The Capitalist in the Hat
In my quest to become the Mike Myers of Austrian economics, I tackle entrepreneurship and Dr. Seuss today at Mises.org:
An amusing story on NPR recently explained the origin of a new collection of Dr. Seuss stories.
The tale involves an entrepreneurial dentist with a passion for Seuss and a knack for exploiting price spreads.
Explaining profits that are fat? We here at Mises know a lot about that!
Why I Am a Christian, Part 2
This post is a follow-up to last week’s… Again, the standard disclaimer: I am not claiming that I am presenting an airtight, deductive proof for the divinity of Christ in a short series of blog posts. But I do want to shed light on why I call myself a Christian.
First of all, some people were confused as to the train of argument. They wondered why (in my first post) I was placing such emphasis on the wisdom of Jesus’ teachings. Did that alone mean He was God?
No, of course not. The crucial point is that Jesus said He was God, if we are to believe the gospel accounts. So then we have to decide (a) do we trust the gospel accounts and (b) do we trust the claims of this man Jesus?
As for (a), I do trust them. It doesn’t seem plausible to me that people would follow around a wise teacher and then, knowing full well that he didn’t come back from the dead, would make up a bunch of stuff that got some of them martyred. In conjunction with the power of the message, that just doesn’t seem like the most plausible explanation of what happened.
As for (b), I partly rely on the standard “liar, lunatic, or Lord” formulation. In other words, if we accept that there was a historical man Jesus who went around healing people and said the things he reportedly said, then he was either lying through his teeth, or he was crazy, or he was exactly who he said he was. Since his teachings are the most profound ones I have ever encountered, it doesn’t seem plausible to me that this man was a liar or nuts.
Now we have to ask, in the grand scheme, is this stuff even possible? And this is why I think it’s very important to have independent arguments for the existence of a God. If it makes sense that a God exists, then it’s much more plausible that this incredibly wise man, who apparently went around healing people and rose from the dead just as He had predicted He would, was the Son of God as He had claimed. In contrast, if logic and science tell us that there really can’t be a God as described in the Bible, then those stories about Jesus just can’t be right.
I know a lot of atheists think they have airtight deductive arguments blowing up the very possibility of the Biblical accounts, but I think they are far too overconfident. For example, many atheists might say, “You Christians revel in your nonsense. You love the ‘mystery’ of the trinity, and how three people can be the same unitary God. Give me a break.”
But yet, those same atheists probably love quantum mechanics, where a cat can be alive and dead at the same time, an electron can be a wave and a particle, and where a famous physicist says, “If you think quantum mechanics makes sense, you haven’t understood it.” It’s fine for there to be utter craziness in quantum mechanics, because we have experimental predictions coming out of it.
Or suppose there were a Bible account saying that a man of God fell out of a high tower, but he was unharmed because angels broke his fall and all were amazed and praised God. “Superstitious nonsense!” the atheist might scoff. “Modern science tells us that people can’t survive falling from a 50-foot tower. Stop believing fairy tales written more than a thousand years ago.”
But if we read a news account of a skydiver falling 12,000 feet, having both chutes malfunction, and living to tell about it, we think, “Huh that’s amazing.” Apparently “the laws of physics” and “modern science” don’t rule such things out, which is actually pretty obvious in retrospect.
So when we read that Jesus walked on water, I am open to that happening. If there were a God and He came down to earth, I would expect Him to do all sorts of “miraculous” things. And these would be consistent with the laws of nature, by definition, because the laws of nature just mean, the rules describing how matter behaves.
In the case of walking on water, it could even be something as “easy” as schools of fish supporting Jesus’ weight. The employees at Seaworld “glide on top of the water” (because they are standing on dolphins) all the time. I’m not saying that is how it happened, but the confident assertions that the Biblical accounts are violations of the laws of physics are simply wrong, even if we take our current understanding of “the laws of physics” to be roughly correct.
Finally, let me address the common distinction drawn between faith and reason. When I say I have faith in Jesus, I mean I trust the character of the man described in the gospel accounts, and (as a derivative) I trust that His followers didn’t invent all sorts of things that He didn’t say or do. I do not mean that I have to turn off my reason when it comes to religious things.
For an analogy, suppose my brother is accused of being a serial killer. The prosecutor has a bunch of DNA evidence, eyewitnesses placing him at the various scenes where the victims disappeared, etc. But I talk to my brother and he says, “I can’t explain that evidence, but you know I didn’t do those things.”
I would believe him; I would have faith in him. It’s true that if I were trying to explain to somebody else why I didn’t think my brother was a serial killer, I couldn’t give “scientific” evidence, in the same way I could try to prove the charge on an electron, or explain why minimum wage laws lead to unemployment. Yet there would be nothing irrational or unscientific about my conviction, and in fact I would be more (personally) sure of my brother’s innocence than of the charge on an electron (which I would actually be trusting scientists to tell me) or even my view of minimum wage laws (which might actually not be an important factor in real-world unemployment).
Jesus said in numerous passages that He was God, and that the way to eternal salvation was through Him. Yes, there are other great moral teachers in history, but I don’t know that they claimed the things Jesus claimed. If some of them did, then by all means point them out and I’ll look at their reported words. But I doubt very much I will find them more compelling than the gospel accounts of Jesus Christ.
Krugman on Inflation and Wages
In the past on this blog, I’ve been chastised for suggesting that Keynesians nakedly assert that high unemployment and high price inflation are incompatible. Today (in a post I largely agree with), Krugman said this:
And taking the longer perspective, you can’t have a wage-price spiral if wages refuse to spiral; and all indications are that wages are being held down by high unemployment, never mind gas and food prices…
So yeah, I suppose Krugman can explain the case of Zimbabwe by saying, “In that situation, ‘all indications’ did not show that wages were being held down by their 90% unemployment rate,” but I think I can be forgiven for saying that Krugman et al. repeatedly claim that we in the US are safe from price inflation because we have high unemployment.
But please tell me why I am wrong, Daniel Kuehn…
Can the Fed Drive Up Food Prices? Reply to Henderson
I have been putting off my reply to David R. Henderson for when I can “do it justice.” Well that’s not going to happen anytime soon, so let me fire off some quick thoughts…
Let’s refresh our memories as to David’s objections:
On Judge Napolitano’s “Freedom Watch” on March 25, Austrian economist Bob Murphy claimed that the unrest in the Middle East was due to rising food prices which in turn are due to the Fed printing money. I’m not sure about the rising food price/political unrest issue–that could well be true. But I’m pretty sure that the Fed printing money/rising food prices link is weak. When the Fed prints money, that raises the dollar prices of goods. But why would it raise the prices to people in the Middle East. All other things equal, the dollar would adjust downward and the prices of food to people in the Middle East would stay the same.
And I’m especially surprised to see an Austrian economist make this argument because isn’t one of the main things they offer to business cycle theory their insight that where the money enters the system matters? In other words, there are Cantillon effects from printing money. If the Fed increases the money supply by buying bonds, then you would expect bond prices to rise. It’s a long stretch to get from that to food prices.
If you want to account for changes in food prices, you should look to the demand and supply of food. So Bob would need to explain why printing U.S. dollars causes the demand for food to rise. I can see some spillover, but why would food prices rise more than other prices that closer in the chain to bond prices? Bob?
OK I have two main lines of response. First–and perhaps this will seem like cheating–I think a lot of countries either have an explicit peg to the dollar, or don’t want to let their currencies appreciate too quickly against it. So when Bernanke floods the world with dollars, this leads many other central banks to rev up their printing presses too. (I don’t know the exact countries off the top of my head, but here’s a discussion from 2010.)
Incidentally, this isn’t just my view. One of my favorite non-Austrian economists just wrote something very similar about price inflation generally, not just food:
Inflation is now a big and growing problem in emerging economies. Why? It’s the combination of the liquidity trap in advanced economies and the unwillingness of emerging nations to let their currencies rise.
The story runs like this: in advanced economies, the collapse of housing bubbles and the overhang of debt run up during the Great Moderation is leading to persistently depressed demand, even with very low policy interest rates. The result is low returns to investment; not much point in adding to capacity when you’re not using the capacity you have.
Meanwhile, emerging economies have plenty of demand, in part because they’re emerging, in part because they didn’t share in the big debt runup. So what the world economy “wants” to do is have large capital flows from North to South, and, correspondingly, large current account deficits in the emerging world — which would, of course, help the advanced economies recover.
But since the doctrine of immaculate transfer is false, the transmission mechanism by which capital flows get translated into trade balances has to involve a rise in the relative prices of goods and services produced in the emerging nations. The natural and easy way to get that would be via currency appreciation; but governments don’t want to see that happen. So the invisible hand is in effect getting the same result — gradually — by pushing up nominal prices in these countries.
Now as to the question, “Why would this be hitting food prices first, and not prices in general?” I think it’s because agricultural products are internationally traded. So they will be hit by currency changes first, with the prices of (say) haircuts rising much more slowly. That’s why exporters favor a weak currency, after all: if all prices adjusted at the same rate, then exporters wouldn’t benefit from a devaluation. (I explain all that here.)
So to recap my first line of defense: I am saying that the Fed and other countries who do not want to let their currencies appreciate against the dollar, have all partaken in a devaluation of their own currencies against the rest of the world. This has boosted the nominal prices of internationally traded goods in their economies, which includes oil and food.
Now on to my second line of defense: I think the Fed’s activities are fueling speculative hedging (not sure if “bubble” is appropriate, since it may very well be vindicated shortly) in various asset classes. Investors aren’t going to pour their money into dot-com stocks or real estate, and in this bleak environment it seems like a pretty safe bet are basic commodities and foodstuffs.
Let me put it this way: Does David at least acknowledge the possibility that the Fed’s activities have a decent fraction of investors worried about a crashing dollar, and that they have loaded up on gold as a defensive maneuver? Further, couldn’t this lead to a relative increase in the gold price against other goods and services, even in non-dollar currencies?
So if we can all understand how that might work, I don’t think it’s a huge stretch to say investors are bulking up not just on gold ETFs, but also wheat futures and the like. Sure, they’re not going to take physical delivery, but they wouldn’t take physical delivery of oil either. Sophisticated derivatives markets allow you to profit from price movements even if you have no interest in the underlying asset or commodity. (Note that in the comments of David’s original post, the quintessential von Pepe makes a similar argument.)
Murphy Fights Freedom With Two Other Guests
OK here is the whole episode; our segment starts a little after the 13:00 mark.
In the studio at Nashville, I just have an audio connection, and I didn’t know who the other two guests were. I thought the guy was Italian, and I pictured the woman as in her 50s and matronly. I couldn’t believe how politically incorrect the “Italian” guy was being, and I couldn’t understand why the Judge was so deferential to the “matron” with her stereotypical leftist talking points.
Now I get it.
The Republicans Are Not Going to Fix the Budget
I’m sure many people have already heard this, but just for those poor souls who rely on me for their financial news: You know the amazing budget deal cut last week, in which the Republicans wanted $60 billion in slashed spending but compromised on only $38 billion? Well, the CBO says it’s more like $352 million. Not that I think the CBO is a bunch of disinterested scientists, but I think their number is likely more accurate than what Boehner and Obama are saying.
And about that radical Ryan plan, which allegedly gets our country on the right direction and is something really refreshing and new in Washington: Do you know that even according to his own numbers–which put off all the really tough and unspecified budget cuts down the road, for future politicians to implement–the federal government doesn’t actually balance its budget until the year 2038?
Let me say that again: The crazy, radical, slashing Ryan budget plan–on its own projections–has the federal government spending more than it takes in, this year, next year, the next year…all the way to 2038, at which point we will finally have a balanced budget.
(BTW I have seen that figure touted in several places, but can’t find an official source. Any help?)
Murphy Fights Freedom Tonight on the Judge Napolitano Show
Tonight I will be one of the freedom fighters on Judge Napolitano’s show. We’re discussing the debt ceiling and a proposed “Robin Hood” tax on banks. Lots of Fed bashing for the whole family.
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