Potpourri
==> I missed this when he first posted it, but Silas Barta has a good contribution on the broken window debate, and how it relates to “recalculation.” I think if Tyler Cowen had written the exact same blog post (scattered with references to classic papers in the literature) people would be doubled over at the profundity. (My point is, I think it’s a really deep insight but you will be tempted to dismiss it because “it’s just from some guy Silas.”)
==> David R. Henderson reviews Bruce Bartlett’s new book. (And I’m a wiseguy in the comments, as is my wont.)
==> Speaking of David, he also blew up Krugman’s recent post on how health insurance obviously doesn’t work without government oversight.
==> The new “Circle Bastiat” blog looks promising. So far they’ve got a good rotation of fresh posts.
==> It’s that time of year…another session of my Principles of Economics online class! We’ve shortened it to 8 weeks. I cut out the methodological stuff; we jump right into the fun material like profit/loss and the drug war.
Who needs methodology?
I missed this when he first posted it, but Silas Barta has a good contribution on the broken window debate, and how it relates to “recalculation.” I think if Tyler Cowen had written the exact same blog post (scattered with references to classic papers in the literature) people would be doubled over at the profundity. (My point is, I think it’s a really deep insight but you will be tempted to dismiss it because “it’s just from some guy Silas.”)
After reading that post, it dawned on me why Keynesians always seem to assume that the counter-factual possibilities to the “obvious” response to broken windows – fixing the windows – tends to be “wasteful” hoarding, or some other “I give up” course of action. It’s because they fail to integrate individual entrepreneurship in their analysis. It’s all aggregates to them. So when they consider scenarios of broken windows versus no broken windows, they tend to hang around the low hanging fruit all day long, thinking only about the “obvious” use of resources that one devoid of understanding entrepreneurship would consider.
If there is no obvious “optimal use of resources” solution to the Keynesian, then they arrogantly insist that the only possible counter-factual to “obvious” fixing of broken windows, is simply doing nothing, i.e. cash hoarding.
What can refute the whole “idle resource” nonsense in yet another way, is to realize that even with idle resources, it is not true that the state knows the best use of resources. Individual entrepreneurs know the best use of dispersed resources including idle resources. Entrepreneurs know more than the Keynesians, the state, and the Austrians for that matter.
The difference between the Keynesians and Austrians in this respect is that Austrians do not conflate their own inability to know what the best use of a resource happens to be, with an actual lack of superior alternatives than the window being broken. Austrians will say “let the entrepreneur figure it out.” Keynesians will say “let the state figure it out.”
Keynesians will continue to fall prey to the broken window fallacy as long as they fail to grasp and thus fail to appreciate the role of the individual entrepreneur.
I read Krugman’s column criticizing the comparison between broccoli and health insurance, and found his complaint lacking for a different reason than that mentioned by the author of the article you link to. Regardless of whether it is proper to analogize between the broccoli market and the health insurance market, there is no constitutional basis for a distinction between health insurance and broccoli; if the federal government may, consistent with the Constitution, mandate the purchase of health insurance, there is nothing in the Constitution which would restrict that power to health insurance only. Thus, the horror of Krugman’s health-care experts is irrelevant, and serves only to remind us that they are not con law scholars whose opinions merit any attention on the question before the Court.
Why is Robert Murphy not in the Circle?