16 Aug 2018


Potpourri 26 Comments

==> The latest Lara-Murphy Show is on stumbling blocks Carlos and I encountered when learning IBC.

==> Tom and I debate Bitcoin (is it fiat?) at the end of this episode.

==> Glenn Greenwald documents how MSNBC is an arm of the Democratic establishment.

==> I haven’t had a chance to read, but David Andolfatto on heterodox vs. orthodox monetary theorists.

==> There Will Be Blood

==> At IER, I tried to come up with an analogy to show what’s wrong with the claims about how much a carbon-tax-and-dividend program would “benefit” typical households:

Warren Buffett and the Milkshake Tax

Just to make sure my basic point goes through, let me use an even more exaggerated analogy: Suppose in an effort to crack down on obesity, the federal government levied a $325 million tax on milkshakes, to be enforced with draconian severity. Clearly, just about nobody in America would drink milkshakes anymore. However, suppose that every year, Warren Buffett (perhaps as part of a publicity stunt, or just to be funny) bought and drank one single milkshake on national television, and paid the huge “milkshake tax” afterwards. The government would then take the milkshake tax revenue, and send an equal dividend check of $1 to all 325 million Americans.

Now in this exaggerated example, defenders of the tax could truthfully say: “The average family of four will gain $4 every year from the milkshake tax.” This is because they wouldn’t pay any of the tax (since they would buy 0 milkshakes), and each person in the household would get $1 from Warren Buffett’s annual contribution.

But clearly, most Americans would not be happy with this scheme. In exchange for “gaining” $1 per year, they would never again get to enjoy a milkshake.

13 Aug 2018

Was Jesus Just a Myth?

Religious 19 Comments

I meant to post this Sunday but I am traveling…

In a recent potpourri post, Scott Alexander says:

Gwern reviews On The Historicity Of Jesus. Short version: the prose is annoying, but the case that Jesus was completely mythical (as opposed to a real teacher whose deeds were exaggerated) is more plausible than generally supposed. Please read the review before commenting about this topic.

I was all excited to sink my teeth into an articulate, well-researched challenge to my worldview. But see for yourself. Literally the only actual claim in the review that I can even evaluate was this one involving Paul:

Combined with the old observations about the extensive euhemerism of mystery cult figures (along with more documented recent examples of religions emerging & retroactively historicizing their ‘founders’), complete with detailed sober historical biographies of demigods we know never existed in any way, the almost total absence of any mention of Gospel events inside Paul’s (heavily-edited) letters despite extensive opportunities for allusions while instead talking about Jesus and his martyrdom by demonic “archons” in ways highly suspiciously consistent with a celestial Jesus (with the best mention being the very vague “brother of the lord” which would be good if Christianity hadn’t made a fetish of family tropes and titles and used those sorts of terms quite indiscriminately)

(In the quotation above, I’ve included the beginning of the sentence just to give a flavor of the review.)

So like I said, that was literally the one claim that I could even parse, and understand how it was a challenge to the historicity of Jesus. The only problem is, Paul says stuff like this (from 1 Corinthians 15):

Now I would remind you, brothers,[a] of the gospel I preached to you, which you received, in which you stand, and by which you are being saved, if you hold fast to the word I preached to you—unless you believed in vain.

For I delivered to you as of first importance what I also received: that Christ died for our sins in accordance with the Scriptures, that he was buried, that he was raised on the third day in accordance with the Scriptures, and that he appeared to Cephas, then to the twelve. Then he appeared to more than five hundred brothers at one time, most of whom are still alive, though some have fallen asleep.Then he appeared to James, then to all the apostles. Last of all, as to one untimely born, he appeared also to me. For I am the least of the apostles, unworthy to be called an apostle, because I persecuted the church of God. 10 But by the grace of God I am what I am, and his grace toward me was not in vain. On the contrary, I worked harder than any of them, though it was not I, but the grace of God that is with me. 11 Whether then it was I or they, so we preach and so you believed.

The Resurrection of the Dead

12 Now if Christ is proclaimed as raised from the dead, how can some of you say that there is no resurrection of the dead? 13 But if there is no resurrection of the dead, then not even Christ has been raised. 14 And if Christ has not been raised, then our preaching is in vain and your faith is in vain. 15 We are even found to be misrepresenting God, because we testified about God that he raised Christ, whom he did not raise if it is true that the dead are not raised. 16 For if the dead are not raised, not even Christ has been raised. 17 And if Christ has not been raised, your faith is futile and you are still in your sins. 18 Then those also who have fallen asleep in Christ have perished. 19 If in Christ we have hope[b] in this life only, we are of all people most to be pitied.

So I think it’s fair to say that Paul does the exact opposite of what the book reviewer claims. He refers to gospel events, and in fact bases the Christian faith itself on the historical fact that Jesus died and rose again.

I realize I have a dog in this fight, but I am astonished that Scott Alexander pointed his readers to such a nonsensical book review on a rather important topic. I am happy to hear pushback on this.

08 Aug 2018

Kick the Tires

Intelligent Design 14 Comments

Hey kids, I had somebody fix some of the obvious problems with the website, such as the Category Search function (on the left). Does anybody notice anything that he might have “broken”?


(BTW check out the category I used for this blog post. Oh I’m such a clever cat.)

06 Aug 2018


Contra Krugman 25 Comments

==> In the latest Contra Krugman, I finally tell Tom he is officially an economist.

==> I don’t think I did anything with it at the time, but Scott Horton refers me to a leftist who blew up Paul Krugman’s whitewashing of U.S. empire.

==> The world of Trump is so upside down, that the NYT publishes Walter Block–and I mean a piece by him, not a hit piece on him.

==> Steve Patterson, fresh from overturning mathematics, turns his attention to the (alleged) abuse of a priorism in economics. I think a lot of his post at best just nitpicks some economists who might be sloppy in their presentation, but eventually he got to (what I think) is a pretty solid point when he argues:

Imagine that the following were true:

“When the minimum wage increases, it changes the self-image of employees. They view themselves as being higher-quality workers and raise their productivity levels accordingly.”

If that were true, then an increase in the minimum wage could, in fact, increase employment. The increased productivity of workers could make their employers more money, which means the employers could afford to hire more people.

Notice that this is not a ceteris paribus scenario. The minimum wage would change, causing another variable to change: the ideas of employees.

So the question is this: do we live in a world where increasing the minimum wage changes the ideas of workers so that they are more productive?

It’s an empirical question.

Now, I personally don’t think we live in such a world. (Or if we do, the gains in productivity are not sufficient enough to offset the additional costs of employment.) However, I didn’t arrive at those conclusions through a series of logical deductions. I’ve observed the world, and I don’t think that’s the one we live in.

05 Aug 2018

“God in the Hands of Angry Sinners”

Religious 1 Comment

I thought that was an amazing phrase. I have not listened to this particular sermon, but I wanted to post this as I am heading out of town. However, I heard him (perhaps in another sermon; someone else was playing it on her computer) preaching on these points, and I thought it was a very interesting perspective. For example, in the one I overheard, he challenged the view you will often get from conventional preachers, where it comes off as if God the Father is getting ready to send everyone to hell but then Jesus gets His angry Dad to calm down. Kruger argues that this view is at odds with the Trinity.

Of course, if some of you think he is misstating Scripture, feel free to challenge him in the comments.

03 Aug 2018

Norm MacDonald Tells the Moth Joke

Humor 4 Comments

I heard Bill Burr mention this–in the context of saying that many comedians act like they don’t care if people like them, but NM is the real deal–and I had to look it up.

02 Aug 2018

Further Thoughts on Fractional Reserve Banking and Simple Theft

Austrian School, Banking 169 Comments

Again, it looks like I’m loading the deck by saying “FRB is like a mugger,” but that’s not the motivation for this analogy…

If you haven’t already read it, you should check out my previous post, where I set up a thought experiment to work through the mechanics of FRB, and how it might (or might not) cause the boom-bust cycle as described in the Austrian tradition.

Ironically, I created the analogy in that post in order to box Enrico into a corner, thinking he would have to admit that if a simple thief surreptitiously lent gold coins out into the community (without the owner realizing it), then surely this would distort interest rates, and so therefore FRB would do the same, if the depositors acted as if they still had their cash balances available.

However, my attempt didn’t work, because Enrico (understandably) clung to an important difference in the analogy, namely that the rich man in my story didn’t know what the thief was doing, whereas people in the modern world are (at least vaguely) aware of what’s going on with FRB.

To add insult to injury, one of the people on “my side”–namely, Dan–also didn’t find my analogy compelling, since in his mind the important thing about FRB and the boom-bust cycle is that FRB creates new money (which hits the loan market relatively early in its life). Since the thief in my original tale wasn’t creating money, but merely stealing it out of a vault, Dan didn’t see how this could be causing a boom-bust cycle in the Misesian framework.

So, in this post let me try to motivate my original idea. But I’ll have to take a detour first, in order to highlight what I think is so special about FRB.

First, imagine a rich guy is walking down the street with 10 gold coins in his pocket. A mugger comes up, sticks a gun in his belly, and takes 8 of the coins. This is certainly immoral and illegal, but it won’t cause a business cycle. The rich man realizes his cash balances have fallen, and so he changes his behavior accordingly. Resources in the economy get reallocated; they now cater more to the mugger and less to the rich man, compared to the original scenario, but there is no reason for the economy to enter upon an unsustainable boom. If, say, the rich man was about to spend those 8 coins on a stagecoach, while the thief instead spends them on a vacation in Barbados, that will simply change relative prices in the economy.

Even if the thief loans the money out, whereas the rich man would have spent it on consumption, that won’t cause a boom. It lowers the interest rate, but that is “correct” in light of the new distribution of wealth. The thief has a lower time preference than the rich man. The rich man has to reduce his consumption (because he just had a bunch of money stolen from him) and that frees up real resources, so the thief’s lending (and pushing down of interest rates) doesn’t cause the capital structure to get out of whack.

* * *

OK, so far so good, I’m imagining. I think Dan, Enrico, and I are all on the same page. Now let’s change things to a standard story of fractional reserve banking. Starting originally from a position of 100% reserve banking on demand deposits, the commercial banks look at all of their customers’ deposits of gold in their vaults, and take 80% of them, and lend them out into the community. This pushes down interest rates. But the original rich depositors don’t alter their behavior. Somebody who had planned on spending 8 of his 10 gold coins still does that. So aggregate consumption in the community doesn’t drop. Therefore, to the extent that the sudden drop in interest rates induces new investment projects that wouldn’t have occurred otherwise, there is an unsustainable boom that must eventually end in a bust.

* * *

At this point, Dan is still with me, but I believe I’ve lost Enrico. Now let me tweak it yet again. Instead of the commercial banks lending out 80% of the gold coins, instead what happens is that a thief slips into the bank vault, and takes out 80% of the coins. But he’s quiet about it, so nobody realizes what happened. The depositors don’t alter their behavior. So long as they don’t all try to withdraw their coins at the same time, the remaining pile of 20% of the coins is enough to satisfy the vagaries of spending/income imbalances.

If the thief lends the money out, won’t that cause a boom-bust cycle?

* * *


I think the thing that’s tripping us all up, is that it’s hard to see what economic function “sterile” money balances serve. In a stable equilibrium of perfect certainty, it’s “wasteful” for a rich guy to hold 10 ounces of gold in his cash balances; he should lend out that money (or use the gold for industrial/consumption purposes) and “put it to work.”

But in the real world, people hold cash balances (partly) in order to keep their options open for future purchases that they can’t know precisely, ahead of time.

So this is why, in my opinion, something is screwy if 100,000 people pool their savings into a common pile, and then they act collectively as if they all still have all of their money available, even though 90% (say) of the pile has been lent out.

Notice how common analogies break down here. For example, the owner of a parking garage can safely sell 1,000 (say) stickers that entitle the buyer to park his or her car in a lot that only has 100 parking spots, if the owner has studied the past and thinks there is only a very small probability that more than 100 people will want to park at the same time. That economizes on society’s scarce resources; it would be foolish to insist on “100% reserves” in such a setting. Let the market do what it will, perhaps with clauses in the contract for what happens if a buyer can’t find a spot. (This is like what happens when airlines overbook, and they have to use an auction to get people to give up their seat.)

But when it comes to cash balances, it seems to me at least that something weird happens if you don’t actually have the cash available. It’s not “wasting” the gold coins for them to be in your pocket even if you’re not spending them in the next 10 minutes, the way it is arguably “wasteful” if there is an empty parking slot with your name on it, even though you have no intention of leaving the house that day.

No, it seems to me that money sitting in your pocket (or in your wallet, your purse, your home safe, your bank vault, etc.) is “providing a flow of services” just by sitting there. It’s not that the money is being wasted until the moment you spend it.

And so in that light, if 1,000 people pool their savings hoping that only 100 of them will want to use them at any moment, that seems economically much different from 1,000 people chipping in to fund a parking garage with 100 spots. The former seems to me that it would cause a mismatch between investment and saving, whereas the latter seems like a clever and efficient leveraging of real estate.

01 Aug 2018


David Beckworth, Economics, Humor, Music 3 Comments

==> This is an old but very interesting post from Mark Bahner on atmospheric CO2 and how quickly it could be removed if need be.

==> A very interesting post from David Beckworth on the yield curve (HT2 Scott Sumner). But most important–look at this analysis from Ben Bernanke back in 2006!! Not only was the Bernank totally wrong, but his wrongness is relevant to right now.

==> An interview with Stan Bush, who was instrumental in one of the greatest scenes in American movie history.

==> On the latest Contra Krugman: How to Unwind the Welfare State.

==> A petition to free Ross Ulbricht.

==> Venezuela’s annual price inflation rate is apparently more than 1 million percent

==> I raise concerns about the Curbelo carbon tax bill, and Veronique de Rugy criticizes carbon taxes too.

==> I was amazed to see this letter to Nature (keep in mind that “climate mitigation” means “government policy actions taken to slow climate change”):

Our analysis shows that by 2050, the potential for a sizeable
increase in the risk of hunger is higher in the RCP2.6 scenarios
under climate mitigation than in the RCP6.0 scenarios without
mitigation in all socio-economic futures and economic mod
els, despite the fact that RCP6.0 scenarios have more severe cli
mate change and greater reductions in crop yields (Fig. 1a–c;
Supplementary Fig. 11). With the SSP2 socio-economic backdrop,
the population at risk of hunger in 2050 increases by 24 million
(2–56 million: the range represents variation across models here
after) with the climate impacts of the RCP6.0 scenario, compared
with the baseline scenario. This number increases by around
78 million (0–170 million) people with the combined climate
impacts and emissions mitigation policies of the RCP2.6 scenario
(Fig. 1a and Supplementary Fig. 14 for the global and regional
baseline scenario). Most of the increase in hunger in the RCP2.6
scenarios is caused by the implementation of climate mitigation
policies, not the climate change impacts.