Krugman Explains That a Bogus Alien Invasion Would End Recession in 18 Months
Sometimes I wonder about the fate of the Austro-libertarian movement. In what I thought would be such a crystal clear post that even Matt Yglesias would personally call and apologize, I made the case that anyone who thought a bogus alien invasion would be better than the status quo, would also think a suitable hurricane (which didn’t hurt anyone bodily) would also be better than the status quo.
The pushback I got was amazing. Several people seemed to think I was endorsing such an alien invasion, and/or wondered why I thought the economy would stay at full employment after removal of the stimulus.
Then it occurred to me: Have you guys not seen the below video? I was just taking that context for granted.
So: If Krugman in my earlier post clearly thinks Scenario A is better than Scenario C, then how can Keynesians object when Austro-libertarians make posters on Facebook attributing fake quotes to Krugman about thinking Hurricane Sandy will at least help the economy? That is the same logic. To be clear, Krugman wasn’t “calling for” an alien invasion, just like he’s not pining for a hurricane. But he is clearly arguing in the above video that a bogus alien invasion that motivated our policymakers to give stimulus would be better than the status quo. So by the same logic, why shouldn’t he say, “Yes, you Republicans and tight-money worry warts are so so awful, that you’re leaving us in worse shape than what would happen–at least economically, disregarding personal tragedy–if we had a major natural disaster that forced people to massively increase their planned investments at current interest rates.”
Are you saying that never, under any circumstances , could a natural disaster have a beneficial effect as measure by both GDP and individual utility ?
I believe it possible to build a counterexample to prove this wrong.
Sure you can. Sometimes destruction is a good thing. It is 1348. A flood washes away the rats landing in Italy with the plague. It is 1936 and an eathquake in Nuremburg kills the entire Nazi party. I have a tree in my backyard I want rid of, and a storm neatly lands it safely on the lawn.
You can always construct special cases. But widespread random destruction sufficient to be called a natural disaster, the odds are slim.
Well said.
Lets exclude things like that by specifying that the natural disaster leaves people with a net loss of $10B.and everyone with lower.utility.
The economic consequences of the disaster then have to reverse that.and leave everyone with a net benefit in terms of both wealth and utility.
That makes no sense.
You might as well say cancer, under certain circumstances, can make cancer victims better off.
Specify that cancer leaves its victims with a net loss of $500 billion and with lower utility.
The “economic consequences” of cancer then “have to reverse that” and leave the victims with a net benefit in terms of both wealth and utility.
Opportunity cost. Without considering the alternative, we can say that there may be a “net benefit,” in that reconstruction leaves us a little bit wealthier than before. But, all those resources could have been allocated to alternative ends, had there been to disaster. It follows that we would have been much wealthier without the disaster.
“You might as well say cancer, under certain circumstances, can make cancer victims better off.”
And if this was proven to be true true then someone who was saying “Cancer always makes people worse of” would have been proven wrong by that counterexample.
Are you saying that Keynesians believe that natural disasters could be beneficial for the economy?
Then prove hurricanes CAN be a benefit, as you claimed was possible!
It looks like your position is grounded in argument from ignorance.
I think if the economy were in a optimum equilibrium (where everyones expectations are aligned at a level that also maximizes their utility) when the disaster struck then this would be true.
If the economy were in a “pessimistic” equilibrium (low expectations about the future) and the disaster created a positive demand shock that jolted the economy closer to the optimum then what you say would not necessarily be true.
If the economy were in a “pessimistic” equilibrium (low expectations about the future) and the disaster created a positive demand shock that jolted the economy closer to the optimum then what you say would not necessarily be true.
Demand doesn’t drive economies. Saving and investment, i.e. capital, drives economies.
I think empirical research may show that both supply and demand are needed to drive economies.
“Empirical research” can only be interpreted by pre-existing theory. It cannot “show” anything.
Demand logically cannot drive economies. Demand is, literally, infinite. Effective demand depends not on how much money one has, but on the supply of total goods and where prices end up because of that.
“Demand logically cannot drive economies.”
So, if recipients of aggregate factor payments (as postulated by Say’s law) stopped demanding goods, I suppose all production would just continue and everything would be just fine!
Way to shoot yourself in the foot.
I think empirical research may show that both supply and demand are needed to drive economies.
Empirical research shows that you cannot manifest a demand for anything unless there is already a supply of it. So empirical research shows that supply drives economies, not demand.
There will always be a demand for goods in general greater than what can be produced.
So, if recipients of aggregate factor payments (as postulated by Say’s law) stopped demanding goods, I suppose all production would just continue and everything would be just fine!
Yes, everything would be just fine, because everyone would be CHOOSING to stop buying goods from others!
If people did that, then they would just start demanding goods produced by themselves. They would then increase their consumption, hopefully, by abstaining from consuming everything, and devoting a portion of their resources to capital, which can increase their production and hence consumption in the future. Here, the economy would still be DRIVEN by saving and investment.
Demand would still not be the driver.
Way to shoot yourself in the foot.
LOL! Try again non-economist!
“Empirical research shows that you cannot manifest a demand for anything unless there is already a supply of it. >
And producers will not produce things for which there is no demand – a basic element of capitalism.
Demand and supply are a chicken and egg phenomenon: just because you cannot have consumption without production (a trivial truth no Keynesian denies), you will not have production without demand.
“So empirical research shows that supply drives economies, not demand””
No, it doesn’t.
It shows in any normal capitalist economy with large productive capital stock with unused capacity, unemployment, idle resources, ability to import resources,demand drives output and employment.
If, hypothetically, all demand fell to zero tomorrow, production would soon cease.
And producers will not produce things for which there is no demand – a basic element of capitalism.
Producers will just produce FOR THEMSELVES.
You are committing the fallacy of composition. You are claiming that because individual producers in a division of labor depend on their individual customers, which in a sense means producers are dependent on consumers, to making the fallacious leap and claiming that in the aggregate, consumption still drives production. But that isn’t true. In the aggregate, consumers have no choice but to consume out of what is produced by producers. Consumers in the aggregate depend on producers.
If the division of labor collapsed, and all producers experienced a collapse in revenues, then they would still produce, just not for others, but for themselves. Their “demand” of what they can actually consume would still be constrained to what they can produce. And what they can produce can only grow if they abstain from consumption and devote a portion of their labor and resources to capital, i.e. saving and investment, and increasing their productivity and hence consumption over time.
Demand and supply are a chicken and egg phenomenon: just because you cannot have consumption without production (a trivial truth no Keynesian denies), you will not have production without demand.
FALSE. Supply and demand are not equally co-dependent. Demand is dependent on supply, period.’
“So empirical research shows that supply drives economies, not demand””
No, it doesn’t.
Yes, it does.
It shows in any normal capitalist economy with large productive capital stock with unused capacity, unemployment, idle resources, ability to import resources,demand drives output and employment.
No, it shows that in any normal capitalist economy with large consumption, there has to be a large productive capital stock from which to produce said production that is later demanded.
If, hypothetically, all demand fell to zero tomorrow, production would soon cease.
False. Production would continue on at the self-sufficient level. Individuals who survived would become self-sufficient farmers and artisans, where their consumption depends on their production.
To address your fallacious claim more directly, if in any normal capitalist economy with large productive capital stock with unused capacity, unemployment, idle resources, ability to import resources, it is still not true that demand drives output and employment. In this case, the wrong investments were made.
In other words, there was a partial relative overproduction of some goods (which are idle), and a partial relative underproduction of other goods (which are UNSEEN).
To crude minded empiricists who can’t think further than their own noses, this situation only APPEARS as a “general overproduction” because they see lots of idle capacity, and they believe that because there is not a corresponding, and instantaneous, expansion of other industries, that somehow there really is a deficiency in demand.
In reality, demand in general always far outstrips the ability to produce. Investors and consumers can only ever be discoordinated in relative terms, in producing too much of what consumers want less of, and producing too little of what consumers want more of. Investors and producers will never be able to keep up, let alone overcome, consumers’ desire to consume.
You are tacitly imposing a particular interpretation of the data, and then fallaciously claiming that your theory is the data speaking for itself.
The data show complete consistency with my theory that production drives demand, but you don’t understand it because you’re not an economist.
“In reality, demand in general always far outstrips the ability to produce.”
And there you implicitly concede that such demand drives production, for producers would not produce more if not for the fact that more is demanded.
This debate is over.
“This debate is over.”
Please god.
“So, if recipients of aggregate factor payments (as postulated by Say’s law) stopped demanding goods”
See bit about demand being infinite. The idea that people would – or even can – stop demanding goods is absolute nonsense.
In short, “[t]here will always be a demand for goods in general greater than what can be produced.”
“And there you implicitly concede that such demand drives production, for producers would not produce more if not for the fact that more is demanded”
Producers produce more because they want more stuff, and they can only get it through trading stuff they made.
The fact that people want more does not mean anything in terms of determining what level of production occurs or how the economy functions. Only effective demand matters – and effective demand can only exist through previous production.
“and effective demand can only exist through previous production.”
Which is why everyone remains a virgin.
“The fact that people want more does not mean anything in terms of determining what level of production occurs or how the economy functions”
I see! So excess demand in some markets driving up prices there does not signal to producers that more production is needed in that product market?
LK:
“In reality, demand in general always far outstrips the ability to produce.”
And there you implicitly concede that such demand drives production, for producers would not produce more if not for the fact that more is demanded.
I made no such “implicit” concession. That the demand for output always outstrips the ability to produce does not imply demand drives production.
Demand in the sense of what can actually be purchased, is always and everywhere constrained to what is produced.
You can’t consume more without producing more. But you can produce more without consuming more. Hence, production drives consumption, not the other way around.
Consumption is a given. Any moron can want to consume. What requires conscious planning, effort and foresight is how to satisfy that consumption.
People can stand around all day wanting to consume more, but that doesn’t mean they will be able to consume more. They have to drive themselves to producing what they want to consume. Without production, their desires will remain forever unsatisfied.
You can’t consume more unless there is more production. Period.
This debate is over.
LOL, you mean you are backtracking faster than a cockroach under a flashlight.
Tanous made a good point I forgot to mention.
Producers don’t produce for the sake of satisfying consumers. They produce for the sake of acquiring the means to enable themselves to consume more, and producers in general cannot consume more unless there is more production in general.
LK believes producers are like misers who produce for the sole sake of hoarding money, and so that means there needs to be an external class to producers who need to give those misers what they want, namely, simply more money. Ergo state spending and deficits.
LK:
I see! So excess demand in some markets driving up prices there does not signal to producers that more production is needed in that product market?
He obviously meant in the aggregate.
Keep up already.
The statement “that people want more” means more of goods in general, not more of one thing over another.
Ken B:
Which is why everyone remains a virgin.
You can’t demand sex unless there is a supply of bodies.
Think of it this way, LK.
Suppose the form that the desire for consumption takes is people never abstaining from consumption, and the only production that takes place is production of consumer goods. All labor goes into the production of consumer goods.
In this situation, in terms of consumption, there is no growth.
Now suppose that some people refrain from satisfying their present desires (i.e. refrain from consumption), and instead they saved resources, and then devote a portion of their days to producing capital goods used to increase productivity, and they sustain themselves on their savings.
In this case, in terms of consumption, there will be growth, because with capital goods now being produced, which can only take place via saving, i.e. not consuming, the rate of producing consumer goods can grow.
If your consumptionist worldview were right, then the former economy should not be limited and they should be able to accumulate capital by only consuming and only devoting labor to consumer activity.
“Producers don’t produce for the sake of satisfying consumers. “
Impressive: now even tenets of Austrian economics are being thrown out the window:
“consumers are the true “sovereigns” whose choices determine the success or failure of market ventures. Promoters and entrepreneurs compete with each other to best satisfy consumer wants because it is only through such action that profits can be made.
Karen I. Vaughn, Austrian Economics in America: The Migration of a Tradition, p. 84.
M_F now demonstrates that he is ignorant of basic Austrian concepts.
““Producers don’t produce for the sake of satisfying consumers. “
Impressive: now even tenets of Austrian economics are being thrown out the window:
“consumers are the true “sovereigns” whose choices determine the success or failure of market ventures. Promoters and entrepreneurs compete with each other to best satisfy consumer wants because it is only through such action that profits can be made.”
LK has shown he cannot understand the difference between the motivation for “production in general” and production of specific things.
Producers choose to produce at all because they want things, and can only get them through trade. They choose what to produce based on what other people will take for that trade. But if they did not want anything, they would not produce at all, no matter what would be most marketable.
” They choose what to produce based on what other people will take for that trade”
I.e., in product markets they
produce what is demanded.
Game, set and match.
Impressive: now even tenets of Austrian economics are being thrown out the window:
“consumers are the true “sovereigns” whose choices determine the success or failure of market ventures. Promoters and entrepreneurs compete with each other to best satisfy consumer wants because it is only through such action that profits can be made.
Karen I. Vaughn, Austrian Economics in America: The Migration of a Tradition, p. 84.
M_F now demonstrates that he is ignorant of basic Austrian concepts.
LK, you’re just being silly. MF is describing the real motivation of producers, self-interest. This self-interest leads producers to produce what consumers want. So in a sense, consumers are sovereign, but as Rothbard pointed out in MES, that idea shouldn’t be taken too far. Individuals are the real sovereigns on the free market.
LK:
“Producers don’t produce for the sake of satisfying consumers.“
Impressive: now even tenets of Austrian economics are being thrown out the window:
“consumers are the true “sovereigns” whose choices determine the success or failure of market ventures. Promoters and entrepreneurs compete with each other to best satisfy consumer wants because it is only through such action that profits can be made.
Karen I. Vaughn, Austrian Economics in America: The Migration of a Tradition, p. 84.
That doesn’t contradict what I said. I can argue that producers don’t produce for the SAKE of satisfying consumers, they do it for the SAKE of increasing their own consumption. In order to increase their own consumption as ends, they have to satisfy the consumers as means.
The key words are “for the sake”. That means ultimate ends, not means.
M_F now demonstrates that he is ignorant of basic Austrian concepts.
Nice try, you’re just grasping for straws because your ethical system is all messed up.
—————
Matt:
LK has shown he cannot understand the difference between the motivation for “production in general” and production of specific things.
Producers choose to produce at all because they want things, and can only get them through trade. They choose what to produce based on what other people will take for that trade. But if they did not want anything, they would not produce at all, no matter what would be most marketable.
LK:
I.e., in product markets they
produce what is demanded.
LOL, notice how you switched the context to “product MARKETS”. You went from making a universal claim that production depends on consumption, to saying that in a division of labor, individual producers depend on individual consumers, and then you claim that this refutes Matt? You’re not making any sense.
Nobody is denying that individual producers depend on consumers in order to earn money. But that doesn’t mean demand drives production. Consumption only DIRECTS to which alternatives capital is going to go as saving and investment are driving the economy forward.
In the economy as a whole, consumers depend on producers and cannot help but consume out of what producers produce.
Game, set and match.
You don’t even have a single point in this game, let alone enough to win an entire match.
In order to increase their own consumption as ends, they have to satisfy the consumers as means.
I.e., increase output as consumers demand more.
So you now appear to concede that demand drives output in individual product markets.
You have now retreated from the absurd extremism of your earlier statements.
But for some reason – magic? – it does not drive it at an aggregate level.
LK, you don’t even know what you’re defending. The Keynesian “demand drives the economy” isn’t production is ultimately for consumption. It’s “consumer spending creates production ex nihilo”. Why else would Keynesians endorse burying banknotes in garbage just to have them dug back up? Or fake alien invasions and broken windows? Or money being created out of thin air? It’s not about what’s being produced, it’s about there’s money being spent.
Suppose every dollar and resource was used for consumption. There would be no production beyond hand-to-mouth. Capital formation and paying workers is not consuming.
It’s all based on a rejection of Say’s Law, products are paid for with products. So nothing needs to be produced first. All that matters is there’s consumer spending to materialize goods and services out-of-thin-air.
Transformer wrote:
Are you saying that never, under any circumstances , could a natural disaster have a beneficial effect as measure by both GDP and individual utility ?
I believe it possible to build a counterexample to prove this wrong.
Ah, Transformer, I see you subscribe to the Gene Callahan newsletter, “How to Drive Murphy Crazy.”
Look guys, here’s what’s going on:
1) A natural disaster occurs.
2) Certain writers, talking about “idle resources” and other such “Keynesian” concepts, say, “This paradoxically can be good for the economy” or “Americans will reinvest and emerge better and stronger than before the disaster.”
3) People like me absolutely flip out.
4) Daniel Kuehn and Matt Yglesias say, “We are shocked and offended that you would accuse us of saying a natural disaster could be good. We never said such a disgusting thing. Take it back, or we duel at dawn.”
5) I point out that if Krugman is right about aliens, then he should also think a natural disaster could be good for the economy.
6) Gene Callahan and now Transformer think they’ve gotten me good, by pointing out that natural disasters can indeed be good for the economy.
Forget this, I’m focusing on my standup career at this point.
Gene! You have my email, please add me to the list.
Also, please send any back issues.
I also think there is an under lying theme with progressives that they never criticize Mother Nature.
Wait, are you sure that the issue was whether they believe natural disasters “could be good”? I thought they have always held that.
I thought the issue was whether they ADVOCATED for these things.
Dr. Murphy said this about Morici,
“For an example of an economist who quite clearly is saying that the storm is bad on a personal, human level, but that it might actually leave us better off in material terms, see this guy. Now let’s be fair: He is not saying, “I am glad the hurricane happened,” or, “The people on the East Coast, all things considered, are better off.” But he quite clearly says that the storm will boost construction spending and that America will “emerge stronger and rebuild better.” So contrary to the claims of my favorite grad student blogger, this guy is not merely looking at flow variables like GDP, he is also talking about the physical structures being replaced such that we emerge “stronger” than before the storm. Unless he actually said, “Daniel Kuehn be quiet” I don’t see how this guy could be clearer.”
DK said this on Callahan’s post about that interpretation,
“But the idea if you have two potential interpretations, I don’t see what it is that leads Bob to grab on to the batshit insane interpretation.”
So DK thinks that if Morici agreed with Murphy’s interpretation that his view would be batsh*t insane.
Why should their contradictory views drive you crazy? It just further proves your point from a week or so ago that nobody on the blogosphere will ever admit to being wrong.
Keynesians, like Daniel Kuehn, believe this view is batsh*t insane.
BREAKING NEWS:
Paul Krugman admits he is a Martian.
Murphy, your logic is even more powerful than you realize. You don’t even need to assume away no deaths with Keynesian stimulus (which is what led you assume away deaths in the hurricane, so as to make a point of logical consistency, or rather inconsistency).
Keynesian stimulus, Keynesians will agree, has SOME crowding out of private market activity. I don’t think any Keynesian would claim that stimulus ONLY affects unemployed people and ONLY affects idle resources. Keynesians should, if they’re not insane, accept that stimulus brings about positive redistribution from some people to other people. In other words, Keynesian stimulus positively harms some people.
Thus, to the extent that there is crowding out, then just like 100% crowding out (e.g. a world communist takeover would invariably result in millions, perhaps even billions of deaths) would result in humans being harmed, so too does Keynesian stimulus result in humans being harmed.
As a result, your 3 scenario logic from the prior post doesn’t even have to assume away human harm. You can say that if Keynesians are willing to harm some people to help others (“for the greater good” or what have you), then they should also be OK with allegedly economically beneficial hurricanes harming a few people (ALSO “for the greater good”).
“Keynesians should, if they’re not insane, accept that stimulus brings about positive redistribution from some people to other people. In other words, Keynesian stimulus positively harms some people. “
The logic works against any private sector investment:
“Austrians should, if they’re not insane, accept that private sector investment brings about positive redistribution from some people to other people. In other words, private sector investment positively harms some people. ”
Yet that is not an argument against private sector investment, for it neglects the positive benefits of that activity.
Furthermore, private sector capital account inflows can cause asset price inflation (e.g, Australia 1880s) and excessive private debt, but that isn’t an argument for banning capital account inflows.
What is your definition of redistribution. I’m betting it is not the same as the people who are against redistribution of wealth. If you are using a different definition then you’re simply playing word games and contributing absolutely nothing to the discussion.
If you’ll excuse me if you’ll pardon me….outright deaths can occur with Keynesian stimulus, to the effect that it harms those people that the very poorest people in the world depend on for their lives, knowingly or not.
Those who die do not even have to be Americans, because poor people around the world, who can just barely afford to stay alive with the existing world price structure, may die with any modestly higher prices for certain goods which resulted from the harming of those people who are the specific producers/providers, which all else equal raises the prices of the goods they sell ever so much, which then “prices out” the poorest people in the world ever so much.
Or, those who are dependent on direct charity of certain Americans who are harmed by Keynesian policies, may end up getting no charity at all and dying because of it, as the harmed people remove the charity as it was their lowest ranked goal given their prior real income.
There are but a few avenues in which the harming of some people via Keynesian stimulus results in harm to those at the margin of their lives somewhere in the world.
If Keynesians are willing to kill a few poor people who are juuuuust priced out of the market, due the reduction in productivity of those producers who were originally sustaining, directly or indirectly, those children, but are negatively impacted by Keynesian policies, and this is all supported by Keynesians for “the greater good”, then they should be OK with hurricane Sandy killing a few people here and there, also for “the greater good”.
This is the case even if they are, at face value, against harming humans, and even if they don’t pine for hurricanes. They committed themselves by supporting Keynesian policies than can end up killing people.
Before any Keynesian apologist here wants to insist that this “kind of thing” can happen “in the market” also, so I am off base, suggesting the possibility of one company outcompeting another, generating temporary unemployment, where those workers may stop giving charity to poor people, thus killing them, I must insist this cannot be used as a gotcha against me, because these “market” scenarios are voluntary outcomes, brought about by changed consumer buying habits, not coercive outcomes, brought about by the state. It is not a valid argument to say that because voluntary actions can in some indirect way result in someone death, that coercive ending of someone’s life (e.g. murder) is not unjustified either.
“Before any Keynesian apologist here wants to insist that this “kind of thing” can happen “in the market” also, so I am off base, suggesting the possibility of one company outcompeting another, generating temporary unemployment, where those workers may stop giving charity to poor people, thus killing them, I must insist this cannot be used as a gotcha against me, because these “market” scenarios are voluntary outcomes, brought about by changed consumer buying habits, not coercive outcomes, brought about by the state”
And there we see the whole specious nonsense above just boils down to a moral objection to the existence of the state, on the basis of a flawed, untenable ethical system.
That’s not a valid argument. You’re just hand waving.
Your whole specious analogy that compares Keynesian policies harming people to market processes “harming” people, “boils down to a moral objection to the existence of [private property anarchism], on the basis of a flawed, untenable ethical system.”
Anyone can hand wave like that.
You have not once shown how my ethics are “flawed” or “untenable”. In fact it is I who have on many occasions, shown you the praxeological impossibility of consequentialism, and the handful of other ethical pleas that you advocate and yet contradict each other, as if you are saying to the world “please pick any one of these ethics, which are not all able to be practised at the same time because they contradict, but I don’t care, because they don’t rule out statism.”
That’s all your ethical worldview consists of. You will, whatever the circumstances call for at the time, advocate for whichever ethic will serve the purpose of continuing the state. That’s why you can only see what I argued as an argument against the state.
My argument does not rest on anti-statism per se. It rests on anti-violence.
If you can’t see beyond the anti-statism, then you are admitting the state is INHERENTLY violent.
Nope, the logic is not the same, for the same reason two scenarios of someone dying does not entitle you to say that the two means are equally morally justified.
A person can die due to murder, or voluntary removal of charity. But that doesn’t mean someone who argues murdering people is morally unjustified has to use what you call “the same logic” and argue that removals of charity are also morally unjustified, such that if they are not willing to argue that removal of charity is unjustified, then they can’t argue that murdering people is unjustified either.
Your claim about “excessive” debt is subjective assertions, not economically rigorous argument. If capital is financed by real savings, and takes the form of debt, then you have no grounds for calling this debt “excessive”. You’re just invoking Minskyian gobbledygook.
“A person can die due to murder, or voluntary removal of charity. But that doesn’t mean someone who argues murdering people is morally unjustified has to use what you call “the same logic” and argue that removals of charity are also morally unjustified, …
Ah, yes, we can all see where logic of this argument leads.
To the *brilliant* ethical thought of Rothbard:
“Applying our theory to parents and children, this means that a parent does not have the right to aggress against his children, but also that the parent should not have a legal obligation to feed, clothe, or educate his children, since such obligations would entail positive acts coerced upon the parent and depriving the parent of his rights. The parent therefore may not murder or mutilate his child, and the law properly outlaws a parent from doing so. But the parent should have the legal right not to feed the child, i.e., to allow it to die. The law, therefore, may not properly compel the parent to feed a child or to keep it alive.”
Rothbard, M. N. 1998. The Ethics of Liberty, New York University Press, New York, N.Y. and London. p. 100–101.
http://socialdemocracy21stcentury.blogspot.com/2012/06/horror-of-rothbardian-natural-rights.html
Holy crap! Rothbard said that? Wow, thanks for pointing that out to a bunch of Rothbardians who have read his work. You want to also tell us that the sky is blue? Really, mind blowing stuff here, LK.
Ah, yes, we can all see where logic of this argument leads.
Ah yes, we can all see how you are evading the core principle of the argument at hand, because you want to turn this into a state versus anarchy red herring once again.
I am talking about violence, not statism per se. Keynesian policies are based on violence and that harms people.
I don’t care if the state beings the policy about, or some powerful coercive private enterprise. I would say the private enterprise that brings about Keynesian policies would be harming people just as much as I am now saying state led Keynesian policies are harming people.
You have no leg to stand on.
To the *brilliant* ethical thought of Rothbard:
“Applying our theory to parents and children, this means that a parent does not have the right to aggress against his children, but also that the parent should not have a legal obligation to feed, clothe, or educate his children, since such obligations would entail positive acts coerced upon the parent and depriving the parent of his rights. The parent therefore may not murder or mutilate his child, and the law properly outlaws a parent from doing so. But the parent should have the legal right not to feed the child, i.e., to allow it to die. The law, therefore, may not properly compel the parent to feed a child or to keep it alive.”
You refrain from feeding starving babies every day, LK, and yet you expect that others don’t call for your imprisonment, indeed, you would consider it a violation of your rights if someone threw you into a cage for not feeding starving babies.
If you are morally justified in not feeding starving babies, then why is Rothbard’s comment so off base to you? If it is justified to put parents into prison for not feeding their children, then why is it not justified putting you in prison for not feeding other parent’s children? Are you saying that you can bring about baby deaths, as long as they are not yours?
Keep digging that hole, LK.
“You refrain from feeding starving babies every day, LK, and yet you expect that others don’t call for your imprisonment,…”
Completely invalid and specious – for the argument above is that parents “should have the legal right not to feed” their OWN children, those whom they have brought into world and to whom they have a moral obligation.
And any individual person can do all they can within their means to give to charity to stop excess deaths in their society or overseas from poverty.
Your idiotic response implies that people are like “gods”, capable of ending all suffering just by snapping their fingers.
And as a matter of fact, a social democratic system really committed to morality, if it existed in enough wealthy nations, should and could provide the necessary wealth transfers – which would be comparatively small in real output – to end excess deaths from malnutrition or hunger all over the world.
Certainly any such social democratic nation could and should act to end any such excess deaths within its own borders.
I would have no problem in paying a slightly higher progressive tax rate if this were done.
Completely invalid and specious – for the argument above is that parents “should have the legal right not to feed” their OWN children, those whom they have brought into world and to whom they have a moral obligation.
Like I said before, you are insinuating that it is justified for you to bring about the deaths of babies (for not feeding them), as long as they are not your babies.
You just haphazardly assumed that bloodlines somehow introduce a moral obligation component into human life. That humans have one moral code with their blood relatives, but a different moral code with their non-blood relatives (even though we all share the same ancestors and thus are all “relatives” in a sense).
Rothbard’s intention was to develop a HUMAN ethic, not a schizophrenic ethic where one ethic applies to blood relatives and another applies to everyone else.
What, are you saying you believe in the ethic that underlies monarchy? That people of certain bloodlines should be treated differently by people, depending on their blood relation?
And any individual person can do all they can within their means to give to charity to stop excess deaths in their society or overseas from poverty.
Not good enough. The same thing can be said about parents who “do all they can within their means”, but choose to not feed their children because “all they can do” is feed themselves, or get drunk, or whatever.
Your idiotic response implies that people are like “gods”, capable of ending all suffering just by snapping their fingers.
No, it does not imply that at all. YOUR idiotic worldview of statism is what implies that.
And as a matter of fact, a social democratic system really committed to morality
False use of the word “morality” and false use of the words “social democratic system”.
There is not just one morality. You should say a particular morality.
Also, social democracy IS a particular morality. You can’t divorce social democracy from morality, and then ask what kind of a morality would dominate in such a moral code.
if it existed in enough wealthy nations, should and could provide the necessary wealth transfers – which would be comparatively small in real output – to end excess deaths from malnutrition or hunger all over the world.
WTF does “excess deaths” mean? You just made that up because you know you’d get nailed if you said just “deaths”.
Plus, you are just asserting that “should” ex cathedra, without scientifically analyzing it. You are using neither logic nor empirical arguments.
There is not just a little transferring taking place. There is a significant quantity if state enforced transfers taking place, and it is precisely that violence that reduces productivity, and reduces the quantity of goodies that CAN be given to charity.
Certainly any such social democratic nation could and should act to end any such excess deaths within its own borders.
Certainly not by violence. You can’t just assume violence is a justified means.
I would have no problem in paying a slightly higher progressive tax rate if this were done.
That’s probably because your income is FINANCED by tax dollars. Even if it weren’t, what YOU would have “no problems with” regarding your own property does not entitle you to impose your desires onto others and their property such that THEY have to obey it at the point of a gun.
If all it took was for an individual to “have no problems with it”, then it would devolve into anything goes for each individual.
“Your claim about “excessive” debt is subjective assertions, not economically rigorous argument. If capital is financed by real savings, and takes the form of debt, then you have no grounds for calling this debt “excessive””
So what is this? Are you now committing yourself to banning FR banking, and banning all negotiable debt instruments (such as negotiable bills of exchange, sight drafts, promissory notes, cheques), all of which expand the money supply above and beyond “real savings.”
Capital has an endogenous money system. Limiting credit to something allegedly backed by “real savings” is nothing but incompetent and monumentally stupid ignorance of the market and the nature of capitalism.
So what is this? Are you now committing yourself to banning FR banking, and banning all negotiable debt instruments (such as negotiable bills of exchange, sight drafts, promissory notes, cheques), all of which expand the money supply above and beyond “real savings.”
No, I am saying that capital inflows is not, contrary to your claim, synonymous with “excessive debt”. It’s the debt beyond real savings that causes the instability, not the debt per se.
There exists credit expansion in our economy specifically due to state intervention.
Capital has an endogenous money system. Limiting credit to something allegedly backed by “real savings” is nothing but incompetent and monumentally stupid ignorance of the market and the nature of capitalism.
Not a valid argument. Capital does have an endogenous money system yes, but we don’t live in that system. We live in a system where investment is brought about by exogenous institutions (states, central banks).
“No, I am saying that capital inflows is not, contrary to your claim, synonymous with “excessive debt”.”
I did not even say that. Just another straw man – from a skilled practitioner in logical fallacies.
What I actually said:
“Furthermore, private sector capital account inflows can cause asset price inflation (e.g, Australia 1880s) and excessive private debt”
Notice that “can cause”? I.e, money inflows draw into a FR banking system, and allowing greater lending for speculative asset price inflation.
“There exists credit expansion in our economy specifically due to state intervention.”
Where the private sector still has a great role in creating new money.
“Capital does have an endogenous money system yes, but we don’t live in that system.”
Yes, we don’t live in the fantasy libertarian world where there is no government, but still a private sector perfectly capable of creating FR banking, negotiable bills of exchange, sight drafts, promissory notes, cheques, etc, but in that system the alleged problems of monetary expansion would still exist.
The private sector inflation would still harm “poor people around the world, who can just barely afford to stay alive with the existing world price structure” and they “may die with any modestly higher prices for certain goods”.
I did not even say that.
Yes, you did. You made a universal claim that capital inflows can lead to “excessive debt”.
What I actually said:
“Furthermore, private sector capital account inflows can cause asset price inflation (e.g, Australia 1880s) and excessive private debt”
Notice that “can cause”? I.e, money inflows draw into a FR banking system, and allowing greater lending for speculative asset price inflation.
Semantics. The point is you are wrong to say that capital inflows CAN lead to “excessive debt”. The word “synonymous” is justified in those “can” cases. That was the context you set up.
Where the private sector still has a great role in creating new money.
With state intervention.
Yes, we don’t live in the fantasy libertarian world where there is no government, but still a private sector perfectly capable of creating FR banking, negotiable bills of exchange, sight drafts, promissory notes, cheques, etc, but in that system the alleged problems of monetary expansion would still exist.
Those are not money.
The private sector inflation would still harm “poor people around the world, who can just barely afford to stay alive with the existing world price structure” and they “may die with any modestly higher prices for certain goods”.
That is not inflation.
“Yes, we don’t live in the fantasy libertarian world where there is no government, but still a private sector perfectly capable of creating FR banking, negotiable bills of exchange, sight drafts, promissory notes, cheques, etc, but in that system the alleged problems of monetary expansion would still exist.
Those are not money.”
Here we see how MF’s arguments just descend into red herrings when he’s beaten.
Even if you want to deny that fiduciary media are money, Mises and Hayek still argue that fiduciary media creation causes an ABC.
So we have now (apparently) established that you would not ban FR banking or negotiable debt instruments.
(1) with FRB and negotiable debt instruments legal under private law systems in an anarcho-capitalist society, why wouldn’t fiduciary media creation occur?;
(2) with fiduciary media creation, under the logic of ABCT, the anarcho-capitalist society will be hit by perpetual trade cycles;
(3) even under the logic of their own trade cycle theory, the anarcho-capitalist belief that the trade cycle will be eliminated in their system is nonsensical rubbish;
(4) the anarcho-capitalist system just reduces to a free banking system: it faces all the instability and unemployment that a free banking system would face, including asset bubbles, banking sector collapse, and debt deflationary depression.
Here we see how MF’s arguments just descend into red herrings when he’s beaten.
Funny, since I just beat you again. You lost, so how can you say I have been beaten? Seriously, where did you show I was wrong?
Even if you want to deny that fiduciary media are money
I didn’t deny that fiduciary money is money. I said your examples, which are not universally accepted, are not money. Checks, negotiable bills of credit, these are not money.
Bank credit ex nihilo which expands demand deposits, those are universally accepted.
Mises and Hayek still argue that fiduciary media creation causes an ABC.
Yes, agreed, they didn’t say privately issued negotiable bills of credit cause ABC.
So we have now (apparently) established that you would not ban FR banking or negotiable debt instruments.
We have first established that you admit that the state brings about a quantity of credit expansion which you hold leads to instability.
(1) with FRB and negotiable debt instruments legal under private law systems in an anarcho-capitalist society, why wouldn’t fiduciary media creation occur?;
Let it occur, but let the costs be internalized by the customers of said banks, and do not bail out said banks at the point of a gun.
Also, prosecute fraud where banks tell their demand deposit clients something other than what they actually do with their money.
(2) with fiduciary media creation, under the logic of ABCT, the anarcho-capitalist society will be hit by perpetual trade cycles;
So we have established that you admit the state brings about booms and busts, through its sanction, and encouragement, of credit expansion.
(3) even under the logic of their own trade cycle theory, the anarcho-capitalist belief that the trade cycle will be eliminated in their system is nonsensical rubbish;
We have also established that you have contradicted yourself in denying that the state brings about booms and busts, because now you are admitting that the state beings about a quantity of credit expansion that leads to booms and busts.
(4) the anarcho-capitalist system just reduces to a free banking system: it faces all the instability and unemployment that a free banking system would face, including asset bubbles, banking sector collapse, and debt deflationary depression.
The Keynesian world faces all the instability that prolonged credit expansion generates, including asset bubbles, banking sector crises, unemployment, and depressions.
“with fiduciary media creation, under the logic of ABCT, the anarcho-capitalist society will be hit by perpetual trade cycles;
So we have established that you admit the state brings about booms and busts, through its sanction, and encouragement, of credit expansion”
No – a perfect example of the straw man, and more proof of your intellectual bankruptcy, for all to see.
the anarcho-capitalist system just reduces to a free banking system: it faces all the instability and unemployment that a free banking system would face, including asset bubbles, banking sector collapse, and debt deflationary depression.
The Keynesian world faces all the instability that prolonged credit expansion generates, including asset bubbles, banking sector crises, unemployment, and depressions.
The sheer blatant evasion of answering or responding to the original statement by MF (in his red herring response) shows he cannot answer the charge made.
Assume (for the sake of argument) that the Keynesian system is subject to all these things that he charges it with: he has not addressed why his own system is not subject to the very same problems, nor why it would be superior.
Cowardly evasion and blatant logical fallacy is your stock in trade, MF.
No – a perfect example of the straw man, and more proof of your intellectual bankruptcy, for all to see.
It’s not a straw man. You said that an anarcho-capitalist world, because it allegedly will be steeped in credit expansion, contain asset bubbles, bank crises, unemployment, and depressions.
You are completely evading your prior claims.
Assume (for the sake of argument) that the Keynesian system is subject to all these things that he charges it with: he has not addressed why his own system is not subject to the very same problems, nor why it would be superior.
It’s been addressed before. If the state brings about a quantity of credit expansion that leads to boom bust, then a removal of that credit expansion will be a removal of that boom bust. If there remains some modest credit expansion, due to ignorance or what have you, then it would still be a vast improvement over Keynesianism.
You cannot claim that there will necessarily be enough fractional reserve banking in anarcho-capitalism to keep generating the boom bust cycle. What anarcho-capitalism does do is prevent the state from exacerbating it IF it is taking place.
In other words, if I were living in an anarcho-capitalist world, I would not hold it unjustified if every relevant party knew and agreed with credit expansion and carried it out, because in such a world both the issuer and the receiver would be subject to losses on their credit transactions.
To the extent that this media is accepted in exchange, they would know it’s credit they are trading, not absolute claims to property.
Without continuous influx of inflation from a central bank, the fractional reserve banks cannot keep issuing more and more credit over time and prolong a boom. The booms, if they took place, would be minor and then progressively smaller over time as people learned that the closer they get to 100%, the more secure their wealth becomes.
It is in all probability that the extent of credit expansion in anarcho-capitalism would be so small, that the “bank panics” and “unemployment” and “depressions” would appear to be, and feel like, occasional minor deviations from a long term trend of growth and employment.
ABCT is not an ethic. It is a theory of cycles. It does not “promise” that credit expansion won’t take place in anarchy.
“You cannot claim that there will necessarily be enough fractional reserve banking in anarcho-capitalism to keep generating the boom bust cycle. What anarcho-capitalism does do is prevent the state from exacerbating it IF it is taking place.”
There’s not a shred of evidence that either businesses or consumers wouldn’t continue to patronise FRBs, nor that any imaginary 100% reserve banks would suddenly became significant in an anarcho-capitalist system.
Nor that FRB and private sector credit money creation would not be sufficient (under the logic of ABCT) to continue to create ABCs.
Your response reduces to: I have blind faith in an imaginary system never
seen in any real world example, but I just *know* it would work contrary to the way capitalism has worked in practice for centuries.
There’s not a shred of evidence that either businesses or consumers wouldn’t continue to patronise FRBs, nor that any imaginary 100% reserve banks would suddenly became significant in an anarcho-capitalist system.
Of course there is not a shred of evidence for that, since there is not a shred of evidence of anarcho-capitalist societies in the world.
It would be like me arguing in a world of slavery, that ending slavery will increase the long term standard of living of not only the slaves, but everyone else too, since gains can be made through economic freedom.
Then you as a slave owning apologist assert “There is not a shred of evidence that this happens”.
Well duh, of course there is no evidence of it, because it doesn’t exist yet!
Your logic is flawed. You are making a case against a proposal by pointing to its lack the proposal’s existence.
That’s why it is called a proposal.
A movement to anarcho-capitalism would at the very least put larger constraints on credit expansion than exist today, because there won’t be any Bernanke Put, or FDIC, or bank bailouts, or inflation of currency out of thin air.
Nor that FRB and private sector credit money creation would not be sufficient (under the logic of ABCT) to continue to create ABCs.
You have no evidence that an anarcho-capitalist system would necessarily contain credit expansion, as per YOUR claim.
Your response reduces to: I have blind faith in an imaginary system never
seen in any real world example, but I just *know* it would work contrary to the way capitalism has worked in practice for centuries.
No, that’s how you think. That is how you think statism works. Blind faith.
>So what is this? Are you now >committing yourself to banning FR >banking, and banning all negotiable debt
> instruments (such as negotiable bills of
> exchange, sight drafts, promissory notes,
> cheques), all of which expand the money
>supply above and beyond “real savings.”
No,
So we have now (apparently) established that you would not ban FR banking or negotiable debt instruments.
You’re in the same boat as Bob Roddis:
(1) with FRB and negotiable debt instruments legal under private law systems in an anarcho-capitalist society, why wouldn’t inflation of the money supply via fiduciary media occur?;
(2) under the logic of ABCT, the anarcho-capitalist society will be hit by perpetual trade cycles;
(3) even under the logic of their own trade cycle theory, the anarcho-capitalist belief that the trade cycle will be eliminated in their system is nonsensical rubbish;
(4) the anarcho-capitalist system just reduces to a free banking system: it faces all the instability and unemployment that a free banking system would face, including asset bubbles, banking sector collapse, and debt deflationary depression.
(1) with FRB and negotiable debt instruments legal under private law systems in an anarcho-capitalist society, why wouldn’t inflation of the money supply via fiduciary media occur?;
Glad you admit that the state brings about a quantity of credit expansion that generates painful boom and bust cycles.
(2) under the logic of ABCT, the anarcho-capitalist society will be hit by perpetual trade cycles;
Non sequitur. An anarcho-capitalist world does not necessarily have free banking. It could have 100%, or close to 100%, reserve banking.
(3) even under the logic of their own trade cycle theory, the anarcho-capitalist belief that the trade cycle will be eliminated in their system is nonsensical rubbish;
Non sequitur. You are fallaciously presuming that an anarcho-capitalist system would have specific universal rules regarding credit and money, when anarchism has no such universal rules.
(4) the anarcho-capitalist system just reduces to a free banking system: it faces all the instability and unemployment that a free banking system would face, including asset bubbles, banking sector collapse, and debt deflationary depression.
The Keynesian world faces all the instability that prolonged credit expansion generates, including asset bubbles, banking sector crises, unemployment, and depressions.
LK, who still does not comprehend economic calculation, is always yapping about Australia in the late 1800s. It sure sounds like it was a big FRB mess to me, but LK, being the non-vulgar fellow that he is, gets to blame us for it:
Here’s a quote from a paper with a relatively positive view of the free banking era, which nonetheless notes the systemic collapse of 1893
Australia provides a textbook example of free banking in practice. One writer on the subject commented that in Australia “the legal framework with which banks operated was perhaps the least restrictive of any on
record” (Dowd 1992).Butlin (1953),commented that “there was no tender law, no central bank, no legal control over the total volume of bank loans, and only a very primitive control by the banks themselves through a loosely applied rule of thumb (cash reserves should be to one-third the sum of deposits and notes) concerning reserves against all liabilities”.
The 1840 Colonial Bank Regulations issued by British Treasury governed colonial banking. The requirements included that: capital should be a determinant amount and must be fully subscribed; total debts must not exceed three times the paid up capital and that all notes were to be payable on demand in specie at the place of issue. Failure to pay on demand for a total of 60 days in any year entailed forfeiture of incorporation. Personal liability for bank shareholders was capped at an amount equal to twice capital and loans against real estate, shops or merchandise were to be prohibited. Amendments to the regulations in 1846 limited the note issue to the amount of paid up capital.
Banking was not substantially affected by the regulations, however. For example, the restrictions on total debt and note issue were largely ignored (Butlin 1986). Likewise, banks found loopholes around the prohibition on lending for land (Pope 1989). In practice, Australian colonial banks were allowed to raise the limits on note issue by including coin and bullion in paid-up capital. Over time, even this stricture was relaxed; by 1856 the Bank of Australasia secured a licence to print private notes up to the value of three times its specie and bullion holdings. Reserve requirements were easily met as “double counting” was permitted: reserves used to back the note issue were simultaneously used to provide liquidity in the event of a deposit withdrawal. Rules limiting total indebtedness were also no threat because deposits were excluded.
This freedom of note issue was, however, accompanied by strong liability provisions. In most colonies by the late 1860s, shareholders had unlimited liability for their note issue (Pope 1989).
Source is OPTIMAL REGULATION OF ELECTRONIC MONEV: LESSONS FROM THE “FREE BANKING” ERA IN AUSTRALIA by THOMAS A. ROHLING AND MARK W. TAPLEY* Economic Papers: A journal of applied economics and policy
http://tinyurl.com/3lw67uw
“LK, who still does not comprehend economic calculation”
Despite the fact we have already listed what you mean by “economic calculation” problems, and I’ve shown here how the problems are either grossly exaggerated or not even price “distortions” at all:
http://socialdemocracy21stcentury.blogspot.com/2012/10/mises-on-rational-economic-planning.html
Even the underlying assumption of a unique market clearing price structure – also held by the neoclassicals – is nothing but a Walrasian fantasy.
Despite the fact we have already listed what you mean by “economic calculation” problems
Actually you didn’t…
and I’ve shown here how the problems are either grossly exaggerated or not even price “distortions” at all:
You were wrong then too. They are indeed price distortions, precisely because the production of money ITSELF is not constrained to profit and loss, and so the coordination between money and all non-money production, becomes distorted.
You still have no clue.
Markets do tend to clear. Neither Mises, nor Hayek, nor any other Austrian held that markets will have 100% employment and 100% non-idle resources.
That you keep claiming otherwise is just red herring nonsense.
1. Of all the numerous aspects which LK refuses to understand regarding the concept of economic calculation, one of the most critical is the notion that average people possess the available dispersed knowledge which cannot be known or understood by a central authority. The best source of that knowledge consists of free market prices and those prices are fatally impaired by Keynesian policies.
2. It is always conceivable that on rare occasion, a benevolent totalitarian dictator could force a group of primitives to learn to be more civilized and/or wiser. However, Keynesians as “progressives” and democratic socialists worship elections. How is an electorate that is too stupid to run their own market affairs (a situation where one can sue and obtain relief for breaches of contracts and for torts) effectuate and put in place a priori an allegedly wiser and more informed political elite to boss them around and “fix” the economy but where no one can sue to obtain relief for inevitable breaches of duty and where voters are generally utterly ignorant of political and economic matters?
We already established that your anarcho-capitalist world just reduces to this:
(1) with FRB and negotiable debt instruments legal under private law systems in an anarcho-capitalist society, why wouldn’t inflation of the money supply via fiduciary media occur?;
(2) under the logic of ABCT, the anarcho-capitalist society will be hit by perpetual trade cycles;
(3) even under the logic of their own trade cycle theory, the anarcho-capitalist belief that the trade cycle will be eliminated in their system is nonsensical rubbish;
(4) the anarcho-capitalist system just reduces to a free banking system: it faces all the instability and unemployment that a free banking system would face, including asset bubbles, banking sector collapse, and debt deflationary depression.
———–
Therefore your system is already inherently flawed, as it endogenously produces business cycles (under the logic of your ABCT).
We have already established that
1) Keynesianism contains brutal boom and bust cycles due to state intervention in the banking system, which expands credit to such large degrees that the extent of booms and busts are greater than they would be without such state intervention.
2) Under your own logic, you admit that the state generates the recessions we experience, and is not “fighting” allegedly purely market driven credit swings.
3) It is false to claim that under anarcho-capitalism, there WILL be credit expansion. It is possible for private owners to outlaw the practice, because there is no state to make a universal law one way or the other. Thus, your assertion that anarcho-capitalism “reduces to” free banking is nothing but straw man garbage.
4) Anarcho-capitalism is not INHERENTLY flawed on the basis of what COULD happen in it, any more than social democracy is not INHERENTLY flawed on the basis that undesirable behavior COULD happen in it.
Your system is inherently flawed, because not only does it contain systematic initiations of violence, not only does it not even accomplish what it allegedly sets out to do, not only does it exacerbate booms and busts, but it also is being presented as allegedly superior to anarcho-capitalism, despite the fact that it is inferior in every single metric you are using to argue against anarcho-capitalism.
Your ideal system is total, unequivocal, rubbish.
‘ Under your own logic, you admit that the state generates the recessions we experience, and is not “fighting” allegedly purely market driven credit swings.”
I admit no such thing.
On the contrary, subjective expectations in the investment decision, shifting consumer preferences, shifting asset markets, and an uncertain world is sufficient to cause significant business cycles.
It is not the state that drives private sector money creation and, say, destabilising asset bubbles: the impetus comes from the demand for credit and speculative borrowers, and the wilingness of banks to grant that credit, just as Australia in the 1880s and 1890s suffered an asset price bubble and debt deflationary depression.
Government intervention would reduce and stabilise the system, just as it did 1945-c.1970s.
” It is possible for private owners to outlaw the practice, because there is no state to make a universal law one way or the other.”
Precisely. I would contend that the practice would likely be prosecuted as fraud, and even if it isn’t, the possibility of bank runs and other problems would mean fractional reserve banks would have their notes discounted by the market, as has happened with banknotes in general in the past.
I admit no such thing.
Under your own logic, yes, you did.
On the contrary, subjective expectations in the investment decision, shifting consumer preferences, shifting asset markets, and an uncertain world is sufficient to cause significant business cycles.
Under yet another logic you admit it once again. Yes, politicians and regulators do indeed have subjective expectations, shifting preferences, shifting rules, and make decisions in an uncertain world, which is sufficient to cause significant business cycles.
It is not the state that drives private sector money creation and, say, destabilising asset bubbles: the impetus comes from the demand for credit and speculative borrowers
They can’t satisfy any arbitrary quantity of demand unless they have assurances from the central bank that it will be there to provide money at low or zero interest rates, and be a last resort inflation financed buyer of otherwise worthless assets, or assets that would otherwise be sold at losses which would constrain the bank from lending as much as borrowers would like.
and the wilingness of banks to grant that credit, just as Australia in the 1880s and 1890s suffered an asset price bubble and debt deflationary depression.
That was not an era of free banking. The state intervened and made it easier for the banks to issue credit, on purpose.
Government intervention would reduce and stabilise the system
It did the exact opposite in the very era you refer to.
just as it did 1945-c.1970s.
It was unsustainable. You can’t cherry pick one small period of time and then claim it can be indefinitely repeated. There were many factors operating that made it non-repeatable, and the collapse of Bretton Woods should be obvious to you that something was not sustainable.
“That was not an era of free banking. The state intervened and made it easier for the banks to issue credit, on purpose.”
Cite evidence for that statement.
Cite evidence for that statement.
LOL, an example was in one of the posts you responded to in this thread
The example of Australia in the late 1800s.
http://tinyurl.com/9wj2dt5
Think of it this way, LK.
Suppose the form that the desire for consumption takes is people never abstaining from consumption, and the only production that takes place is production of consumer goods. All labor goes into the production of consumer goods.
In this situation, in terms of consumption, there is no growth.
Now suppose that some people refrain from satisfying their present desires (i.e. refrain from consumption), and instead they saved resources, and then devote a portion of their days to producing capital goods used to increase productivity, and they sustain themselves on their savings.
In this case, in terms of consumption, there will be growth, because with capital goods now being produced, which can only take place via saving, i.e. not consuming, the rate of producing consumer goods can grow.
If your consumptionist worldview were right, then the former economy should not be limited and they should be able to accumulate capital by only consuming and only devoting labor to consumer activity.
If Keynesianism and funny money loans do not cause distorted prices, what is the alleged source of Minsky Moments? How can “regulators” have better knowledge a priori of various risks than market participants?
An endogenous money system and unregulated or even poorly regulated financial sector can produce reckless lending or asset price inflation. These are endogenous problems of capitalism.
They can happen under a Keynesian system too, with a poorly regulated financial sector, but would be prevented or diminished by effective financial sector regulation.
“How can “regulators” have better knowledge a priori of various risks than market participants?”
The whole premiss of your question is wrong.
The market participants (banks and speculative borrowers) are not interested in halting destabilizing asset price inflation, for they see a quick profit opportunity in arbitrage from asset price rises.
An effective regulatory system can, and has in the past, prevented such destabilizing asset price inflation, by putting curbs on speculative lending, e.g., by stopping obviously reckless lending like liars loans, NINJA loans, or speculative asset purchases loans on margin lending etc..
An endogenous money system and unregulated or even poorly regulated financial sector can produce reckless lending or asset price inflation. These are endogenous problems of capitalism.
The state brings about exogenous money and investment that exceeds real savings.
They can happen under a Keynesian system too, with a poorly regulated financial sector, but would be prevented or diminished by effective financial sector regulation.
It can’t be regulated “non-poorly”, because no statesmen and no private market actor can know what the “true”, or “optimal”, or “correct” rate of credit ought to exist beyond the quantity of real savings.
As with the rest of your garbage worldview, you think regulations are a panacea. That politicians subject to bribes, and subject to SELF-INTEREST, are somehow intellectually and morally capable of knowing, and bringing about, the required regulations that curb what you would consider “excessive” credit expansion, and yet, in over 300 years of modern banking, no state has EVER created the “right” set of regulations that can do what you have a religious in believing can be done.
Your faith is statism being able to solve all the “large” economic problems.
The whole premiss of your question is wrong.
The market participants (banks and speculative borrowers) are not interested in halting destabilizing asset price inflation, for they see a quick profit opportunity in arbitrage from asset price rises.
Not surprisingly, you completely ignored politicians and regulators who are financed and bribed by said banks and speculative borrowers, and who also are intellectually convinced, thanks to Keynesians and Monetarists, that asset price inflation due to “easy money” from central banks, is a good thing, due to its “wealth effect” and its alleged “boost to employment”.
An effective regulatory system can, and has in the past, prevented such destabilizing asset price inflation, by putting curbs on speculative lending, e.g., by stopping obviously reckless lending like liars loans, NINJA loans, or speculative asset purchases loans on margin lending etc..
Which government has put a curb on credit expansion?
Wouldn’t a government that put a curb on credit expansion be, according to you, violating consensual agreements between adults, who want to engage in FRB banking?
“Which government has put a curb on credit expansion?.”
Virtually all governments in the Western world, c. 1945-1970s/1980s:
“For instance, from about the 1930s to the 1980s, many countries had policies of financial regulation that included many of the following:
1. Interest rate ceilings
2. Liquidity ratio requirements
3. Higher bank reserve requirements
4. Capital Controls (that is, restrictions on capital account transactions)
5. Restrictions on market entry into the financial sector
6. Credit ceilings or restrictions on the directions of credit allocation ….
(Ito, H. 2009. “Financial Repression,” in K. A. Reinert, R. S. Rajan et al. (eds), Princeton Encyclopedia of the World Economy, Princeton University Press, Oxford and Princeton, N.J. pp. 431–433).”
http://socialdemocracy21stcentury.blogspot.com/2009/11/financial-deregulation-and-origin-of.html
“Wouldn’t a government that put a curb on credit expansion be, according to you, violating consensual agreements between adults, who want to engage in FRB banking?”
No, because my position does not use natural rights ethics, but consequentialism.
I am not committed, as you are, to defending every voluntary, non fraudulent exchange on the market.
Virtually all governments in the Western world, c. 1945-1970s/1980s:
Which period is that? 1945 to the 1970…what? 1945 to 1980…what? This is sloppy.
1945 to 1971 had curbed credit expansion because of the pseudo-gold standard Bretton Woods, not because of enlightened politicians and regulators who knew how much credit there should be.
Are you wanting to bring back the pseudo-gold standard Bretton Woods?
LOL!
“For instance, from about the 1930s to the 1980s, many countries had policies of financial regulation that included many of the following:
1. Interest rate ceilings
Doesn’t curb credit.
2. Liquidity ratio requirements
3. Higher bank reserve requirements
You mean you want higher bank reserves? Like closer to 100% reserves? LOL!
4. Capital Controls (that is, restrictions on capital account transactions)
Doesn’t curb credit.
5. Restrictions on market entry into the financial sector
Definitely does not curb credit, because it reduces bank to bank redemption requests.
6. Credit ceilings or restrictions on the directions of credit allocation ….
What is the correct credit ceiling?
No, because my position does not use natural rights ethics, but consequentialism.
It’s already been shown to you that consequentialism is praxeologically impossible to practise.
Consequentialism reduces to whatever subjective whim you personally want.
I am not committed, as you are, to defending every voluntary, non fraudulent exchange on the market.
Yes, I think most of us know you condone initiating violence against people who have not initiated violence themselves. That’s your corrupt worldview in a nutshell.
LK’s entire raison d’être is that regulatory elites a priori have better knowledge and are wiser than market participants. The end.
And this lame “you won’t ban FRB so the galaxy will explode” crap purposefully ignores that the fact that private money will be branded and prices will be stated in brands of money and thus be comparable and competitive. (In addition, various private enclaves could and might very well ban FRB.) Further, the ABCT is based upon people being MISLED by phony prices. If no one is misled, there is no problem. If payees are misled by an FRB note, they would have a cause of action for fraud. If they are not misled and suffer a loss, that’s their problem. If FRB can survive in the market, it will. If not, it won’t. The fact that many prices will still be stated in 100% reserve money will probably be a check on too much expansion of FRB credit and perhaps on the practice itself.
In the market, people have a cause of action for a breach of contract or for fraud. Under Keynesian statism, there is no relief from the injustice of the predatory Keynesian state.
This is just another pathetic and desperate attack by LK on a subject he cannot understand.
“ignores that the fact that private money will be branded and prices will be stated in brands of money and thus be comparable and competitive.”
Any “private competitive money” would just be a debt instrument as all historical debt instruments, and would be redeemed for commodity money, as in the past.
There is no logically no sense why prices would be stated on a completely different level when final payment would be in the commodity money anyway. Just blatant illogic.
Any “private competitive money” would just be a debt instrument as all historical debt instruments, and would be redeemed for commodity money, as in the past.
Any? So according to you, a private gold producer would just be an issuer of a debt instrument. After all, a private gold producer is “any” private competitor of money.
There is no logically no sense why prices would be stated on a completely different level when final payment would be in the commodity money anyway.
If the FINAL payment is in the commodity, then ONLY the commodity is money.
That’s what money does. It finalizes exchanges.
If someone buys a house with a certified check for gold bullion, I suspect he’d get a better price that if he tried to write a check on an FRB account with 1% reserves which resembles a credit transaction. The house price stated in certified checks for bullion would not be confused with a price based upon a check on an FRB account with 1% reserves. No one would be misled into thinking there was more demand for housing than there really was. Fiat funny money loans can and does mislead people into thinking that there might be an endless supply of buyers for $100,000 homes willing to pay $600,000.
I cannot believe that we are still having this stupid “debate”.
“I suspect he’d get a better price that if he tried to write a check on an FRB account with 1% reserves which resembles a credit transaction”
If you had no faith in a check on an FRB account with 1% reserve, you would simply reject the cheque: you would not charge a separate price, for you have already decided it is unlikely you would get paid.
Utter stupidity at its finest.
If you had no faith in a check on an FRB account with 1% reserve, you would simply reject the cheque: you would not charge a separate price, for you have already decided it is unlikely you would get paid.
Who said anything about NO faith? If people are not risk averse, they can trade those fiduciary claims at a heavy discount.
Utter red herring at its finest, LOL
My main problem with FRB is that it appears to be a form of credit masquerading as a near spot barter exchange. That’s where people might get misled. Austrians are not against credit (although I can’t count the times I’ve been accused of such), they are just against misleading financial instruments.
This is not that complicated. Keynesians, having no serious analysis or response, apparently are compelled to instead muddle the water and obfuscate.
This “debate” comes down to LK positing a series of potentially unscrupulous or fraudulent banking practices, asserting a priori that a group of actors acting voluntarily in contractual privity are invariably to stupid to draft rules and contracts which might anticipate such behavior, but the same group of lunkheads will <a priori always be able to vote by majority rule and elect a bunch of overseers with SWAT teams who would always effectuate those very same rules in the form of 3rd party regulations.
And LK understands the knowledge problem. Right.
In other words, customers who voluntary abstaining from spending their money at one company, to spend more at another company, are not harming people the same way Keynesian policies are harming people.
Keynesian policies are based on state enforcement, i.e. law, i.e. coercion, i.e. violence. Customer redirections of spending are based on decisions with one’s own property, i.e. peace.
You can’t compare the two. You are trying to compare apples and oranges, as always.
This seems to be a modus operandi with you. You see someone expose the harm created by government policy, and you seek to find some equivalent in the voluntary market. Right off the bat you are wrong when you do that. You cannot legitimately argue peaceful behavior is analogous to violent behavior.
Customers who abstain spending at a company, to spend more at another company, does not harm people at the first company. Their persons are not aggressed against and their property is not confiscated. Store robbers who loot one company and give to another, harm people. It doesn’t matter that the end results for both are nominally the same. One is peaceful, the other is violent. You can’t say that one who is against looting also has to be against the changed customer spending.
Private investment is not funded by taxation or Federal Reserve buying of government debt with newly created money. It isn’t spending money that is redistributive – it’s spending OTHER PEOPLE’S money.
Inflation created out of thin air is not other people’s money, but it still redistributes resources.
It is devaluing other people’s money, and that’s very similar to spending in my books.
Okay this might be complet nonsense but isn’t the difference between a bogus alien invasion and a natural disaster that the latter actually occurs and destroys capital whereas the former just fools people into investing but doesn’t actually destroy anything?
No. In the hurricane example, it is assumed that 1000 of capital remains as in the example of the alien invasion.
Well, we don’t have to remove the stimulus- we can just say that we have always been at war with the aliens.
I’ve read several posts recently where Bob basically would say, or imply, “it’s understandable when the average Joe thinks [insert Keynesian stimulative idea] is crazy”. This particular video is the poster child for why Americans are so skeptical/fed up with today’s economists. When your economic theories lead you to policy positions that result anywhere from people aimlessly digging holes and filling them back up, to the U.S. government incorrectly observing an alien invasion, then no wonder the economics profession is essentially regarded by Americans as an absolute joke.
And then you’ve got Krugman, who advocates a housing bubble, gets one, and then reneges that he advocated it when he realizes reality isn’t all fairies and unicorns. How aren’t tons of people within the profession ostracizing this lunatic as nothing less than just that? Fake alien invasions and hole diggings? When that is all you’ve got left how can’t you realize you’re essentially done for as any sort of intellectual?
Corrupt philosophy is the characteristic feature of our age.
I thought it was book-length blog coments.
I forgot to mention, bad spelling is also a characteristic feature of our age.
Bad spelling is a feature of trying to post the 17th comment up against the right margin.
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Sorry, that’s ugly.
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Spelling was a passing fad, invented by the publishers of dictionaries to make their product more desirable.
Rothbard explains that PhD economists were invented in Germany as apologists for the state. Unsurprisingly, a preponderance of economists are of the Keynesian persuasion because Keynes’ ideas conveniently involve expanding the state.
How fun reading MF successfully battle LK above. But I was taken aback whenever MF would mock LK for being a non-economist! How ironic.
What would be the utility of economists in a Rothbardian utopia? We might not even need aggregate economic statistics. Horrors.
But I was taken aback whenever MF would mock LK for being a non-economist! How ironic.
One can be an economist without being a PhD.
Henry Hazlitt for example was not a PhD, yet he outranks the majority of government bureau basement dwelling bean counting PhDs of today.
That’s true. I just assumed you meant “real” economist like our dear Bob Murphy, PhD
Economist is a changing term I think. In the last century they had high school courses for girls called “home economics” about how to succeed in the homemaker biz.
http://rmc.library.cornell.edu/homeEc/masterlabel.html
Who knows, maybe LK is an economist in some sense after all!
Economics first meant “the management of a household and estate”. I think it was Plato who was the first to put forth the definition.
Plato might be aghast to learn that today we grant degrees to legions of economists every year who think they are trained to manage other people’s households and estates — whether they like it or not.
“A man is likely to mind his own business when it is worth minding. When it is not, he takes his mind off his own meaningless affairs by minding other people’s business.” ― Eric Hoffer
The word for “household management” is oikonomia in Greek, and that word predates Plato.
The Greek poet Hesiod, c 750 – c 650 BC, wrote a treatise on oikonomia.
You guys are spelling it wrong. It’s spelled Play-Doh.
Lord Keynes worships the ship of state above all else.
False idolatry at its finest…
In conclusion, LK brought up his same old same old about Australia and the need for regulation. I posted some historical statements about the loopy Australian FRB system and predicted LK would try to blame us for it. He did and then showed that he still doesn’t understand economic calculation as he keeps insisting that bureaucrats will invariably have better information than market actors. And we go over the same thing again and again and again and again and again.
” posted some historical statements about the loopy Australian FRB system and predicted LK would try to blame us for it.
You mean “loopy” because it was heavily laissez faire and effectively unregulated?:
“Banking was not substantially affected by the regulations, however. For example, the restrictions on total debt and note issue were largely ignored
In other words: the closest thing imaginable to a system where banks could do what they wanted, largely free from government.
And nobody blamed the fantasy world Rothbardian anarcho-capitalist
system for this disaster: you just making things up.
All that was asserted was that this is historical evidence on how a good approximation of free banking world work.
You mean “loopy” because it was heavily laissez faire and effectively unregulated?:
Effectively unregulated? So that’s what happens when regulations turn out bad.
LOL
It was a heavily regulated system in terms that people were expected to obey the law, and that personal liability would follow.
It was unregulated in as much as those banks that were willing to impose personal liability on their shareholders could act without otherwise being imposed on by government monetary controls. However, when those banks had a problem, the law did chase down the shareholders, and they were made to pay, just like anyone else who made a promise.
Banks were never “free from government”, they had to obey the law.
By the way, the problems of the Australian banking crash were just the outcome of a supply shock, when they got used to a steady stream of gold, and the gold ran out. Very much like the US in the 70’s when they suffered an oil supply shock and the whole stack went wobbly and took a while to get under control again.
Murphy:
I liked this comment you made over on the Mises article you wrote:
“Other things equal, we are better off when people have to work less to achieve a given level of wealth or flow of consumption.”
In other words: the closest thing imaginable to a system where banks could do what they wanted, largely free from government.
What then is the relevance of such a system to what we are proposing? We are proposing nothing more than the strict application of the principles of fraud, breach of contract and property rights to such endeavors. Your example from Australia is of a society apparently not particularly concerned with the strict application of such rules.
And nobody blamed the fantasy world Rothbardian anarcho-capitalist system for this disaster
You vulgar liar. The implication is clear and has been continuous: Australia in late 1800s is what one can expect under a Rothbardian or Austrian system. And “the fantasy world Rothbardian anarcho-capitalist system” is nothing more than a proposal for strict enforcement of contracts and property rights.
You find a situation more than a century ago where there was lax enforcement of fraud, contract and property rights, mock our proposals for strict enforcement and then imply that strict enforcement is a “fantasy world” which would nevertheless collapse as did the century old lax system. You are great, LK. Just great.