Potpourri
* Silas Barta smells a rat in the official inflation numbers.
* Ha ha, those Austrian economists teach at small schools and have funny names for their dogs. QED.
* I have written in several places that the Fed is responsible (at least in part) for rising commodity prices and oil in particular. Jerry Taylor and Peter van Doren disagree, saying that speculators have nothing to do with oil prices. It can all be explained by fundamentals and elasticities.
* Bob Wenzel linked to this piece on excess government properties.
* William Grigg has been following this disturbing story of a SWAT team barging into a guy’s house and killing him. Apparently they held the medics at bay for an hour while the guy died. Does anyone want to play devil’s advocate and offer some rival interpretation?
* The nightmare is over. And remember, they hate us for our Walkers. (BTW the top comments are better than the article.)
* My article at Mises today talks about privatizing transportation in New York City. I didn’t make this assertion in the piece, but I honestly believe the crime rate would drop significantly over time if they implemented my ideas. A highlight:
As an economist, it appalls me how wasteful the current system is. Every weekday, millions of very productive engineers, doctors, writers, and other workers sit in traffic jams going into and out of Manhattan. Under private ownership, the tolls on bridges and tunnels, and the fees (however allocated) for driving on the normal roads would reflect the actual demand for the scarce product.
There would be time-varying prices, too, so that people who could rearrange their schedules to avoid rush hour could save money and thereby reduce peak congestion. (Such pricing structures have slowly been introduced even by the government’s transportation authorities, but not very quickly.) Yes, the month after a full-scale privatization of all the roads and bridges, it might be very expensive to drive from Wall Street to the Hamptons at 4:45pm on the Friday of a three-day weekend. But at least it could be done in a very smooth fashion, without having to stop-and-go for an hour or more.
Even better, the high prices would only be temporary. Entrepreneurs would see the demand (signaled by the high prices) and would devise new ways of catering to it. After a few years of genuine private ownership in transportation systems, Manhattan would look like a science fiction movie. There would probably be multiple layers of new bridges and tunnels, and extremely clean subway systems that were never too crowded, because of appropriate pricing and customer management. (Do you ever go to a movie theater — even for a popular film on opening night — and have someone try to squeeze into your seat? Of course not: the theater owners don’t allow patrons to crush each other. But that happens all the time with government subways.)
Until inflation of prices includes more than just consumer items, I think it only interesting at best to talk about CPI. If you want to know where inflation has gone the last 20 years, you need to look beyond consumer items to get the truer picture.
Because I’m so fearless, I challenged Krugman to a debate – with Bob Murphy:
http://tinyurl.com/5rwqgws
While the complete misunderstanding of Austrian economics by the types at Salon is to be expected, including those who read it, I was heartened to see many sound responses to the article and the comments.
Furthermore, the more it is discussed, even in disdain, the more people will hear the message and come to have a look and learn economics. Sort of like, the only bad press is your obituary.
Krugman always comes off to me like he’s half in the tank – like there is no problem with liquidity at the watering holes he patronizes.
Commuting by car is wasteful human action, it doesn’t really matter who owns the roads. It’s just a waste of time and non renewable natural resources.
Driving cars gives meaning to life.
So, should I start walking for my commute to work? Would that be a better expenditure of time? I never work in the same place, sometimes the job is 2 miles away, other times it is 500 miles away. Please, tell me how I would better spend my time getting to work?
Yes, you should walk or take a train. Driving to work is a waste of time and of non renewable natural resources at the same time.
They are both scarce and you are squandering them..
Is there anything that isn’t scarce? Also, who are we saving these “non-renewable” resources for? If they are available now, use them now. The fact that gasoline is still relatively cheap at $4 a gallon tells me that there is still ample supply. And, if supply does get low, then the price will ration its use.
The entire point of any production is to provide for consumption, thus increasing quality of life. Having the convenience to drive anywhere I want anytime I want at a cheap price only serves to increase my quality of life (and that of everybody). Trains do not travel to every destination, and walking long distances only takes aways from time that could otherwise be spent on productive activities.
Seems to me that all you seek is a move backward. If everybody opted to take the train and/or walk, it would have dramatic effects on the net productivity of the economy. In effect, what you are suggesting is that regress economically.
This is just another example of statists thinking they are smarter than average people and they must be given power to run other people’s lives. Somehow they think that “government” has special omniscience and integrity when, in fact, power is being handed over to plain old people with no special knowledge, but people who generally love power over others.
The only gas I’ve ever “squandered” was gas that I bought and that belonged to me. So that’s my business. Government, having the world’s highest conceivable time preference (the next election), is the biggest squanderer of oil (and blood).
http://planetgreen.discovery.com/tech-transport/planet-biggest-gas-guzzler.html
The gas you bought was stolen. And you’ve squandered it giving a meaning to your sorry life. Typical Rothbardian.
1. Suddenly the MMTers are concerned for future generations. $100 trillion in unfunded government obligations, anyone?
2. When and if oil becomes too expensive, people will be forced by price information to find alternatives.
3. It was the government and their “long term” vision that built the freeways. (Actually, I was the one who built the freeways).
http://www.flickr.com/photos/bob_roddis/3518487963/in/set-72157600948975202
4. I love the vicious ad hominem attacks. Keep ‘em coming. It means I’ve won.
Stupidity is not scarce.
Neither are solar, wind and tidal energies.
There is a difference between consuming resources and squandering them. If you have no better use of them than commuting you better save them for later generations. Or to their rightful owners.
Don’t forget the price of the gallon is regulated by your SWAT teams.
And yes if everybody walked or took the train that will dramatically increase productivity.
Gravity isn’t scare either and provides good acceleration for travel. Do us all a favor and put this underutilized resource to use for your next trip to the sidewalk.
Solar, wind, and tides are indeed abundant, but the capital and resources needed to harness them is not.
And, no. Walking and taking a train cannot increase productivity because it takes time away from productive activities. If I walked to work every day (let’s say 5 miles each way), I would not be able to be as productive due to fatigue. Further, my job is not the only productive activity that I engage in, so the time spent walking would necessarily eat into the time I spend on those other productive activities. Trains all have set schedules, which means that everybody would have to adjust their own schedules accordingly. In order to catch a particular train, I may have to spend an hour or two of idle time just so that I can catch the train.
Are you really this ignorant of productivity and opportunity cost? Or, are you just trying to get a rise out of people? Seriously.
I think he’s drunk, Joseph. There can be no other explanation.
Berp…
Sorry, what nonsense were you saying about ignoring future generations?
Are you drunk right now?
He may or may not be, but I am a little buzzed. 😉
I more or less think that he does not fully understand or deduce the logical implications of what he is saying. I usually don’t even respond to his comments, because they are kind of sensationalist. However, I had to in this instance.
“If you have no better use of them than commuting you better save them for later generations”
What claim does a non-existent “future generation” have on goods produced today? The future is always uncertain, “future generations” do not exist in the present, and one does not know that the Earth or its inhabitants will even exist in the future. Therefore, “future generations” are nonexistent and only exist in one’s mind. However, even if they did exist, what gives them greater claim to resources as compared to current generations. If there was suddenly only enough food to feed the current population for 5 years, would you say that we should instead let people starve in order to ensure that the food is available for future generations? Do you not see how counterintuitive that is, that to starve the people today merely exacerbates the problem, and may very well ensure that there will never be a future generation.
It is the same thing with oil. You would say that we need to cut back on our use of oil, and that we need to take a civilizational step backward. You also seem to be hinting that we should instead use other energy resources in its place. Sure, I agree that we should seek other energy resources, but where are they, and why are they not in use. The reason is that they are not yet developed enough to even come close to fulfilling our current needs, and to fully implement them now would only serve to set civilization back more than a few steps.
Much like the example that I use with food, what you would have us do would only serve to hurt “future generations”, because it would necessarily hamper productivity and production, as well as the capital structure needed in order to further develop alternative energy sources. The very use of oil today helps to increase our productivity and capital investment due to its low cost, and that its low cost allows further investment in other avenues of production. Using oil today brings us far closer to realizing feasible alternative energy sources than your solution.
Your solution not only seeks to hamper current productivity, capital and quality of life, but it also wishes to pass that onto your so called “future generation”. If you cannot see that then you are quite blind.
So, what should these non-renewable natural resources be used for?
I always love how media hacks like Salon always categorize anything that challenges their statist desires as “right wing”. Last I checked the right wing also idolizes the state. In my opinion, whenever you are being attacked it only means that you are making progress.
I used those same 10 items from that fox article and calculated the average yearly inflation rate from 2001-2010 just for fun and only got 3%. Those dirty rats!
Here’s the yearly inflation rate for each year from 2001-2010 using those 10 items.
http://i.imgur.com/BOAUn.jpg
It’s the end of the world man! Jump into a safety boat quickly.
Dont know if you already saw this bob:
http://www.amazon.com/Privatization-Roads-Highways-Walter-Block/dp/193355004X/ref=sr_1_2?ie=UTF8&qid=1305280823&sr=8-2
Walter Block’s remarkable new treatise on private roads, will cause you to rethink the whole of the way modern transportation networks operate. It is bold, innovative, radical, compelling, and shows how free-market economic theory is the clarifying lens through which to see the failures of the state & see the alternative that is consistent with human liberty.
Yeah I linked to it in my article.
Well you got me. Ill just admit it, I dont click on links.
“Commuting by car is wasteful human action, it doesn’t really matter who owns the roads. It’s just a waste of time and non renewable natural resources.”
Whatever you do, dont stop and think too long about how that opinion is a product of an individual perspective that is entirely SUBJECTIVE. I mean if you do that too long alot of the austrian line of thinking becomes abundantly clearer, and you wouldnt want that clouding your thinking now would you?
Interesting discussion on transportation. In a system of “one citizen one vote” the poorest citizen demands equal treatment to the richest citizen and gets that equality by voting. The result is that everyone pays with their time in traffic jams and when it comes to traffic all of them get equal return on their time invested and that is nothing.
In a fully capitalist system of “one dollar one vote” the road runs smoothly but the poor don’t get to use it. That’s shitty for the poor, but good for the rich. Mind you, those rich who now get to work more easily become more productive and thus generate more goods at marginally lower prices than they were under the old system.
It’s very much a balance of efficiency vs equity and a democratic system pushes the balance towards equity. Then again, non-democratic systems tend to kill arbitrary numbers of citizens which can upset your day (rich or poor).
Silas’ inflation post was kind of odd.
The BLS puts out numbers on prices. If you confine yourself to looking at their numbers for some food items, you find a higher rate of increase for those items than for prices overall. How this is supposed to cast doubt on the CPI is unclear.
If you want to know what is happening to the overall price level, looking at food prices (let alone a handful of food items) is not a great way to do it. If you look at the Billion Prices Project (which is not based on government numbers), inflation is not high. It is slightly higher than the official CPI number, but not by much, and it’s possible that the difference is due to things like changes in the price of housing that the BPP can’t measure well.
I’ll let him defend himself, but I think what Silas was doing is looking at those food items compared to the BLS’ official estimate of *food price* inflation, and getting totally different numbers.
Bob,
But the numbers for those specific food items came from the BLS!
… which would make the critique stronger, bro.
It would make the critique stronger if you had shown an inconsistency between the two numbers. Bur you didn’t. It’s perfectly possible for the rate of price increase for a handful of food items to be 8% while the increase in food overall is only 2.9%.
On the other hand, if the BLS was manipulating the data, how plausible is it that they would publish unmanipulated numbers, so that anyone who looked would see that they had gotten the math wrong? That hardly seems likely. Much more likely is the possibility that whoever wrote the Fox Business article picked food items with higher than average price increases as illustrations.
It would make the critique stronger if you had shown an inconsistency between the two numbers. Bur you didn’t.
Ah, but I did: that was the part where I compared a realistic sampling to the headline food numbers.
It’s perfectly possible for the rate of price increase for a handful of food items to be 8% while the increase in food overall is only 2.9%.
Sure, and it’s possible to fudge the numbers so you report a lower average than the true average. For example, if all prices were going up by 12%, and so people switched to cheaper, crappier items, so the BLS switches the weighting to those items (which haven’t been part of the price increase because it didn’t have to tool up yet to meet higher demand).
You know, like the openly admit to doing to handle substitution (despite the complete stupidity of arguing that there’s disinflation because people are switching to eating free dirt when they can’t afford food).
On the other hand, if the BLS was manipulating the data, how plausible is it that they would publish unmanipulated numbers, so that anyone who looked would see that they had gotten the math wrong?
“I couldn’t have committed this crime, your Honor — if I did, why would I have left evidence?”
Much more likely is the possibility that whoever wrote the Fox Business article picked food items with higher than average price increases as illustrations.
And then put the chocolate chip cookies in just to throw us off? Oooh! Devious!
Look, believe what you want. Go increase your grocery spending at the official rate of inflation, and see how long you can ignore the decreasing catch you bring home, the debased food items, etc. If telling you there’s little inflation ameliorates the crappiness of what your dollars currently by — more power to ya. It just doesn’t work for me, is all.
The problem is that a realistic consumer basket from their data gives such a higher number that the official basket from their data. So, something is going on in between the two that lets them throw out 5% of the inflation we got.
Bottom line, even assuming what they say is true, the *realistic* inflation that we’ll actually have to deal with — not the same thing as the official food CPI — is, by a low estimate, higher than the numbers you’ve heard, and no, the 90% of the public noticing this isn’t imagining it. Fair enough?
Um??? Silas, do most of the public even care or pay attention to these numbers? Unfortunately, I think not. What I find even more intriguing is the PPI and commodity statistics over the past year. While input prices are increasing dramatically, I just do not see consumer demand keeping pace, especially with 9% unemployment (supposedly). I see capital wasting in our future (as if enough capital has not been wasted enough in the past 30 years).
Personally, I see something similar to Japan’s lost decade in our future, just without the capitalization needed in order to actually increase productivity. And, this opinion of mine is not even accounting for the debt, or future defaults and/or retributions for past interventionist activities in foreign economies.
In layman’s terms, we are up chit’s creak without a paddle, and we have no choice but to go all in or change our ways. I would have thought that this was quite clear a year or so ago, but some are still lawdy-dawing and think that the world always turns out to be favorable to their preconceptions. We aren’t going to change our ways, and more than likely “our ways” are going to get us into hotter water than we can stand. Sure, our own situation at home is quite daunting; but, that is nothing compared to those pissed off nations that went for the ride over the last 30 years or so.
Basically, we are economically without resort, and internationally, we are hanging on a thread.
Just my opinion….
“something is going on in between the two”
Well that “something” is obviously the fact that you only used 10 arbitrary items compared to the dozens and dozens of products the BLS uses. There’s nothing fishy about different methodologies getting two different numbers. Of course there would be a big difference. Using those 10 items only, you would get 1% DEflation in 2005. Was the BLS conspiring to hide that deflation from the public by giving us a fake 2.5% inflation number that year?
Did I claim food inflation was high in 2005?
You argued that the average 2006-2011 inflation rate is higher than the official bls numbers on your blog. It’s not that big of a stretch for me to say you also think the BLS underestimated the 2005 numbers.
You argued that the average 2006-2011 inflation rate is higher than the official bls numbers on your blog
Bzzt. I made no claim about that period, and am currently agnostic on what errors the BLS might have made and in what direction, or what deviation between realistic and BLS food aggregates there might be.
It’s not that big of a stretch for me to say you also think the BLS underestimated the 2005 numbers.
Yeah it is, when I’m talking about 2010-2011 numbers. FWIW, I recall food prices being steady in 2005 … but feel free to attack whatever strawman will make you right.
” And if you think 1 year is too short because of volatility, then look at the five-year food inflation numbers, a time period that covers the “massive” price collapse and “deflation” following the 2008 crisis onset: 4.7% per year.”
To me, this sounds like you’re saying the the BLS underestimated inflation the past 5 years, especially with your sarcastic line about the massive deflation.
But I’ll just have to take your word for it.
Btw, Bob, your article on the NYC TLC was excellent.
Ditto!!!
Would a non-Austrian please explain to me their obsession with the denial of our current price inflation.
A basic tenet of the Austrian School is that money dilution results in Cantillon Effects, which means that the new money is generally injected only into specific areas of the economy and that not all sectors may endure a resulting general increase in prices. The problem in the first instance is that the new money causes distortions in the investment and capital structure that may or may not result in a general increase in prices. The 1929 depression was caused by new money injections that did not result in general price increases. The fact that general price increases do not result from a round of money dilution is not a refutation of the Austrian School. Similarly, things are not necessarily “OK” in an economy experiencing funny money dilution simply because there is little or a small amount of perceived price inflation.
The fact that no one really knows for sure at the moment just how much price inflation will result from future rounds of funny money dilution (which will be occurring during periods of perhaps significant deflation in areas like real estate caused by prices having been bid up by funny money dilution in the 2000s) is just another reason to permanently ban the fiat money regime.
Would a non-Austrian please explain to me their obsession with the denial of our current price inflation.
Inflation is currently about 2-3%. Non-Austrians aren’t the ones obsessed with denying that fact.
A basic tenet of the Austrian School is that money dilution results in Cantillon Effects, which means that the new money is generally injected only into specific areas of the economy and that not all sectors may endure a resulting general increase in prices.
Inflation need not involve an increase in the price of every item, but it does require an increase in the overall price level. It’s true that you may also have changes in relative prices due to Cantillon Effects, but that doesn’t mean you don’t end up with an overall price rise.
MC Bob Roddis: Why do people insist at understating inflation at 2-3%? What motivates this?
Blackadder: No one’s insisting. Inflation *is* 2-3%.
Me: *falls out of chair*
Prices at my grocery store are getting much higher than in the past. Gasoline is much higher than in the past. My house is worth 60% of what it was worth 6 years ago. I see general price inflation. Further, prices have been held down recently because people are broke. The only person who might deny the obvious is a Keynesian claiming we need more “stimulus”, which in AP Lerner-speak, is just someone’s “ideology” talking.
“My house is worth 60% of what it was worth 6 years ago. I see general price inflation”
That’s called deflation, not inflation, buddy.
He mentioned one data point, of which was greatly inflated over the past 10 years and had culminated in the largest bubble in the history of mankind. Inflation does not affect all prices in a uniform fashion, and it is no surprise that home prices are declining (you would not believe the amount of debt that would need to unwind; hundreds of trillions in derivatives alone). House prices still have not gone down to 2000 levels, even with their current regional declines.
In any case, Bob’s observations still stands. Producer’s prices and commodities are seeing double-digit increases on an annualized bases. Food, which is almost entirely inelastic, is seeing dramatic price hikes. Housing is about the only thing still going down. That, and the dollar.
Deflation in housing. Inflation elsewhere. Not good and all caused by funny money.
Different sectors impacted in different ways. The foolishness of focusing upon the “general price level”.
Prices at my grocery store are getting much higher than in the past. My house is worth 60% of what it was worth 6 years ago. I see general price inflation.
Inflation is not a synonym for “stuff I don’t like.” Falling prices aren’t a sign of inflation.
Trying to gauge inflation simply based on prices at the grocery store and/or the gas station is not a reliable methodology. People only spend a small percentage of their overall income at such places. To see whether there is general price inflation you have to look at prices generally.
Silas,
Roddis asked why people where denying “current price inflation.” If current price inflation is 2-3% (which it is), then it is the person who claims inflation is 8-10% who is denying current price inflation, not the person who claims that it is 2-3%.
Explain why a 2-3% annual theft of purchasing power via funny dilution is “OK”.
Theft is how the gas you squander to give meaning to your life is obtained.
Time erodes the value of everything. A 2-3% inflation is not only benign but good. It forces you to invest your money in something productive.
I think I know the answer to my own question. Little Matty Yglesias and Krugman think that if there is little general price inflation then either more money dilution and/or more debt is necessary to give the economy “traction” and won‘t cause problems. Of course, economies don’t have or lack “traction” and more dilution and/or debt will always cause more problems.
Thus, the obsession with proving there is no current general price inflation.
Hey, Bob. I take it that you’re the REAL Bob Roddis? And, that “Motor City Bob Roddis” is a fake. Is that the reality of the situation? I’m confused here, help me out.
There’s only one that I know of. I added “MC” to the post about cars and it stuck overnight in the name line of “Leave a Reply” which I only noticed after posting this a.m.
Is that good or bad news?
Gotcha. That is what I had assumed earlier (BTW, I did catch the humor immediately, you being from MI). It was just kind of weird to have two different Bob Roddis’ in the same thread.
Now that I know the background, it isn’t good or bad, it is just and proper. When it comes to the internet, it isn’t as clear cut as talking to someone face to face. That is why I use my birth name, because at least people know who they are talking to.
Obviously, I am somewhat discriminating as to where I do list my birth name on the internet, but when it comes to economics and politics I always list my true name. Call me old-fashioned, but it is my feeling that if you cannot put your name and reputation on the line, then your opinions and principles mean nothing.
FYI, on a completely unrelated topic, Google’s online blog site, Blogger.com, has been unavailable for nearly 3 days now as a result of a failed update on Wednesday 11th May.
http://www.webhostdir.com/news/ShowItem.aspx?ID=90246
That includes a lot of my favorites like Wenzel.