07
Aug
2011
Is This Really His Lordship?
This is really Keynes, right? Since this is the only (alleged) footage I’ve ever seen of him, I have no idea. For all I know this is a particularly high-brow Monty Python sketch.
This is really Keynes, right? Since this is the only (alleged) footage I’ve ever seen of him, I have no idea. For all I know this is a particularly high-brow Monty Python sketch.
assuming it’s real, this is a great find.
That’s how people in this country used to speak back then so probably genuine.
Of course it is him.
http://socialdemocracy21stcentury.blogspot.com/2011/06/keynes-on-end-of-gold-exchange-standard.html
And his predictions about the effects of going off the gold standard were dead right.
Contrast that with Mises’s failed prediction:
“In September 1931, Ursula Hicks (wife of John Hicks) was attending Mises’ seminar in Vienna when England suddenly announced it was going off the gold exchange standard. Mises predicted the British pound would be worthless within a week, which never happened. Thereafter, Mises always expressed deep skepticism about the ability of economists to forecast.” (M. Skousen, 2009. The Making of Modern Economics: The Lives and Ideas of the Great Thinkers [2nd edn], M.E. Sharpe, Armonk, N.Y. p. 286, n. 2).
“Contrast that with Mises’s failed prediction”
Quoting someone who claims Mises made a failed prediction is not the same as quoting Mises.
“Quoting someone who claims Mises made a failed prediction is not the same as quoting Mises”
Only if the report by Hicks is wrong/false/invented/a lie.
Where’s your evidnece of this?
Holy crap batman. Your logic fail is hurting my brain. Keynes told me via private correspondence just before he passed that he was puling his economic theory of out his arse and can’t believe everyone bought it!
Apparently according to your above statement, my above narrative is equivalent to a direct quote from Keynes saying the exact same thing unless one can produce evidence that I’m lying?? Haha try again bud.
Your original comment implies that Hicks’s story about Mises was wrong/false/invented/ or a lie.
Until you can give evidence of that, you ramblings have no force.
Your original comment implies that Robert Fellner’s story about Keynes was wrong/false/invented/ or a lie.
Until you can give evidence of that, you ramblings have no force.
No wonder you love Keynes, when someone highlights the fact that hearsay exists and it is not the same as direct testimony you mock their lack of sophistication and refer to their comment as ramblings! Brilliant!
If you want people to take anything you say seriously, it would be best not to bitterly defend an obviously asinine position because you are so desperate to avoid admitting you made a mistake. Defending the position by offering no substantive argument as to why you think hearsay is equivalent to direct testimony and instead simply saying that I am “rambling” reveals you have no real argument, understand you are wrong, but are too weak to admit it. This leads one to question the quality of your other, unrelated, comments.
Keynes had his own failed predictions. He did not predict the Great Depression but Mises did. Hooray for both of them. But is Keynsianism the right Rx for recessions/dperessions? I don’t think so. I think Mises is better in this regard. And he also attempts to explain how a recession/depression is born. No talk of “animal spirits.”
Mies didn’t “predict” the Great depression. That is a fantasy of Austrians:
http://socialdemocracy21stcentury.blogspot.com/2011/05/mises-did-not-predict-us-stock-crash-of.html
““As his assistant in the university seminar which met every Wednesday afternoon, I [i.e., Fritz Machlup] usually accompanied him home. On these walks we would pass through a passage of the Kreditanstalt in Vienna [one of the largest banks in Europe]. From 1924, every Wednesday afternoon as we walked through the passage for pedestrians he said: ‘That will be a big smash.’”
Parroting a line about the fall of the “Kreditanstalt in Vienna” is not in any sense a prediction of a global great depression.
In 1928 Mises wrote a paper criticizing Irving Fisher’s price index theory. He wrote that artificially lowering interest rates through artificial credit expansion (expansion of fiduciary media), even while prices remained stable, would lead to a recession.
http://mises.org/journals/qjae/pdf/qjae11_3_5.pdf
This is entirely consistent with what he proposed in his ToMC in 1912. This is why he predicted the fall The Kreditanstalt. This is why he said pursuing artificially low interest rates anywhere – including the US – would lead to a crisis.
Lee was not parroting a line. He was merely noting that Mises said pursuing artificially low interest rates would cause a crisis.
Correction – I meant ‘book’ where I wrote ‘paper’.
“He wrote that artificially lowering interest rates through artificial credit expansion (expansion of fiduciary media), even while prices remained stable, would lead to a recession.”
(1) the Austrian trade cycle theory is flawed and false. There is no such thing as a Wicksellian natural rate of interest –the very foundation of the theory, required for it to even work. The “predictions” of endless recessions by Austrians using ABCT are worthless: if you are forever crying wolf, predicting disaster, eventually by sheer accident you are appear to have “predicted” something on occasions.
(2) Mises’s prediction of some “recession” (its depth or length, for example, not even mentioned) is not the same thing as predicting the stock market crash of 1929 or a global Great depression.
Wicksell has been ignored in favor of Fisher. False this does not make it. In fact, here’s a nice paper indicating that Wicksell’s theory of inflation has legs:
http://www.cbo.gov/ftpdocs/52xx/doc5279/2004-5.pdf
Furthermore, Wicksellian interest is taken seriously by the fellows at the Fed when it comes to stabilization policy.
LK,
1) If you think ABCT is bogus, fine. But that was not the point. The point was Mises said that credit expansion fostered by the central banks would lead to s crisis. The banks were doing just that before the crisis occurred. He predicted a recession based on a policy the banks undertook and that is what happened. You denied that he ever made such a prediction. He did.
2) The Great Depression was not just a stock market crash. The stock market reflected that fall in asset prices that Mises said would occur because of the prior credit expansion. That is a prediction. That Mises is not on record anywhere as not saying stocks would crash does not mean he did not predict the credit expansion would lead to a crisis. He most certainly did. Read the paper I linked to.
LK,
As for your comment “Mises’s prediction of some “recession” (its depth or length, for example, not even mentioned) is not the same thing as predicting the stock market crash of 1929 ”
Name me anyone who says Mises predicted that. Mises says explicitly there is no scientific way to do that.
Again, the point is that Mises said that continuing to advocate a credit expansion even while prices are stable will lead to a recession. One of the leading economists of the day, and many other economists of the day, expressly denied this could happen. As long as prices remained stable, everything would be fine. They were wrong.
It is my understanding that nobody called anything a “depression” until after The Great Depression occurred. Before that, everything was referred to as a recession. Therefore, if he predicted a recession, he was technically correct.
(1) the Austrian trade cycle theory is flawed and false. There is no such thing as a Wicksellian natural rate of interest –the very foundation of the theory, required for it to even work. The “predictions” of endless recessions by Austrians using ABCT are worthless: if you are forever crying wolf, predicting disaster, eventually by sheer accident you are appear to have “predicted” something on occasions.
The Austrian theory does not require a single natural interest rate in order to “work.” It only requires that given nominal interest rates are changed from where they otherwise would have been, due to central bank intervention.
(2) Mises’s prediction of some “recession” (its depth or length, for example, not even mentioned) is not the same thing as predicting the stock market crash of 1929 or a global Great depression.
Predicting the stock market crash of 1929 is not the same thing as predicting that there will be an inevitable crash due to central bank intervention.
“The Austrian theory does not require a single natural interest rate in order to “work.” It only requires that given nominal interest rates are changed from where they otherwise would have been, due to central bank intervention.”
False. You cite me me one Austrian who dispenses with the natural rate of interest in an exposition of ABCT.
And dont name Hayek or Mises, Rothbard or Garrison: they ALL use a natural rate.
You cite me me one Austrian who dispenses with the natural rate of interest in an exposition of ABCT.
That’s not what I argued. It’s not necessary that the natural rate be dispensed. Natural rates with an “s” can be used and nothing in the theory would be compromised. Nothing.
I argued that the ABCT does not need to have a single natural interest rate to exist in order for it to correctly explain the business cycle. The fact that Mises and earlier Hayek used a single natural rate as a placeholder, does not make their theory false if natural rates are used instead.
Cite one economist who has successfully shown that the inclusion of more than one natural rate of interest serves to refute the Austrian theory of the cycle.
Predicting a global great depression after 1929 is not the same thing as predicting that the current central bank intervention taking place (1924) would lead to an inevitable crash, on the basis of Mises’ theory of the business cycle.
This is funny.
Of course he was using rhetoric dude!
Seriously, anyone who truly believes that he really meant what he said that the pound could go valueless in just a week after getting off the gold standard should have their brain checked, such as you.
Congratulations on finally finding this little piece that can “prove” Mises wrong after perhaps years of searching. Not an easy task, is it?
In making this prediction, the genius Mises was just giving average people credit for being about 8x smarter than they really are. He wrongly assumed that average people would protest being robbed blind by the bankster class via the ruse that ultimately became known as Keynesianism. Hello!
Mises’ inability to see average people as they really are in this instance says nothing about the soundness of Austrian Theory. The success of Keynesianism is attributable primarily to its institutionalization of mass Kleptocracy and in convincing the weak-minded elites that Kleptocracy was scientifically justified. The masses don’t care about all that highfalutin lingo and just like getting “free” stuff.
First, going off the gold standard is a different thing from Keynesian countercyclical fiscal stimulus.
“In making this prediction, the genius Mises was just giving average people credit for being about 8x smarter than they really are.”
Elitist crap.
Poor “feeble-minded” masses! If only they had Austrian light and truth! Too stupid to make decision for themselves…
First, going off the gold standard is a different thing from Keynesian countercyclical fiscal stimulus.
That was my point. Both legs of the Kleptocratic Keynesian Juggernaut (“monetary” and “fiscal”) are based upon theft and fraud.
Poor “feeble-minded” masses! If only they had Austrian light and truth! Too stupid to make decision for themselves…
Actually, we think average people are perfectly capable of making economic decisions for themselves. In fact, they MUST be allowed to make economic decisions for themselves. You are the one who claims they are so stupid that by engaging in free exchange that they will need an exogenous SWAT team to cure them of their hapless “lack of aggregate demand”.
First, going off the gold standard is a different thing from Keynesian countercyclical fiscal stimulus.
That was my point, smart guy. Both legs of the Kleptocratic Keynesian Juggernaut (“monetary” and “fiscal”) rely upon theft and fraud with supporters getting lots of “free” stuff.
Poor “feeble-minded” masses! If only they had Austrian light and truth! Too stupid to make decision for themselves…
You have things bass-ackwards. We think average people are perfectly capable of managing their own economic affairs. In fact, we believe they MUST manage their own affairs. It’s the Keynesians who think people are so stupid that their engagement in free exchange will lead to a “lack of aggregate demand” such that they require an exogenous SWAT team to set them straight.
“. It’s the Keynesians who think people are so stupid that their engagement in free exchange will lead to a “lack of aggregate demand””
Drivel.
The American people voted Roosevelt into office wanting a drastic change in government policy. And then re-elected him, giving the vote of confidence in his shift to intervention.
Try again.
People know about how to run their own lives. They think they know how to run other people’s lives, but don’t.
Politics with SWAT teams is a whole other corrupt criminal game from the voluntary world of free exchange. You are blind and cannot see that. And you still don’t even comprehend the nature of economic calculation.
And yes, I think people should be “regulated” by a strict adherence to the non-aggression principle because without it, they tend towards genocide, rape and pillage. Those are the problems facing humanity. Not “lack of aggregate demand”.
Lord Keynes, this is the Democratic platform on which FDR campaigned for the 1932 election:
The Democratic Party solemnly promises by appropriate action to put into effect the principles, policies, and reforms herein advocated, and to eradicate the policies, methods, and practices herein condemned. We advocate an immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus, and eliminating extravagance to accomplish a saving of not less than twenty-five per cent in the cost of the Federal Government. And we call upon the Democratic Party in the states to make a zealous effort to achieve a proportionate result.
We favor maintenance of the national credit by a federal budget annually balanced on the basis of accurate executive estimates within revenues, raised by a system of taxation levied on the principle of ability to pay.
We advocate a sound currency to be preserved at all hazards and an international monetary conference called on the invitation of our government to consider the rehabilitation of silver and related questions.
Also, regarding that stuff from Skousen… I think in that very same book, Skousen opens by explaining that Thomas Hobbes thought that life in the England of his day was “nasty, brutish, and short.” I’m not saying the quotation from Mises is invented, but for all we know he was cracking a joke, in the same way that I tell kids at Mises U “I get the top bunk when we’re all in prison next year.” Am I actually predicting we’ll all be in prison next year? No. So I’m not sure Mises was officially predicting the pound would be worthless.
I am aware that Roosevelt’s official policy stance in 1933 was as you describe.
But when it was clear he had turned to massive intervention by the mid-1930s he still was re-elected in a landslide by the American public:
“The United States presidential election of 1936 was the most lopsided presidential election in the history of the United States in terms of electoral votes. In terms of the popular vote, it was the third biggest victory since the election of 1820, which was not seriously contested. The election took place as the Great Depression entered its eighth year. Incumbent President Franklin D. Roosevelt was still working to push the provisions of his New Deal economic policy through Congress and the courts. However, the New Deal policies he had already enacted, such as Social Security and unemployment benefits, had proven to be highly popular with most Americans … Although some political pundits predicted a close race, Roosevelt went on to win the greatest electoral landslide since the beginning of the current two-party system in the 1850s, carrying all but 8 electoral votes. Roosevelt carried every state except Maine and Vermont.”
http://en.wikipedia.org/wiki/United_States_presidential_election,_1936
This doesn’t fit your story, does it?
Also, I suspect most American voters really paid very little attention to the “fiscally conservative” rhetoric Roosevelt was using in 1933. Most Americans were sick and tied of 3 years of deflationary depression and voted against Hoover by voting for his major opponent.
Once Roosevelt got into office he threw this laissez faire nonsense to the wind, knowing full well that people wanted something new.
Lord Keynes I’m going to have to call BS. It is not like Roosevelt ran against a free market ideologue. It was the typical choice of two men with almost no substantive difference.
In 1936 Roosevelt ran against Alf Landon who supported Theodore Roosevelt’s Progressive Party in 1912, and, in 1922. Landon respected and admired Roosevelt and accepted much of the New Deal but objected that it was hostile to business and involved too much waste and inefficiency. Late in the campaign, Landon accused Roosevelt of corruption – that is, of acquiring so much power that he was subverting the Constitution.
http://en.wikipedia.org/wiki/Alfred_Landon
So I guess if Obama or any republican besides Ron Paul wins the election then the country is really in favor of continuing these wars forever even though the polls show that the majority are ready for them to end.
Lets take a look at the 1940 election too.
Willkie centered his presidential campaign about three major themes: the alleged inefficiency and corruption of Roosevelt’s New Deal programs, Roosevelt’s attempt to win an unprecedented third term as President, and the government’s alleged lack of military preparedness. Willkie claimed that he would keep most of FDR’s New Deal welfare and regulatory programs, but that he would make them more efficient and effective, and that he would work more closely with business leaders to end the Great Depression.
His opponent Franklin D. Roosevelt won the 1940 election with 55% of the popular vote and 85% of the electoral vote.
Afterward, Roosevelt found Willkie to be compatible politically with his plans and brought him aboard as an informal ambassador-at-large. Willkie criss-crossed the globe on the former army bomber The Gulliver, bringing home a vision of “One World” freed from imperialism and colonialism. “One World” was Willkie’s travelogue of his travels and meetings of the then-Allies heads of state, as well as ordinary citizens and soldiers in regions such as Russia and Iran.[2] His liberalism lost him supporters in the GOP and he dropped out of the 1944 race, then died of a heart attack. He never held political office.
http://en.wikipedia.org/wiki/Wendell_Willkie
Idiot.
The people voting in Roosevelt is not the same thing as the people accepting the Keynesians’ claims that the people are so stupid that they will engage in self-destructive behavior unless the government prints and spends money.
First, going off the gold standard is a different thing from Keynesian countercyclical fiscal stimulus.
Elitist crap. The economy does not need “elites” controlling the economy and hence other people’s economic lives.
The only other video I’m aware of is this one: http://www.sms.cam.ac.uk/media/761745;jsessionid=8F43C0B00CFA8689119695C128999869
Go to 21:15. The end of the video here looks like it’s from the same video that you post here – but the beginning is different. I’m not sure if it’s from a different occasion or just from a part of the video that wasn’t presented in this youtube clip.
Hayek: You see, another political element was that, of course, politicians just lapped the argument and Keynes taught them if you outspend your income and run a deficit, you are doing good to the people in general. The politicians didn’t want to hear anything more than that — to be told that irresponsible spending was a beneficial thing and that’s how the thing became so influential.
Yeah, and Hayek can talk: he recanted and actually came to support the “evil” monetary stabilisation of the “wicked” Fed:
“There is no doubt, and in this I agree with Milton Friedman, that once the Crash had occurred, the Federal Reserve System pursued a silly deflationary policy. I am not only against inflation but I am also against deflation! So, once again, a badly programmed monetary policy prolonged the depression”
Pizano, D. 2009. Conversations with Great Economists, Jorge Pinto Books Inc., New York. p. 13.
Damn hypocrite.
He never recanted. It – stabilizing the moneystream – can be found in his prices and production. He acknowledged however that at time he misjudged the situation and his support for deflation was political, to break the power of the trade unions.
He never recanted. It – stabilizing the moneystream – can be found in his prices and production.
Where?
I have read Prices and Production and see no evidence of Hayek urging monetary stabilisation there.
Want to back up your claims with citation of a page number?
http://www.themoneyillusion.com/?p=5966
http://hayekcenter.org/?p=93
I don’t know the page number, but they should be there somewhere in Lawrence White’s article.
There is essence not much of a difference between urging for inflation and stabilisation as the result of stabilisation is inflation. You can however see the difference if – I believe – you regress Core CPI on M. If it is not a straight line then you’re stabilising. If it is a straight line, then inflating will temporarily reduce unemployment, but only make matters worse down the road.
Hayek’s coment in the 1970s:
“I have to admit that I took a different attitude forty years ago, at the beginning of the Great Depression. At that time I believed that a process of deflation of some short duration might break the rigidity of wages which I thought was incompatible with a functioning economy. Perhaps I should have even then understood that this possibility no longer existed. … I would no longer maintain, as I did in the early ‘30s, that for this reason, and for this reason only, a short period of deflation might be desirable. Today I believe that deflation has no recognizable function whatever, and that there is no justification for supporting or permitting a process of deflation.”
He is telling you EXPLICITLY: in the early 1930s he thought “short period of deflation might be desirable”!
There is not one shred of evidence he favoured monetary stabilisation in 1930, 1931 or 1932 or even 1933.
Have you had a look at the links and the article in JMCB? You’ll see there that Hayek did in fact favor stabilization. That he thought it not warranted at the time for political reasons, does not mean that he thought it so for reasons based on economics. You’re conflating economic theory and policy.
Anyhow, I also provided you with an answer that stabilisation and inflation are not that different from one another and that ones view depends on the data.
My comment is awaiting moderation, as I posted two links, but there is an article by Lawrence White in the Journal of Money Credit and Banking on this topic: Did Hayek and Robbins prolong the Great Depression?
Where?
I have read Prices and Production and see no evidence of Hayek urging monetary stabilisation there.
You didn’t read prices and production you lying hypocrite. If you did, then you would have easily seen that Hayek speaks of monetary stabilization in Lecture IV.
In section (8), he speaks of a reason to increase the supply of money when spending transfers from lower stage to higher stage production, where velocity is different. He writes:
“If, for instance, money is transferred from a lower to a higher stage of production where the interval between
two successive stages is twice as long, and, accordingly,
only half as much money is needed to hold the same
quantity of goods in that stage, half the money so
transferred would become free. In the opposite case
an addition of new money of an equal amount would
be necessary. In such a situation, therefore, the transition to more or less capitalistic methods of production may also require a change in the quantity
of money, not because the physical magnitude of the
goods-stream has changed, but because money has been transferred from a sphere where the co-efficient of money transactions has been higher to one where it is lower, or vice versa.”
This is a case for when “monetary stabilization” is warranted.
He did conclude however that central banks can’t do this effectively.
He’s talking about quanity changes in the money stock in the context of his trade cycle theory, not monetary stabilisation during a secondary deflation – two different things.
Hayek in his OWN words:
“I have to admit that I took a different attitude forty years ago, at the beginning of the Great Depression. At that time I believed that a process of deflation of some short duration might break the rigidity of wages which I thought was incompatible with a functioning economy. Perhaps I should have even then understood that this possibility no longer existed. … I would no longer maintain, as I did in the early ‘30s, that for this reason, and for this reason only, a short period of deflation might be desirable. Today I believe that deflation has no recognizable function whatever, and that there is no justification for supporting or permitting a process of deflation.”
He’s talking about quanity changes in the money stock in the context of his trade cycle theory, not monetary stabilisation during a secondary deflation – two different things.
You fallaciously claimed, in response to Martin stating that Hayek did speak of monetary stabilization in Prices and Production, that he did not. Your claim is wrong, as is evidenced by Hayek’s Section IV onwards where he does speak of reasons to stabilize the money supply and volume of spending.
Hayek’s theory of the business cycle already includes deflation during the bust phase, so to say that his business cycle theory is separate from the bust phase is like saying his theory of the booms and busts does not include busts.
Hayek in his OWN words:
Yes, we all know Hayek changes his mind from one time to another, as did Keynes.
LK, didn’t you just lecture Roddis above that fiscal and monetary policy are different? How is Hayek being a hypocrite with those quotations?
(But I do think the Hayek of 1932 was much cooler than the later one. He and Robbins were right!)
So – unlike George Selgin (who displayed good sense in the recent Skidlesky debate) – you are not a “stable MV person”?
You believe that delfation (in your Austrian sense of a severe contraction of the money supply) has no deleterious economic effects?
Not even Roger Garrison believes this:
“Deflation caused by a severe monetary contraction is another matter. Strong downward pressures on prices in general put undue burdens on market mechanisms. Unless, implausibly, all prices and wages adjust instantaneously to the lower money supply, output levels will fall. Monetary contraction could be the root cause of a downturn – as, for instance, it seems to have been in the 1936–7 episode in the USA. The Federal Reserve, failing to understand the significance of the excess reserves held by commercial banks, dramatically increased reserve requirements, causing the money supply to plummet as banks rebuilt their cushion of free reserves. But what caused the money supply to fall at the end of the 1920s boom? The monetarists attribute the monetary contraction to the inherent ineptness of the central bank or to the central bank’s (ill-conceived) attempt to end the speculative orgy in the stock market, an orgy that itself goes unexplained. In the context of Austrian business cycle theory, the collapse in the money supply is a complicating factor rather than the root cause of the downturn. In 1929, when the economy was in the final throes of a credit-induced boom, the Federal Reserve, uncertain about just what to do and hampered by internal conflict, allowed the money supply to collapse. The negative monetary growth during the period 1929 to 1933 helps to account for the unprecedented depth of the depression.”
R. W. Garrison, “The Austrian School,” in B. Snowdon and H. R. Vane (eds), Modern Macroeconomics: Its Origins, Development and Current State, Edward Elgar, Cheltenham. 2005. p. 515:
No Austrian denies that massive deflation will have no negative effects on the economy.
The difference is that Austrians hold that the deflationary collapse is caused by prior central bank inflation.
“No Austrian denies that massive deflation will have no negative effects on the economy.”
Not so:
“Similarly, a decrease in the money stock involves no social loss. For money is used only for its purchasing power in exchange, and an increase in the money stock simply dilutes the purchasing power of each monetary unit. Conversely, a fall in the money stock increases the purchasing power of each unit” (Rothbard, 2004 [1962], Man, Economy, and State p. 766).
Rothbard made that comment in the context of gradual deflation and general inflation, tending towards equilibrium.
Rothbard did hold that massive deflation will have destructive economic consequences. He wrote in “Mystery of Banking” the following:
“There is admittedly a great deal of charm to this position.
Why shouldn’t the banks be open to the winds of a harsh but rigorous
justice? Why shouldn’t they at last receive their due? But
against this rigor, we have the advantage of starting from Point
Zero, of letting bygones be bygones, and of insuring against a
wracking deflation that would lead to a severe recession and
numerous bankruptcies. For the logic of returning at $500 would
require a deflation of the money supply down to the level of existing
bank reserves. This would be a massive deflationary wringer
indeed, and one wonders whether a policy, equally sound and free
market oriented, which can avoid such a virtual if short-lived economic
holocaust might not be a more sensible solution.”
Hayek was philosophically a statist, so attacking him on this point in order to refute the essence of Austrian theory is attacking a straw man.
Straw man arguments are your stock in trade.
I am not attempting to “refute” Austrian theory in the comment in quetsion: it’s about Hayek’s having changed his view, and being inconsistent.
Nothing MORE, nothing LESS.
Straw man arguments are your stock in trade.
Hahaha, “I know you are but what am I” is the recourse of those who have no way to defend their position.
I am not attempting to “refute” Austrian theory in the comment in quetsion: it’s about Hayek’s having changed his view, and being inconsistent.
That’s called ad hominem tu quoque fallacy.
You didn’t even respond to Roddis’ reference to Hayek’s statement. You just smeared Hayek and did not even attempt to consider the argument he made, which stands alone.
If you want to criticize Hayek for being inconsistent, then that’s fine, but pointing that out can’t can’t be used to refute any of his arguments.
After all, Keynes also changed his views from the time he wrote A Tract on Monetary Reform, and A Treatise on Money, to his General Theory. But this fact alone cannot serve as a refutation of anything he said.
No. LK attempts to “refute” Austrian theory based upon Bob Murphy saying that there are multiple dynamic rates of interest in the real world and not one “natural” rate. This means that reality is even more complex than we originally thought and is even more complex and undecipherable to Kleptocratic overseers imposing their mindless Keynesian “solutions”. Since LK cannot comprehend the nature of economic calculation, finding a technical dispute among Austrians is as good as a win for him since he’s so desperate to find anything negative about the Austrians.
http://socialdemocracy21stcentury.blogspot.com/2011/07/robert-p-murphy-on-pure-time-preference.html
Since he is spending so much time trying to refute the Austrians, and the only criticisms he can find are internal disputes on details, and the occasional changing of minds, both of which are prevalent in his own mish mash worldview, it’s blatantly clear he is really only trying to convince himself.
Hayek in 1975:
PROFESSOR HAYEK: You see, even at that time, I did say so. I will tell you of an episode that may be significant. In 1929, or perhaps 1930, when the depression was beginning to get quite serious on the European continent, a German political commission—the Braun Committee— proposed to combat it by reflation (though that term had not yet been coined), by rapid credit expansion. One of the members, in fact the main author of the report, was my late friend, Professor Wilhelm Roepke. I thought that in the circumstance the proposal was wrong, and I wrote an article against it. I did not publish the paper, however, but sent it to Roepke with a covering letter in which I made the following point:
Apart from political considerations, I think you should not—not yet at least—start expanding credit. But if the political situation is so serious that continuing unemployment would lead to a political revolution, please, do not publish my article. That is a political consideration, however, which I cannot judge from outside Germany, but which you will be able to judge. Roepke’s reaction was not to publish the article, because he was convinced that at that time the political danger of increasing unemployment was so great that he would rather risk the danger of causing further misdirections by more inflation in the hope of postponing the crisis; at that particular moment, such postponement seemed to him politically necessary.
I have never denied that one can, in the short run, reduce unemployment in that fashion,. All I am arguing is that in the long run you do more harm than good by inflation, and unless the circumstances of the moment threaten greater dangers, I would not inflate.
As Bob Murphy in his excellent book on the depression explains, what more could the Fed do than 1.5% interest rates for 5 months in 1931? Where was this so-called “tight” money?
http://www.flickr.com/photos/bob_roddis/4164589632/sizes/o/in/set-72157600951970959/
The banks were collapsing on masse – as Milton Friedman showed a long time ago.
What you needed was QE on a big scale to stabilise the financial system, by protecting depositors, then clearing bad debts and non performing loans without collapsing the economy.
And you misundertand my position: Hayek was totally wrong – just as Friedman was – to think that mere monetary policy would have staved off the depression. Only fiscal policy could have done that.
The fact that interest rates stood at 1.5% for 5 months in 1931 and had no significant effect is TOTALLY consistent with the Keynesian view.
Ever heard of “pushing on a string”?
Keynes’ view, I believe, – I have this from Keynesian economics and the economics of Keynes – was that the central bank was politically and ‘practically’ constraint. Fiscal policy is and was a second best. It’s pointless though to argue what x or y would have found: do you believe that it is impossible for central bank to generate hyperinflation at any time of its choosing? If not, then why hold on to that view?
Fiscal policy is always bad policy. As Jonathan Catalan explains, government spending is bad policy.
http://mises.org/daily/5123/Government-Spending-Is-Bad-Economics
He doesn’t explain anything. He pretends to explain, but does nothing else than repeat the standard austrian dogma which is what people love to get from articles at mises.org.
How would you even know? You don’t understand Austrian theory.
There is no theory whatsoever in that article. Only dogma to make austrians salivate and bark.
“It is impossible for the government to balance it’s budget when it is running a deficit.”
‘That is the version for morons.
The important one is that the government can only balance its budget if the non government sector runs a deficit equal to the trade deficit, to the penny.
You only understand the first version.
That is the version for morons.
Hahahahaha
From now on, anything I say that is tautologically obvious, I will just say “that is the version for morons, my version is more sophisticated, trust me.”
What you needed was QE on a big scale to stabilise the financial system, by protecting depositors, then clearing bad debts and non performing loans without collapsing the economy.
No, what is needed is no further inflation, in order to stop further economic distortions.
Money is not neutral. Inflation affects the real structure of the economy.
Fiscal policy is economically destructive, because it punishes wealth producers and rewards the unproductive, which reduces prosperity.
Actually there is a pretty good case for increasing Core CPI. Just graph Core CPI (% from year ago) from 2008 to 2011 against Unemployment and you will see a downward sloping line and a simple linear regression gives a high R^2. Core CPI slopes downward as a function of unemployment from somewhere around 2 to less than 1.
Graph M2 against Core CPI and you’ll see that as M2 increases – over that same period – Core CPI increases. In other words the decline in inflation and the increase in unemployment suggests a drop in the Money Supply.
If MV in Py is kept stable you’re not supposed to see that relationship. The economic distortion – a drop in M – already happened. That’s why this mess got so big.
‘in Py’ should read ‘in MV=Py’
You are ignoring why there was a massive drop in M to begin with. It’s because of a previous inflation.
To believe that more of what got us into the mess cam get us out is the absolute opposite thing to do.
The alleged connection between Inflation and unemployment was already refuted empirically in the 1970s.
Inflation simply is not a full employment policy. Full employment is a real phenomenon, not a monetary phenomenon.
Well Bob, didn’t you know that they didn’t print enough new green pieces of paper? Yeah they printed green pieces of paper but if they would only have printed a lot more everything would have been fine.
We wouldn’t have to quibble about how to cure catastrophic statist inflationist bubbles if we didn’t allow statists to inflate bubbles in the first place.
Gee, if we do the right thing, will the mob go all Nazi on us?
LK, I wasn’t pushing a “story” about FDR at all. You said he promised he would intervene and the American people elected him in 1932 on the basis of that promise to help them. So I was merely pointing out that this isn’t true. I’m not a fan of the “wisdom of the American people.” They’re ultimately responsible for the crazy policies we have.
Also, you’ve got it right, I am not a fan of the Fed “reflating” to prevent a “secondary depression” or any such thing. If we have to have the gov’t involved in money and banking, then I favor a 100% gold dollar. No discretionary policy at all. I’m not saying massive deflation is a good thing, I’m just saying having a Fed with the ability to selectively inject new money is a bad thing.
Also, everybody please let’s keep it civil. LK, you are quick on the draw with your insults, and everybody else, let’s at least cut LK some slack since he has obviously read a lot more Austrian stuff than Krugman has.
“Also, you’ve got it right, I am not a fan of the Fed “reflating” to prevent a “secondary depression” or any such thing. If we have to have the gov’t involved in money and banking, then I favor a 100% gold dollar. No discretionary policy at all. I’m not saying massive deflation is a good thing,”
Which raises the question: if this secondary deflation causes unecessary suffering, as argued by Hayek and Garrison, then why would you wish to see unnecessary economic effects on an economy?
I remember that Hayek/Garrision argue that the secondary deflation is of cource unwanted, but from the problem side of knowledge (how to prevent the secondary effects by allowing the liquidation of the malinvestments through stabilization policy) unsolveable (finding the right instruments, monitor and uncorrupt operator). But i cant find the source.
Rubbish.
It is isn’t “unsolveable “, according to Hayek:
“There is no doubt, and in this I agree with Milton Friedman, that once the Crash had occurred, the Federal Reserve System pursued a silly deflationary policy. I am not only against inflation but I am also against deflation! So, once again, a badly programmed monetary policy prolonged the depression”
Pizano, D. 2009. Conversations with Great Economists, Jorge Pinto Books Inc., New York. p. 13.
Monetary stabilisation is required. Clear to you?
Stll unclear how to find a omniscient, powerful but uncorrupt(able) philosopher king operating monetary policy in interconnected markets a la Bagehot who “lends freeley at a high rate against good collateral”. Maybe the private not-100%-reserve banks of the “free bankers” can self-stabilize due to the profit/loss-market test, but not the political selected central bankers.
Food for thought for curing deflation hardships: Allow bankrupty courts to reset the terms of contracts so that the debtor only owes in real stuff what the parties envisioned in the first place while allowing easy discharge of debt created with funny money. The terms of your “real” debt are reset and your funny money debt is discharged.
Then forbid any future problems by a return to 100% reserves and enforce the chopping off of the hands of bankers and government officials who violate it.