06 Jun 2012

Murphy Twin Spin

Economics, Federal Reserve, Shameless Self-Promotion 41 Comments

Man really busy basically for all of June… To prevent some of you from going into horrible withdrawal, here are two recent articles:

==> Another of my columns at the The American Conservative, this time on government’s role in dividing us. I mention gay marriage and contraception coverage, but those are just a springboard to my more general point. And let’s just say there is no danger of the first commenter wanting to marry me. (I.e. he hated my article.) UPDATE: This is actually a pretty good summary of the article:

In other words, part of the reason people care so much about whether the government agrees on who can get married, is that the government exercises so much power over the rest of our lives. If the federal government were a minor institution in society — charged with repelling foreign armies, negotiating treaties, and not much else — then nobody would much care what the president of the United States thought about gay marriage. The reason President Obama’s recent “evolution” on the issue so energized his supporters is that the federal government sticks its nose into all areas of our lives. If federal officials think the globe is warming too quickly, that women aren’t paid enough, that speculators are pushing up the price of oil, that Americans are too obese, that a foreign ruler isn’t treating his dissidents properly, or a million other thing[s], then find your kids and hang on to your wallet. Infused with vast power over us, the opinions of federal officials come to be tremendously important to everyone. If Obama came out and said he doesn’t permit his daughters to listen to country music because of its historical ties to the Confederacy, that would cause a national uproar, not because anybody looks to Obama as a model parent or music critic, but because they’d worry that his administration might go ahead and ban music they consider offensive.

==> A rarity for me on the Internet: In this EconLib article, you wouldn’t be sure whether I favored more or less government intervention. It is close to a pure analysis of economic modeling, with just about no policy conclusions! Savor it while you can. An excerpt:

Non-economists often think that “economists study money.” The reality, though, is that most academic economists hardly think about money at all. Whether we’re talking about tariffs, wages, Social Security taxes, or pollution, the analysis (though often couched in dollar terms for the benefit of the general public) really is grounded in microeconomics and would work just as well if we were talking about a barter economy. In fact, in a typical Ph.D. program, students study models with money in them only when explicitly trying to answer questions about central-bank policy. Even in these cases—in which the very purpose is to draw conclusions about appropriate monetary policy—the underlying logic of the model doesn’t really have a role for money. Instead, economists insert money into the model somewhat awkwardly, through various ad hoc assumptions.

41 Responses to “Murphy Twin Spin”

  1. Gene Callahan says:

    The EconLib piece is great!

    • marris says:

      Damn, Gene beat me to it!

      It is very good to see such a clear comparison of the two approaches.

    • Silas Barta says:

      I’m going to go out on a limb and guess you have the opposite opinion of the other article, based on what you’ve written in the past about the polis and such?

  2. Lloyd J. Smith says:

    You are amazing, and what you said is great, i love what you said. Thanks a lot.

  3. Tel says:

    I think you did an excellent job of explaining the link between big government and culture wars, the first comment was clearly from someone who just doesn’t get it. If you can’t explain it to him, and Ludwig von Mises can’t explain it to him, then nothing I could say will help.

    The second comment is more interesting, but I think the philadelphialawyer contradicts herself when she finished up with: “Some of the opponents will see that it really doesn’t matter to them, as their marraiges and religions are not affected.”

    Of course, everything earlier in her comment about why she believes that arbitration really can’t replace a court of law backed with the power of the gun, is exactly why religions are affected. It’s a thorny problem to be sure, but at least if you can get people to confront the problem there’s a chance they might start working toward dealing with it.

    As for her belief that religions are slowly fading away, the evidence seems to point in completely the opposite direction. Religions are becoming stronger and more militant, and also more intolerant (many of them, not all) while Atheists themselves are also bolder and more intolerant. Given that as the oil runs out and cheap energy comes to an end, we will undoubtedly go through a period of economic hardship, I expect this problem will come back in worse and worse incarnations.

    I think in simple terms the test is this: if you believe in cultural diversity, then you must also be willing to accept that there will be some situation where you come across a person who does not want to associate with you because of who you are or what you do. If you can deal with that, and walk away and accept that this person does not want to associate with you, then you have passed the test and you honestly support cultural diversity. If you can’t handle that situation then the only way forward for you is universal cultural sameness enforced at the barrel of a gun as finer and finer details of our lives are examined and forced into conformity.

    Can I again plug my simulation article? I hope to live up to the “Shameless Self-Promotion” tag.


  4. Aperture Intern #5 says:

    Is it just me or did everyone in the Statism post completely miss the point? Maybe I’m just not as smart as they are.

  5. Major_Freedom says:

    I liked the American Conservative article. That quoted passage hits the nail on the head.

    It’s just intuitive isn’t it? The state, as Mises argued, is society’s institution of coercion and compulsion. The larger the state becomes, the more systematic coercion and compulsion occurs, and the more systematic coercion and compulsion occurs, the less systematic voluntary cooperation occurs. Or, another way of stating it, the more systematic violations of property rights there is, the less systematic respect for property rights there is.

    With declining respect for property rights, the more divisive people get concerning even the most banal and innocuous of behaviors that in a strict property rights society, wouldn’t be a source of conflict.

    In a private property society, marriage remains a private issue. In a public property society, marriage is politicized, and independent powers that would otherwise be limited to their own property will jostle, plot, and scheme to make sure their personal desires are “the” sanctioned desires for “the public.”

    Society breaks down when systematic violations of property rights dominate systematic respect for property rights.

    • Bob Murphy says:

      I liked the American Conservative article. That quoted passage hits the nail on the head.

      It’s just intuitive isn’t it?

      Apparently not. Did you see the comments? I think my next article should riff on Hayek and be, “Why I Am Not Liked by Conservatives.”

      • Major_Freedom says:

        I left some responses. It is simply breathtaking to see how shallow some of those posters are.

        This one guy there said:

        “If democracy isn’t a satisfactory manner of resolving differences, which model does George see in the world that would work better?”

        Imagine making THAT a modus operandi to settling all conflicts.

        You disagree with me on who people have sex with? Let’s vote to decide for everyone! You disagree with me on slavery? Let’s vote to decide for everyone! You disagree with me on what people should eat? Let’s vote to decide for everyone!

        Another breathtaking fact: That website is the American Conservative. The posters there don’t seem to have any conception of property rights. Imagine that. Conservatives not liking property rights to settle disagreements.

        Is conservatism dead? Or did I just walk past a graveyard and caught a glimpse of zombies?

        • MamMoTh says:

          Democracy is the best way to decide under which kind of dictatorship we want to live.

          • Major_Freedom says:

            You’re right. Hitler was declared Fuhrer by a democratically elected parliament, with the support of the majority of the German people.

            It’s not dictatorship when 51% agree, because the other 49% aren’t real people.

        • Scott H. says:

          Everything is dead. These issues are all politically incorrect, therefore they, by and large, are not taught to young Americans. What is a right? What is a republic? Maybe those things are memorized but not contemplated.

          It gets worse when you get to market capitalism.

    • MamMoTh says:

      Marriage is a private issue. You can always ask your best friend to declare you married and live happily ever after.

      Anyway, marriage should be banned. It’s the cornerstone of collectivism, and it inevitably leads to keynesianism first, and the to communism, or roddism.

      • Ken B says:

        The one thing marriage has never been is private.

        Nor is it clear that it should be. Society always has a say in what contracts it is willing to enforce, and what happens with children in extreme cases.

        Easier to get churches out of the business of creating legal arrangements.

      • Major_Freedom says:

        Marriage is a private issue. You can always ask your best friend to declare you married and live happily ever after.


        Therefore, it is with my pleasure that I, as your best friend, declare what you have wanted to have declared for many years but were afraid to ask, that you and Warren Mosler are now husband and husband. You may kiss the groom.

        I’ll build you two a house made from Zimbabwe paper money notes, and a car made from Weimar Republic paper money. You’ll be wealthier beyond your wildest dreams.

        Anyway, marriage should be banned. It’s the cornerstone of collectivism, and it inevitably leads to keynesianism first, and the to communism, or roddism.

        Of course! Vows of exclusivity (marriage) are definitely the foundation for non-exclusivity (collectivism). That’s MMT logic, folks!

        • MamMoTh says:

          You are jealous because Murphy is never going to propose to you.

          • Major_Freedom says:

            Yes, you would find jealousy to be a legitimate reaction to an absence of marriage proposals from other men.

            • MamMoTh says:

              Sorry, but Murphy is infatuated with Krugman.

              • Major_Freedom says:

                Don’t apologize, because you post more comments about what Murphy writes, than Murphy posts comments about what Krugman writes.

                If Murphy is infatuated, then you’re smitten with the love bug.

  6. Major_Freedom says:

    From EconLib:

    “To reiterate, the problem with this (standard) exercise is that there is no explanation for why people in the real world use money. After all, if the economist is able to “solve” for the relative price of apples and oranges without the use of money, it’s not clear why people in the real world use intrinsically useless pieces of paper in their dealings. Why not consult their preferences and swap fruits directly against each other, as the economist assumes they can do?”

    “Note that the criticism here is not the familiar one that a given model is “unrealistic”; just about every economic analysis assumes away real-world complications to isolate particular relationships. Rather, the objection here is that if we are going to use a model to talk about money, then there should be a good reason in the model for people to use money. The standard equation of exchange approach does not obey this simple principle.”

    Oh how people need to learn this!

  7. Bob Roddis says:

    The only real solution is to privatize schooling altogether and let families, churches, and secular institutions voluntarily come up with their own curricula and rules for student behavior.

    Which means private neighborhoods which means exclusion of people with different values, ethnicities, religions etc…. And, of course, exclusion and discrimination are the crimes of the century according to the “progressives”. It’s much better to let your society fight it out to the death like Yugoslavia or Rwanda than to protect private property rights and the right to not interact with whomever.

    Did I mention that the Democrats’ Jim Crow laws were enacted because people tend to voluntarily interact in a peaceful manner?

    And yes, this topic does not seem to properly register in the minds of either the “progressives” or Santorum voters.

    • Major_Freedom says:

      But how will I ever reabsorb back into the creator, become one with the human blob, and escape this intolerable “alienation” that I constantly see around me, by me not being what I see?

      The more exclusivity there is, the more alone I will feel, and because I feel bad about it, I have the right to get government guns to be pointed at my fellow men to force them to…reabsorb…back into statist collectivity.

      It would exploitative to keep people away from resources they didn’t produce. They deserve the fruits of other people’s labor.

  8. MamMoTh says:

    Nearly all economists don’t understand money, even those who study it.

    Only MMTers do.

    • Major_Freedom says:

      Sorry, but anyone who says paper money inflation is the creation of “net financial assets”, and says government debt is “net private sector savings”, needs their head examined.

      • MamMoTh says:

        Paper? You are so yesterday…

        • Major_Freedom says:

          Figures of speech and colloquiums have been around even longer.

    • Bob Roddis says:

      We all know that the government “prints” fiat funny-money via ‘keystrokes”. That makes it even more ghastly than just printing it.

      I could go on and on about MMT, but I’ll let the “brilliant” Mike Norman explain why Social Security isn’t bankrupt. I really don’t think average people are going to fall for this crap. The MMTers constantly complain that people are too stupid to understand that unlimited money “printing” via keystrokes has abolished the law of scarcity.


      • Major_Freedom says:

        Actually everything in that video I agreed with, other than of course him conflating saving with cash hoarding.

        He said we need to produce more. Well yeah, but production requires abstaining from consuming, and investing instead. That is saving!

        To be fair to Norman, he didn’t exactly say that keystrokes will abolish the law of scarcity.

        • Bob Roddis says:

          He implied it. Of course, the MMTers will never say that explicitly.

          We can just print the money via keystrokes so that $100 trillion of adult diaper changing services will miraculously appear because the government can never run out of “dollars”. If there is no need to save, what else is he implying?

          All that coupled with the perpetual aversion to and avoidance of engaging basic Austrian concepts, a pitiful but universal characteristic of all Keynesians all of the time.

          • MamMoTh says:

            He didn’t imply anything like that. He just showed why SS was not broke as often claimed in the media or on this blog.

            That’s one of the many advantages that understanding modern money has. No need to get grand children or Austrian bullshit into the mix. They are irrelevant.

            • Bob Roddis says:

              I guess you are right. Prosperity doesn’t come from people inventing, making and exchanging goods and services and properly restraining themselves from using goods and services in the present to save for a later time. Prosperity comes from fiat funny-money dilution via Keystrokes.

              • MamMoTh says:

                I am right.

                But not because you put your words on my or Mike’s mouth.

                Let me guess, you are an attorney right?

                Gosh, you might really believe prosperity comes from attorneys…

          • Major_Freedom says:

            If there is no need to save, what else is he implying?

            Bear in mind that when MMTers like Norman say “saving”, they mean cash holding. He says people don’t need to hold cash to fund SS, because the state can just print the money. As far as that goes, it’s true. SS doesn’t have to go bankrupt if the state doesn’t want it to.

            As for the implied arguments, I honestly can’t say from that video that Norman said production is “guaranteed.” He just assumed it would take place, like most people do.

            Of course you’re right that he doesn’t understand the relationship between money and production, as it pertains to economic calculation, because he views money as a single “money flow” that can increase real productivity when more money is printed. He doesn’t understand that real wealth can only be redirected in this way, from more highly valued deployments to less valued deployments, in the process reducing total productivity from what it otherwise would have been.

            • MamMoTh says:

              Mike Norman is aware that productivity doesn’t come from attorneys or financial bloggers.

  9. Watoosh says:

    Have you been on top of Krugman vs. Estonia?

    It’s almost beyond words. Estonia’s president rips Krugman for not understanding the situation behind Estonia’s recession and spending cuts (plus some economists have already shown that Krugman was cherry-picking data), and his response?

    “Look over there! It’s FDR!”

    • Bob Murphy says:

      Is it at Krugman’s blog? I hit my monthly limit so I haven’t checked it in a while.

    • Tel says:


      “Let’s write about something we know nothing about & be smug, overbearing & patronizing: after all, they’re just wogs.”

      Hard to tell if that’s a president enthusiastically and unapologetically standing up for his country, or merely a perfectly normal reaction to Paul Krugman’s articles. I do not believe that Krugman is racist by the way, over the years he has built up a pretty good spread of people he has been patronizing towards.

    • Tel says:


      Looks like if you are laggardly these days, some other economist will put Krugman to bed before you get your boots on. Bob could be slipping behind on this one.


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