24
May
2012
Laffer vs. Krugman
My former employer Arthur Laffer will be on Bill Maher’s show with my future employee* Paul Krugman on Friday, May 25. I have sent Dr. Laffer material to prepare him for possible Krugman attacks. I have sent no such material to Dr. Krugman.
I don’t even have a TV, so if anyone wants to risk years of prison by posting this on YouTube, that would be cool…
* Think: the end of Back to the Future.
Wait a second, no TV? How did you watch X-Men with your son then?
Also, shame on you for not likewise sending prep work for Krugman. Would would Jesus say? (Other than ‘wicked beard Dr. Krugman’)
Jesus would say love thy enemy. I don’t see anything there about sending your enemies your battle plans.
Major, what enemy? Krugman doesn’t even recognize Bob as an opposing force.
Also, I don’t see anything about battle plans at all, so I don’t know how Jesus would stand on those.
Krugman knows Bob Murphy. Krugman is just a coward and a liar, that’s all. Krugman suspects he’d lose a debate with Bob Murphy and thus will not even entertain familiarizing himself with basic Austrian concepts.
http://krugman.blogs.nytimes.com/2011/01/19/great-leaps-backward/
This is the reason for the “progressives’ complete lack of engagement with our ideas and their total dependence upon ignoring and/or defaming us.
You won!
Your prize is to spend the remaining years of your life in a Keynesian world.
Which means when the BIG crash comes, it won’t be the free market to blame.
And it hasn’t been the free market to blame for the problems of the past several+ decades.
This inadvertent Mam-mouth admission is almost as good as DK’s inadvertent but final obliteration of Keynesianism when he demonstrated in his paper on the 1920 depression that the distortions which induced the depression were caused by Fed support for the government slaughterfest. It was not the free market that time either and never is.
Bob – you need to write this idea up and submit it as a reply to the RAE. I still have no idea what you’re talking about when you say this disproves Keynesianism.
I’m guessing even Austrian reviewers will smack it down – but give it a shot. Stop restricting yourself to blog comment sections on this one.
More chest-thumping from DK.
Actually, Bob would probably have more people read what he has to say here in the blog comments rather than in some obscure, academic journal.
Richie –
I think what the argument needs is scrutiny, not coverage. He’s said it many times now and he still won’t respond to requests for clarity,
My apologies DK. I misunderstood what you were saying.
Why should anything be decided by verbal debates? Clever 5 year olds routinely silence their parents – doesn’t mean they’re right.
We need public debates because most of the statist cohort, having been educated in government schools, cannot read or think. Further, the entire “progressive” agenda is so simple and preposterous that it cannot be defended in a public debate without average people understanding its preposterousness. The jig would be up.
That’s why you guys are afraid of debates or any direct engagement for that matter.
OK. I’m too scared to stay here and be refuted so well, back to HQ – I think Kaiser Krugman is hosting a hate gathering.
intarwebs
Imagine Krugman waxing Bob’s car while this music is playing (à la Back to the Future),
http://www.youtube.com/watch?v=VkAVfsw5xSQ&feature=related
I think if you send Laffer anti-Kruggers stuff you should send Krugman anti-Kruggers stuff. It’s only fair, and think of the fun.
What material can get Laffer out of his 2009 prediction of soaring inflation and sky-high interest rates in a few years time?
Peter Schiff being wrong about this:
http://www.businessinsider.com/the-real-crash-2012-5
Gene,
You don’t understand. Apocalypse is inevitable. If Krugman believes otherwise it’s because of how Keynesian our institutions are and because he’s being paid by the Bureau of Keynesianization to lie.
I submit that what you have stated is actually the truth. Our institutions are indeed terminally Keynesian. Krugman’s lifestyle and status would take a major hit if he merely ever presented a fair elucidation of basic Austrian concepts which would also impair the careers of other powerful Keynesians if they did the same. Krugman’s life as a celebrity would certainly be over if he even became an Austrian. The best sheen we can put on this would be to call it “careerism”.
I imagine Keynes would prefer we spell it Keynesianisation.
Say it loud say it proud.
Our current true price inflation rate yoy is around 10% and the money supply should have been significantly contracted as a result of massive malinvestments. I believe current price inflation rate is actually somewhere around 50% yoy. Not quite hyperinflation, but pretty close.
Pretty amazing that “true price inflation rate” is so high and yet pretty much everything I buy costs as much as it did five years ago. Some of it’s even cheaper!
What’s cheaper?
Almost anything with a computer chip. Laptops, smartphones. TVs. GPS. The servers that power all the websites I visit. Umm… LED light bulbs? Digital media?
Ah, you’re referring to the “good deflation” that “doesn’t count” when a central bank is trying to justify why it doesn’t have to fight deflation?
When gold was flowing in from the New World to Spain, would you count the increased efficiency of abacuses (owing to the adoption of the Hindu-Arabic number system over Roman numerals) against the higher gold-denominated prices, since you now pay more “but it’s a more efficient abacus”?
Light bulbs? I used to be able to buy a light bulb for 50 cents. Now the cheapest I can find is three bucks.
The problems with deflation mainly centre around investment rather than consumption.
And of course, given the convenient time frame I picked….. houses.
Maybe you missed having your steak dinner replaced by hamburger meat.
Substitution is a controversial measurement. But haven’t Americans been averaging less percentage of income spent on food for several decades?
Substitution is a controversial measurement.
But you’re paying the same price for your dinner “meat”! Everything is fine. No inflation.
But haven’t Americans been averaging less percentage of income spent on food for several decades?
Oops, you’re right. The BLS makes sure to ignore energy as well. There’s no inflation when you can use candles and Flintstone-mobiles.
MF, that food has increased in price is a far cry from hyperinflation (or even 50% inflation).
Make up your mind and try again.
I don’t think that my crotchety old and embittered writing style would translate to an economics journal. Further, I don’t have much more to say that what I’ve said several times before:
2. The austerity depression of 1920–21
During World War I federal expenditures ballooned and although the new income tax was able to partially finance the war effort, most of the financing was done through federal borrowing and by the highly accommodating monetary policy of the Federal Reserve. The role of the Federal Reserve at this time was expressed unambiguously by the New York Federal Reserve Bank Governor Benjamin Strong, who told a Congressional committee in 1921 that ‘I feel that I, or the bank at least, was their [the Treasury’s] agent and servant in those matters’ and further added that the wartime inflation caused by the low interest rates maintained by the bank were ‘inevitable, unescapable, and necessary’ for prosecuting the war (Strong, 1930).
However, after the war ended the deficit spending of the Wilson administration and the expansionary policy of the Federal Reserve were sharply curtailed to bring a halt to the inflation. By November 1919 the Wilson administration balanced the federal budget, slashing monthly expenditures by almost 75% in a matter of months.4 The New York Federal Reserve Bank raised the discount rate by 244 basis points over the course of eight months, with other Reserve System banks following suit. Shortly after these austerity measures were taken, the 1920–21 depression was under way. Postwar industrial production in the USA peaked in January 1920 as the economy moved into a major depression, with production levels dropping by 32.5% by March 1921.5 This loss in output is second only to the Great Depression in American economic history (Romer, 1999), although its duration was considerably shorter. Declines in output were matched by precipitous drops in employment and the price level. The proximate cause of the 1920–21 depression was a deliberate fiscal and monetary retrenchment following World War I.
http://cje.oxfordjournals.org/content/36/1/155.full.pdf+html
That sure sounds like the Rothbard narrative to me.
In order for Keynesian solutions to even begin to make sense, the basic Keynesian axiom must be proven to be true. That is, the Keynesians must show that the free market tends inexorably towards structural unemployment that can only be cured by various Keynesian “stimuli”. However, as Kuehn demonstrated, the market did not fail in 1920. The government CAUSED the problem and despite the horrendous but necessary price readjustments, the readjustments occurred despite a 6% NY Fed discount rate January 1920 through May 1920 and a 7% discount rate thereafter though April 1921, 6.5% in May and 6% in June.
Nevertheless, these “solutions” did not repair the underlying problems with the various central banks and led inexorably to the Great Depression which, contrary to myth, was not the fault of the free market either.
Further, the idea that Murphy or Woods omitted identifying the Wilson spending cuts as Wilson spending cuts is simply not true. Bob Murphy wrote at least one article showing this and I heard Tom Woods make several references to Wilson’s “stroke of luck” which allowed others to make the necessary spending cuts while taking advantage of Wilson’s fortuitous (for the human race) incapacity.
As to whether or not the actual historical government response to the 1920 depression was technically “Keynesian” or not I’ll leave to DK to find the appropriate interested audience.
Finally, I enjoy seeing our opponents approvingly cite the Kuehn article as having disproved the Austrians because it alerts me to the fact that they don’t what they are talking about.
“That sure sounds like the Rothbard narrative to me. “
As it should. I’ve said many times now that its consistent with the Austrian narrative. Many, many times. That’s not what I find poorly argued on your part Bob. What I find poorly argued is when you say above that “inadvertent but final obliteration of Keynesianism”
Daniel Kuehn
at
Richie –
I think what the argument needs is scrutiny, not coverage. He’s said it many times now and he still won’t respond to requests for clarity,
There was NO MARKET FAILURE. The problems were caused by the aggressive looting terror state employing inter alia artificial credit expansion to support the slaughterfest. There was no market and no market failure.
Just to be clear……
Keynesianism is based upon a theory of market failure. The market does not fail and did not fail.
The essence of Keynesian theory is that it is an alleged cure for a problem that does not exist.
THERE WAS NO MARKET FAILURE in 1920. And you proved it. What else can I say?
What I find poorly argued is when you say above that “inadvertent but final obliteration of Keynesianism”
You’re right. Empirical data can never prove or disprove any economic theory, because we can always confirm two contradictory theories that are both consistent with the historical data.
For example, I think we can agree that living standards in the 19th century were lower than they are now. I think we can also agree that government regulations/interventions into the market have also increased. This data is incontrovertible.
Now, suppose I offer you two theories:
A. Living standards increased BECAUSE of the increased government regulations/interventions; and
B. Living standards increased DESPITE the increased government regulations/interventions.
I hope you can see that both of these theories completely exhaust all possible theories concerning living standards and government regulations/interventions. Either Y is an effect of X, or it isn’t. There are no other possibilities.
Now, I also hope you can see that both theories are consistent with the historical data. Both can be deemed “confirmed” by the data. But they can’t both be right. So what’s going on?
Well, this is where a priorism comes in. This is where competing theories are actually settled. Keynesians for the most part do not want to settle disputes in this way. They for the most part only want to settle disputes by deferring to historical data, even though, as we have seen, any theory can always be “confirmed” by the data, despite the fact that there are competing, contradictory theories that are also consistent with the data. So deferring to the historical data is actually the wrong way to go about settling competing theories.
Keynesianism, just like Austrianism, is actually an a priori theory that can never be refuted by way of observing past data. Murphy has clearly and repeatedly shown this to be the case. On many occasions, he has shown that the same data people like Krugman look at, are often consistent with Austrian theory as well (although typically Murphy has to do a lot of unspinning and deconstructing of Krugman’s often misleading data choices).
So I agree with you that Roddis is actually off base when he says that your 1920 study is in any sense a “final” obliteration of Keynesian theory. No, empirical data cannot be the “final” obliteration or verification of any theory, since as I am sure you are thinking, Keynesian theory is also consistent with the 1920 data.
What you and Roddis have to do is you have to agree to a non-empirical, non-hypothetical standard first. You both have to find some area of agreement on how to judge competing theories. It can’t be empirical data. It has to be something that is grounded on something personal. Something personal that both you and Roddis share. Not experiences, not knowledge, not preferences, but something structural that both of you are presupposing as the same in the very process of interacting, debating, thinking, etc.
Unless and until Keynesians and Austrians do this, there will NEVER be settlement. Keynesians in 2012 still think they’re right, Austrians in 2012 still think they’re right. It’s been almost 80 years and Keynesians and Austrians are still in conflict. If almost 80 years of conflict, almost 80 years worth of data munching, hasn’t settled the dispute, maybe it’s high time Keynesians and Austrians agree to an epistemological foundation.
I agree that the “final obliteration” language is a slight bit of hyperbole. The emphasis being upon “slight”. The Keynesians have the burden of proof to show either through logic and/or evidence that the market failed. DK conveniently forgot to even mention that essential part of the argument.
The folks who want to sic SWAT teams upon peaceful folk have a very high burden of proof. They always fail to meet it and appear unaware of their burden.
Very nice post!
Did anyone see this? (I don’t have a TV.) How did it go?
Here you go!
I thought it was rather dull. The Krugman vs. Laffer definitely didn’t live up to its billing…Nealon was pretty funny though.
Here’s the overtime segment – http://www.youtube.com/watch?v=1SHYHvWm1OY
I started laughing around about the comment, “Shouldn’t government just be smart?”
After that it was hard to take anything seriously. That’s the answer though, just get some real smart people to go out and do some real smart things. Solves everything really.
Right. Sorry Bob but it seems your debate with Krugman with Laffer as proxy didn’t go so well. You will have to do it on your own.
Just found it on youtube:
http://www.youtube.com/watch?v=lPyaImDMBuc