21 Sep 2012

## Tom Woods Keeps Krugman’s Feet to the Fire

Tom Woods has posted another video, this one on Krugman’s rhetorical questions about Austrians and MMMF:

A few points:

==> I totally forgot to be snarky about this, but Tom’s video reminded me: I thought Krugman said he wouldn’t debate me, because he didn’t want to give a platform to Austrian views? So now we have to revise Krugman’s value system again. It’s OK to debate Ron Paul and his “goldbug” views to sell your (Krugman’s) books, it’s OK to debate George Will every week on TV even though you think he’s a moron, it’s OK to make fun of Austrians on your blog when you’re bored and want to ridicule something…but debating the guy who penned what you yourself said was the “best exposition I’ve seen yet of the Austrian view that’s sweeping the GOP” for an hour in order to thereby send $75,000 to a food bank in NYC…is completely beneath your principles. ==> If you haven’t visited yet, I encourage you to visit KrugmanDebate.com. I know I pick up new readers over time, and perhaps some of you never saw the funny videos as well as the serious articles. (Krugman actually referred to me in print and gave me some pushback, in case you didn’t realize.) Let me emphasize that if the pledge total rises above$100,000, I think I can “do something” with it, like get local press to pick it up or get the Food Bank to make a statement. In particular, I know there are people who haven’t pledged because they say, “Bob, Krugman’s never going to debate you, get real.” Right, so that’s why you shouldn’t be afraid to pledge \$50, because in your mind your credit card will never get charged. (The money doesn’t come from your card until the event happens.)

==> A lot of people ask me, “Bob, why does Tom Woods keep plugging you so much? You don’t have any money, and he’s way more famous than you. What gives?” The answer is that what happens in Freedomfest, stays in…Bob’s smart phone memory. (Or does it? Tom?)

#### 68 Responses to “Tom Woods Keeps Krugman’s Feet to the Fire”

1. successfulbuild says:

And yet Tom Woods won’t debate with Max Keiser and his friends. Seems selective in who Austrians will debate. It comes down to the fact that Austrians can’t envision a system where people aren’t coerced into working.

• Bob Murphy says:

That’s impressive, SB. I disagree with your premise and your conclusion, and I disagree that your premise–if true–would imply your conclusion. I feel like I should send you an autographed book or something.

• skylien says:

I guess SB might be one of the guys Joeftansey was talking about in this other post about Ademo Freeman. Though I really doubt SB could convince any person with even a bit of common sense with his “Everything for free. Linux proves it works” non sequitur…

• skylien says:

And be careful Bob. If you send him an autographed book for free, it will just be another undeniable fact that no property rights are needed, which means you blow up the fundamental basis of your own ideological view… Imagine what a fool you would look like..

• Matthew Swaringen says:

Sure he will, just only in a neutral setting where he gets to ask his own questions and not only to reply to whatever Max wants. He was very clear about this and for good reason.

• Matthew Swaringen says:

If I recall he also said he was requiring Max to give him a serious reply to his assertions that somehow Menger would have agreed with his thoughts on private property and the environment. Max has not bothered to do this.

• zee says:

Yes, we are all so very scared of Max Keiser. Krugman is nothing, but Keiser, he is too smart for us.

• Bob Roddis says:

For the record, “successfulbuild” is an MMTer. What else need one say?

http://bobroddis.blogspot.com/

• skylien says:

MMTers at least recognize the necessity of property rights and trade. You don’t even need a money theory at all without markets. So I really think it is quite an offence for MMTers to call SB an MMTer.

• Bob Roddis says:

MMTers tend to be commies in drag. They are quite hostile to private property and are clueless about trade or exchange. I submit that the concept of voluntary exchange is completely absent from their thinking which, of course, precludes any understanding of the problems of economic calculation. They are central planners who firmly believe that prosperity can be rationally maximized (and the problem of scarcity easily solved) by the elite manipulating the fiat money supply through unconstrained government spending to bring such funny money into existence. In fact, they are obsessed with pointing out that the government can and does create funny money simply by “spending”. This point is always followed (without any analysis whatsoever) by the pronouncement that, since we can never run out of funny money “dollars”, there is no debt or unfunded entitlement crisis and people who claim that there is are liars and morons (their word).

• successfulbuild says:

I never said anything like “Linux proves that capitalism doesn’t have to exist.” What I said was that it shows that “market forces” are not needed in all cases. That’s all I said. I never said anything like it proves that a price system universally doesn’t have to exist. I know that Linux is unique in some regards in that software, in many ways, can be viewed as being able to be copied endlessly.

Second, MMT is, in fact, more free-market than austrian economics in the sense that the supply of money is determined by market forces, not artificially tied to a precious metal.

MMTers do believe you can send money out into the economy by spending on research projects and so on, and I think that can be a good thing.

• skylien says:

“What I said was that it shows that “market forces” are not needed in all cases.”

Whoever refused that? Didn’t I say that people should have the freedom to cooperate without trading as far as it is voluntary?

I’d like to hear you saying now: “Yes people should also be allowed to trade with each other and should not be prohibited from doing so by force!”

Wrong, Austrians do not argue (in their first best solution) for artificial ties to PMs. Read them!

I guess you mean printed up by the state and spent on R&D. The question is not if it could be a good thing once in a million times, but would it tend to be better than if it was done entirely by the market (This even ignores distortions created by this policy in the price structure, which finally needs to be considered as well).

• successfulbuild says:

You’re making things up. Rothbard himself said there should no “free-market” in money and that there should be a 100% gold standard. So you’re wrong again. You have people in this very thread calling FRB a fraud and suggests people can’t use it.

Do not enforce your right-wing values on me, or anybody else for that matter.

• Major_Freedom says:

You’re making things up. Rothbard did not say that there should be no free market in money. He said that money should be free, but that HE preferred, as a market participant, gold as money. He didn’t advocate that everyone be forced by state law into accepting gold. He just held that a free market in money would spontaneously generate gold as the money of choice, so he advocated for gold as a proxy.

Do not enforce your left wing, state monopoly over money and coercive dollar taxation system on me.

• successfulbuild says:

Rothbard argued against Hayek’s competing currencies idea and advocated a 100% gold standard. That means that the price of gold would be fixed, as he himself said: ”

Furthermore, once selected, the definition, whatever it is, must be fixed permanently. Once chosen, there is no more excuse for changing definitions than there is for altering the length of a standard yard or the weight of a standard pound.

“To call for a free market in the price of gold would, in short, be as absurd as calling for a fluctuating market price for dollars in terms of cents. How many cents constitute a dollar is no more subject to daily fluctuation and uncertainty than inches in terms of yards. On the contrary, a truly free market in money will exist only when the dollar is once again strictly defined and therefore redeemable in terms of weights of gold. After that, gold will be exchangeable, at freely fluctuating prices, for the weights of all other goods and services on the market.”

• skylien says:

Austrians in general are for a pure free market in money. Many of them like Rothbard (who is just one of them, he doesn’t represent THE Austrian) just assume/predict that Gold would be chosen by the market as primary money.

Also it is not the same to say 100% reserve Gold money needs to be enforced, or that the market process would lead to that (Just for the record, I think the 100% vs FRB discussion is mostly one of semantics, and rather be against Rothbard than with him on this one) It doesn’t change that FRB and 100%ers within the Austrians favor the same: A complete free market in money.

Else show me page and quote that says otherwise.

Wow. You dare not to say that markets are not needed per se, but you also daren’t saying that voluntary trade is good. You are really quite confused.

I am curious which book(s), author(s) describes in your view best how a society should be organized?

• successfulbuild says:

Rothbard not only advocated a 100% gold standard, he said that the price of gold would have to be “fixed” rather than be set by a free-market:

“To call for a free market in the price of gold would, in short, be as absurd as calling for a fluctuating market price for dollars in terms of cents. How many cents constitute a dollar is no more subject to daily fluctuation and uncertainty than inches in terms of yards. On the contrary, a truly free market in money will exist only when the dollar is once again strictly defined and therefore redeemable in terms of weights of gold. After that, gold will be exchangeable, at freely fluctuating prices, for the weights of all other goods and services on the market.”

he also ranted against paper dollars and again, in this very thread on Robert Murphy’s blog, you have morons like Major Freedom and Adrian Gabriel condemning fiat money.

So you’re just wrong.

• skylien says:

You really have a lack of reading comprehension.

First Rothbard criticizes Hayeks plan not because he is for competing currencies (Rothbard also is for competing currencies I will give you the quote) because his plan doesn’t go far enough, because Hayek doesn’t propose in his plan to separate state and money completely.

“Hayek is surely correct that a free market economy and a devotion to the right of private property requires that everyone be permitted to issue whatever proposed currency names and tickets they wish. Hayek should be free to issue Hayeks or ducats, and I to issue Rothbards or whatever”

Second, Rothbard describes in this essay how he would proceed to go to the final goal which is Free Banking . In which everyone can issue every currency he wants, even empty unbacked paper notes, it is just unlikely that without government enforced legal tender laws (which would make it fiat) such money would have any chance. Even you should understand this, or do you know one private bank whoever issued completely unbacked paper (without government privileges) that had a lasting business with such a kind of currency?

So it is clear if he wants to privatize the USD, it has to be backed, and for Rothbard the choice would be an amount of gold. Of course the market could still discount the USD paper notes if the market would suspect insufficient backing. There is nothing fixed, it is only a definition for one Dollar. The bearer of 1 USD can redeem the note for a certain amount of Gold. If 1 USD was one ounce then 1 USD would be nothing else as another name for a certain amount of weight in Gold. That is all. It doesn’t make sense to change this definition all the time for the bank who issues it. Also if you would not do this the USD would quite fast lose its value as soon as it was separated from the state and its protection from government would cease for obvious reasons. Rothbard wants to avoid this because this would cause avoidable trouble, at least in his view. You may disagree, which doesn’t change that the final goal is:

“…money and banking would at last be separated from the state, and new currencies, whether “Hayeks” or “ducats,” would be free to compete on the market with the gold dollar.”

So again, Rothbard wants to separate money from the state to have free banking. You could issue your own SB Dollars if you would like. And everyone was free to choose.

• skylien says:

Also why aren’t you answering my direct questions?

I need to ask you several times until you at least refer to trading, and even then you are evasive.

Which books, people represent your view?

• successfulbuild says:

In that quote Rothbard is merely DESCRIBING hayek’s system, you moron, he goes on to refute it:

“Hayek’s plan would have merit if the thing—the commodity—we call “money” were similar to all other goods and services….”

He also states that this plan, the ability of Rothbard to issue Rothbard currencies and Hayek to issue Hayek currencies, is a “plan” that is “Utopian in the worst sense: not because it is radical, but because it would not and could not work.”

He also says that that no one will accept the new currencies. You’re apparently unaware of the fact that fractional reserve banking occurred to an even greater degree when there was no government monitoring the money supply. In the US and other countries as well.

Rothbard also said “”There is nothing sacred about any initial definition of the gold Dollar, so long as we stick to it once we are on the gold standard.”

He then says in the very same essay that the ONLY acceptable standard is if the dollar is tied to gold. “Furthermore, once selected, the definition, whatever it is, must be fixed permanently”

So in other words indeed, money is tied to gold, and it is a standard enforced collectively, and fractional reserve banking is immoral.

He essentially is advocating a big, collectivist system, enforced by his system of state/property slavery.

So it is you who lacks comprehension.

If I say, “If I go to the sore, I will get some milk,” means that I may get milk from someone else, if I say “Only if I go to the store will I get some milk” means that I will get milk at the store.

So either Rothbard was a moron who couldn’t communicate his ideas or he advocated a 100% gold standard, where competing alternatives were abolished.

• successfulbuild says:

You lied about me saying that Linux proves that capitalism doesn’t have to exist, when in fact I never said that and made several arguments as to why Libertarianism is totalitarian. I would never say, Linux itself proves everything.

Second, Rothbard says “Furthermore, once selected, the definition, whatever it is, must be fixed permanently. Once chosen, there is no more excuse for changing definitions than there is for altering the length of a standard yard or the weight of a standard pound.…..”

So in other words, Gold is already chosen, as he claims it historically was used for money, as the unity of money, and is set to a fixed standard, all while banning FRB.

So in other words, Libertarians and Rothbardians are big government collectivists, who merely assume that gold must be used based on the (now known to be false) idea that it was the original money and the pure standard for thousands of years. In reality, commodity developed after gold money, and gold is the ultimate fiat money anyway, forcing everybody to use this set standard instead of expanding production while new creations are invented. There isn’t enough gold to run the economies of New York/California, let alone the world economy.

• skylien says:

Wow. I just provide one issue that clearly shows that you are trolling. You said:

“Rothbard argued against Hayek’s competing currencies idea and advocated a 100% gold standard.”

I said. Wrong Rothbard is not against competing currencies here is the quote:
“Hayek is surely correct that a free market economy and a devotion to the right of private property requires that everyone be permitted to issue whatever proposed currency names and tickets they wish. Hayek should be free to issue Hayeks or ducats, and I to issue Rothbards or whatever”

Then again you do not clarify your own position. You are just throwing around insults, which show your immature behaviour. And you show that you understand absolutely nothing of economics, you do not even understand the simple concept of backed money…

• Major_Freedom says:

“What I said was that it shows that “market forces” are not needed in all cases.”

Except it doesn’t show that. Linux is not a mafia operation is it? It’s not a criminal syndicate, right?

The individuals who improve Linux over time are supposedly respecting each other’s individual property rights, are they not? That IS the market process, and hence market forces, in action!

Market forces do NOT necessarily imply “I pay you money for your property, and you pay me your property for my money”. It could, but it doesn’t have to. Market forces ALSO include every voluntary action that is not a violation of the market process, which is composed of individuals freely cooperating with each other, doing anything they want, without aggressing against each other’s persons or property.

MMT is not more free market than Austrian economics, because Austrian economics is value free. It doesn’t advocate for a free market. It is a science of human action.

Furthermore, the supply of money in a fiat regime, which all MMTers embrace, is what is not determined by market forces. The force is a non-market institution that has coercive control over money production, via its own money creation facilities and through granting monopoly privileges to private institutions to create money.

Precious metals as money is not “artificial” if that is what a free market process would result in. It would be coercive if the state mandated through law that only gold is legal tender and demanded taxes in gold. But it wouldn’t be any more coercive than if the state mandated through law that only federal reserve notes and bank fiduciary claims are legal tender and demanded taxes in those currencies.

MMTers are incorrect to believe that the state can improve the general welfare of the people by “spending money into existence”. The real resources are what is important, and when the state “spends money into existence”, they alter the direction and allocation of real resources away from where market actors want them, to where the state coercion and their market friends who benefit from the coercion want them.

• successfulbuild says:

Of course Linux is not a mafia organization: it doesn’t operate on principles people like you advocate where a “private protection” agency can set up a racket where the only way you have your “property” protected is if you pay them service charges.

What you advocate is pure tyranny and is on ample display in places such as Africa.

Second, Linux developers generally have had no problem with free-software being protected by the government. The idea is that it would be illegal TO enforce a closed source standard, i.e., if you use GPL’d code in your project, your entire project has to be GPL’d. It’s basically a collective agreement.

It’s a basic fact of economics that the money supply has to expand with growing production and population growth. What you advocate would lead to massive deflation, putting companies out of businesses and ensuring that borrowers would be at the whims of their lenders, the very thing the early American progressives opposed.

Austrian economics is not “value free,” either. It comes with a set up of philosophical assumptions that are demonstrably false.

2. successfulbuild says:

Speaking of logic, what you seem to be saying is that he will only debate Max if Max agrees to certain engagement terms and if he first properly backs up one of his statements to Woods’ satisfaction. It’s just kind of awkward when you have one guy (murphy) saying, yeah I just want to debate Austrian economics no matter what, on a TV show or anything, and another guy adding a set of preconditions before he debates.

So it’s true to say Austrians won’t debate “any time, any place.” I on the other hand would debate my statements any time, any place, no matter the preconditions. If someone only asked me off topic questions I’d pull a Peter Schiff and just start talking about anything I wanted. I’m confident in my statements; and you can see with the wall street journal what happens when you say things like “Xerox invented the internet.” That guy probably single-handedly made the Wall Street journal a laughing stock.

Btw… I only got in trouble at Mises media when I corrected someone by pointing out that an argument is always constructed using statements and propositions (philosophically the same thing really), and technically, questions aren’t statements. The Austrian economist actually denied this and someone (probably Jeffrey Tucker) deleted all my posts. Of course all you have to do is turn to page 1 of a logic book to back this up: “The premises and conclusion of an argument are always statements, as opposed to questions, commands, or exclamations.”

Masters of logic indeed you are.

• Bharat says:

Where does Murphy explicitly say he’ll debate Krugman no matter what? (Nowhere) If Krugman says he’ll debate Murphy on only on Mustafar, you think Murphy will actually agree?

I take it back actually. I can totally see Dr. Murphy agreeing to this.

• Tel says:

Maybe you could start by explaining your statement about how I’m coercing people into working. What exactly am I personally doing to force them?

• Major_Freedom says:

“I only got in trouble at Mises media when I corrected someone by pointing out that an argument is always constructed using statements and propositions (philosophically the same thing really), and technically, questions aren’t statements.”

This is incorrect. Arguments are not always constructed by using statements and propositions only. There is the intellectual component, the “verstehen”, which is not the act of making a statement or a proposition, but the understanding of what statements and propositions actually are.

Also, questions CAN be statements, if they are rhetorical in nature. For example, “Do you still beat your wife?” is a question that contains an implicit statement regarding your prior actions. I am stating, indirectly, that you have in fact beaten your wife.

“Masters of logic” we are not necessarily, but we’re far superior than your chosen role models.

• successfulbuild says:

Technically, questions are never statements. For an expression to be a statement it must be either true or false, and what you wrote about doesn’t qualify.

If it does, show the textbook that says that it is.

• successfulbuild says:

And does this little turd sandwich have any proof that he’s even studed logic or first order logic?

Let \sigma and r be signatures. Suppose \phi is a set of formulas of LP(\sigma) and \psi is a set of fromulas of LP(r).

Show that if \phi and \psi is a craig pair then both \phi and \psi are syntactically correct.

I remember little robbie was here talking about how 1,2.,3 etc… go on forever, and how to explain that… Can he prove that’s correct using first order logic?

3. Chris H says:

Dr. Murphy I went to the Debate Krugman website you posted and watched the video, and I was absolutely appalled by what I saw! On the book shelf I saw not one, but two Dan Brown books there! Come on Dr. Murphy, there’s better fiction out there!

But on a more serious note, I’d love to see this debate and would give to help out if I wasn’t still a student with a pretty limited base of available capital. Nonetheless while Krugman is perhaps the most prominent economist in the United States today (sadly) have you thought about debating another neo-Keynesian economist? Obviously, Krugman is ideal for getting Austrian economics a platform, but I’m just curious if there have been debates or plans for debates with other neo-Keynesians who might be a bit less of simply shrills for the Democratic party. My thinking is simply a) I like seeing debates and b) if Austrian economists can soundly beat the best neo-Keynesians (which I don’t think Krugman is or if he is that school is in worse shape than I thought) that might make more waves in academia (an albeit more limited and potentially less useful goal, but one that might still be worth pursuing).

4. Major_Freedom says:

I’ve said it before many, many times, and I will take pleasure in saying it again:

Krugman is afraid. He is afraid of how stupid you will make him look. He is afraid of what all his followers would think of him. He is afraid of what will happen to Keynesianism. He is most afraid of Austrian ideas spreading even more amongst the populace.

Fear is the only reason he won’t debate you. It is why his excuses keep changing.

5. Lord Keynes says:

“Krugman is afraid. “

Afraid of wasting his time on a cult that has practically zero influence on public policy. Frankly, Murphy and other Austrians have an inflated view of their importance. Your time in the sun came and went in the 1930s, and you completely lost these debates.

Someone in Krugman’s position has bigger fish to fry: people like monetarists, New Classicals or neo-Walrasians, those who actually have influence over public policy.

• Dan says:

So why did he debate Ron Paul?

• Lord Keynes says:

If one bothers to read what he said about it on his blog, he was more interested in promoting his new book, and saw the interview as a way of doing that.

Also, I suspect because Ron Paul does have some marginal influence on US politics, if not actual public policy.

• Joseph Fetz says:

Wait, I thought you said “zero” influence. Which is it?

• Lord Keynes says:

“…practically zero influence on public policy.”

Note that qualifier “practically” and how it was on “public policy”.

Ron Paul has some marginal influence on US politics, but that is a different thing from what I have said above.

• Richard Moss says:

LK,

No, I think the difficulty is understanding the logic of your argument.

You said PK is not willing to debate an Austrian because their influence on policy is basically negligible, yet he was willing to debate RP in part because his influence is at least marginal.

Yet, RP is recognized as *the* champion of the “Austrian” point of view in congress. So the latter being negligible doesn’t make sense given the former is, to a degree, somewhat influential.

Not to mention, as Bob noted in his post, PK has *said* that the Austrian view “is sweeping the GOP”. How in the world it would make sense for him to also say he won’t debate an Austrian because their influence is basically negligible, escapes me.

• Lord Keynes says:

Influence on politics, rather than public economic policy.

Krugman did indeed refer to Austrian economics “that’s sweeping the GOP” – back in January 19, 2011:

http://krugman.blogs.nytimes.com/2011/01/19/great-leaps-backward/

But even that was exaggerated and turned out to be wrong.

Also, GOP interest in Austrianism is very different from having influence on public policy.

Ron Paul has some marginal influence on US politics, but not public policy. There is no contradiction in anything I have said above.

• Richard Moss says:

LK,

You wrote:

“Krugman did indeed refer to Austrian economics “that’s sweeping the GOP”…But even that was exaggerated and turned out to be wrong.”

Turned out to be wrong (that is, negligible influence) according to whom; you or PK? It’s what PK thinks that matters here.

Anyway I will agree to disagree. I am not sure how one can separate political influence from influence on public policy.

Lord Keynes, you must really enjoy your state influenced education. I notice that your love of the education you have received has turned you into a pedant like Selgin and Sumner, two men you think Krugman needs to debunk. Just to remind you, Selgin is a Keynesian like you, and those other economic schools of thought Neo-Classicals (similar to Keynesians insofar as they do not understand subjective value theory), Neo Walrasians (whom are in love with the ballyhooed economics of the state, focusing more on the numerical equilibrium instead of the factors that tend towards an equilibrium), and the monetarists (men who are in love with inflating the money and losing the value of its purchasing power).

I see your links in support of fractional reserve banking, they are petty and naive at best. Perhaps it would help if you took the time to understand praxeology and the importance of value scales. I’m pretty sure Mises lays out a concise method by which value scales are more effective than indifference analysis. Furthermore, it is important to further read into how fractional reserve banking ratchets state power. Rothbard was against the swindling methods of fractional reserve banking, not its existence as such. Rothbard, as did Mises, explained that in a free society fractional reserve banking would be weeded out by fully reserved and more sound banks. Is it not true that in every instance a state existed, fractional reserve banking was used as tool towards illusory profits for the citizens. A false price spread does look nice for an average citizen to believe he can make money off of a deposit. Rothbard understood the free market would punish the overly ambitious and fraudulent practices of these banks, not that they should not exist at all.

It is always the men that fully embrace and do not wish to challenge their overpriced education that continue this process of finding ways in which to make frb legit and justified. Hardly ever does a man that learned the velocity of money expose its thorough assumptions in the way Murphy does. This is where he stands superior to all the men you mentioned. Evidently you fear him, if you desired to attempt to pillory him on his page. Thanks a lot Mr Coercion, I mean Lord Keynes.

• Lord Keynes says:

” other economic schools of thought Neo-Classicals (similar to Keynesians insofar as they do not understand subjective value theory), Neo Walrasians (whom are in love with the ballyhooed economics of the state”

You are clearly ignorant/deluded beyond words.

Neo Walrasians/Chicago school Neo-Classicals/New Classicals do not understand “subjective value theory”?? Despite the fact they subscribe to the marginal utility theory?

Neo-Classicals “similar to Keynesians”? When New Classicals reject both fiscal and monetary policy as ineffective?

As for FRB, Rothbard was quite adamant throughout his work that was allegedly inherently fraudulent, – again despite what you say.

Keynes also subscribed to marginal utility. He was even proven wrong that the marginal efficiency of capital was the rate of interest by Mises. Simply because the intelligentsia of time, and most specifically the state itself, desired to use Keynes’ tools to strengthen its powers, does not mean Mises was ever proven wrong. Keynes was just able to provide a groundwork of statist economic theory the state could use to monopolize in schools and spread its empire and prowess. I suggest you read further young coercive fool. This mistake by Keynes was revealed by Rothbard in a footnote of MES:

“In the reams of commentary on J.M. Keynes’ General Theory, no one has noticed the very revealing passage in which Keynes criticizes Mises’ discussion of this point. Keynes asserted that Mises’ “peculiar” new theory of interest “confused” the “marginal efficiency of capital” (the net rate of return on an investment) with the rate of interest. The point is that the “marginal efficiency of capital” is indeed the rate of interest! It is a price on the time market. It was precisely this “natural” rate, rather than the loan rate, that had been a central problem of interest theory for many years. The essentials of this doctrine were set forth by Böhm-Bawerk in Capital and Interest and should therefore not have been surprising to Keynes. See John Maynard Keynes, The General Theory of Employment, Interest and Money (New York: Harcourt, Brace & Co., 1936), pp. 192–93. It is precisely this preoccupation with the relatively unimportant problems of the loan market that constitutes one of the greatest defects of the Keynesian theory of interest.” – Rothbard, Man, Economy and State with Power and Market, Footnote 5, Chapter 6

• successfulbuild says:

You want to ban fractional reserve banking and yet you say others advocate coercion. Typical right-wing moron who has never done anything but troll

Second of all, isn’t it debated whether or not keyenes was a subjectivist? I haven’t heard a clear argument either way.

Read again meathead. I responded to Lord Keynes earlier that Rothbard did not advocate banning FRB, he simply understood that the soundest form of banking was 100% reserves. And as accurate Austrians one must respect the fact of quelling business cycles. Thus 100% reserves stands far superior.

Keynes was not a subjectivist at all. Did you not understand my response. I was pointing out that although those other schools of thought use marginal utility, this does not make them subjectivists. They are all statists that aubscrube to the labor theory of value.

• successfulbuild says:

He said “On the contrary, a truly free market in money will exist only when the dollar is once again strictly defined and therefore redeemable in terms of weights of gold.”

If he defines a free-market existing only when there is a gold standard, then the free-market can exist only when there is a gold standard.

And where does he say that fractional reserve banking will be legal in his system of a 100% gold backed currency?

You are the biggest statist of all, presuming that people can be made slaves merely because they come into property by happenstance. Plus, people have to own their property according to YOUR ridiculous ‘homesteading’ principles and other nonsense.

You’re probably a stefan molyneux cult member you’re such a little fool.

• successfulbuild says:

“They are all statists that aubscrube to the labor theory of value….”

And yet you clowns ascribe to the labor theory of value when it comes to a gold standard, believing that the entire economy should be tied to a limited precious metal because it keeps the economy in check.

You’re like little religious fanatics.

• Martin says:

“Cult”? Come’on kid, your handle is “Lord Keynes” and you seem more obsessed with labels of what people are or what they’re not rather than their actual argument. Plus you seem to be coming back to this blog to badger the non-believers and proselytize the true faith.

• Bob Roddis says:

I constantly see articles and blog posts from the inflationist cohort bemoaning the “excessive” influence of Ron Paul and the Austrians on monetary policy because, with the public partially alerted to the unpleasant fact that inflation is purposeful government policy, the monetary authorities are allegedly skittish about injecting new rounds of funny money to “cure” the depression.

Under these circumstances, you might expect someone from the vast inflationist horde to directly engage basic Austrian concepts and refute them. But you would be wrong.

Also, don’t lose sight of the fact that despite his 19,256 blog posts attacking Austrian Economics, LK still does not understand the basic Austrian concept of economic calculation.

• Lord Keynes says:

“LK still does not understand the basic Austrian concept of economic calculation.”

Yes, clearly I’ve *never understood* the notion of price flexibility allegedly leading to market clearing equilibrium prices that clear all markets, including the labour market – despite the fact that all mainstream economists believe this, even at heart New Keynesians.

And the idea isn’t even “Austrian”: its standard neo-Walrasian GE theory.

• Bob Roddis says:

See? “[The notion of price flexibility allegedly leading to market clearing equilibrium prices that clear all markets, including the labour market” is not about the Austrian concept of economic calculation and its impairment, especially by Keynesian-style policies.

The concept is not that complicated and Bob Murphy explained it in a most excellent manner here:

http://consultingbyrpm.com/blog/2012/03/murphy-on-mises-on-money.html

That lecture won’t help LK, however.

• Bob Murphy says:

Heh this is actually funny. I had always assumed Roddis was being unfair when accusing LK–who has read a ton of Hayek–of not knowing the Austrian concept of economic calculation. But, based on LK’s angry retort, turns out Roddis was right.

• Lord Keynes says:

Bob Murphy,

(1) The standard quote from Hayek that Roddis pulls out in his absurd claims that no non-Austrian understands “economic calculation” is little more than standard neo-Walrasian fare:

“The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept. The point I want to make is that this equilibrium structure of prices is something which we cannot know beforehand because the only way to discover it is to give the market free play; by definition, therefore, the divergence of actual prices from the equilibrium structure is something that can never be statistically measured.” (Hayek, Friedrich A. von. 1975. A Discussion with Friedrich A Von Hayek. American Enterprise Institute, Washington. pp 6–7).

Any neoclassical in the audience of this talk would have been nodding his head in agreement.

I showed this a long time ago:

http://socialdemocracy21stcentury.blogspot.com/2012/07/is-this-what-vulgar-austrians-mean-by.html

(2) Now Roddis links to a lecture on Mises’s view of money and credit, as if no non-Austrian has ever understood this either.

• Bob Roddis says:

See. LK still does not get it. While Hayek is explaining that you cannot statistically measure prices that are not allowed to ever come into existence, it is in the context of Keynesian policy impairing all prices which is the central Austrian concept which must be understood before applying it to more specific circumstances like capital structure and business cycles And no non-Austrian seems to have ever understood this either.

(Also, I believe that somewhere in his talk, Hayek states that he’s not a big fan of the term “equilibrium”.)

• Christopher says:

While Hayek is explaining that you cannot statistically measure prices that are not allowed to ever come into existence, it is in the context of Keynesian policy impairing all prices which is the central Austrian concept which must be understood before…

Sorry, apparently at least I am not understanding either what you are trying to say here. I am having trouble with the sentence structure.

• Bob Roddis says:

1. People cannot read each other’s minds.

2. People have subjective values.

3. The best/only way to know and/or predict the subject values of strangers regarding economic goods is through unadulterated free market prices. That information allows for informed economic calculation.

4. The artificial creation of money and credit as proposed by Keynesian, monetarist and other interventionist and inflationist policies distorts those prices and impairs economic calculation. I would say that this is the fundamental Austrian insight and concept.

5. One must have an understanding of point # 4 before one can apply the concept to more specific situations such as the impact of inflation, and money and credit creation upon the capital structure and the business cycle.

6. I fail to see any understanding of #4 by non-Austrians.

7. In the Hayek quote, Hayek is noting that one cannot measure statistically the unimpaired prices that are never allowed to come into existence due to inflationist policies.

http://www.flickr.com/photos/bob_roddis/7534880182/sizes/o/in/set-72157630494776170/

He is not speaking specifically about economic calculation.

• Bob Roddis says:

Further, Hayek is addressing the charge that Austrians with math degrees from Columbia like Murray Rothbard are too dumb to do math and such people therefore avoid using math and statistics in economics.

• Major_Freedom says:

That quote from Hayek is not what Roddis means, nor what any other Austrian means, by “economic calculation”.

Economic calculation does not mean, nor imply, nor is synonymous with, “Walrasian equilibrium”.

After all these years of “research”, he still does not understand it!

Cultist “Lord Keynes” wants to believe that winning a political battle is primary, and losing the intellectual battle is secondary. After all, the Keynesians lost the intellectual battle in the 1930s, but won the political battle, and that is sufficient for LK to believe Austrian economics was refuted.

Austrian economics has intellectually demolished Keynesian economics, and LK is mad about that.

• Richie says:

Again, this is rich: being called a cult by someone whose title is “Lord Keynes”. LOL.

6. Martin says:

Hey Bob, I know you follow Garett Jones, however, have you connected your sushi story with these results:

“But there’s more to it than that: High-leverage counties lost a lot of retail and restaurant jobs (which they label “non-tradable”), but they didn’t lose an especially high number of jobs making tradable goods. So the worsening balance sheets hurt the demand for local goods, but didn’t noticeably hurt the supply of exported goods.”

It seems to me that high debt caused the malinvestment in those counties.

The authors of the paper do adjust for structural factors, but do so only by removing construction jobs and related industries, whilst the point of malinvestment is that not some, but all entrepreneurs are misled.

I do think that the malinvestment story makes sense and partially explains the mess: if the financial system badly allocates capital and sees a drop in profits because of it, then yes you’re going to have a longer recovery after the crisis.

7. Christopher says:

What’s so frustrating about this who debates whom stuff is that pretty much everyone agrees on the basic goals and morals of economics yet nobody is willing to have a productive and fruitful discussion. We all want a thriving economy, low unemployment, successful companies, enjoyable lives for as many people as possible and so forth. Nobody wants people to be poor and miserable.

So what’s all this who is in what camp and who hates whom stuff good for? If you throw a handful of engineers into a room and tell them to find a way to make their machine 20% faster while reducing energy consumption by 40%, they’ll work together to figure out a way. But if you do the same thing with economists they’ll just try to win and make the other guys look stupid and in the end come up with nothing…

Just think about it, this profession has been fighting over pretty much the same questions for 80 years now and still somehow manages to be taken seriously…

• Tel says:

… pretty much everyone agrees on the basic goals and morals of economics …

Really? So where does, “you didn’t build that” fit into what everyone agrees?

Oh wait, they tried to pretend that was just about infrastructure, so let me quote Elizabeth Warren instead, “No. There is nobody in this country who got rich on his own – nobody.” Pretty hard to believe she was talking about infrastructure.

Or quote from George Lakoff:

There are no self-made men! They wealthy have gotten rich using what previous taxpayers have paid for. They owe the taxpayers of this country a great deal and should be paying it back.

Funny I thought I was a taxpayer, I guess I should refer to Krugman, since I owe it to myself, nothing to worry about. But anyway, Lakoff’s basic premise is that you could pay for your government delivered electricity, and your government delivered water and even after you paid, you are still expected to pay again, and again, for the same thing.

Then I could get to Robert Frank who wants to erase the whole idea that people who work for something actually earn their income. I see some fundamental disagreements.

8. Lord Keynes says:

“The artificial creation of money and credit as proposed by Keynesian, monetarist and other interventionist and inflationist policies distorts those prices and impairs economic calculation. I would say that this is the fundamental Austrian insight and concept. “

And in the quote of Hayek you endlessly cite this is all dependent on the notion of flexible wage and price market clearing with equilibrium prices – just standard Walrasian GE theory.

It is laughable that you think such ideas are a “fundamental Austrian insight and concept”.

• Bob Roddis says:

It really does not matter if the Austrian concept of economic calculation was first described by a Frenchman, a Martian or a cannibal. You do not understand it.

LK is like an automobile buff who knows every part of every car ever produced but does not understand that they run on gasoline. Bizarre.

• Major_Freedom says:

LK is right, a state-managed (e.g. fiscal, monetary) market cannot ever reach equilibrium, because of the subjective expectations as well as fundamental uncertainty on the part of regulators, public spenders, and other government agents.

It is silly to believe that the political process will never result in a state of prolonged disequilibrium, for example during depressions. During these times, the optimal method of recovery is the market process, for it maximizes relevant knowledge-based actions.

9. Edward says:

Reposted from before:

I hear the same fallacy, over and over again, the “they’ve done more than the ever have before” fallacy. Now I don’t agree that low rates NECESSARILY means money has been tight, just that there is a strong correlation.
(As Scott himself has said.)

But back to the fallacy, why should we consider history. History is irrelevant here, Bob. WHO CARES WHAT THEY”VE DONE BEFORE! If you have a raging infection that requires 100 doses of antibiotics, and the moderately conservative doctor gives you 50 doses, (which is more than he EVER did in the past) There is no mystery as to why the patient wont recover. (Despite that reasonable conservative doctor’s utterly bat**it crazy radically conservative colleagues who hallucinate and imagine that the antibiotic is actually arsenic.

• Mike T says:

Edward,
How do you know the patient requires 100 does of antibiotics? How do you know the extra 50 doses won’t cause more serious harmful consequences to the patient? What is so objectionable about raising these seemingly innocuous questions?

• Major_Freedom says:

THOU SHALT NOT QUESTION THE MONETARY AND FISCAL OVERLORD SYSTEM!