my view lines up with Keynes, whereas his (Wenzel’s) view lines up with the Austrians.
First, look at Chapter XXV [.pdf] (p. 334) to see Hayek’s views on income, saving, and investment in The Pure Theory of Capital. I can’t give you a knockdown quote that settles the matter, since–after all–we’re dealing with Hayek here. So you need to read five pages to get the context. But my point is, within the first few pages, it should be clear that Hayek thinks saving and investment are different things, and also that he defines saving as income minus consumption. (E.g. on page 337 he says, “The indirect method consists in comparing the increase or decrease with the supposed standard case where capital remains “constant”, and thus arriving at the concepts of net saving (net income minus consumption) and net investment, and then placing these derived concepts in juxtaposition.“)
Second, if you scroll near to the bottom of this link, you will see that Keynes in the General Theory actually “proves” that savings necessarily equal investment. Since Wenzel was so happy to find Rothbard saying the terms were basically interchangeable, and since Wenzel thought my own view in contrast was similar to the dreaded K-word, I thought this would be surprising. (I too was surprised when I first saw this, such that I bored my History of Economic Thought students to tears by going over it in class. But I had thought one of the big bugaboos in the GT was that investment would fall short of savings. Yet Keynes apparently says that is impossible.)
Third, I have saved the best for last. Here is Mises on the topic. Maybe we can all get along now, because Mises seems to unify us all. As I read the quote below, Mises is clearly saying that adding to your cash balances is a form of saving. However, Wenzel might say that Mises is also (apparently) claiming that it is also a form of investment.
If an individual employs a sum of money not for consumption but for the purchase of factors of production, saving is directly turned into capital accumulation. If the individual saver employs his additional savings for increasing his cash holding because this is in his eyes the most advantageous mode of using them, he brings about a tendency toward a fall in commodity prices and a rise in the monetary unit’s purchasing power. If we assume that the supply of money in the market system does not change, this conduct on the part of the saver will not directly influence the accumulation of capital and its employment for an expansion of production. The effect of our [p. 522] saver’s saving, i.e., the surplus of goods produced over goods consumed, does not disappear on account of his hoarding. The prices of capital goods do not rise to the height they would have attained in the absence of such hoarding. But the fact that more capital goods are available is not affected by the striving of a number of people to increase their cash holdings. If nobody employs the goods–the nonconsumption of which brought about the additional saving–for an expansion of his consumptive spending, they remain as an increment in the amount of capital goods available, whatever their prices may be. Tho two processes–increased cash holding of some people and increased capital accumulation–take place side by side.
I have to be brief because we’re going to church in a bit. But I know at least some of you are following the tennis match between Robert Wenzel and me. We are arguing over whether we should call it “saving” if someone contributes extra cash to a piggy jar on the dresser. I say yes, Wenzel says no. (If you want to get up to speed, here is Wenzel’s latest post, which then has a link allowing you to backtrack to the beginning of this debate.)
OK first of all, let me say I was impressed. Like Darth Vader when he says, “All too easy,” I thought I blew up Wenzel with my last post. But then he jumped 30 foot out of my trap, leading me to now say, “Impressive.” (And no I’m not claiming to be Wenzel’s dad.) In particular, the distinction I made between “saving” and “investment” is one that Rothbard might not agree with, though a Hayekian surely would. So in the interest of brevity I withdraw my objection to Wenzel on that front.
Like I said, I need to be brief, so I’m not going to parse Wenzel’s post, or go through the long Rothbard quote he listed. Rather I am going to reassert my view, and if you read Rothbard carefully I think you’ll see that this is entirely consistent with what he’s saying.
Someone gets $1000 in income. We can picture it as cash if we want, but the person could be paid in postage stamps or chickens. That might be part of our confusion here, that we think of someone as “starting out” with cash as that period’s income flow, but it need not be.
OK, the person then has to decide how much of that $1000 to consume or to save. Let’s say he decides to spend $800 on food, gas for his car, and buying a few DVDs (which feature movies for enjoyment, not training videos for his career). He has clearly consumed $800.
Now, I want to say that the entire $200 remaining is saving. The guy might spend $150 on a CD from his bank, and then put the other $50 underneath his mattress. I claim that these are both forms of saving, even though one “goes to work pushing up capital goods prices when the bank lends it out” [Wenzel's description] and the other “merely” goes to increasing the guy’s cash balances.
I’m hoping Wenzel will now say, “Oh OK, I buy that, and so would Rothbard. My whole point was just that the saving/consumption decision happens first, and then it’s just a matter of allocation among different ways of holding wealth. We’re all good.”
Last point: I’m just trying to show the absurdity of (what I take to be) Wenzel’s view so far. Suppose I put $100 a week into my jar, and then after 10 weeks I go to Vegas and blow the $1000 on the tables. I come home and say, “Well, I saved up for 10 weeks to enjoy one hour of amazing consumption. I postponed all of the potential consumption I could have had, in order to consume it all in one fell swoop at the tables. Eight weeks ago, I was trading away $100 in potential present goods, for what at that time was an additional $100 in future goods–i.e. enjoyment at Vegas.”
I think Wenzel (given his earlier views) would have to say, “No you didn’t. That money never hit a bank or was out ‘in the economy’ pushing up prices, so there was never any saving.”
UPDATE: Actually, I realized the above isn’t quite right. It’s not that the saving/consumption decision happens first (in chronological time), it’s rather that we can evaluate the guy’s actions with that lens, and we can also evaluate his actions by asking what happened to cash balances. I’m not saying that his decision to save a given $150 is more primordial than his decision to put it into a bank CD rather than buy some shares of corporate stock. We can simply view him as allocating his money to the most highly ranked ends, which include various units of food, bank CDs, DVDs, increased cash balances, etc.
I’m not making an appeal to authority (or to hipness), but I do find it interesting that Johnny Cash sang what would be a goofy Christian hymn if performed by an old lady with a pipe organ. But hey, it’s Johnny Cash, so it’s cool. He’s hardcore.
(Thanks to Aristos for sending me the JC CDs.)
Lately I have been trying to get inside the head of Ben Bernanke:
What’s Big Ben up to? If I’m really paranoid, I imagine that he’s rattling that huge upswing in the base, in order to get all the savvy investors loaded up on gold and inflation hedges. And then BAM Ben cuts the monetary base in half overnight, saying, “You guys said you wanted me to contain inflation. Make up your mind!”
But then I think, nah, the elites are already in a pretty sweet spot. I don’t think they will screw with people just for kicks. No, I think they realize this is their golden opportunity to really make out like bandits. Wow, in one week alone last year they managed to grab $700 billion, and it only took a few billion to pay off the Congressmen who needed prodding.
So, in order for us to anticipate the Fed and government’s moves, we need to imagine what we would do in a simulation involving all of their financial and military power, if we had the objective of increasing our wealth and power. Remember, you have to put aside all sympathy for your fellow man. If you could make a trillion dollars by causing the second Great Depression, you would do it. So, how would you do it? And could you really make a trillion dollars if you saw it coming?
This simulation involves more real-world knowledge of financial markets and more treacherous calculation than I can summon. There is one man up to the challenge: Robert Wenzel.
Help us RW, you’re our only hope.