19
May
2014
More Links on Capital Debates, Piketty, etc.
==> Nick Rowe back in 2012 had a funny (for an economist) post on the Cambridge Capital Controversy.
==> A guy running the blog “Naked Keynesianism” (and whose avator is a picture of Keynes) teams up with another blogger calling himself “Lord Keynes” to explain why the Austrians are clueless about capital. *shudders* (Remember, the Austrians are the cultists.)
==> In the comments at Nick Rowe’s blog I trade barbs with Kevin Donoghue, who runs the blog “Any Old Bullsh*t.”
==> Tom Woods and I discuss Piketty’s book.
One of the commenters in the “Naked Keynesianism” post said:
Well Major Freedom, it seems you don’t really get the point of why lower real wages do have a negative impact on the level of activity.
Who cares about the level of activity, so long as it satisfies the preferences of the specific individuals who have taken the risk to undertake or forego a certain level of activity?
Nobody is owed other people’s productivity.
often you justify your imaginary ideal system by saying that it leads to the greatest wealth. Now you’re saying it doesn’t matter if that isn’t actually the case.
Can you point to a case where “greatest wealth” has been used as justification?
How do guest measure “greatest wealth” by the way?
libertarians always argue that total ‘free market’ laissez-faire leads to the greatest wealth or prosperity.
They always argue that any deviation from this reduces wealth or prosperity.
(by “‘free market’ laissez-faire” I mean your conception of what such an economy would be like, which often has little to do with how economies actually work).
“Free market” ideology is not an imagination of what the world would look like. It is an ethic. It only says that in a free market world, it would be considered illegal to initiate force against other people’s persons and homesteaded/traded property.
What the world would look like with such an ethic, would be up to the individuals at the time.
It is true that wealth is maximized with free markets. How is this capable of being known? By recognizing that even the concept of “wealth” is subjectively, meaning individually, determined.
For example, the libertarian who understands economics would rightly claim that a world of slavery that resulted in a lot of material “stuff” like thousands of pyramids and weapons of war, castles for the rulers, thousands of buildings for eugenics, and forced conception (imagine a dystopian totalitarian nightmare ), would actually have LESS “wealth” that a society where individuals are able to produce and exchange according to their own preferences, and it just so happened that the individuals at the time want a more, what’s the word that escapes me, a more “nature” driven life, with little material goods and whatnot, then that little material wealth would be worth MORE than all the pyramids, weapons of war, and eugencies buildings. This is because individuals are free to pursue THEIR OWN values, rather than the values of masters.
Yeah,
The town managers brand new full size Ford, that he commutes 80 miles per day with, I do not consider wealth, although I am sure the Mayor, Board and bureaucratic regime do…
“it would be considered illegal to initiate force against other people’s persons and homesteaded/traded property.”
There’s lots of ideology wrapped up in that statement. Suffice to say that I don’t agree with your basic assumptions, and so reject your simplistic pronouncements about “violence” and “initiating force”.
I think that slavery is morally wrong and I wouldn’t seek to justify that belief with economic arguments.
“…would actually have LESS “wealth” that a society where individuals are able to produce and exchange according to their own preferences”
The slave society you describe might potentially have more wealth, but that wealth happens to belong to the slave masters and can not be enjoyed by the majority of the population.
You could say it would be pareto inefficient to redistribute that wealth from the slave masters to the slaves, as that would make the slave masters worse off.
“There’s lots of ideology wrapped up in that statement. Suffice to say that I don’t agree with your basic assumptions, and so reject your simplistic pronouncements about “violence” and “initiating force”.”
I do not care if you disagree, to be honest. Your actions are what matters, and according to your actions, at least in our interactions, you are not in a position to actually threaten my body with violence, nor are you in a position to threaten me with violence if I don’t have over my wealth to you. So in terms of your actions vis a vis my actions, I am getting what I want from you, and you are effectively agreeing with me to the extent that you refrain from such violence voluntarily.
You can posture all you want about how you personally don’t agree with homesteading rights. But that’s all it is, posturing. You can posture and thump your internet tough guy chest all day long.
“I think that slavery is morally wrong and I wouldn’t seek to justify that belief with economic arguments.”
You verbally advocating threatening people with violence if they don’t hand over their homesteaded and/or freely traded wealth, is you verbally advocating the same thing slavery is based on.
“…would actually have LESS “wealth” that a society where individuals are able to produce and exchange according to their own preferences”
“The slave society you describe might potentially have more wealth, but that wealth happens to belong to the slave masters and can not be enjoyed by the majority of the population.”
Even if such slave driven wealth were offered the slaves, it still wouldn’t be worth as much as compared to if the slaves could produce and exchange their own wealth in peace.
Even if the government steals from people and then brings about the production of roads and bridges and schools and innocent family killing drone bombers and SWAT armored vehicles, and offers this to the people as “services”, that wealth would be worth less to those people than if the wealth were voluntarily produced and/or purchased by those people.
Sure, you can convince yourself that you have chosen what the government does, and I’ll chalk it up with your posturing on thuggish advocacies.
“You could say it would be pareto inefficient to redistribute that wealth from the slave masters to the slaves, as that would make the slave masters worse off.”
But the slave masters have already violated pareto efficiency by making the people who are slaves worse off by virtue of their slavery.
But that’s OK. The masters don’t agree with the Rothbardian conception of self-ownership or homesteaded property rights for the slaves either, so they reject the slave’s assumptions and premises.
“you are effectively agreeing with me to the extent that you refrain from such violence voluntarily.”
Well I don’t agree with your particular bizarre ideology, so no I don’t agree.
Philippe,
I think it is i bizarre to call it “bizarre” if someone asks for reciprocal rights…
No you do not advocate reciprocal rights. You have decided that people cannot self-determine (secede). Without secession, no reciprocity. You think that based on arbitrary boarders (which are existing right now) the majority can forbid any minority to self-determine by threat of deadly force.
Philippe:
“Well I don’t agree with your particular bizarre ideology, so no I don’t agree.”
It’s not bizarre, and I said you are, by virtue of your ACTIONS, not your prattle on this board, effectively agreeing with me.
Philippe:
“Well I don’t agree with your particular bizarre ideology, so no I don’t agree.”
It is not “my” ethic, it is the ethic for every individual who desires, and has a right, to not be aggressed against, both their persons and their homesteaded/traded property.
And it isn’t “bizarre”. Your violence advocating ethic is what is bizarre.
And I said you are, by virtue of your ACTIONS, not your prattle on this board, effectively agreeing with me. You are not stealing homesteaded or traded for property. You are not initiating violence or threats thereof against others. In terms of how you carry yourself, you are a full fledged Rothbardian extremist.
You can’t put a price on freedom. Total wealth and or prosperity is irrelevant.
You never answer the question do you?
sorry I can’t be bothered to trawl through guest’s comment history to find a quote that satisfies you. I can’t be bothered.
Philippe, in your two comments here, you went from saying libertarians “often” do it to “always” do it.
so what?
So the latter is certainly wrong.
So you’re not being consistent.
my first comment was directed at guest specifically, but I’m not going to search through his comment history to find a quote to satisfy Tel. The second comment was a generalization which is not false.
So as long as you say the same things to the same people, it doesn’t matter if those groups of things contradict each other? Is that what you are saying?
Maybe you should take a deep breathe and figure out what you believe each and every libertarian is saying.
my comments don’t contradict each other.
Philippe.
Yes they do. Often and always do contradict each other.
not in this case, at least.
Actually yes in this case.
So you have failed to point out even one single example. Just like every time I ask you to provide a link, a quote, a point, anything at all.
guest is apparently less concerned with my description of his views than you are. You appear to be grasping at straws.
There could come a time when the highest value in society is a “back to nature” anti-commercialism ethic where there is less economic activity than before. Such a society is perfectly compatible with the NAP and it would and could be easily explained using Austrian concepts. What’s your point?
often you justify your imaginary ideal system by saying that it leads to the greatest wealth.
A world in which private property rights are always respected or enforced is ideal, but only partially imaginary: there are in fact times when people’s individual rights don’t get violated.
Maybe it would help if I said it would lead to “pareto efficient” wealth. That is, the greatest wealth that can be attained without violating anyone else’s rights.
Besides, “activity”, per se, doesn’t equal wealth.
For example, you could forcibly confiscate people’s wealth and bury it at certain depths to create “shovel-ready” jobs, which would increase activity.
But since they would have used that money in pursuit of their own preferences were it not for the forcible confiscation, either everyone is made poorer, or the make-work jobs represent protectionism (cronyism) for businesses which employ capital toward uncovering the buried wealth.
Only when output is undertaken in the pursuit of profit, to be made through voluntary transactions, is the output considered “wealth” (or, at least, pareto-efficient wealth, since theft does create wealth for thieves – but that would be pareto inefficient).
How you define pareto efficiency depends on how you define being ‘better off’. Also, a pareto efficient situation is not necessarily optimal, Nor is it necessarily desirable from the point of view of most people.
for example, say that people are hoarding money, and that other people are unemployed.
You could argue that this is a pareto inefficient situation, as reducing hoarding through increased investment and consumption would make everyone better off.
Or you could argue that the situation is pareto efficient, if you say that the hoarders get more subjective utility from hoarding than they would from investing/spending.
“for example, say that people are hoarding money, and that other people are unemployed.”
“You could argue that this is a pareto inefficient situation, as reducing hoarding through increased investment and consumption would make everyone better off.”
“Or you could argue that the situation is pareto efficient, if you say that the hoarders get more subjective utility from hoarding than they would from investing/spending.”
Obviously they do, or else they wouldn’t do it!
Clearly your second alternative is the correct one.
“How you define pareto efficiency depends on how you define being ‘better off’.”
There is no need to argue over definitions, since we know that the individual can tell you for themselves what makes them better or worse off. We can constrain the sum total of those preferences to whether or not any given individual preferences infringes on the property rights of other individuals.
Pareto solutions are not claimed as being “optimal” by libertarianism. They are claimed as being consistent with the NAP.
“Clearly your second alternative is the correct one”
not according to marginalist/ neoclassical supply/demand economics. But maybe according to you.
Not according to subjectivist economists, but maybe according to you personally in your own little world that nobody else agrees with fully as they point and laugh at you for being so fringe and odd.
“not according to subjectivist economics”
The quotes posted here by Bob Roddis are all about economic calculation as an estimation of and accounting for profit and loss.
Whether a company makes a profit or not isn’t really subjective, it’s there in the accounts.
You want to argue that if a company makes a loss, maybe it really benefits because subjectively the owners think that making a loss was beneficial in some subjective way.
Ok, you can make that argument.
The problem is that you can’t conflate “subjectively benefitting in some way” with making a profit. Either a company makes a profit or it doesn’t.
Philippe:
It’s still subjective valuation of said profits and losses.
The actual profits themselves are objective, but the valuations of them are not.
“Under certain idealized conditions, it can be shown that a system of free markets will lead to a Pareto efficient outcome. This is called the first welfare theorem. It was first demonstrated mathematically by economists Kenneth Arrow and Gérard Debreu. However, the result only holds under the restrictive assumptions necessary for the proof (markets exist for all possible goods so there are no externalities, all markets are in full equilibrium, markets are perfectly competitive, transaction costs are negligible, and market participants have perfect information). In the absence of perfect information or complete markets, outcomes will generically be Pareto inefficient, per the Greenwald–Stiglitz theorem.[3]”
http://en.wikipedia.org/wiki/Pareto_efficiency#Pareto_efficiency_in_short
It is not necessary to restrict Pareto optimality in such a way, before we can know that free market action is the only action consistent with Pareto optimality.
Even if initiating violence is the only way that a particular road will be built, it does not mean that Pareto efficiency is violated in a context of peace. You have to include the act of initiating violence itself as removing alternatives from the individual’s potential choice pool. It doesn’t matter if an individual WANTS a road but only if everyone else pays a minimum fee. These desires are not a part of ALL individuals getting what they want, which includes wanting to not pay for something they don’t want to pay for, given whatever circumstances prevail that might influence them to make those decisions.
Goods produced due to initiating violence are not examples of market failures. They are a violation of the market process of individual production and voluntary exchange.
Mises, in other words, despite the assumption of given knowledge is not assuming perfect knowledge in the usual economic meaning of that term. If perfect knowledge was assumed, then the problem with socialism would be at best a complexity issue which could be solved by a supercomputer. The “knowledge of the particular circumstances of time and place” and the fact that we are dealing with data which “by its nature cannot enter into statistics” do not just challenge the practicability of socialism (see Hayek 1945, pp. 80, 83). Rather, socialism is impossible precisely because the institutional configuration of socialism precludes economic calculation by eliminating the emergence of the very economic knowledge that is required for these calculations to be made by economic actors.
Mises’s argument is subtle and must be read carefully. Not only does he contend that economic knowledge cannot be inferred directly from technological knowledge without the aid of the market process, but that knowledge of equilibrium values is irrelevant for action outside of equilibrium. In equilibrium the underlying variables of tastes and technology are perfectly reflected in the induced variables of prices and profits and loss. If this was not the case, then the conditions defined by Pareto optimality-in terms of production efficiency, exchange efficiency, and product-mix efficiency-would not hold. But this situation is irrelevant for actors in the world outside of equilibrium. “What impels a man toward change and innovation,” Mises wrote, “is not the vision of equilibrium prices, but the anticipation of the height of the prices of a limited number of articles as they will prevail on the market on the date at which he plans to sell.” The market economy is an entrepreneurial process which “again and again reshuffles exchange ratios and allocation of the factors of production. An enterprising man discovers a discrepancy between the prices of the complementary factors of production and the future prices of the products as he anticipates them, and tries to take advantage of this discrepancy for his own profit. The future price which he has in mind is, to be sure, not the hypothetical equilibrium price. No actor has anything to do with equilibrium and equilibrium prices; these notions are foreign to real life and action; they are auxiliary tools of praxeological reasoning for which there is no mental means to conceive the ceaseless restlessness of action other than to contrast it with the notion of perfect quiet” (Mises 1949, p. 711). Boettke p. 147-148
Philippe:
Please note that if one adopts a consequentialist version of libertarianism, then and only then can you make that accusation of hypocrisy, or at least inconsistency.
But for those of us who understand liberty from a deontological perspective, any mention of liberty resulting in the greatest aggregate output of “stuff”, would not be an argument of justifying liberty per se, but only a benevolent outcome of it.
On the one hand you argue that an imaginary anarcho-capitalist ‘free market’ would result in greater wealth, higher living standards, less unemployment, less poverty, etc. (1)
(You blame economic problems like poverty and unemployment on deviations from the imaginary anarcho-capitalist ‘free market’).
Then on the other hand you argue that, actually, this isn’t necessarily true – an anarcho-capitalist ‘free market’ would simply result in whatever happens to occur in an anarcho-capitalist ‘free market’.(2)
It could be anything, really.
It could be less wealth, lower living standards, more unemployment, more poverty… Who knows, and who cares.
Your point is simply that whatever happens in an anarcho-capitalist ‘free market’ is necessarily good because it is supposedly “voluntary”.
So if turns out that there is actually more unemployment and more poverty, it doesn’t matter, as people are necessarily ‘better off’ because it’s all “voluntary”.
The problem is that you misleadingly conflate (1) and (2).
“It could be anything, really.”
Within the constraint of respect for private property rights, of peaceful production and exchange, yes, it could be anything.
And there is no evidence that more economic freedom makes people worse off materially. The evidence shows the exact opposite.
“yes, it could be anything”
so it could be more poverty, more unemployment, lower standards of living in general. Who knows and who cares.
“The evidence shows the exact opposite”
The evidence does not support your particular ideology, but who cares, right? Because evidence doesn’t matter, right?
why do you claim that ‘evidence’ supports your ideology, when you don’t even care whether the evidence supports your ideology?
Basically you are just a slippery customer. You will say whatever you have to say to further propagate your belief system. You don’t even care if it’s true or not, because for you truth is less important than your belief system.
The photo of North Korea and South Korea seen at night shows a contrast that explains the virtue of freedom over despotism.
There are similar photos of the farms in Rhodesia, vs the same farms once Socialist land reforms were imposed by violence in Zimbabwe.
http://img216.imageshack.us/img216/8351/1207koreaelectricitygrikf0.jpg
There’s the photo, very difficult to explain that away.
http://www.cgdev.org/page/scorched-earth-zimbabwe-and-after-satellite-photos
This shows the Zimbabwe land reforms.
Philippe:
“So it could be more poverty, more unemployment, lower standards of living in general.”
Only if that is what individuals CHOOSE to do with their liberty. But there is no objective law or structural limitation that would necessitate this.
Also, and not that this proves people will continue to choose to do so, but history shows that liberty is associated with a minimization of unemployment, a maximization of output, and rising out of poverty.
Violence is not needed to convince people to improve their own lives according to their own values. Indeed it cannot accomplish this. With liberty, people’s own choices and drive would be allowed to enable individuals to self-determine and improve.
“Who knows and who cares.”
There is no historical evidence that economic freedom is associated with falling living standards.
There is no theoretical, logico-deductive evidence either.
In fact, both suggest the opposite.
“The evidence shows the exact opposite”
“The evidence does not support your particular ideology, but who cares, right?”
The fv
, right? Because evidence doesn’t matter, right?
Philippe:
Bah, clicked on submit by mistake.
“The evidence does not support your particular ideology, but who cares, right?”
Theempirical evidence does not refute or falsify my ideology either.
And the empirical evidence certainly does not support your ideology.
“Because evidence doesn’t matter, right?”
You keep claiming the existence of falsifying or unsupportive evidence of the theory that economic freedom allows people to maximally improve their lives, and yet you have never provided any.
Philippe:
“why do you claim that ‘evidence’ supports your ideology, when you don’t even care whether the evidence supports your ideology?”
Because you care about whether economic history is consistent with the theory of economic freedom, and I was responding to your false claim that the theory is falsified by history.
“Basically you are just a slippery customer. You will say whatever you have to say to further propagate your belief system. You don’t even care if it’s true or not, because for you truth is less important than your belief system.”
Your personal belief of what constitutes the foundation of true knowledge, differs from rationalists and praxeology.
You don’t care if your theories contradict rationalist principles. You will say anything to further propagate your irrational violence advocating ideology. Truth for you is not important at all.
“Who cares about the level of activity, so long as it satisfies the preferences of the specific individuals “
The outcome doesn’t satisfy the preferences of the specific individuals.
Deleterious macroeconomic effects — debt deflation, recession, real output collapse, unemployment — emerge from micro behaviour.
These macroeconomic effects are not intended by the individuals themselves.
You are ignorant of emergent properties.
“Debt deflation” comes about because people do not understand that inflation is either a government backed or FRB induced phenomenon which is unsustainable and will ultimately collapse. Recession, real output collapse and unemployment are also the result of the very policies you endlessly promote. These problems do not emerge from “micro behavior” per se.
you apparently believe that all these economic problems are ultimately caused by money creation – either by the government or through fractional-reserve banking.
An obvious problem with your belief is that fractional reserve banking is a creation of market economies. As such it follows that you believe that market processes lead to these economic problems.
yah, Philippe, Roddis has never been able to explain why people would suddenly reject credit money and FR banking in his “free” market — except by force and violence.
He’s incoherent on this subject.
LK, did Bob ever actually affirm that people would suddenly reject FR notes on the “free” market?
What I said was (IMHO) that in order to avoid a claim of fraud, the notes needed to have printed on them language sufficient so that an unsophisticated payee would understand that the note was not the same as a warehouse receipt for specie. Then I said that if such was printed on each note in big letters, few, if anyone, would accept them as payment.
Further, I said that to the extent such notes were used, that they would have their own “brand” and the issuing bank would have a reputation to uphold. Both the note language and branding would help avoid and limit artificial and unsustainable price increases in a true free market.
“What I said was (IMHO) that in order to avoid a claim of fraud, the notes needed to have printed on them language sufficient so that an unsophisticated payee would understand that the note was not the same as a warehouse receipt for specie.”
There are few people who do not understand that cheques are an IOU, yet cheques are and were widely used.
Roddis fails again.
Maybe I haven’t paid enough attention around here but you really seem to be misread a lot. It really clutters the comments. (Granted, I’ve contributed to that clutter myself)
And this is coming from a non-libertarian who actually supports FRB.
LK:
“There are few people who do not understand that cheques are an IOU”
70% of the UK believes they are the owners of the money they deposit.
So 70% do not understand FRB deposits as IOUs. They understand them as bailments.
That is not fraud: it is merely ignorance on the part of the public.
Moreover, the **same survey** you cite reveals that 61% of people surveyed also said that they did not mind the bank lending out some of the money in their current account as loans (p. 8)
Only 15% said that they keep money in a FR current account for safekeeping (p. 5).
The empirical evidence does not support you.
1. Writing a check means that the payor is claiming that he really has the money in his account.
2. If there wasn’t a problem with the bank finding the money to pay the checks, what’s the point of the Fed and the FDIC?
3. There are two distinct potential problems with FRB: 1) Bouncing notes and checks AND 2) Artificially induced and unsustainable prices.
4. If there wasn’t a problem with FRB causing bubbles and distorted unsustainable prices, what’s the necessity of your omniscient and benevolent government “regulator”? And why did bubbles occur? The fact that they occurred demonstrates that there was an unaddressed problem.
1. Prices are indeed artificially bid up by FRB beyond the point they would be if money in circulation reflected actual savings. What’s the dispute?
2. Regarding the understanding of the masses, the masses do not even understand that inflation is a purposeful government policy and not a mysterious force of nature.
FR mutuum lending is not bailment: it is a promise to pay only.
It is your incompetent inability to understand basic legal concepts that is the issue, roddis.
The dispute is your absurd belief that FR banking would disappear without government.
Or that negotiable bills of exchange, promissory notes and other forms of credit wouldn’t still be widely used with all the possible economic problems you stupidly blame on governments.
“70% of the UK believes they are the owners of the money they deposit.”
Whose money do the other 30% think it is ?
Whose money do the other 30% think it is ?
A Nuanced Point in the Outrage Over Cyprus
When the Cyprus bailout-plus-tax-on-depositors was first announced, most people flipped out, saying it was stealing money from the average Joe …
…
Yet here the critics (including me) were unwittingly buying into the very problem: People have been conditioned by governments (and the financial elites) that there is something sacrosanct about depositing your money in a bank. If you put your money in Bank A, and it lent those funds to the Greek government which then defaulted on the loan, then why shouldn’t you take a hit? It’s partly your fault for giving your money to an institution that makes such dumb decisions.
LK:
“That is not fraud: it is merely ignorance on the part of the public.”
The majority are ignorant precisely because they are being misled, and their lack of education is taken advantage of by the banks.
“Moreover, the **same survey** you cite reveals that 61% of people surveyed also said that they did not mind the bank lending out some of the money in their current account as loans”
That is irrelevant to the specific point of whether or not the depositors consider themselves or the bank as owners of the money. The fact that most clients believe they are the owners, is primary to them also agreeing with the bank lending money that they believe is theirs, out to third parties.
This mass confusion is a crucial component to the business cycle. Clients consume as if they own the money in the present. But banks lend and to the exten that the borrowers invest, are investing as if they own the money in the present.
“Only 15% said that they keep money in a FR current account for safekeeping (p. 5).”
In an inflationary economy no less. Now imagine how much more willing people would be to merely keep their money safe at no interest, while prices are gradually falling over time.
“The empirical evidence does not support you.”
Yes, it does. The evidence is perfectly consistent with my theory. It is also perfectly consistent with your theory, and everyone else’s theory. History is only not consistent with historical claims that contradict history.
It does no good to point out that I’ve explained myself years ago on this very topic. FRB becomes dangerous when payees mistakenly believe that FRB notes promising immediate payment in specie (but which are, in fact, a form of credit because the specie is not actually there) are the same thing as true warehouse receipts for specie and these notes are all accepted and traded at the same value without people clearly understanding the difference in their minds. This results in the artificial and unsustainable bidding up of prices based upon the issuance of credit which is mistaken for an existing pool of true savings. It has nothing to do with (and is no argument against) the use of “credit” where all parties understand that they have entered into a credit transaction, which is a different kettle of fish.
http://factsandotherstubbornthings.blogspot.com/2012/07/bob-roddis-makes-bad-argument.html?showComment=1342710030818#c2618524232434861358
“It was you who was claiming that people simply don’t want to hold cash, nor keep gold bars.”
Nah, tel, I said, “People want a return on their money, not idle money hoards, costing them warehousing fees.”
Wrong comment.
LK
Your claim is contradicted by the existence of people who deposit money for safe keeping purposes.
There would be an incentive to reject them LK, since in a pure free market the costs of such activity would not be able to be spread out onto millions of taxpayers through bailouts, and each individual in the 70% of the UK population who believe they are the rightful owners of their deposits, would find that when their bank goes bankrupt, they will lose their entire life’s savings.
In this context, it is almost a certainty that banks would fall over themselves trying to cater to depositors with 100% reserve services.
Not saying all would, but at least CHOICE will be able to be had, meaning at least individuals would be FREE FROM the initiations of violence that externalizes the costs of other depositor’s bad choices onto others.
But we both know that you don’t want to avoid any externalizations of costs of FRB. You blabber all day about how FRB should be allowed because it’s free market, but then you turn face and want to violate the free market by externalizing the costs through state aggression and coercion.
“An obvious problem with your belief is that fractional reserve banking is a creation of market economies. As such it follows that you believe that market processes lead to these economic problems”
Mandatory taxation in such FRB notes is NOT a creation of the market process.
Fractional reserve banking has, historically, been maintained through government encouragement, and bank protection from bankruptcy when they overextend.
If FRB should happen in a purely free market, and if such activity leads to bankruptcies, then as long as the market process is strictly protected, any level of FRB would likely shrink over time as more and more banks and bank clients realize how much it is in their interests to sign 100% reserve contracts given they choose to want a safest storage.
We would not see the gigantic swings in inflation and deflation that we have seen WITH government encouragement and protection. There might be a gentle wave of up and down, which would be less painful than it is with government.
The point that is going over your head is that the libertarian argument is not that liberty will be perfect. Only that it will be an incredible improvement over statism.
“FRB would likely shrink over time as more and more banks and bank clients realize how much it is in their interests to sign 100% reserve contracts given they choose to want a safest storage.”
No, it wouldn’t. You’re assuming that people want to pay money just to have their money sit in warehouses.
This is grossly unrealistic.People want a return on their money, not idle money hoards, costing them warehousing fees.
And even if such a world did exist, it would collapse investment as credit supply would be chocked off owing to hoarded money.
“No, it wouldn’t.”
Yes, it would. This is shown by the fact that governments step in to protect FRB banks and clients from losses. That generates MORE FRB than otherwise would have been the case, because with government externalizing the costs, the incentive for individuals to engage in FRB goes way up.
“You’re assuming that people want to pay money just to have their money sit in warehouses. ”
No assumption at all. People dop that now with individual lock boxes.
“This is grossly unrealistic.People want a return on their money, not idle money hoards, costing them warehousing fees.”
False. You can’t make that claim when there are individuals who DO pay for it, EVEN WITH inflation.
In a free market world, where the production of money would almost certainly be less than the production of real goods, such that prices fall, then “hoarding” money would incur a real positive return. There is an incentive for people to set a aside a portion of their earnings in non-interest bearing cash.
“And even if such a world did exist, it would collapse investment as credit supply would be chocked off owing to hoarded money.”
False inference. While the portion of wealth owned in money would likely increase, there is no substantiation for the claim that investment would “collapse.” Even if NOMINAL investment declines, it would NOT imply a decline in REAL investment, since with less credit expansion, the nominal demand for, and hence prices of, capital goods would decline. The same real investment can be made with fewer dollars exchanging hands.
“You can’t make that claim when there are individuals who DO pay for it, EVEN WITH inflation.”
Yes, I can. Virtually everyone uses banks. Warehousing services for money bailment are negligible.
Glad you admit that people use lock boxes even with inflation.
Now imagine the incentive to allocate a portion of one’s wealth in non-interest bearing cash when prices for goods gradually falls over time, thus netting a real return for simply holding onto one’s cash earnings
“since with less credit expansion, the nominal demand for, and hence prices of, capital goods would decline.”
And there is the retreat into the fantastic world of unrealistically flexible prices and wages.
No real world facts stand in your way do they, M-F
“And there is the retreat into the fantastic world of unrealistically flexible prices and wages.”
I never made a claim as to how unrealistically fast prices adjust.
Just that that would be the tendency. Market forces would indeed put downward pressure on capital goods as the production outpaces money production and spending.
We see this in electronics for example. Production is so high that not even the Fed prints enough to make those prices rise.
What happens with electronics can happen for every other good, as producers come to expect lower future capital goods and consumer goods prices, which enables them to set lower present factor prices for those goods.
You are advancing an inrealistic ideology that makes it seem like price deflation is an impossibility.
“No real world facts stand in your way do they, M-F”
It’s the real world of ACTION that constitutes the foundation of my convictions, LK. What do you have? False theories making a mess of historical data that you even claimed requires a correct theory before it can be interpreted properly.
“Now imagine the incentive to allocate a portion of one’s wealth in non-interest bearing cash when prices for goods gradually falls over time, thus netting a real return for simply holding onto one’s cash earnings”
And now your whole position collapses. You’re saying above that investment would not suffer from collapse of credit and contraction of money supply owing to hoarding, but now suddenly you think everyone has an incentive to just hoard their money and get a guaranteed return!
Thanks for revealing your intellectual bankruptcy here, M_F.
MF,
“imagine the incentive to allocate a portion of one’s wealth in non-interest bearing cash when prices for goods gradually falls over time”
“Even if NOMINAL investment declines, it would NOT imply a decline in REAL investment”
There’s a contradiction there. Hoarding money is not ‘real investment’.
“I never made a claim as to how unrealistically fast prices adjust.”
Right. So you have no idea how severe economic maladjustment would be owing to serious wage and price inflexibility, even in your postulated future free market .
“What happens with electronics can happen for every other good, as producers come to expect lower future capital goods and consumer goods prices, which enables them to set lower present factor prices for those goods.”
Oh, wait: is this a prediction of the future or what would happen in a REAL WORLD economy? Or a prediction of what would happen in a real world Rothbardian economy?
Sorry M_F you’re speaking out of your ass:
“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
“All predictions of what humans will do in the future are ass pulls”
http://consultingbyrpm.com/blog/2014/03/potpourri-188.html#comment-301508
Hey LK, feel free to point out where your opponents are saying similar things (and I’ll put them in the time-out corner too), but “you’re speaking out of your a**” is over the line.
LK:
“You’re saying above that investment would not suffer from collapse of credit and contraction of money supply owing to hoarding, but now suddenly you think everyone has an incentive to just hoard their money and get a guaranteed return!”
You’re confused. You’re conflating real with nominal.
While nominal investment might decline, real investment has no reason to decline from lower prices and spending.
Second, to be clear, I never said that individuals would hoard ALL their earnings. Even with a modest real return, there would still be a huge incentive to investment money, the same way that even with a guaranteed government bond risk free rate, investors as a class still invest an overwhelming majority of their money in higher risk, higher return investments.
“Thanks for revealing your intellectual bankruptcy here, M_F.”
LK, the only thing that is being revealed here is your economic illiteracy and reading comprehension failures.
Philippe:
“There’s a contradiction there. Hoarding money is not ‘real investment’.”
I feel like I’m in the Twilight Zone.
Philippe, holding onto money in a world with gradually falling prices of goods, would enable people to buy more goods in the future by virtue of merely waiting for prices to fall. That is what is meant by “real return.”
MF,
“That is what is meant by “real return.”
Yes, in a deflationary scenario the hoarder of money would get a real return on his hoarding, as the value of his money would increase.
But that’s not investment.
“Even with a modest real return, there would still be a huge incentive to investment money,”
So people wouldn’t all decide to just hoard their money and get a guaranteed return!!
Suddenly FR banking becomes an obvious way people will want to lend money as a mutuum for a return.
Very time you open your mouth, we get a different story, M_F.
Bob Murphy,
Fine. Delete the comment.
It is only a paraphrase of what M_F said right here on your blog, without ,apparently, you being concerned about it:
“At root, yes. All predictions of what humans will do in the future are ass pulls. Now you know one of the reaons I consider Keynesianism to be such.
Philippe:
“But that’s not investment”
Semantics. Call it whatever you want.
LK:
“So people wouldn’t all decide to just hoard their money and get a guaranteed return!!”
Not all of it, no. Same reason why investors as a class don’t invest fully in government bonds only.
As long as there is SOME portion of nominal investment that goes towards capital goods and other risky ventures, that nominal spending is capable of absorbing the entirety of all possible investment opportunities, provided prices are free to fall sufficiently, which they tend to do in a free market.
Suddenly FR banking becomes an obvious way people will want to lend money as a mutuum for a return.
Very time you open your mouth, we get a different story, M_F.
“nominal spending is capable of absorbing the entirety of all possible investment opportunities, provided prices are free to fall sufficiently, which they tend to do in a free market.”
But you don’t actually care if that’s true or not, do you.
If it wasn’t true you would still advocate exactly the same thing.
“This is grossly unrealistic.People want a return on their money, not idle money hoards”
This is an odd comment from someone who supports the liquidity preference view of interest rates.,
But we have deeming laws that tax people who try to hold money without earning interest, and we have capital gains tax to penalise people who hold their savings as assets. If you believed what you say, those laws would be unnecessary and we should get together and campaign for repeal. But deep down you know that the fiat system rests on the use of force which is the real reason you like those laws.
Your assertions fail empirically, as well as logically. Knowing all that time you spent ‘learning’ economics was a complete waste must hurt, huh?.
“As long as there is SOME portion of nominal investment that goes towards capital goods and other risky ventures, that nominal spending is capable of absorbing the entirety of all possible investment opportunities, provided prices are free to fall sufficiently, which they tend to do in a free market.”
Is that a prediction of what would happen in the real world??
If so, you are talking nonsense — by your own claims above.
If not, then you’re not talking about the real world, so nobody need be concerned in the least about this because it is also irrelevant.
“But we have deeming laws that tax people who try to hold money without earning interest, “
So what? And we have laws that tax people’s consumption of food and alcohol: this doesn’t prove that if we abolished alcohol tax, then suddenly everybody would drunk or be drunk 24.7
This comment is a non sequitur and red herring.
It was you who was claiming that people simply don’t want to hold cash, nor keep gold bars. But you also support laws to prevent people doing those things… the things they were never going to do anyway.
Nah, tel, I said, “People want a return on their money, not idle money hoards, costing them warehousing fees.”
Philippe:
“But you don’t actually care if that’s true or not, do you.
If it wasn’t true you would still advocate exactly the same thing.”
But it is true, because it follows from true premises.
LK:
“Is that a prediction of what would happen in the real world??”
No, it is implied by the fact that humans act, meaning they seek to acquire gains and avoid losses.
Gains can be made by reducing factor and output prices with a free market in money, just like gains can be made by raising factor and output prices in an inflationary economy.
Money is just a tool of economic calculation. Think of money not as something people eat or make their bodies healthier via consumption, but as a means to calculate real gains and losses.
“If so..”
I am not.
“If not, then you’re not talking about the real world”
Ys, so nobody need be concerned in the least about this because it is also irrelevant.
Bah, hit submit again too early.
LK:
“If not, then you’re not talking about the real world, so nobody need be concerned in the least about this because it is also irrelevant.”
I am, and it is, a talk about “the real world.”
The real world of action is not an empirical science. It is a synthetic priori.
No , bob roddis, debt deflation be a severe problem in any world with Knightian/fundamnetal uncertainty and where deflation could happen — e..g, in a Rothbardian world.
[Edited by RPM.]
Debt deflation is severely exacerbated with government sanction of the fraudulent versions of FRB, andby government protection from market forces (bail outs, holidays, etc)
(1) FR banking isn’t fraudulent: this is Rothbardian mythology.
(2) government interventions will ameliorate debt deflation, and also stop it happening in the first place.
(1) I never claimed “FRB is fraudulent.” I was referring to the specific portion of FRB that is fraudulent, namely, those instances where outright misrepresentation occurs between bank advisor/manager, and client.
(2) The fact that you recognize that governments “ameliorate” debt deflation *is in itself the flip side of the coin that governments encourage FRB credit expansion*, which you denied they do by denying that FRB would be lower in a free market.
(1) “namely, those instances where outright misrepresentation occurs between bank advisor/manager, and client.”
Have any real world examples backed with empirical evidence? Or do you just **know** by magic or a priori wizardry?
(2) it is free decisions and actions by people on markets that create and encourage FR banking.
Governments might or might not encourage credit cycles. That is a different question.
But they can also restrain them and prevent crises caused by private sector actions.
(1) You can read Jesus De Soto’s historical analysis of instances of outright fraud.
(2) Governments cannot regulate away the effects of artificial low interest rates, credit expansion, and malinvestments.
Lord Keynes, I don’t know if you’d indulge this thought experiment, but …
If a thief expects a steady flow of “income” from future thefts, and he bases his borrowing on this belief, would it be theoretically possible, in your view, for the thief to suffer what you would call “debt deflation” if he is prevented from engaging in future thefts?
This though experiment will make LK very uncomfortable. That’s my prediction. And he won’t be honest because he knows if he agrees with even a basic logical premise with an Austrian, that what follows will destroy his dearly held beliefs. That’s why he fights even the most self evident axioms. He knows where it will lead it and it bothers him. All statists display this behavior, not just him.
What axiom is that?
Your thought experiment has nothing discernible to do with debt deflation, and I reject the view that government is engaged in theft.
(I’m obviously trying to equate monetary inflation with theft, I admit.
(But I’ve also been aware for some time that you don’t consider it theft.
(I’m not trying to trick you into providing me a “sound bite”, here.)
Your response still works for me, I think, if you will indulge me, further:
What would be the name you attach to a situation where a thief took out loans he expected to be able to pay off with money acquired from future thefts, but is now unable to do so because he has been prevented from engaging in future thefts?
The reason I ask is because I think if I were to use your word for this, it would help me to better express the distinctions between debt deflation that happens after prior monetary inflation and debt deflation that happens without a prior monetary inflation.
I want to be able to express that the concerns you have about debt deflation are concerns that only occur after monetary inflation.
LK
Reason, logic and evidence contradicts your claim that the government isn’t engaging in theft.
LK,
In the real world I am forced to hand over my money to the US government against my will, under threat of punishment. What is that except theft?
Also, why does the US government get a pass but a mugger on the street doesn’t? If your answer is, “because the mugger does not give you anything in return like the US government does with your tax dollars,” then I suggest you send me your money, in an amount I will determine to be fair, under threat of violence if you do not, and I will mow your lawn for you. And if you don’t find equal value in me mowing your lawn to what you paid, or you don’t want your lawn mowed, or maybe you don’t like how I mowed your lawn? Too bad, pay up.
“The outcome doesn’t satisfy the preferences of the specific individuals.”
It does, or else they would not keep choosing to do what they do.
“Deleterious macroeconomic effects — debt deflation, recession, real output collapse, unemployment — emerge from micro behaviour.”
If by micro behavior you mean violent behavior, from states and other thugs, then yes, it is “micro” generated.
“These macroeconomic effects are not intended by the individuals themselves”
WHich individuals? You mean the victims? Yes, they did not intend to be victimized in the way they are being victimized.
“You are ignorant of emergent properties.”
You are ignorant of the market process.
“If by micro behavior you mean violent behavior, from states and other thugs, then yes, it is “micro” generated.”
Nah, M_F. I mean unintended macro-effects from free micro decisions.
If everyone increases savings to pay down debt, without the intention of causing a recession, nevertheless the aggregate effects of these micro-decisions can cause recessions throwing people out of work when they intended no such thing.
“Nah, M_F. I mean unintended macro-effects from free micro decisions.”
There is no macro effect that is not micro effects.
If you don’t mean the micro activities of statesmen who bring about the effects you listed above, then you’re just wrong, because they do.
“If everyone increases savings to pay down debt, without the intention of causing a recession, nevertheless the aggregate effects of these micro-decisions can cause recessions throwing people out of work when they intended no such thing.”
You’re conflating the issue. Yes, if I stop buying your goods, and you go out of business, then yes, YOU did not intend to go out of business. But that isn’t my problem. My choice was to hold onto my cash rather than buy your goods. I got what I wanted.
If someone else holds onto their cash instead of buying my goods, then yes, I did not intend to go bankrupt, but the guy who held his money intended, and achieved, holding money instead of the goods I might have sold to him.
I cannot fire myself from my own job by refusing to buy the products of my own business, and even if I could bring about my own employment in such a way, it would mean that I am my own biggest customer, which means I would have to have outside capital investment to keep my production running.
You are fallaciously lumping every individual into a giant blob that suffers from its own frugalit, by muddying who’s who and not making clear who it is you are talking about and which activity is bringing about which specific outcome.
I do not have a duty to keep you flush with cash. You must convince me. The same goes for everyone else.
If I and many others hoard cash, where others hoarding cash leads to my unemployment, and my hoarding cash leads to theirs, then it is false to claim that I did not get what I wanted FROM MY OWN CASH HOARDING, while others got what they wanted FROM THEIR OWN CASH HOARDING.
WHat happened here is that OTHER PEOPLE’S CHOICES lead to my unemployment, and my choices lead to their unemployment. There is nothing here at all that would warrant the free market having some inherent seed of its own destruction. All you’re saying is that in a free market, one individual’s choices of where they spend and how much they spend actually have an effect on other people’s incomes. That is, incredible as this may sound to your collectivist centralized mommy and daddy government ears, what libertarians WANT. They want individual market signals to be free to be observed, so that producers can better produce for the individual consumer’s preferences cross sectionally and over time.
“WHat happened here is that OTHER PEOPLE’S CHOICES lead to my unemployment, and my choices lead to their unemployment. “
You just conceded my argument, despite all the desperate denials.
MF,
All you’re saying is that whatever happens in your imaginary ideal world – no matter what it is – is necessarily good, because you define whatever happens in your imaginary world to be good.
It’s a circular argument. A communist could make exactly the same argument: whatever happens in a communist system is necessarily good because a communist system is necessarily good.
LK:
“You just conceded my argument, despite all the desperate denials.”
You conceded mine. That individual people can go bankrupt or unemployed by unexpected changes in their exected customer’s demand, is what you yourself support and consider normal. You just insert an unjustified ad hoc assumption that this suddenly changes when the statistics reache a certain arbitrary, non-scientific set of numbers. You pay lip service to the idea that it is OK for individuals to lose their jobs and for individual firms to go bankrupt due to miscalculations, but when your mind goes to “aggregates”, then all of a sudden you contradict yourself.
Philippe:
“All you’re saying is that whatever happens in your imaginary ideal world – no matter what it is – is necessarily good, because you define whatever happens in your imaginary world to be good.”
“It’s a circular argument. A communist could make exactly the same argument: whatever happens in a communist system is necessarily good because a communist system is necessarily good.”
I’ve already corrected you more than once on this false claim of yours Philippe. Repeating it over and over again isn’t going to magically turn it into truth.
For the 4th time, no, I do not “define what happens in a libertarian world to be good.”
I argue that individual liberty, i.e. absence of aggression, allows individuals the ability to seek out and practise their own good for themselves, given the existence of other individuals seeking out and practising their own for themselves. To the extent this includes overlap in the form of mutual cooperation, and to the extent it includes self-sufficiency, is up to the individual, again given the existence of other individual’s values and choices.
Now are you going to choose to stop fallaciously claiming that I am arguing what you claim I am arguing? It is getting boring and tiresome.
“You just insert an unjustified ad hoc assumption that this suddenly changes when the statistics reache a certain arbitrary, non-scientific set of numbers.”
No, M_F: the genuine existence of unintended macro-effects from individual micro decisions is the issue here.
There is overwhelming evidence that such emergent properties exist everywhere from natural physical processes — e.g., superconductive materials, antiferromagnets, ferroelectrics, liquid crystals, DNA, and human consciousness — to the social and economic sphere, and even Austrian ideas like Hayek’s spontaneous order.
The strong reductionism you’re positing — ontological and methodological individualism — is intellectually bankrupt,
and you’re simply in denial.
LK:
No LK, there are no “macro” phenemena that isn’t micro phenomena.
Every economic event is a micro event.
If A does not agree to buy the products of B, then ceteris paribus, that will decrease aggregate spending from what it otherwise would have been. You can confuse yourself and interpret this as “micro phenemona having macro effects”, but all it is in the real world is one person choosing not to buy the products offered by another person. All micro.
Now, if two individuals choose not to buy the products of two sellers, then that is also a purely micro set of events. Once again, you can confuse yourself and interpret this as “micro events resulting in macro effects”, but once again, there is no “resulting” cause and effect between micro phenomena and macro phenomena. It starts and ends as micro phenomena.
There is no injustice had by A choosing not to buy the products of B. There is no “emergent” phenomena here either. It is one individual choosing his own cash versus spending allocation, and another individual choosing to invest in, set a price for, and offer a product.
If there is more than one individual choosing a particular cash versus spending allocation, then that is still purely micro.
The reason you are confused is because your flawed worldview starts at the macro aggregate level and you understand humanity as a single blob and is to be cared for and treated as if it were a single individual human being, and then you begin to view actual individual human beings as mere cells who have a duty to care for this aggregate organic blob.
You are a philosophical collectivist, LK. You want to care for and protect an abstract collective concept at the expense of individual well-being. You want to sacrifice individuals for the sake of a collective concept.
There is ZERO evidence that individual humans are mere cells to some aggregate organic entity. There is no emergent phenomena in social life that is not individual action determined. ALL of what happens in human society is a product of individual action. There is only individual action.
Hayek’s theory of spontaneous order is fully grounded on methodological individualism. It is precisely individualism that Hayek was referring to when he spoke of spontaneous order.
Your worldview that is plagued by hypostatization is intellectually bankrupt. Such thinking is from ancient humans who lacked sufficient philosophical enlightenment.
Methdological individualism does not suffer from the internal contradictions that your collectivist worldview suffers from.
You are in denial that you are an individual actor.
“All you’re saying is that whatever happens in your imaginary ideal world – no matter what it is – is necessarily good, because you define whatever happens in your imaginary world to be good.”
I can’t believe you voluntarily say this over and over and over again for everyone to see.
Perhaps you could try to make a more substantive rebuttal.
Philippe:
You have shown that you do not understand substantive rebuttals, as they have been made repeatedly, and yet you continue making the same false claim.
IMO, Dan doesn’t owe you a substantive response. Flippant comments are now warranted.
“A guy running the blog “Naked Keynesianism”… “
Not just some “guy”, Murphy, but Matias Vernengo, an Associate Professor of Economics at Bucknell University, a pretty well known Post Keynesian academic.
“…teams up with another blogger calling himself “Lord Keynes”
No, mate, he doesn’t “team up” with me. You just made that up. I wrote one comment in the comments section.
As for the “cultists” remark, (1) you apparently think none of your opponents has a sense of humour, and (2) no Post Keynesian thinks Keynes is some sort of infallible master, who never made an error. Post Keynesians have plenty of criticisms of Keynes’s work.
As for the “cultists” remark, (1) you apparently think none of your opponents has a sense of humour…
What could possibly give me that idea?
I just discovered that Peter J. Boettke stole all of my ideas — back in 1998. Economic calculation is THE Austrian contribution to political economy and Joe Salerno is wrong about Mises vs. Hayek. Boettke writes: “Obviously, a communication failure between the Austrians and other economists persists” [@ 150]. I wouldn’t put it exactly that way. I would suggest that Mr. Vernengo’s mind has never engaged these simple and self-evident concepts.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1531112
I’m sure that Mr. Vernengo explains to his students how Keynesian policies distort economic calculation so that inflation leads to unsustainable investments and is cause of unemployment and the boom/bust cycle. That way, they are not intimidated into conformist and false modes of analysis:
In my intermediate macroeconomic classes at the University of Utah I always start by asking students what do they think is a more socially relevant problem an increase in inflation of 1% or the same 1% rise in the unemployment rate. Although the answers vary somewhat according to the macroeconomic circumstances, it is almost always true that the vast majority of my students think that inflation is the real problem.
When pressed on why do they think inflation is worse than unemployment they rarely suggest that inflation may hurt the poor more than the affluent, which would show a concern with income distribution, or seem to understand that moderate inflation might be good. Further, they have no idea that deflation is considerably worse than inflation, and that the reason for that is that deflation causes severe unemployment.
http://nakedkeynesianism.blogspot.com/2012/08/full-employment-why-it-is-important.html
I always start by asking students what do they think is a more socially relevant problem an increase in inflation of 1% or the same 1% rise in the unemployment rate.
Trick question.
There’s no such thing as a “socially relevant problem” – only individually relevant problems.
What is most irritating to me is that he has a captive audience of young people who are paying up the wazoo (along with the taxpayer) to go to a government school and he’s using his position of authority to dissuade them from their pre-existing (and correct) belief in the evil of inflation in order to convince them that some amount of government-induced inflation is both good and necessary. And that it’s all so “scientific”.
“There’s no such thing as a “socially relevant problem” – only individually relevant problems.”
Bingo. Add to that the tacit presumption that the person being asked that question is even in a rightful position to make such a determination on behalf of billions of other individuals. It’s preposterous.
Along the same lines, I have been watching Walter Block debate Jan Helfeld regarding limited guberment vs anarchy.http://www.youtube.com/watch?v=OVYn6DH_9kU
Jan reveals himself. Jan says many people have agreed to purchase services and Walter is wrong saying this is a mugging. Jan does not realize or is purposely ignoring the obvious. Private citizens could purchase most of these supposed services from private business. So Jan is really advocating a specific purchasing system. Jan is advocating a collective purchasing system in which cost are distributed widely and use doe snot correlate to payment.
Point is, the above thread and Jan’s video, the individual is being ignored and or abolished.
So this entire debate is not about services, etc. This debate is about individualism or collectivisms. Bees versus eagles…
he he, eagles. Find your own symbol.
Phillipe,
The Queen is angry, you have deviated .0001% away from her plan, now get back to work. There will bee consequences!
If we keep getting a 1% rise in unemployment each year (or let’s avoid confusing terms and say that employment decreases by 1% each year) then gradually there will be no employment, presumably because government has found a way to outlaw productive activity.
If we keep getting inflation going up by 1% every year, and it’s predictable then either people will attempt to move their savings into something else, or if they are prevented from doing that, then they will calculate ahead and allow for inflation.
The Keynesian will not be satisfied with just a predictable 1% increase every year, it requires that ordinary people cannot calculate in advance. In order to rule the market, inflation must be inflicted on the unsuspecting.
Right ,the “wealth effect” depends on people getting it wrong about future prices, which is also why they engage in debt contracts which at some point will go bad, and LK will use those very debt contracts who were stimulated by his policies in the past as justification for more of the same policies.
… debt contracts that were stimulated…
Bob, off-topic, but have you seen this?
http://fw.to/SvrgHXj
I think it’s relevant to your “day job” work at the IER. It looks like 96% of the shale oil we thought we could extract in California is inaccessible using current technology. And the Califronia shale formation has 2/3 of Americas’s shale reserves.
Not really my area Keshav but I’ll ask other people.
The Tom Woods podcast where Bob Murphy eviscerates Piketty is also here:
http://tomwoods.com/blog/thomas-piketty-refuted/
I highly recommend it.
Best part (at 22:48):
The basic point here is, I just want to mention, look at how disgusting and disturbing the envy is, here; I mean that’s really what it comes down to is: nobody disputes that, as capitalists save and invest more and increase their collection of machinery or irrigation techniques and other techniques that make farm land more productive- nobody disputes that the absolute earnings of laborers is going to go up over time because the workers now have more tools to augment their hands.
So, everybody agrees that the trend, if left unchecked, would mean the standard of living of everybody is going to go up over time. This thing that they’re quibbling over is: “Oh, but the *percentage* of income each year (which is going to keep getting bigger and bigger) the workers earn, might go down if this technical little point is bigger than one, or not”. And that’s what the argument’s over.
So, everybody who’s supporting Piketty is saying, “I want to go out and tax the heck out of rich people, even though I know that will make poor people have a lower standard of living, because I don’t like the fact that such people have so much more than other people.”
If that’s all that Piketty is arguing, then his point is irrelevant.
I don’t care if someone else has more than me, so long as he didn’t steal it, or hire someone else to steal it.
Yes, there is a vast amount of wealth that is stolen through cronyism, but that cronyism is only enabled by successful Collectivist agitations for government regulations of the economy.
Absent government regulations, there would be no cronyism; Only the wealth and income inequality that is more or less consistent with uncoerced trade.
(The next issue that would have to be addressed would be crime).
Dr. Murphy, I’m not an economist so I wanted to ask you question regarding Piketty’s “r > g” claim.
From my perspective, I don’t see any meaningful distinction between human capital and non-human capital. Human capital has a rental rate (the wage) and it has a price in the form of the cost of education or any other attempts by people to increase the productivity of their labour, and the interest rate plays just as much a role in the price of human capital as it does in non-human capital.
It makes just as much sense to say that r is rate at which the capitalist’s assets appreciate as to say that r is the rate at which a person’s human capital appreciates. Given this, I don’t see how the value of the interest rate can affect how aggregate income is distributed between capital and labour.
Am I missing something? Given that I’ve seen nobody make this point I’m thinking there may be some mistake in my argument.
Good question. Piketty does try to deal with this objection. He hand-waves (in my opinion) away the idea that human capital has become relatively more important in recent decades.
But more generally, I think one main reason economists still make a fundamental distinction between wages and rent on capital goods is that you can sell capital goods for their capitalized market price. In contrast, you can’t really sell your human capital in order to invest it in higher-yielding bonds (or whatever).
Yes there is still reason to expect competition/arbitrage to have an effect, but I think the principles affecting returns on traditional capital goods do not carry over as smoothly to “human capital.”
consultingbyrpm blog tag piketty