An Excellent Question From Steve Landsburg
When he’s not working on the great American novel, Steve Landsburg poses some excellent questions to his readers:
Scientists at CERN have found apparent evidence that neutrinos can travel faster than light.
Suppose that tomorrow historians at Harvard find apparent evidence that the South won the American Civil War — not in some metaphorical “they accomplished their goals” sense, but in the literal sense that it was actually Grant who handed his sword to Lee at Appomatox and not the other way around.
Question: Of which conclusion would you be more skeptical?
Of course your answer might depend on exactly what this new “apparent evidence” consists of. So let me reword: As of this moment, which do you think is more likely — that neutrinos can travel faster than light, or that the South won the Civil War?
This is indeed a “big question.” I encourage you to think about the implications of this, especially if your own gut reaction (like mine) is to be more confident about the War Between the States. Steve has put his finger on something really important here.
In principle, the “fact” that particles can’t go faster than light is supposed to be embedded in the very nature of the universe. I remember when I was younger, first reading about relativity, how the pop authors would all stress: “We are not talking about limitations on our technology here. Einstein showed that even in principle it’s impossible to travel faster than light. A million years from now, humans might have invented all sorts of neat gadgets, but they won’t have a spaceship that can travel faster than light.”
And yet, as Steve’s question brings to the surface, the caveat to all this was “…assuming we know the right laws of physics.”
I’m not sure why, but for some reason Steve’s question seems analogous to mathematical economics versus Austrian economics. The former is incredibly precise and rigorous, subject to the initial assumptions. Austrian analysis, in contrast, is a lot more loosey-goosey, but I’m more confident in its conclusions than in the things popping out of mainstream models.
(It should go without saying that none of my discussion really hinges on whether the CERN scientists “disproved Einstein” or not. Even if it turns out they didn’t, the point is–we are prepared to believe it. In contrast, if rogue historians announced that they had “disproved DiLorenzo” (by showing that it was the tyrant Lee who subjugated the North) then nobody would wait with bated breath to see what other historians had to say about it. We would all “know” the rogue historians were either crazy, liars, or relying on goofy definitions.)
“Austrian analysis, in contrast, is a lot more loosey-goosey, but I’m more confident in its conclusions than in the things popping out of mainstream models.”
AE is loosey-goosey? I am more confident in AE than whether or not the sun will rise on the horizon tomorrow. Mathematic economics is not economics at all. It is a fraud.
Hilarious
AE is “loosey-goosey” because it understands that economics deals with real live people, their crazy behavior and predicting the future. It’s expressly not physics or physics-like.
i cant believe noones proposed the futurama explanation of superluminal travel:
“These are the dark matter engines I invented. They allow my starship to travel between galaxies in mere hours.”
“That’s impossible. You can’t go faster than the speed of light.”
“Of course not. That’s why scientists increased the speed of light in 2208. “
> Scientists at CERN have found apparent evidence that neutrinos can travel faster than light.
Funny, MMT’ers been saying this for decades…
I am sorry. English is not my first language. I had hard time understanding what loosey-goosey is. I though it means “not serious” or “not scientific, irrational”. You do not want to know what http://www.urbandictionary.com
gives as a meaning of loosey-goosey.
Loosey–goosey defined for English-language learners: very loose or relaxed
http://www.learnersdictionary.com/search/loosey-goosey
… as in, don’t drop the teleological aspects of choice when building your model just because you can make your model more “functional.”
Reminds me: I once had a dream where I had to translate the Latin ad hoc into terms understandable to people in the rural US. My translation? “Higgledy piggledy”.
‘I’m not sure why, but for some reason Steve’s question seems analogous to mathematical economics versus Austrian economics. The former is incredibly precise and rigorous, subject to the initial assumptions. Austrian analysis, in contrast, is a lot more loosey-goosey, but I’m more confident in its conclusions than in the things popping out of mainstream models.’
It’s weird how you guys call for being outside the mainstream when you come to effectively the same policy conclusions (e.g. less government), obviously minus a central bank. I’m also pretty sure a lot of Austrian theory is deduced from the human action axiom, which is not dissimilar to deducing it from assumption.
It’s amazing how people love to form opinions about topics they know nothing about.
Out of curiosity, who in the mainstream calls for less government AND has a record of following through on that promise?
Actually I’ve been reading about the topic for quite a while. Accusations like that are why people don’t like to engage with Austrians (with the exception of the author of this blog).
‘Out of curiosity, who in the mainstream calls for less government AND has a record of following through on that promise?’
Erm, well:
– Developed countries are currently trying to outdo each other on austerity.
– Thatcher, Reagan, the 80s?
– Milton Friedman, Robert Lucas, you know – the people who have shaped economics for the last 30 years?
– The IMF/World Bank – the giant institutions that have been imposing ‘free market’ policies on developing countries for decades.
Now you will come back with the inevitable ‘look at state spending as % of GDP, it didn’t even decline that much!’ Well, state spending is pretty arbitrary and tells us little about how little or how much the government is doing. It also increases naturally as a result of Baumol’s Cost Disease so cutting it in absolute terms can be very difficult indeed.
Libertarians like to pretend they are outside the orthodoxy in a statist, freedom hating world. In reality, neoliberalism has been the orthodoxy for 30 years, and neoliberalism entails tax and spending cuts, deregulation and privatisation.
Stop making sense!
This is not what this blog is for. Don’t ruin it.
Mammoth, you actually agree with him that we have been following libertarians for the last 30 years? That makes sense to you?
No, he is saying that largely mainstream economics for the past 30 years have endorsed neoliberal policies that promote less government intervention.
No, he is saying that largely mainstream economics for the past 30 years have endorsed neoliberal policies that promote less government intervention.
That is false. The last 30 years have been dominated by Keynesian/Monetarist economists who want the government to play a larger role in the economy, if not through Keynesian statist polices, then Monetarist state policies.
How in the world did Reagan make government smaller?
http://www.lewrockwell.com/rothbard/rothbard60.html
I was going to count Cahal as the 102,345th anti-Austrian who has no familiarity with basic Austrian concepts. But it’s easier just to count the anti-Austrians who have such familiarity. ZERO.
No Bob, we’re wrong. He understands Austrian economics and sees that we’ve got the kind of government we want over the past 30 years. How could an Austrian argue when we’ve had Reagan, Friedman, the IMF and World Bank pushing through Rothbardian ideas this whole time?
You are putting words in my mouth.
My point: in terms of policy prescriptions, there is not as massive a difference between neoliberalism and Austrianism as you guys make out.
I have a good degree of familiarity although it is not comprehensive because time is a precious resource and Austrian theory was abandoned after the 1930s debate.
Dan,
I honestly can’t read Rothbard without tearing my own hair out, so I stopped when I saw the first insult.
Fact is, Reagan deregulated, bashed unions and privatised and cut taxes on the rich. He also pulled the overton window drastically right, which is perhaps more important than his policies.
In any case, neither of you have answered my points substantively.
What 1930s debate? There was no 1930s debate.
Is there any point in me replying if you’re going to deny the occurrence of historical events?
I’ll deny that those events could be reasonably called a “debate”.
The back and forth between Hayek and Keynes, Schumpeter, Sraffra, Kaldor and so forth?
Many books published, critiques of each others, verbal debates at Cambridge and the LSE?
If that isn’t a debate then what is?
There was no debate on basic concepts such as ignorant acting man or economic calculation and certainly no debate on Cantillon Effects. The statists in the “debate” avoided such crucial basic concepts to instead fuss about whether there is one natural interest rate or many. Zzzzzzzz.
Just like now, the basic concepts are ignored. Purposefully.
Speaking of Kaldor, I seem to recall going down to the local university library and paying $15 for a Kaldor article “Professor Hayek and the Concertina-Effect”.
I think I sent it to Bob Murphy two years ago and we decided that Kaldor was spending a lot of time ripping Hayek’s scholarship, rather than addressing the issue of whether central banks cause business cycles. Pretty worthless in terms of a “debate”.
So since the Austrians lost convincingly, it can’t have been a real debate.
There’s no point with you guys.
So since the Austrians lost convincingly, it can’t have been a real debate.
No, the Austrians won the debate intellectually. However, the statists “won” in being able to implement their plans on everyone.
How can we answer you substantively? You brought up Reagan as a guy who made government smaller so I posted an article where Rothbard completely exposes that myth. You answer that with saying you wouldn’t read it and continued to push a myth that the facts don’t match. Just saying fact is doesn’t make it so.
Hayek didn’t “LOSE” the “debate”. You don’t even know the subject matter of the Austrian school. Keep blabbing.
You guys never lose anything. You just keep moving the goalposts every time you lose.
Your theory makes no sense. It sells with Glenn Beck and other crazies, but back here on planet earth it’s just a bunch of garbage.
You guys never lose anything. You just keep moving the goalposts every time you lose.
That’s what the loser socialists kept doing in the 1930s.
Your theory makes no sense.
Your theory makes no sense.
Hey Bob,
Given the recent collapse in precious and industrial metals I was wondering how you’re feeling about your hyperinflation prediction? Your readers seem to think that the price of these metals represents clear evidence of hyperinflation or high inflation so does that mean the recent collapse is now pointing to deflation?
Given the recent collapse in precious and industrial metals
Margin hikes strikes again.
Your readers seem to think that the price of these metals represents clear evidence of hyperinflation
Only if the prices are unhampered. It’s impossible to predict what governments will do to suppress the prices.
Do you really consider giving back 6 weeks of gains to be a collapse? I think it’s fine to call it a collapse if we encourage hyperbole.
This reader thinks the price of gold reflects a debasement and subsequent lack of faith in the currency. As well, independently of the price of gold, I believe the US is due for higher bouts of inflation. I’m not ready to predict hyperinflation, but it’s a concern.
Speaking of MMTers, they apparently suddenly realize that they never discuss the real world. Thankfully, there’s a new blog to cure that problem:
A few days ago I checked out the latest stories over at Pragmatic Capitalism, and found a rather insightful comment by an anonymous user.
“So why do the posts and discussions on this forum focus 90% on the unimportant mechanical process and only 10% on the more critical factor – productivity and economic value of government spending?”
The user has a point. The importance of the insights of MMT has little or no impact if we don’t take a rigorous approach to modelling an MMT system and compare it to a mainstream monetary theory model. Often I see the MMT proponents arguing about these mechanical processes, but the real potential of MMT would be to use it to improve monetary and fiscal policies. This can’t be done without modelling, and there is little work being done in this area.
http://www.modernmt.net/2011/08/14/moving-forward-with-modern-monetary-theory/#more-92
Really.
Nice
Quantity and quality of government spending is a political choice.
MMT is thus agnostic about it, as opposed to Austrian economics which is ideology in disguise.
L. Randall Wray and Bill Mitchell are nothing but crazed welfare-statists:
For exhibit B, we have economist L. Randall Wray, who wrote a blog post with a title that leaves nothing to the imagination: “Modern Budget Cutting Hooverians Want a Return to the 1930s.” Wray informs us,
Our modern Hooverians would like to return to the “good old days” of President Hoover, when the government was smaller and both unwilling and unable to offset the swings of private investment spending. Back then, when investment collapsed unemployment did not go to 9 or 10 percent, it went all the way to 25 percent. Hooverian economics would turn back the clock to ring in another Great Depression with the same old pre-Keynesian ideas that failed us in the 1930s.
http://mises.org/daily/5215
MMT is nothing but a bunch of lefties trying to convince the weak-minded that they are discovered a way to abolish the law of scarcity and, along with catallactics, all economics in general so as to suggest that there is no limitation on the amount of goodies the government can effortlessly provide to the rabble.
MMT is agnostic about size and type of government spending. MMTers are not.
You shouldn’t attribute to MMT what belongs to some MMTers.
Otherwise you should accept that anyone could say Austrian economics is a stupid religious dogma because you present it as a stupid religious dogma.
MMT is agnostic about size and type of government spending. MMTers are not.
You shouldn’t attribute to MMT what belongs to some MMTers.
LOL, if only you could apply that same thesis to Austrian economics, which is value free, and Austrian economists, who might not be.
Austrian economics is not value free wrt to the role of government.
It is precisely the fact that it is not value free that attracts some libertarians wjp did not try other kind of therapy.
Cullen Roche, a primary MMTer, is a Republican. He complains about the size of government all the time. You don’t seem to have your facts straight (a recurring theme for you Austrians).
Cullen Roche, a primary MMTer, is a Republican. He complains about the size of government all the time. You don’t seem to have your facts straight (a recurring theme for you Austrians).
Nonsense. He isn’t complaining about the size of government. He is complaining about the size of Democratic government.
Roche, like most other Republicans, have no problems increasing the size of the state if the spending is on war machines.
It seems you MMTers can’t even get your facts straight.
And, of course, Mr. Roche has completely refuted Bob Murphy:
http://pragcap.com/final-thoughts-on-the-austrian-school
Same old, same old.
I can see why you’re so defensive about MMT. It seems that everything Cullen and the MMTers predicts turns out to be true. Meanwhile, you fools have only to fall back on your precious metals theme and that’s falling apart as we speak.
Keep on backpedaling Austrians!
I can see why you’re so defensive about MMT. It seems that everything Cullen and the MMTers predicts turns out to be true.
MMT doesn’t make any predictions. It’s just a hodge podge of accounting gimmicks on the basis of ignoring economic scarcity and human action.
Meanwhile, Austrians predicted the housing bubble and collapse, and have already predicted the sovereign debt crisis that is unfolding as we speak.
Precious metals isn’t collapsing. The regulators just keep hiking margin requirements in a desperate attempt to suppress the prices and thus give credence to ignoramuses like you who believe precious metals are in a bubble.
Austrian economics doesn’t make any predictions. It’s just a hodge podge of religious faith and ideological dogmas.
MMTers predicted the US credit crisis, using the sectoral balances approach, and the problem with the Euro from inception.
In the meantime, Austrian guru Murphy bought his house at the peak of the market.
And there is no sovereign debt crisis. The only debt crisis is not a sovereign one.
“Meanwhile, you fools have only to fall back on your precious metals theme and that’s falling apart as we speak.”
Really? So, you count a little noise in a longer-term trend as “falling apart”? So, the Fed’s announcement to not increase its balance sheet (only maturity), Brazil’s 30% tariff hike on Asian nations, China’s almost inverted yield curve, the Eurozone’s sovereign credit problems (esp. Greece), and the IMF’s admission that it will be out of funds, etc; all have nothing to do with this move. Maybe you can elaborate.
I don’t want to put words into your mouth, but what your comment seems to say is that precious metals are going to get crushed in the near-mid term.
If this is what you mean, then come out and say it. If not, then why even bring up the idea?
Also, I hope that you do realize that there is a lot going on in Brazil, China, India, the Eurozone right now. Plus, the Fed essentially said that it will not increase its balance sheet. Are you sure that the current move isn’t just a head-fake?
The apolitical parts of MMT are fairly small, aren’t they? Can’t we summarize the theory as “Look Ma! No spending constraints!” ? Everything else seems to be classical Keynesianism [employment-inflation tradeoff, saving in nominal terms, …]
” Einstein showed that even in principle it’s impossible to travel faster than light”
This is not true! Einstein showed that there is a barrier which one cannot cross. That is, it is not possible to accelerate from below light speeds to above light speeds. Einstein never claimed that nothing could travel faster then light given that they already do so in their physical state of nature.
I actually am familiar with that Dan (tachyons right?) but you’re right, as I wrote it that statement is wrong. I should have said, “…it’s impossible to accelerate up to and surpass the speed of light.”
It is actually possible, with a large enough fiscal stimulus.
Yes, Bob. Tachyons. I was going to mention just that, but it appears Dan beat me to it.
Good thing that I actually read the comments before commenting, huh?
My understanding of Einstein’s theory is similar to Dan’s. Basically, the theory says that no object can accelerate past the speed of light. However, if an object is already at the speed of light during its creation, then relatively speaking, it is standing still. Remember, there is no zero-point of reference, only a theoretical one.
Sorry, I should be more clear as to what I am saying above.
The point of reference is very important in this question, I think. If for instance the Earth is traveling exactly at the speed of light, and you are standing on the Earth, from your point of view you are entirely still. However, if you hopped into an SR-71 and decided to fly from Tennessee to Paris at 2000 mph, then you are now traveling the speed of light plus ??? (the actual speed would depend upon the SR-71’s flight path and its deviation from the line of Earth travel).
My understanding is that Einstein’s theory never precluded this possibility.
The speed of light is constant in every frame of reference.
Oh yes, that Cullen Roche is a freakin’ genius:
Hey Cullen,
I was hoping you could elaborate a little. How much of “Austrian economics” do you feel is debunked by MMT? In fact, how do you define Austrian econ, and how familiar are you with it’s corpus?
**********
In my opinion, it almost entirely debunks it. Austrians have this vision of a world where we pay no (or few) taxes and everyone lives happily ever after feeding off the goods and services provided by a perfectly rational and efficient private sector marketplace (ironically, the deregulated and free wielding financial sector is an offshoot of this sort of thinking and helped cause this recent crisis). I just don’t think that’s a rational perspective on the world. There’s a reason why no society like that exists on earth (except maybe in parts of Africa where you’re not likely to live past the age of 30).
More importantly though, we are pack animals. We form groups because we are more likely to ensure our survival through cooperation. We don’t live in solitude. The formation of governments is nothing more than a manifestation of this fact. Now, it’s important to note that govt can and does corrupt. If it is not being used in the best interest of the group then its purpose has failed.
Austrians love to point back to the 1800′s when the world more closely resembled their vision. But look at the disaster that was the 1800′s. SIX depressions. If you want to live in that world then be my guest. I am pretty happy living in a world where people bitch and moan about the fact that they make 10X the amount of the average Chinese citizen (an economy we should supposedly be envious of currently)….
So, in a reality based world (where large group based governments exist) and not this dream world (where the efficient market provides services to people who live in solitude) MMT largely debunks all of the thinking that comprises the foundation of the Austrian beliefs. In short, it makes for great compaign slogans. But as a species, the Austrian ideals contradict our natural animal instincts….
http://tinyurl.com/3ff26n7
I never before realized that people cannot live together in peace without SWAT teams. He sure set me straight.
No Bob,
According to you guys we just need an island, some coconuts and that’s about it! It’s just a magical treasure island where we don’t need to rely on each other for anything and everyone just gets along swell! Sort of like vacationing in Somalia!!!! Yeay!!!!!!!!!!!!!!!!!!!
I myself prefer linen and cotton media of exchange. You can wear it, unlike coconut pulp.
Sushi can be helpful too. But you need to keep those gnomes at bay.
Hmm!? Talk about your great errors of knowledge and understanding.
When did any Austrian assume that the economy today is an island with just coconuts? I believe that you take the “Crusoe Model” as a real construct rather than a mental construct. No Austrian has ever said that this is reality, rather they use it as a mental construct in order to understand the basic (and, essential) economic axioms that form the foundation of the science.
Further, the cooperation between individuals is the most essential aspect of economics from an Austrian perspective, so how you can state that Austrians believe that the economy is, “just a magical treasure island where we don’t need to rely on each other for anything and everyone just gets along swell!”, is just plain ignorant.
Even more ignorant is your citing of “Somalia”. Never mind that this stateless society happened by way of violent civil war due to the collapse of a socialist state (not any sort of libertarian movement), but even still, the peoples of that region are far better off than they were prior…. Also, the prime source of conflict in Somalia today is the fighting factions attempting to gain enough power to institute a state. Who would have thought that the cause of the greatest crime and slaughter would come from those groups that wish to instate their own monopoly power over a group of peoples?
Have you ever even been to Somalia, the Horn… Have you ever even been to Africa? If you have, great! If not, then why even bring up something of which you have no knowledge? It is as if you are attempting to argue the merits of mode-substitution and interval-leaps in the diatonic scale, yet you have no knowledge of music theory. Do you spit often?
http://www.independent.org/pdf/working_papers/64_somalia.pdf
You don’t even understand the ridiculous contradiction in your work. Rothbardians essentially say there is no need for government. That entirely misinterprets the interdependence of human beings and the relationships that lead us to create and rely on governments to begin with.
But you guys create these fantasy “Crusoe Islands” to prove that this fantasy world is realistic….
The analysis that ensues is purely unrealistic and bordering on comedic.
“Rothbardians essentially say there is no need for government. That entirely misinterprets the interdependence of human beings and the relationships that lead us to create and rely on governments to begin with.”
Rothbardians essentially say there is no need for government – government being an established coercive monopoly on the provision of codified “law” and its enforcement. If there was a single organization with a forced monopoly on the production and distribution of food and we opposed it for all the reasons that markets typically better serve the consumer you wouldn’t be offering up empty platitudes about how we misinterpret the interdependence of human beings and how we rely on food. Rothbardians support the abolition of such coercive monopolies IN LIGHT of our interdependence and material needs…not in spite of it.
At that point, it’s fine to go back and forth on the efficacy of having or not having an institution with a monopoly on such things, but it’s a mistake of the first order to pretend that free-market anarchists don’t understand human interdependence.
Oh child please. We didn’t create this coercive institution so we could punish ourselves on a daily basis. This is a democracy for crying out loud.
You’re not fooling anyone with this garbage except the other idiots who come to pray at the Church of Austroretardation.
“We didn’t create this coercive institution so we could punish ourselves on a daily basis.”
You could say that about many coercive institutions (non-governmental included) throughout history – intention has little to do with the efficacy of either argument. Democracies are very capable of of not only inadequate provision of defense and law, but often outright injustice against its own people…particularly those out of democratic power.
“This is a democracy for crying out loud.”
Which proves what – other than that a simple plurality of the people decide what goes for the rest of us? If everyone had a vote on what model of car we’d collectively produce every four years, do you think we’d end up with (comparatively) good cars?
“Imagine buying cars the way we buy governments. Ten thousand people would get together and agree to vote, each for the car he preferred. Whichever car won, each of the ten thousand would have to buy it. It would not pay any of us to make any serious effort to find out which car is best; whatever I decide, my car is being picked for me by the other members of the group. Under such institutions, the quality of cars would quickly decline.” – D. Friedman
I think it’s more likely the neutrino went faster than light. Does that make me an Austrian economist?
Actually I’m pretty sure that Keynes predicted this Accelerator effect in the General Theory.
Maybe I’m dense, but I don’t understand the big deal. They only went 20ppm faster. That could be nothing more than error or some kind of little bitty thing that hadn’t been noticed before. It’s not as if they went twice as fast or something like that.
What’s worrying them is that they considered that possibility and tried every known way to account for the results as error, and had a huge number of prominent scientists checked it out, and still can’t account for the result that way.
“In contrast, if rogue historians announced that they had “disproved DiLorenzo” (by showing that it was the tyrant Lee who subjugated the North) then nobody would wait with bated breath to see what other historians had to say about it. We would all “know” the rogue historians were either crazy, liars, or relying on goofy definitions.)”
Correct. Because the emprical evience for the north winning is overwhelming.
In contrast, empirical investigation of the properties of esoteric subatomic particles like neutrinos is in its infancy.
Moreover, this discovery, if true, should not be that surpising because ALL theories in the natural sciences are open to revision since the only the only to defend them is either (1) induction or (2) Popper’s falsificationism by hypothetico-deduction. The conclusion of an inductive argument is only ever high probable at best, and in Popper’s method any scientific theories that has passed thousands of tests in the past could in principle be falsified tomorrow. This is why science is not dogmatic.
Empirical evidence that the free market does not result in a “lack of aggregate demand”, unemployment or monopoly is overwhelming. That doesn’t stop vicious Keynesians and “progressives” from destroying our common law and constitutional private property protections to solve “problems” that do not even exist.
A free market without any government intervention has not even existed in modern times.
So, as a point of logic, there is no empirical evidence at all about free markets.
Apparently, not only you don’t understand the concept of an axiom, but you neither do you understand the concept of empirical evidence.
No wonder you became an attorney.
I am quite new to all this, but I must say I am quite impressed by the Austrians’ logic.
As I understand it, what they actually try and get across are points like this:
Increased government regulation, will distort market prices and lead to higher prices of production which will have to be passed onto consumers as price rises. In practice, these regulations are usually the work of corporate lobbyists who then pass on these regulations to politicians who present them to the public as a caring sharing government policy. I think I can quite happily agree with this analysis, nothing too shocking there.
They go on to say that government spending will largely have similar effects. Government spending will takes resources out of the private sector, which will increase interest rates for the remaining participants looking for funds to invest. Also, the goods/services produced by the state will more often than not have been better used in the private sector. Again, I have to agree completely.
Finally, they also say that a central bank will more often than not print more money which will cause certain sections of the community to benefit at the price of others in that community. In addition, this money printing will distort the savings and investment market, and mess up the whole price mechanism thing which will inevitably lead to an eventual messy blood bath with interest sky rocketing. Again, this seems quite logical once you think about it for more than 10 minutes. I mean, it does seem quite rational that money printing can only have marginal consequences on production, if any, and that any production it create have will probably be at the expense of production that would have occurred somewhere else in the private sector. I mean didn’t say teach us like 200 odd years ago that its goods that make us wealthier, not money and that it’s increased capital that creates goods, not increased money???
Regarding the chap’s comment above stating that governments have largely followed Austrian principles for the last 30 years, I think he may be wrong. I mean, surely common sense tells us otherwise. We may have seen a burst of privatisation, but regulations have soared, government money printing has gone crazy since 1971 and spending by governments have increase to war time levels.
I just don’t see why people can’t get their heads around the simple concepts of real money, private property rights and legal contract. Maybe I’m just stupid, it’s very possible, but in economics I prefer simple answers and at the moment it’s the Austrian school that’s presenting these answers to me in a clear, uncomplicated & common sense manner.
I am not an economist, and my knowledge is not what it should be, but Austrian economics just seems so simple and logical when compared to the other schools of thought. As I read Keynesian economics or maybe neo Keynesian economics as it may now be called, I always find that I end up more confused than when I started. And as economics is about men, about me, I cannot follow a school of thought that I find utterly confusing and void of in-depth thought. I mean it works if you analyse it for about 3 minutes, but 3 minutes more thought makes it sound ridiculous
Maybe I’m just stupid, it’s very possible, but in economics I prefer simple answers
That sums it up, son.
Welcome to the Austrian church. We will give you the simple answers you need.
JJ:
Mammouth provides us with daily evidence that the anti-Austrians refuse to understand AE and can do nothing but resort to name-calling.
Please brother Roddis,let’s hold hands and tell brother JJ how fulfilling a life you have lived since you joined the Church of the simple answers almost 40 years ago.
@JJ Please forgive MamMoTh.
He thinks we cannot reason about “real money” as a concept because “operationally,” there is only notional money. As in the stuff you have in your wallet. Or the number in your bank balance. He then extrapolates that there is something “wrong” with the people who reason in terms of real money because they’re reasoning about stuff which “does not really exist.”
And I *think* he believes that Austrian economics only applies under a gold standard… where the “notional money” cannot be produced at will. I think this is just massive confusion. If you want to understand the real operational details of the current “monetary order,” then I recommend this paper by Vijay Boyapati [http://libertarianpapers.org/articles/2010/lp-2-43.pdf] which mentions that the reserve ratio model may not be a good abstraction for modern banking regulation. Specifically, Boyapati argues that banks don’t even need to keep “checking deposit reserves” when they make loans. They can move ALL of the amount into a “sweep account” [which requires no reserve] and loan the whole amount.
You should be aware that some people will have counter-arguments to what you wrote:
> the goods/services produced by the state will more often than not have been better used in the private sector
Questionable, but popular counter-argument: Producing “better goods” is a matter of operational knowledge, not politics or legal theory or … Why CAN’T the government actors have this knowledge? Why can’t they produce stuff (or maybe some stuff) better than the private sector?
[I don’t know a way to discuss this without bringing in more complicated ideas, like the need for real prices for effective economic calculation. And even then, some will dispute the meaning of “effective.” To a redistributionist, it may be worth producing less stuff if it means the stuff that IS PRODUCED will be distributed more evenly. I don’t think you can “counter” this claim on a pure “the private sector is more efficient” basis. You need some alternate ethical theory, like “taking people’s stuff is BAD” and “it is NOT GOOD for me to take from Peter to pay Paul” etc]
> Government spending will takes resources out of the private sector, which will increase interest rates for the remaining participants looking for funds to invest
Questionable, but popular counter-argument: The problem in the current economy is not a lack of real resources. Just look at all those idle factories… We are in a downturn because people want notional money, not real money. So the government should print up some notional money and spread it around. And while we’re at it, here’s my shopping list of stuff that the government should buy…
> this money printing will distort the savings and investment market, and mess up the whole price mechanism thing which will inevitably lead to an eventual messy blood bath with interest sky rocketing
Questionable, but popular counter-argument: Well, why not just have the government print even more money and lend it out? Won’t rates then fall because loan supply will increase? Hmm? Hmm?!?!?
> I just don’t see why people can’t get their heads around the simple concepts of real money
Yeah, that’s a tough one.
Forgive me father Lu, for I have sinned.
Uh… MamMoTh? Who are you talking to? von Mises is operationally not here.
Oh brother, can’t you feel his presence? Are you having doubts?
MMT commenter Neil Wilson says:
Getting the bank model right is key and one of the main issues is whether to treat the central bank as simply the third party in banks clearing with other banks (which is the circuit view), or to combine its role as clearer with its role as government money creator.
So the model can either allow the government to simply mark up liabilities in any private bank (which then causes reserves to rise and therefore an offsetting asset to pop up in the central bank), or you can get the government to ‘borrow’ from the central bank (which creates the central bank asset first as a loan and then transfers the deposit to the private bank)*.
http://tinyurl.com/42c6jxs
If you click on the NeilW link, you’ll find him saying that MMT debt really isn’t “real debt”:
Not All Debt is Real Debt
While discussing China saving the world today I came across what I think is the crux of the difference between the Post Keynesian view of the world and the ‘Sound Money’ crowd.
Debt is a promise of repayment with future work and energies.
That is only the case if the debt in question is denominated in a liability you do not have monopoly control over.
When you go to the Bank of England with your £20 note and ask them to fulfill the promise on the front of it, you will get another £20 note. That is not future work and energies. That is an accounting journal.
Some debt is real debt. The rest is just an accounting liability.
Thus, when you cut through their BS, when MMTers use the word “savings”, they don’t really mean savings. When they use the term “debt”, they don’t really mean debt. Who knew?
*All wonderful and necessary ideas, right?
MMTers use the word savings for what savings are: income – spending.
Austrians use the word savings for unconsumed coconuts.
MMTers understand the modern monetary system, the hierarchy of money within it where government liabilities are at the top, and the fact that only the government can create net financial assets in the unit of account.
Clearly, government debt is different from private sector debt. After all, every 1$ banknote is a government liability but you can’t claim anything else than your right to use it for the payment of taxes.
Just more lies.
Oh, and who only has “facts” and no “theory”? Those words also take on new meaning.
As one of the leading MMTers, Warren Mosler has pointed out (2nd last paragraph), there is no point in government debt rising to the point where government has to pay any interest on such debt. I.e. government should not issue interest paying debt.
Put another way, most of the alleged and popular reasons for government borrowing are bunk, as I point out here.
The only reason for having government issue liabilities is to ensure that the private sector has sufficient net financial assets to ensure that the private sector spends at a rate which brings full employment. Indeed, the latter point is simply a re-statement of Keynes’s “paradox of thrift” point. That is, if the private sector is intent on saving money, rather than spending it, the result will be excess unemployment unless government prints enough money to satisfy the private sector’s savings desires.
http://ralphanomics.blogspot.com/2011/09/whats-optimum-long-term-debt-to-gdp.html
Keep blabbing, Mam-mouth.
The lie is that we can create a working society without a government and monetary system as its centerpiece.
You guys live in a fantasy land of coconuts and sandy beaches. Those of us who understand how planet earth and the human race actually works, know that we are very social animals who rely on each other to exist. And we create these “coercive” institutions to help regulate and streamline our societal needs and wants.
The church of Austroretardation wants to eliminate this entity and go live on beaches and drink from coconuts. Why don’t you just get on with it and go buy an island somewhere and leave America so the rest of us can just continue dominating the world in just about everything.
Good luck!!!!!!
> Those of us who understand how planet earth and the human race actually works, know that we are very social animals who rely on each other to exist. And we create these “coercive” institutions to help regulate and streamline our societal needs and wants.
This part is always awkward. Apparently you remember some non-beach social gathering where everyone got together and set up institutions to help regulate and streamline our needs. Do you have any pictures from your trip?
Seriously, you can’t blame the Crusoe abstraction as “unrealistic” when you go around talking about the history of middle earth.
So explain to me then, why we created this government by the people and for people. So we could punish ourselves on a daily basis? Because that’s the basic gist of your argument. You like to think that government serves no real role in our society when in fact we created it because we can’t govern and coordinate a functioning society without some sort of centralized governing body.
But hey, if you guys want to go to some island and give it a try then please be our guests. Just make sure you round up every last one of you.
I believe “government by the people and for people” is a phrase from the Gettysburg address [is it older]? And I think it generally means democracy. Is this how you’re using it?
As far as I know, none of the people who signed the Treaty of Paris, or the Articles of Confederation, or the Constitution, had very nice things to say about democracy. I believe they thought that citizens had certain rights which should be kept our of the hands of even majority rule. [At the time, these rights were enjoyed by a minority, like white males. But over time, they’ve come to cover no one.]
Most of this is very American-specific. If you want to use some other government, then we can talk about that instead.
Anyway, the original American “government” was created to fight the revolution and pretty much disbanded. It grew larger over time as certain groups used it to expand their own advantage: banks who wanted cheap financing, domestic producers who wanted high tariffs, progressives who wanted a more redistributionist society, military goods producers who wanted revenues, etc.
Not exactly improvements in “coordination” of a functioning society.
Your implication seems to be that the USA might have been better off without ever having created the central government.
The only problem with that theory is that the USA has done in 200 years what no society in the history of the world has ever been able to achieve. So, your whole idea that this is somehow not working out is just flat out contrary to reality.
But please, go live on an island if you wish. Honestly, if you don’t like America then just get the hell out.
Uh oh, you seem to be upset now. I think you need to look at your reasoning more closely.
The structure of the central government has changed drastically over those 200 years of prosperity. You cannot simply assert that this increase in centralization has made us MORE prosperous. You need an argument. Or a control group. Do you know what those are?
Telling people to go away because you don’t like what they’re saying is very democratic. Good job. Lincoln would be proud.
“Your implication seems to be that the USA might have been better off without ever having created the central government.
The only problem with that theory is that the USA has done in 200 years what no society in the history of the world has ever been able to achieve.”
Non sequitur.
Several European states, near the time of our nation’s birth, could have claimed the exact same thing. To the extent that such claims would be true, would that mean no better system could be envisioned? Would it, perhaps, stand as a self-evident argument that the system the United States were bringing to bear was, in fact, inferior to those previous systems? I don’t think so.
Saying that something is better than whatever came before it is not even remotely close to proof that something better could not be.
There are actually some models of general relativity where you can travel faster than light. Most famously, Kurt Godel showed that if you solve general relativity equations in a rotating universe, you in fact can travel back in time and therefore exceed the speed of light.