A Note on Intellectual Honesty
[UPDATE: In hindsight, I wish I hadn’t cast this post as explicitly about “intellectual honesty,” because I don’t like it when DeLong, Krugman, et al. castigate their opponents as not being simply wrong, but being dishonest to boot. So, in retrospect I wish I had written this differently, to just explain why their use of the Mellon quote troubled some of us.]
Look, I feel funny even writing this blog post, like I’m explaining why drowning kittens for sport is not cool, but apparently it is necessary.
In his Memoirs, Herbert Hoover explained that after the stock market crash of 1929, there were two schools of thought that emerged in his Administration. In Hoover’s words: “Two schools of thought quickly developed within our administration discussions. First was the ‘leave it alone liquidationists’ headed by” Hoover’s Secretary of the Treasury, Andrew Mellon.
Hoover then goes on to quote Mellon’s infamously hardhearted advice, to “liquidate stocks,” “liquidate labor,” and so forth.
Then, on the very next page (in my edition of Hoover’s Memoirs), Hoover says: “But other members of the Administration, also having economic responsibilities–Under Secretary of the Treasury Mills, Governor Young of the Reserve Board, Secretary of Commerce Lamont and Secretary of Agriculture Hyde–believed with me that we should use the powers of government to cushion the situation.”
OK, so now ask yourself, how could someone be incredibly intellectual dishonest, without technically lying? Well, he could read from Treasury Secretary Mellon’s advice (which we only know about because of Hoover’s Memoirs, so it’s possible he didn’t even say it just like that), and then lead the listener/reader to believe that this was the Hoover Administration’s official policy. At this point, it shouldn’t surprise you that that’s how Brad DeLong and Paul Krugman operate. To repeat, these guys know full well what they are doing; they don’t say anything that is technically, demonstrably false, which is worse than some journalist who ignorantly says “Hoover was a liquidationist” because that’s what he was taught in 5th grade and never heard differently.
So, when Krugman pulled this stunt in his recent NYT op ed (what I link above for him), various people went to the trouble of pointing it out–for example David R. Henderson. I wasn’t even going to get involved, because what was the point? It was a dog bites man issue.
Yet innocent Daniel Kuehn, who knows nothing of guile, can’t even see the appearance of a problem here. Why would anyone object to someone taking a quote that Hoover brought up explicitly to renounce, in order to convince people that Hoover was a Mellonite? Just as DeLong did at the time I pointed out the problem with such a move, Daniel started arguing about the budget data and whether Hoover was or was not a proponent of fiscal austerity.
OK, that’s fine Daniel. If the fiscal history makes the case that Hoover was an “austerian,” then DeLong and Krugman should use that evidence when trying to convince the public. But they don’t do that, instead they rely on “shocking” quotes from Mellon. When you realize why they chose to do that, then you will realize why it was so intellectually dishonest.
For an analogy: Look at how outraged progressives are about Obama’s “you didn’t build that” issue. To make this comparable, Obama would have had to say in his speech, “Now when it came to the stimulus package, Christy Romer pulled me aside and said Barack, those private entrepreneurs didn’t build that. That was government infrastructure. Yet Larry Summers and I knew better, that it was the capitalists whom we should thank for all of our commercial and scientific advancements.”
Now, if conservatives had taken that statement to run around saying, “OMG!! The Obama White House doesn’t think entrepreneurs built their businesses, can you believe it?!” you would get an idea of what’s going on with the Mellon/Hoover record. It doesn’t matter what Obama’s fiscal policies are; it would be ridiculous to lift a quote like that and use it against him, when we only know about it because he brought it up to say he disagrees with it.
Let me try one last thing here, knowing full well it’s futile: If I get up and say, “My barber says I’m bald, but I repudiate that!” then I am still bald. I don’t inoculate myself from the allegation, just by denying it in print. The issue here isn’t whether Hoover is, or is not, a liquidationist. The issue is, using Mellon’s quote to convince people.
I think you’re way out of line here to accuse them of intellectual dishonesty.
A hundred years from now, describing the austerity of this period (where the US actually does a little better than the EU), they’re going to be quoting something outlandishly austere that Ron Paul said and then follow it up with a reference to Obama’s austerity and VSP talk on deficits, and then follow that up with a pro-austerity quote from Bob Murphy, the famous twentieth century economist.
That’s exactly what Krugman is doing bringing up Hoover, Mellon, and Schumpeter.
Who cares that Hoover likes to think of himself as cushioning the blow? Since when do we care about politicians’ self-perceptions (or maybe not even self-perception – it’s the image they present of themselves… but for argument’s sake we can say it was Hoover’s honest self-perception)?
It was a period of austerity with varying examples, just like today. There’s a huge gap between Paul and Obama but it’s a period of austerity right now.
I don’t fail see guile. I see plenty of it. I just happen to see here someone that is too trigger-happy to tar others as being dishonest.
Twenty first century, I suppose 🙂
The point is that Krugman’s wording suggests (without actually saying so) that the mistakes of the 30s were the laissez-faire policies Mellon advocated. This seems deliberate.
I don’t understand your position, Daniel.
Are you saying that Krugman has Hoover correct, or are you saying that it doesn’t matter whether Krugman has Hoover wrong?
Like I said in the linked post – Krugman has been sloppy sometimes with Hoover – I wouldn’t want to unequivocally embrace everything he’s said about him. Here he has him “essentially” correct, though, and he’s certainly not dishonest for leading a column by referencing a few key austerians from the period.
Bob and I have argued in the past, and he has mentioned drowning kittens for sport. When I was a child I too had base impulses, and can remember stomping on ants for sport. But we must not let our baser instincts drive us and I hope Bob will cease giving in to his.
Imagine that paragraph in another context, read by someone who has not seen this thread. Now in that para I never, not once, said Bob drowns kittens, and everything in the para is true. But most causal readers will get the impre4ssion I think Bob drowns kittens for sport, and many would conclude he confessed as much. If I did that as part of an attempt to discredit Bob’s politics I think that’s be dishonest.
[To repeat. Bob has never confessed to drowning kittens for sport.]
I’m confused by what you’re trying to get across here. You don’t need to convince me that people can write paragraphs in misleading ways.
I think most people would read that paragraph and think “So Mellon, Hoover, and Schumpeter were behind austerity”.
That is not misleading.
They were.
Now if you want to talk about the differences of opinion within the Hoover administration, that’s an interesting to talk about. But it seems silly to make that the issue at hand in this column. Romer and Summers were both pro-stimulus. If someone listed them in a column would you say it was misleading or dishonest if they were just presented as such – without going into the sharp disagreements the two have had? Of course it wouldn’t be dishonest.
No, I think Krugman’s little comment confessing to error occludes just exactly which errors he means and who made which ones. The effect is to make people think Hoover embraced Mellon’s advice, and that that advice was one of the mistakes of the thirties.
I think Krugman is a smart careful writer so I think this was deliberate.
DK wrote:
he’s certainly not dishonest for leading a column by referencing a few key austerians from the period.
Yes, it is dishonest, if Krugman’s point is to say, “The policymakers in the 1930s thought their austere policies were necessary to purge the excesses of the boom.” No, they did NOT think that’s what they were doing.
Now you can’t come back and say, “Who cares what they THOUGHT they were doing, what matters is what they DID in fact.” Because then Krugman’s whole piece goes out to the window. KRUGMAN is bringing up the psychoanalysis; he’s trying to explain to us where these nutjobs are coming from, kind of like an FBI profiler of a serial killer. Not only can Krugman use IS-LM to tell us why these are bad policies objectively, but he can also quote from Paul Ryan and Andrew Mellon to show us what *motivates* these bad policies, psychologically. Except, he’s just making stuff up on the latter, and on the former, we have a disagreement over economic theory.
You are making an awful lot of knowing what they’re thinking.
People are welcome to speculate on what people are thinking.
What I’m not sure of is that I’d take one sentence in a memoir as gospel truth. But notice I was even willing to grant it was gospel truth for the sake of argument. So let’s stop getting caught up in this.
Why, then, don’t you suppose that Bob has Krugman “essentially” correct?
Because he seems wrong to me.
I’m not sure I understand the question.
I’m going to start calling one of my favorite cheap meals, “dishonest joes.”
@Daniel
It is plain as day that Krugman is taking a pro-liquidationist quote said by Mellon to Hoover, which was mentioned and then dismissed by Hoover, as evidence of Hoover being a “liquidationist”. How do you not see Krugman is being dishonest by connecting dots that aren’t there?
Ummm… Hoover believed in “liquidation” like Schumpeter and Mellon. Hoover believed that the government’s proper job was to reduce the human misery caused by necessary liquidation. Mellon believed that unless liquidation produced lots of human misery it would not be complete.
I bounce back and forth between thinking that Murphy knows that he is knowingly lying when he mischaracterizes me or just can’t think straight. Which do you think it is?
Brad DeLong wrote:
I bounce back and forth between thinking that Murphy knows that he is knowingly lying when he mischaracterizes me…
How did I mischaracterize you? I said you read to an audience the views of Hoover’s Treasury Secretary, in order to tell them what the Hoover policy was, without mentioning to the audience that Hoover explicitly rejected that quote. That’s not what you did?
Murphy, DeLong says you’re lying because you said he is lying.
But he has since made a “I was wrong” post on Hoover, so accusing you of lying is his way of saying “Darn you Murphy for showing I was full of it!”
DeLong –
“Hoover believed that the government’s proper job was to reduce the human misery caused by necessary liquidation”
>> Ok, so even if you’re right and this is what Hoover “believed,” you concede that Hoover believed the government should do something (“government’s proper job was to reduce human misery”). Liquidationism is generally defined as the government and central bank doing nothing. So, either you are contradicting yourself or have your own definition of liquidationism. Which is it?
The meaning of “liquidation” is subject to change at a moment’s notice, whenever any stimulus is followed by sluggish output and employment growth.
No, it is a matter of degrees.
Just as advocates of austerity today might disagree on what DEGREE of fiscal contraction is necessary, nevertheless they are still all advocates of the same fundamental policy.
LK –
This isn’t helping your argument.
By fiscal contraction, are you merely referring to federal spending? In that case, nominal federal spending increased each year under Hoover in a deflationary environment (ie spending increases in real terms was even higher).
Or in terms of budget deficits? In that case, except for FY’30 (where the surplus remained just about the same as FY’29), every other year under his administration saw either a shrinking surplus or rising deficit.
Where was the fiscal contraction? So if I’m understanding you correctly, by your definition of austerity (degree of fiscal contraction), Hoover wasn’t even an austerian, let alone a liquidationist. Although admittedly, I’m still not even sure what your definition of either happens to be.
(1) One simple fact:
Hoover ran a federal budget surplus in fiscal year 1930 (July 1, 1929–June 30, 1930), so his spending increases in fiscal 1930 are irrelevant since they were covered by taxes (a transfer of existing spending power, not an addition to it).
If you can display even basic knowledge of Keynesian theory, you should know that Keynesian theory says that Hoover contracted demand from the economy in fiscal 1930.
Even your own Austrian theory should tell you that taxing and destroying an amount of business and household incomes by a budget surplus is a deleterious economic policy, certainly in a recession.
1., I was just trying to get at your definition of fiscal contraction. Not sure why you’re blasting me about Keynesian/Austrian theory. I didn’t mention or reference either.
2. I noted FY’30 in my previous comment when mentioning his surpluses/deficits. How do you explain the other years during Hoover’s administration?
So are you conceding that even in Keynesian theory in fiscal year 1930 Hoover did not pursue Keynesianism, his spending was not stimulus (since it was simply covered by taxes)?
In 1933, Hoover cut spending, and the net effect of federal fiscal policy in 1933 was contractionary.
On 1931 and 1932:
http://socialdemocracy21stcentury.blogspot.com/2011/05/herbert-hoovers-budget-deficits-drop-in.html
http://socialdemocracy21stcentury.blogspot.com/2012/02/steven-horwitz-on-herbert-hoover-mostly.html
LK –
“So are you conceding that even in Keynesian theory in fiscal year 1930 Hoover did not pursue Keynesianism, his spending was not stimulus (since it was simply covered by taxes)?”
>> I’m not conceding anything, because I never made the claim that he pursued Keynesianism that year. I am claiming he was no liquidationist.
DK wrote:
Who cares that Hoover likes to think of himself as cushioning the blow? Since when do we care about politicians’ self-perceptions…
I don’t know Daniel, email Krugman and ask him. The title of his article was “The Urge to Purge.” He wasn’t offering technical analysis of budget numbers, he was trying to get inside the mind of the pro-austerity people and figure out what the heck drove them to recommend such policies. He repeatedly tells us that they view this in moral terms, that we need to be punished for our sins of the boom.
So, to answer your question, it is Krugman who is getting inside the mind of policymakers to understand what they *think* they are accomplishing.
To the extent that Krugman is saying “Herbert Hoover thought his refusal to help would actually be a good thing, to purge the excesses of the boom,” then you’re right, that’s actually a lie. But it’s such an inflammatory thing that I didn’t want to come out and say that in my post.
If professed beliefs about themselves aren’t to be trusted why should they be used in argumentation at all? Do you really think that using Paul and Murphy as representatives of Obama Administration policy is honest talk?(yes, even if a century from now the period is regarded as a very austere period, wouldn’t you phrase it as: despite the administration’s perceived foes babbling they got the best of it in regards of policy?)
Daniel,
To be clear, you think linking Hoover Administration policies with that Mellon quote is equivalent to linking Obama Administration policies to the views of Ron Paul? And you don’t have a problem with using a quote from Ron Paul to sum up the Obama Administration’s policies?
I don’t have a problem with listing a spectrum of opinions from Paul to Obama to characterize the center of gravity of opinion in favor of austerity.
If you meant something else by “linking” I’d have to know what that is.
I am still confused about today being austere. What would it take in order to not be austere? Where is this case where we are austere by definition until the economy improves?
*Or is this a case*
I’m with Bob. Krugman uses a rhetorical trick here, which I discuss here and a couple comments down as well with an example http://econlog.econlib.org/archives/2013/04/krugman_gets_ho.html#256377
What Bob said. All of it.
Steve Horwitz wrote:
What Bob said. All of it.
I’m now going to update my post to include a critique of all fractional-reserve banking…
Aha! Your refusal to add timestamps explained at last!
You play a long game Bob …
Question about this from Krugman’s blog:
“Remember how federal deficits were supposed to cause soaring interest rates? Never mind: After four years of such warnings, rates remain near historic lows — just as Keynesians predicted.”
I don’t understand why Keynesians see this as such a nice feather in their cap. Isn’t the Fed actively keeping keeping rates low? It seems to me that the Keynesians at the helm of the Fed are making their own wish come true.
One last thing Daniel: I really don’t see how you’re doing Krugman any favors by saying, “A hundred years from now, people will quote from Murphy’s economic writings to understand the government’s policies of this period.” I think you should come up with a different analogy, because that sounds nutty to me too.
This. It’s as if Daniel is creating a fictitious example of intellectual dishonesty to claim Krugman’s analagous situation is not intellectual dishonesty. Both situations are not okay. Both situations are examples of misleading statements that individuals should avoid.
re: ” I really don’t see how you’re doing Krugman any favors by saying, “A hundred years from now, people will quote from Murphy’s economic writings to understand the government’s policies of this period.”
First, I’ve got no interest in doing Krugman favors (at least no more than I’d do anyone else a favor). Second, I didn’t say that. Your writings are a terrible guide to understanding the government’s policies of this period.
You do, however, exist on a wide spectrum of people who respond to the crisis with an advocacy of fiscal austerity, belt-tightening, getting serious about the deficit, etc. etc.
“Your writings are a terrible guide to understanding the government’s policies of this period.”
Hahahaha
Translation: You didn’t paint the government’s policies in a “Government stimulus can be used for good” light, the way I prefer to read statistical data over such matters.
No, the translation is that almost nobody making policy agrees with Bob.
He’s a good example of a pro-austerity view in the early 2010s. He is not a good exemplar of administration policy thinking.
“No, the translation is that almost nobody making policy agrees with Bob.”
Outstanding. Congrats DK, you just revealed your double standard tendencies yet again…
You said above:
“Who cares that Hoover likes to think of himself as cushioning the blow? Since when do we care about politicians’ self-perceptions (or maybe not even self-perception – it’s the image they present of themselves..”
So sometimes we’re not supposed to care about politician’s self-perceptions, when it suits you, but then we are supposed to care about politician’s self-perceptions, also when it suits you.
So Bob was wrong for making judgments based on politician’s self-perceptions during the 1930s, but you’re right for arguing that Bob is wrong about this periods’ government policies…..by grounding your judgment on politician’s self-perceptions.
You deserve a medal.
My brain hurts. I think I’m missing something.
The context of “who cares what politicians say they think” is in citing a single sentence of Hoover’s. I don’t think that single sentence was all that inaccurate (there obviously were frictions with Mellon), I just think you need more than that to articulate what Hoover stood for (particularly when its in a glossy memoir two decades later).
Certainly what politicians say is fodder for arguments. I just don’t think we ought to rely on it.
I think you are making too much of that line. I imagine Bob agrees with me on that line, don’t you?
“Certainly what politicians say is fodder for arguments. I just don’t think we ought to rely on it.”
Except when it comes to Bob’s writings on the government’s policies this period. Then we ought to rely on them.
I mean, that’s what you just relied on by saying Bob’s writings are “a terrible guide to understanding the government’s policies this period.”
So I guess it’s OK when you do it, but not when others do it.
Don’t worry – I won’t call you intellectually dishonest for attributing that to me even though I never said it.
In before LK puts up data showing Hoover was a liquidationist.
Wow – that was just under the wire! Although the data hasn’t come in yet.
Hahaha, I think this should count! :
“The man let a great part of the US banking system collapse on his watch, around 5,000 banks between 1929 and 1933.”
You are right in that Krugman is either ignorant or dishonest in attributing the *hard liquidationism* of Mellon to Hoover. But it does not follow that Hoover’s policies were not a lesser form of liquidationism. The man let a great part of the US banking system collapse on his watch, around 5,000 banks between 1929 and 1933.
Presumably Austrians think that Hoover should have done zero monetary interventions so that even more banks collapsed? Let 70%, 80% or 100% of the financial system collapse?
Yes, I’m sure that would have led to a quick and strong recovery and not made the depression worse…
The whole policy prescription of original Hayekian liquidationism requires massive and devastating depression, so do not be shy about defending it!
Where does one draw the line between *soft liquidationism* and *soft interventionism*?
“But it does not follow that Hoover’s policies were not a lesser form of liquidationism.”
Lesser form from what standard? 100% non-bankruptcy?
Who are you to decide which firms are to be sold and which are to continue on?
Only the market process can reveal the information needed for you or anyone else to conclude which firms are valuable enough to survive, and which are to fail.
You’re talking gibberish.
No, it’s not gibberish – it’s a decent point.
It’s certainly an intelligible point (not gibberish) even if you disagree with how strong it is.
DK, the concept “liquidationism” is a market grounded concept. It isn’t a concept that derives from LK’s, or your, arbitrary labelling of politicians based on how many firms the politicians “allow” liquidated via market means, which happens to be greater or less than what LK or you can personally tolerate.
This is precisely why there is a dispute over the label of Hoover as a “liquidationist” or a “rescuer.” LK and you leave the definition of liquidationist vague and fuzzy, because you want to reserve for yourselves the judgment of which politicians are “liquidationists” and which are not.
Liquidationist doesn’t even make sense in a context outside of the market. The only liquidationists that exist are customers and creditors of market institutions in a market context. Politicians can only use force. A liquidationist politician is gibberish. What is really being referred to is to what extent is the politician bringing about force. To protect against initiations of force or to rescue friends from peaceful liquidation?
It’s gibberish DK. It’s not a decent point, and certainly not a strong point.
You speak LK’s gibberese, but you use a slightly different dialect. But you can make out his anti-market grounded statements, and because you get it, you think he’s making a sound argument.
“LK and you leave the definition of liquidationist vague and fuzzy”
I’ve done no such thing.
At a minimal level, a NON-LIQUIDATIONIST policy would have a stopped the collapse of the banking system, as in 2008.
That is why policy in late 2008 along with the stimulus was NON-LIQUIDATIONIST, and Hoover was a form of liquidationism.
Care to clarify a bit, as it looks eerily like your definition actually hinges on whether the policy produces the output you wanted?
KP – this is a good point. I think this is a big problem with market monetarists, for example.
I think the solution is just to identify (or have a theory that can give you) a rough idea ex ante of what response would be sufficient. There are standard tools for translating an output gap into a required amount of fiscal policy. We can quibble about the details – we have quibbled about the details. And of course the process is dynamic – new information comes in that might require a new response.
But you need some ex ante assessment of the right response aside from just saying “what it takes”.
Hoover didn’t come close. Obama of course comes closer.
That’s my response to what I think is an important point of yours – not sure if LK is on board with that but I imagine he is.
“I think the solution is just to identify (or have a theory that can give you) a rough idea ex ante of what response would be sufficient.”
And LK said I was off base for saying his stimulus policy perscriptions (which are indistinguishable from yours) hinge on vague and fuzzy definitions.
Ha.
“I’ve done no such thing.”
and then
“At a minimal level, a NON-LIQUIDATIONIST policy would have a stopped the collapse of the banking system, as in 2008.”
Still vague and fuzzy. Define COLLAPSE please!
You’re just defining one vague term for another vague term.
“That is why policy in late 2008 along with the stimulus was NON-LIQUIDATIONIST, and Hoover was a form of liquidationism.”
So a vague and fuzzy definition is exactly what lead you to conclude Hoover was X instead of Y.
Gotcha.
Stopping collapse of banking system = preventing bank runs, insolvency of banks and mass loss of deposits.
In short, keeping the banks solvent and functioning and people’s deposits available when accessed.
“Stopping collapse of banking system = preventing bank runs, insolvency of banks and mass loss of deposits.”
Yet more vague terms. This time “Mass”, and pretending to same something with “preventing bank runs.”
You mean preventing any and all bank runs, no matter how shaky and horrible a bank is?
“In short, keeping the banks solvent and functioning and people’s deposits available when accessed.”
More vague terms. “Functioning.”
Which banks? All of them? Which deposits? Every single person’s deposits?
If no one loses a deposit, then the intervention was clearly non-liquidationist.
QED.
“If no one loses a deposit, then the intervention was clearly non-liquidationist.”
How many deposits have to be lost in order for the intervention to be “liquidationist”?
According to your definition, has there ever been non-liquidationist activity?
Policies to stop financial collapse were implemented in virtually every country in 2008.
Real world examples of stabilisating of financial systems — a minimal form of non liquidationism — exist everywhere.
You didn’t answer the question.
It would seem that if Hitler conquered the world, and political fascism was everywhere, then you need not answer any questions of what constitutes fascism or capitalism.
As long as others are doing it, you don’t need to intellectually justify your support of it.
Lord Keynes wrote: “Presumably Austrians think that Hoover should have done zero monetary interventions so that even more banks collapsed? Let 70%, 80% or 100% of the financial system collapse?
Yes, I’m sure that would have led to a quick and strong recovery and not made the depression worse…
The whole policy prescription of original Hayekian liquidationism requires massive and devastating depression, so do not be shy about defending it!”
Stop enacting bad policy that causes the problem to build up then the liquidation is no biggy. Throw some commodity money in the mix and all the wealth will never disappear or 100% crash as you put it.
If you hold down the throttle with an artificial brick( social policy/cronyism/favoritism/Fedfrac) of course you have to slam on the brakes or use an additional 500 feet to stop. It would be better to never had held down the throttle for so long in the first place, with steering wheel cranked in wrong direction, simply not natural. You see.
Think about it.
Why should “the financial system” receive gains at the expense of everyone else?
You’re preaching economic fascism, DK.
Yeah, MF, no doubt allowing mass collapse of the banking system and mass loss of deposits is a wonderful policy that leads to *gains across the board.*
Dressing up economic fascism in “save the babies” and “DOOM AND GLOOM” slogans, doesn’t make it something else.
And who said anything about wanting gains across the board? Healthy markets have losses.
“Why should “the financial system” receive gains at the expense of everyone else?
You’re preaching economic fascism, DK.”
Why should the justice and police system receive gains at the expense of everyone else?
Of course, Mises, Hayek and all other minimal state Austrians were just preaching *economic fascism*, M_F!
What they really needed to endorse was Rothbardian anarcho-capitalism where police can beat and torture suspects, and parents can kill children by withholding food.
We Rothbardians just *love* human freedom.
http://socialdemocracy21stcentury.blogspot.com/2012/06/horror-of-rothbardian-natural-rights.html
http://socialdemocracy21stcentury.blogspot.com/2011/10/rothbard-on-torture.html
LK,
If a doctor prescribes a diet to a morbidly obese patient, would you accuse the doctor of depriving the poor patient of sustenance and wishing harm on the patient? Please answer this simple question.
re: “You’re preaching economic fascism, DK.”
When you don’t have any arguments to make, accuse the other guy of preaching fascism.
I think this well has dried up. Bye.
The first person who accuses their opponent of being fascist is nearly always intellectually bankrupt.
Agreed. Nearly always.
Sometimes however, like you said, they are right.
Look up economic fascism LK, and you’ll see that calling for “the banking system” to gain at the expense of everyone else, through state coercion, where banker interests are to be promoted at the expense of non-banker interests, is indeed economic fascism.
Sorry to have to break the obvious to you. Well, I guess not so obvious to everyone.
“where banker interests are to be promoted at the expense of non-banker interests,”
All public with bank accounts lose their accounts if all banks collapse, so it follows saving the banking system from collapse can only serve nonbankers’ interests too.
Basic standards of logic fly out the door every time you open your mouth, M-F.
“where banker interests are to be promoted at the expense of non-banker interests,”
Where did you think the scarce value that bails out bankers comes from?
Fairies? Leprechauns from the land of plenty?
“All public with bank accounts lose their accounts if all banks collapse”
It’s not their money LK, remember? They freely loaned it to the banks, which carries risks of loss.
Moreover, if the entire public loses money, then nobody is in any relatively higher or lower position relative to anyone else.
Prices and wages and costs would fall down towards a new market clearing trajectory.
The remaining money that isn’t destroyed by fractional reserve deflation, would experience a huge jump in value.
Also, if FRB banking is legitimately consensual activity, then as debt investors, those who invested in fractional reserve banks, would likely no longer do so in the future, and a new generation of bank managers will of course know this, and offer non-FRB deposit banking, and from then on, people won’t have to lose money from bank failures. Their money would be backed 100%.
What’s the problem with this outcome again?
“It’s not their money LK, remember? “
Correct. They have a mutuum contract by which the bank promises to repay its debts to customers as determined by the FR account contract.
Allowing banks to fulfill their contacts has considerable benefits to all those with such contracts.
“Also, if FRB banking is legitimately consensual activity, then as debt investors, those who invested in fractional reserve banks, would likely no longer do so in the future, and a new generation of bank managers will of course know this, and offer non-FRB deposit banking”
That is contradicted by hundreds of years of capitalist history. Plenty of bank runs occurred in the 19th century, but FR banking just continued as usual.
“That is contradicted by hundreds of years of capitalist history.”
What capitalist history?
“Plenty of bank runs occurred in the 19th century, but FR banking just continued as usual.”
There are different extents of FR banking. You have to go into the details. 10000 out of 10000 banks being FR, and 10 out of 10000 banks being FRB, are two different extents of FR.
Banks were more laissez faire during the 19th century, and to that extent, the extent of FR was less.
Depositors did learn that their money isn’t as safe as if the accounts were 100% backed.
Bank panics without bailouts occurred during the 19th century, and the whole banking system didn’t go bankrupt. Why? Because there were higher reserve ratio banks than others.
There is no reason to believe that people in 2013 can’t learn that their money isn’t safe in an FR bank in a bailout free world.
Humans learn, and what people knew in the past doesn’t “contradict” what I said above about what people have the capacity to know now and in the future.
Obviously, because most who deposits money into an FR bank know full well what they are getting themselves into, according to you, they would likely take precautions and put money into safe deposit boxes if they want to make sure they don’t lose money from FR lending, and write checks and make debit transactions on those deposits instead.
People can learn.
And if people know, but want to continue to invest in FR debt anyway, then because they are voluntary contracts, there is no justification for harming third parties to ensure that those who renege on those contracts, are bailed out.
“Correct. They have a mutuum contract by which the bank promises to repay its debts to customers as determined by the FR account contract.”
Which is why you are calling for economic fascism through calling for third parties to be forced to pay to bail out all the parties who agreed to invest in a risky debt contract, and lost.
What’s the point of the contract being a debt contract, if the implicit bailout makes them 100% backed demand deposits?
“Allowing banks to fulfill their contacts has considerable benefits to all those with such contracts.”
Allowing? That’s a funny way of saying taking from some, giving to banks, so that banks can fulfill the promises they broke.
Benefits? That’s a funny way of describing those who have to pay for it, directly or indirectly.
When you are psychologically or intellectually unable to identify economic fascist activity, blame those for calling it out, and pretend that they only said it because they don’t have any arguments to make that make you feel safe and secure.
See ya. And while you’re gone, look up the term “double standard” and then see how it applies to your condemnation of Murphy’s writings on 2008 being based on your conviction that it isn’t in line with the politician’s self-perceptions, and then condemn Murphy for his writings of 1930s politicians being based on his convictions of politician’s self-perceptions.
Nicely done, Bob. Thank you.
DK says things like:
“Glenn Greenwald bothers me in a really deep, genuine way.”
http://factsandotherstubbornthings.blogspot.com/2012/04/glenn-greenwald-bothers-me-in-really.html
I’m way past of the point of “Can you believe what DK just said!!!”
Nice “period of austerity”…
http://www.cato.org/sites/cato.org/files/pubs/pdf/bp122.pdf
If you zoom out on the federal spending chart you’ll see later presidents spending much more though… so… uh, there.
Really though, I think the argument is that he should have spent even more because of the conditions (depression), but didn’t, so “austere” mean “didn’t spend enough” in this case.
… I think.
“Really though, I think the argument is that he should have spent even more because of the conditions (depression), but didn’t, so “austere” mean “didn’t spend enough” in this case.”
>> Yep, that’s the same conclusion I draw, even when referencing today. In other words, what measure should we consider today a “period of austerity?” Sure, since ’09 federal spending in real terms has remained relatively flat; however, we also had the two massive one-time appropriations that fiscal year (TARP, ’09 stimulus pkg). If we compare today with pre-’09 spending/deficits, both federal spending and federal deficits as a percentage of GDP are higher than in any other year since ’46 (except for ’83). Total nominal federal spending is higher than ’08 levels by over 20%. So, is today “austere” simply because we haven’t increased spending enough?
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200
Other than the expected DK fumbling and flailing about, this post and thread has been very informative.
Being informed over these matters would lead one to concluding that Mellon’s liquidiationism is not an accurate attribution to Hoover, since Hoover rejected Mellon’s advice in writing and in practice.
Re: Krugman, it boils down to how informed he is assumed to be. If Krugman is assumed informed, then he is dishonest. If we assume he is honest, then he is not informed.
Assume what you will…
“Let me try one last thing here, knowing full well it’s futile: If I get up and say, “My barber says I’m bald, but I repudiate that!” then I am still bald. I don’t inoculate myself from the allegation, just by denying it in print. The issue here isn’t whether Hoover is, or is not, a liquidationist. The issue is, using Mellon’s quote to convince people.”
At least you’re not trying to say “Hoover was not an austerian because in his own biography he said he wasn.t'”
However now that you qualify this it seems that yet again you’re making some pretty heavy weather over the pretty small beer.
You’re saying “Maybe Hoover was liquidationist but still Krugman’s source to prove it was evil” which try as I might doesn’t seem to amount to much.
As far as acribing things to an Administration that were just the view point of certain cabinet members happens all the time. I mean we’ve had Republicans ascribe views to the Obama White House that weren’t said by anyone in it, but were the views of some “liberal reporter” on CNN.
To me, there’s a larger issue here. If Krugman is clearly correct, then he shouldn’t need to resort to pulling quotes out of context to make them seem more damning than they are. The fact that he can’t resist doing so anyway suggests that Krugman is either less sure of his position than he’s letting on, or the whole question is legitimately a matter of opinion.
The whole purpose of citing sources is to buttress one’s own argument. If you cite them erroneously, that casts doubt on your use of all other citations. If Krugman is willing to swing below the waist on a matter in which he is “definitely correct,” then what does that say about the overall quality of his arguments in general?
Innocent is not how I would describe the sophistry at this late date.
DK wrote:
Romer and Summers were both pro-stimulus. If someone listed them in a column would you say it was misleading or dishonest if they were just presented as such – without going into the sharp disagreements the two have had?
Whoa, now I’m really mixed up Daniel. Presumably Christy Romer was *for* the stimulus package that had her name on it, right? And yet on your blog the other day, you said that for Krugman’s rhetoric to go through, we have to take the Obama Administration in practice, as analogous to the Hoover Administration.
So I would have to say no, given the rules you have laid down to exonerate Krugman on this Mellon issue, if someone said Romer or Summers were “pro-stimulus” that person would be wrong. I wouldn’t care what they thought or said, I would look at the objective policies of the Obama Administration and conclude that Christy Romer and Larry Summers were liquidationists.
If that seems weird to you, then now you understand how the rest of us feel regarding Krugman’s treatment of Hoover.
“So I would have to say no, given the rules you have laid down to exonerate Krugman on this Mellon issue, if someone said Romer or Summers were “pro-stimulus” that person would be wrong. I wouldn’t care what they thought or said, I would look at the objective policies of the Obama Administration and conclude that Christy Romer and Larry Summers were liquidationists.”
That’s exactly the argument in a nutshell.
How much do you want to bet that he still won’t see things your way?
Well I wouldn’t call the stimulus package “austerity”.
If you asked me what 2009 was like, I would not call that “austerity”. If you asked me “how did the federal government respond to the Great Recession in total”, it’s been pretty austere. We had a good start – we’ve done pretty poorly since then.
Obama is to Hoover what Ryan/Paul is to Mellon. Sorry to be confusing – I’m not saying Obama’s record is identical to Hoover’s. I’m saying one can still have a general pro-austerity orientation without being as big of an austerian as some other guy in the room.
OK, and I’ll leave you alone now. It’s the kind of thing where if we disagree at step 1 (on the use of the Mellon quote), further discussion is probably pointless. Either you think that’s unfair or you don’t; we all know what happened.
“Well I wouldn’t call the stimulus package “austerity”.”
Why not? You’re calling Hoover’s stimulus packages “austerity”.
At one point, or what range of points, does stimulus become “austerity”?
Based on what criteria?
I’d need to review the numbers again, but Hoover had a decent jolt many years into the crisis. That’s nice. It followed a sharp contraction in the deficit though. That’s not nice. But it was a large percentage change from a relatively small base. So it wasn’t really up to the task (and like I said – several years late).
Obama’s was bigger relative to what needed to be done and it came right away (the monetary response came right away too this time).
Hoover is of course a man of his times. The alternative ideas were relatively new, and like I said he was working from a small base. Short of a war a large increase is hard to conceive of anyway (in this country at least).
Sorry, what were the criteria again?
Do you have the assessment of what “needed to be done” by Obama and Hoover on hand?
I’m trying to get this criteria straight here.
Take a projected output gap or a projected employment gap you’re interested in (if the employment gap, use Okun’s law to back out the output gap), take multiplier estimates for the components of the program you’re proposing and work out a figure.
Adjust for new information.
Adjust for a non-cooperative central bank if you’re above the zero lower bound.
Work out something plausible. Compare it to other estimates that other people think are plausible.
As the legislation gets crafted consider how it’s being implemented and ask yourself whether you need to revisit the multipliers you’re using.
I know you want this to be some easy number from me that I can squeeze into a blog comment, but I’m sorry that’s not how the world works. It’s not my fault – I didn’t make it that way. If we could do this all in easy blog comments typed up between other work that we all have to do these things would be a lot easier, wouldn’t they?
But certainly this is more than enough for an intellectually curious person to run with and start thinking about in the context of the discussions we’ve been having about Hoover and Obama’s budgets.
I’m not sure if that was to me of M_F, but I was actually looking for more of a paper where someone actually used this criteria in some sort of equation to reach an asnwer.
Aware of any on hand?
Just running the numbers isn’t something that would usually be published in journal articles, so none come to mind. At that point it’s just number crunching after all – there’s no real empirical or theoretical value added. The real academic work is in estimating multipliers and constructing models.
I imagine most of this work is done in memos in the Treasury department, the White House, and the Fed.
Sometimes Mark Zandi does stuff like this – I’d google that. Also Krugman walked through this in response to the Romer/Bernstein paper. Romer/Bernstein are a good example except (1.) it was early in the crisis and we didn’t know a lot (although even then people thought they were lowballing it), and (2.) they didn’t really put a lot of the math in the paper if I recall. The CBO might have something, but probably not (they mostly evaluate bills). Some place like CEPR or EPI might have done something like this (someone like Josh Bivens would have done it at EPI, and Dean Baker at CEPR).
Or try it yourself. Get output gap figures from CBO, pick a few plausible multiplier estimates, and multiply the output gap by the reciprocal of the multiplier. Play around with what different combinations of programs (which have different multipliers) will do.
That’s exactly what I’ve been playing around with Daniel, but it’s been all over the map, so I’m trying to get a better gauge of what’s being used.
But I’ll look into Mark Zandi and CEPR.
“Take a projected output gap or a projected employment gap”
Gap defined by what criteria?
re: “Gap defined by what criteria?”
Subtraction.
That would only be a criterion Daniel, come on.
From what?
And no, I don’t have it because I don’t do this work. I do other sorts of work.
Smart people were saying two trillion. My view is if you can get 750 billion, take it. But when you follow that up with a freeze, a tax increase, and a public payroll cut because you’ve spent all your political capital on health reform don’t be surprised when people characterize the period after the stimulus fades out as “austerity”.
Well, thanks anyways.
Keynesianism sure is scientific, isn’t it?
Such definitive definitions and terms and multipliers based simply on who spends the money (private citizen no, public employee yes), how can you even spout off about a scientific approach with a straight face.
As “Lord Keynes” has inadvertently demonstrated, there is no such thing as a “trend line” (and hence no “gap”) because “past data is not a useful tool for predicting the future state of the system”. LK explains:
Certain types of phenomena in our universe are what mathematicians call non-ergodic stochastic systems. The concept of radical uncertainty applies to such systems, like medium term weather events, financial markets, and ECONOMIES [emphasis added], and other natural systems studied in physics.
In these systems, past data is not a useful tool for predicting the future state of the system and the problem of induction is particularly acute.
http://socialdemocracy21stcentury.blogspot.com/2011/03/uncertainty-and-non-ergodic-stochastic.html
I would also add that there is nothing in reality to suggest that:
a) the accumulated prices of voluntary exchanges recorded during an artificial boom phase are the equivalent to subsequent government spending/squandering of resources taken by force; and/or
b) such unsustainable boom phase accumulated prices and spending patterns are anything that should be artificially emulated and/or replicated via subsequent government action.
The reason there is a depression in the first place is because of prior price distortions that induced investments in unsustainable lines of investment. And Hoover jaw-boned extensively against those essential price corrections.
I have never said, “demonstrated” nor “inadvertently demonstrated” any such thing.
Trends, cycles and oscillations certainly occur in nonergodic systems.
One has no difficulty identifying an output gap or high unemployment in the present or immediate past.
What cannot be done in a pure nonergodic system is give a objective probability score for some specific state of the system in the future. In no sense does this mean no trends or cycles ever occur.
If Roddis denies that let him explain how long term climate can have trends and cycles while being nonergodic.
LK:
You are stuck in a contradictory position, LK, and no amount of denying the semantics will change that.
You claimed that past history is not a reliable guide to forming trend predictions.
Now you’re claiming that one can “easily identify trends”.
But identifying anything is an observing of history.
So if observing history cannot be used to make predictions, as per your blog post that Roddis posted, then you cannot claim to be able to form that which depends on such predictions, namely, output gaps.
“What cannot be done in a pure nonergodic system is give a objective probability score for some specific state of the system in the future.”
You said ECONOMIES are non-ergodic systems and as such economic history cannot be used via induction to make judgments of future trends.
You keep contradicting yourself over and over, and it’s rather astonishing that you continue to do so as if you’re talking about the weather.
You keep insisting that you have only claimed that you just can’t make predictions of specific stocks and securities due to non-ergodicity. But you said that WHOLE ECONOMIES are non-ergodic as well, which implies you can’t make predictions of economies either.
You have to admit you’re either wrong about the economy, or you’re wrong about the economy being non-ergodic.
“You claimed that past history is not a reliable guide to forming trend predictions.
No, it does not give the data for anobjective probability score for some specific state of the system in the future.
You are of course either so dense you cannot understand the difference or more likely guilty of deliberate distortion.
Now you’re claiming that one can “easily identify trends”.”
Of course you can in the past and immediate past and a trend continuing now in the present, e.g, rising unemployment.
You said ECONOMIES are non-ergodic systems and as such economic history cannot be used via induction to make judgments of future trends.
I said cannot be used to make predictions of specific states of future variables with an objective probability score.
The existence of nonergodic, stochastic systems in markets does not prevent identification of output gaps in the present or past, or unemployment or GDP levels in the present or past, nor does it prevent identification of basic trends in market systems.
You are of course so ignorant that you fail to know that these ideas about the essence of uncertainty are also held by Austrians:
“Mises distinguished between the role of ‘quantitative predictions’ within the natural sciences and ‘qualitative predictions’ in sociology and economics. He argued that it is impossible to predict specific outcomes in social science with any degree of accuracy and that, instead, social science should concern itself only with the prediction of patterns”
Mark J. Smith, Social Science in Question: Towards a Postdisciplinary Framework, p. 155.
“No, it does not give the data for an objective probability score for some specific state of the system in the future.”
Aha, finally you’re getting somewhat consistent on this. Not being able to predict specific states in the future is the same thing as saying not being able to predict any and all states in the future, which is the same thing as saying not being able to predict future trends.
Now you’re saying something other than predicting individual stocks. Now you’re talking about not being able to predict the future of whole economies using past data.
And that’s what I just said, and what collapses the whole concept of output gaps. For it means you have no reliable data from which to form any predictions about future states and hence future changes in states (trends) such that you can identify any “gaps”.
In other words, since history is not a reliable guide, you won’t be able to distinguish a fall in trend output and fall in trend employment, from an increase in any output “gap” and employment “gap”.
Your “gap” is a figment of your own imagination.
In other words still, if you observe a decline in output of say 2%, and a decline in employment of say 5%, then you cannot infer from this past data that any “gaps” have formed. For if you did, then that would require you to induce from past data future states of the economy.
You must accept the possibility, indeed the likelihood, that trend output and trend employment have fallen, such that there are no “gaps” at all, but a change to the underlying economy (which you could not have predicted using past data!).
“Of course you can in the past and immediate past and a trend continuing now in the present, e.g, rising unemployment.”
And as clockwork, you go right back to contradicting yourself again. Now you’re going back to saying that yes, history now is a reliable guide to forming predictions of future states and hence future trends, such that you are claiming to be able to perceive employment “gaps”.
Contradictions galore.
Up.
No, down.
Black.
No, white.
Trends.
No trends.
Is roddis incapable of observing empirical evidence of high unemployment or real output collapse as it exist in the present?
These are your own words, buddy boy:
In these systems, past data is not a useful tool for predicting the future state of the system.
Further, you’ve never explained why this alleged “non-ergodic-ness” should be such a problem only for mundanes but not for know-it-all government planners. And you’ve never responded to my critique that government spending is not the same thing as accumulted boom phase prices or why anyone would want to artificially replicate an unsustainable structure of prices and production even if it could be done.
Finally, since you still don’t understand the concept of economic calculation, you are blind to the necessity of prices readjusting to sustainble levels.
Even in LK’s beloved superficial world of Steve Keensianism and the Minsky-ites, there is the problem of “debt-deflation” which, of course, is the same thing as the ABCT but with the analysis hermetically sealed off from the essential problem of prices being distorted by funny money. Why would the government want to replicate that mess?
Your inability to understand basic ideas does you credit.
(1) Objective probability scores of some specific future state (e.g., price value of stock x 2 years from now) and (2) current real world quantities, the most recent part of past trends, are two different things.
LK:
You claimed that whole economies are non-ergodic, and you claimed that non-ergodic systems cannot be used to make future predictions.
That implies you cannot make predictions of whole economies using past data, which means your whole bunk about outputgaps falls like a house of cards.
You have no basis from which to identify “gaps”, because gaps imply an ability to predict whole economy trends.
Every time you point to declines in employment, the theory of non-ergodicity implies that you cannot claim the output gap has increased. For the trend itself may have declined, and you just don’t know it through observing past history.
LK, you’re contradicting yourself.
LK:
“I said cannot be used to make predictions of specific states of future variables with an objective probability score.”
Yes, you said one cannot make predictions of future states of the economy, and hence one cannot make predictions of trends (which are the connections between (unpredictable) states of the economy).
That’s what is making you contradict yourself vis a vis your other claim that future trends, and hence future states, can be predicted using past data.
“The existence of nonergodic, stochastic systems in markets does not prevent identification of output gaps in the present or past, or unemployment or GDP levels in the present or past, nor does it prevent identification of basic trends in market systems.”
Contradiction yet again!
If you claim to be able to OBSERVE trends, then you are claiming to be able to induce, from past history, future trends.
But that contradicts your claim in your blog where you said that history of non-ergodic systems are unreliable sources for making future predictions.
“Mises distinguished between the role of ‘quantitative predictions’ within the natural sciences and ‘qualitative predictions’ in sociology and economics. He argued that it is impossible to predict specific outcomes in social science with any degree of accuracy and that, instead, social science should concern itself only with the prediction of patterns”
How is pointing to what Mises said going to salvage your incompatible statements?
Besides, the argument from Mises that you cited is actually a counter-argument against you. For Keynesian theory is grounded on the supposed ability scientifically, i.e. on the basis of “facts”, i.e. data, i.e. history, predict the future economy, and it is on this basis that their interventionists policies depend.
Not being able to “scientifically” predict the future economy, throws the entire Keynesian methodology under the bus.
Identifying “patterns” are something that Mises argued cannot be done scientifically, that only entrepreneurs can do it, who risk their money in their own separate markets, and whose judgments are deemed correct or incorrect on the basis of profit and loss. Those entrepreneurs who forecasted correctly, earn profits, and those who did not, incur losses.
Keynesians on the other hand are claiming to do what Mises explicitly rejects. And you think his passage supports your contradictions? Astounding.
We shouldn’t even allow for one minute the use by these Keynesians of presumptuous terms like “austerity” and “stimulus”. “Austerity” comes from the word “austere”.
Slashing government spending and getting the money regime back to where interest rates are set by the market causes prosperity. Thus actual Keynesian “austerity” causes prosperity. Government spending, funny money and artificially low interest rates cause depressions and suicide.
They’re using the terms whether you like it or not Roddis. It’s a necessity of the beast.
The only way to deal with it is by finding out what exactly they mean by the terms.
So far, I’ve gotten vague definitions, and vague definitions for the words in the vague definitions.
My guess is that they have no concrete meaning in mind, but rather by what the outcomes of both allegedly are.
I think they get defined retroactively. If there was a recovery, then it was a stimulus. If not, austerity.
That doesn’t make much sense. We had stimulus in 2009, but no recovery.
Inadequate stimulus, obviously.
Or the theory’s wrong.
THE THEORY IS NOT WRONG.
Just to be clear DK, you think it is not intellectually dishonest to take a quote out of context with the intention of changing the speaker’s apparent meaning?
That strikes me as extremely dishonest.
Krugman mentions Hoover once in that article:
“According to Herbert Hoover, Andrew Mellon, his Treasury secretary, urged him to “Liquidate labor, liquidate stocks, liquidate the farmers. … It will purge the rottenness out of the system.”
I don’t see how one could conclude from this that Hoover agreed with Mellon’s remarks and I don’t think there is anything in the post that could be said to “lead the listener/reader to believe that this was the Hoover Administration’s official policy’ (if so , what ?)
I wish people would not throw terms like “intellectual dishonesty” around so lightly – it makes real debate much harder.
Google “50 Herbert Hoovers” and “51 Herbert Hoovers”.
2008: “The priority right now is to fight off the attack of the 50 Herbert Hoovers, and make sure that the fiscal problems of the states don’t make the economic crisis even worse.”
2010: Fifty-One Herbert Hoovers
“More than a year ago I coined a phrase that seems to have made its way into the econolexicon; writing about how cutbacks at the state and local level would tend to undermine fiscal stimulus at the federal level, I said that we had fifty Herbert Hoovers.
But I was wrong. Via Mark Thoma, we have at least fifty-one — because we have to add David Broder to the list.”
http://krugman.blogs.nytimes.com/2010/03/11/fifty-one-herbert-hoovers/
But that was 2008 and 2010, Roddis.
It’s possible he was only joking.
It’s possible he was just quoting someone else named Paul McCulley of Pimco.
Why do you continue to criticize Krugman? Deep down he’s got a good socialist heart and just wants rich people to be robbed.
Well, obviously Krugman thinks that Hoover was a liquidationist – but that doesn’t make him intellectually dis-honest – just in disagreement with most Austrians.
Rob,
In your first post you wonder how anyone could draw the conclusion that Hoover was a liquidationist based on the isolated quote Krugman provided.
But now you say that is obviously what Krugman thinks.
I’m impressed.
1, Krugman thinks that Hoover was a liquidationist and has said so in many places.
2. One of those places was not in the recent post at the point where he quotes Hoover quoting Mellon.
1. Krugman believes Hoover is a liquidationist. He has said so in many places.
2. He uses an isolated quote from Hoover’s memoirs without intending it as support to his belief, expressed many times before, that Hoover was a liquidationist, because he doesn’t come right and say something like Here is some support to my belief that Hoover was a liquidationist
Right. Gotchya.
Rob Rawlings, he mentions Hoover by name, then talks about the Mellonism of the 1930s. He is assuming his readers know that Herbert Hoover was in charge in the US in the early 1930s. But if one didn’t know that, then I agree, it’s not as obvious that Krugman is saying Hoover implemented Mellon’s advice.
But his post is more about people who call for liquidationist policies (“the urge to purge”) in the the present than the policies of the 1930s – which are only mentioned in passing.
Maybe I’m just naive but I’m struggling to see why he would bother to say “Hoover was a liquidationist” in such a coded way when in those other posts that MF pointed to he just comes out and says it openly.
What do you think it means:
What mistakes, exactly?
I would not be at all surprised if Krugman believed that Hoover actually implemented Mellon-style ,policies in the 1930s.
However there is a difference between believing that, and using the Mellon quote in an intellectually dishonest way as Bob alleges. I not just not seeing that the quote as being used in that way – its just being used as an example of the kind of things liquidationists say.
(i) Except in a socialised community where wage-policy is settled by decree, there is no means of securing uniform wage reductions for every class of labour. The result can only be brought about by a series of gradual, irregular changes, justifiable on no criterion of social justice or economic expedience, and probably completed only after wasteful and disastrous struggles, where those in the weakest bargaining position will suffer relatively to the rest. A change in the quantity of money, on the other hand, is already within the power of most governments by open-market policy or analogous measures. Having regard to human nature and our institutions, it can only be a foolish person who would prefer a flexible wage policy to a flexible money policy, unless he can point to advantages from the former which are not obtainable from the latter. Moreover, other things being equal, a method which it is comparatively easy to apply should be deemed preferable to a method which is probably so difficult as to be impracticable…….
(ii)…..If important classes are to have their remuneration fixed in terms of money in any case, social justice and social expediency are best served if the remunerations of all factors are somewhat inflexible in terms of money. Having regard to the large groups of incomes which are comparatively inflexible in terms of money, it can only be an unjust person who would prefer a flexible wage policy to a flexible money policy, unless he can point to advantages from the former which are not obtainable from the latter.
(iii) The method of increasing the quantity of money in terms of wage-units by decreasing the wage-unit increases proportionately the burden of debt; whereas the method of producing the same result by increasing the quantity of money whilst leaving the wage-unit unchanged has the opposite effect. Having regard to the excessive burden of many types of debt, it can only be an inexperienced person who would prefer the former. “The General Theory” Pages 268-269 Chapter 19 [emphasis added]
VI. 13 “Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become “profiteers,” who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.”
VI.14 “Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” – JM Keynes,”The Economic Consequences of the Peace”
It would seem that by the time he wrote The General Theory, Keynes was actively trying to destroy capitalism and instill Leninism.
That book, IMO, set economics back by probably 3 or 4 centuries. Digging up old mercantilism fallacies and dressing them up as if they were new discoveries. Unfortunately, because the economics profession at the time was at a rather weak point in history, due to the “throwing the baby out with the bath water” rejection of classical economics on the basis that because the labor theory of value was incorrect that the entirety of classical economics was worthy of rejection, the economists were almost entirely disarmed of the teachings of the classicals that were more than sufficient in refuting Keynes’ claims.
The fact that Keynes was able to get away with straw manning Say, is testament to the weakness of the economics profession at the time.
By his death, Keynes recanted:
“I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.”
Of course, this quote is not written by Keynes anywhere, it was reported by another person, and that means we can conclude it was a LIE! Then go back to prattling about the horror of individuals holding onto money for time periods longer than the “TAX INCOMES NOW” Keynesians can tolerate before going tribal warrior apes#!t.
I fail to understand the usual hysterical Keynesian reaction to curing the problem of price distortion by allowing prices to attain their undistorted levels. Further, bankruptcy need not mean “liquidation”. Today in the US, most secured loans can be modified pursuant to a Chapter 13 plan (except loans secured by one’s primary residence – Section 1322(b)(2) — an insane rule, but there it is).
http://www.eastwakebankruptcy.com/blog/modifying-secured-loans-chapter-13
Contra Keynes, I fail to understand how a case-by-case process of loan modifications for distressed loans where all of the participants know all of the specific facts and abilities of the participants (and where they could and should be taught Austrian Economics) is not preferable to the chemotherapy-like poisoning of society by additional funny money dilution and uncontrolled generic government spending.
“I fail to understand the usual hysterical Keynesian reaction to curing the problem of price distortion by allowing prices to attain their undistorted levels.”
Let me help:
The reason is that without people being employed now, they can’t be taxed now.
Notice how American Keynesians of all stripes never call for US Treasury and Federal Reserve financed stimulus of third world countries whenever there are rises in unemployment there. Why? Because any stimulus of “incomes” there would be taxed by the local government, not this government. So who gives a s#!t about those people.
When Americans go unemployed however, then US taxation is threatened. Therefore, f@%k the wealthy Americans, stimulate here, raise “incomes” here, and secure the taxation stream that the parasitical Keynesian mind depends on for both material and psychological dependency.
Of course, to save face, you’ll hear fake outrage over foreign governments not stimulating the local economies, and they’ll call for local governments to stimulate, but that is just so that they can “prove” to their fellow citizens that stimulus is better than no stimulus, just in case unemployment rises domestically.
It’s all about securing a steady stream of local resources to the state, from local taxpayers, nothing more. Everything else is smoke and mirrors. The make believe altruism, which is needed for statism to even exist, is borrowed of course, and the propaganda is that anyone who is against the state taxing additional nominal incomes, are enemies of mankind.
“Contra Keynes, I fail to understand how a case-by-case process of loan modifications for distressed loans where all of the participants know all of the specific facts and abilities of the participants (and where they could and should be taught Austrian Economics) is not preferable to the chemotherapy-like poisoning of society by additional funny money dilution and uncontrolled generic government spending.”
This requires delving into dirty, complex, diverse, and separate concept oriented market phenomena. The state on the other hand is singular…pure. Thus, that which concerns the state, namely single concept aggregates, such as “output” and “employment” are made primary.
Hence, they don’t want to soil themselves dealing with case by case debt renegotiation, modifications, and default/paybacks. These have nothing to do with securing a steady stream of resources to the state, which requires aggregate employment and incomes to stay high. Even if the higher incomes result from higher consumption and lower investment, and thus lower standards of living for everyone, it doesn’t matter. It’s incomes that matter, because the state taxes incomes. Hence, we are told that incomes are the driver of the economy, i.e. the driver of taxation.
Ultimately, it’s a matter of metaphysics and philosophy. Statists of all striped are entrenched with singular, oneness metaphysics. The state is one. Employment is one. Output is one. The universe is evil to the extent it is diverse and cut off from itself. Thus individuality is evil, or, at best, a necessary nuisance. That’s why LK resents Austrian economics, which is based on individual action. His collectivist/Platonic philosophical convictions clash with it at a deep level, and so he rationalizes that conflict by trying to destroy individuality in his own mind through all kinds of gobbledygook concepts from sloppy and ridiculous texts from like minded Platonists.
Their minds are warped with bad philosophy. They don’t know it, they’ll swear they have it right, but I know that deep down they are massively conflicted individuals, hopelessly fighting a war they cannot possibly win. As long as individuals continue to act, they will continue to struggle with reality, they will continue to be frustrated, and they will continue to seek to control individual activity.
I understand why the actual elitists who run the Keynesian Kleptocratic State would think like that. What I don’t understand is hipster “progressives” defending it with all their heart and soul. Except perhaps as hack careerists thinking about their future employment possibilities.
Hipster progressives differ from Kleptocrats in extent of personal power.
Have you seen this, yet?:
How to Reach the Left | Roderick T. Long
http://www.youtube.com/watch?v=t4hjO1ak4_M
Roderick’s got a compelling theory of “conflationism” he’s working with, here, where the Left is assuming that the economy is currently a close approximation of a free market, rather than the government-created corporatist system that it is.
He says that showing the Left that what exists now is not a free market, and agreeing with them that Corporatism is bad and helping them understand that government is the source of the Corporatism is key to helping them understand that a free market would solve a lot of the economic problems they’re concerned about.
You can’t teach “progressives” the difference between laissez faire and crony capitalism. Their entire scam is based upon making sure the differences are conflated in the minds of the “masses”.
“If no one loses a deposit, then the intervention was clearly non-liquidationist.”
How much did depositors lose in the depression?
If Krugman’s point was to show that Mellon’s advice was liquidationist advice, and then consider the mental state of someone giving such advice then fair nuff on that score. However, Krugman follows up with:
This is directly and absolutely dishonest. Krugman implies here that Mellon’s advice led to “the mistakes of the 1930’s” but actually Mellon’s advice was never followed, so we just don’t know what would have happened had Mellon’s advice actually been followed.
I think this is also a bit dishonest because there are lots of ways to measure inflation and Krugman presumes an awfully favourable metric to get it down to 2%. Most people and most businesses have seen their costs rise more than 2%.
Anyhow, Obama won the election, and Obama figured out how to bypass the debt ceiling, so we will see what we will see. Employment has not turned around and Krugman and his ilk can own it.
Someone need to explain to me why Moley and Tugwell described the New Deal programs they helped FDR create as owing so much to Hoover: said:
“When it was all
over, I once made a list of New Deal ventures
begun during Hoover’s years as Secretary of
Commerce and then as president. . . . The
New Deal owed much to what he had be
gun.”
Another member of the brains trust,
Raymond Moley, wrote of that period:
When we all burst into Washington
. . . we found every essential idea [of
the New Deal] enacted in the 100-
day Congress in the Hoover admin
istration itself. The essentials of the
NRA, the PWA, the emergency relief
setup were all there. Even the AAA
was known to the Department of
Agriculture. Only the TVA and the
Securities Act was drawn from other
sources. The RFC, probably the great
est recovery agency, was of course a
Hoover measure, passed long before
the inauguration.
Late in both of their lives, Tugwell wrote
to Moley and said of Hoover, “we were too
hard on a man who really invented most
of the devices we used.”
Folks will also have to explain why a Pulitzer Prize historian like David Kennedy recognized the continuity between Hoover and FDR as well.
As Hoover said in his acceptance speech for the 1932 Presidential renomination:
[W]e might have done nothing. That would have been utter ruin. Instead, we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action.
As Rothbard said: “No one could accuse him of being slack in inaugurating the vast
interventionist program”:
No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depression, dividends, profits, and the cost of living have been reduced before wages have suffered.
No, Hoover’s policies were not officially “Keynesian” because he did not seek to plug the non-existent “gap” and he raised taxes like crazy in 1932. But he was not a “liquidationist” and he was not “laissez faire” and his regime does not demonstrate the failure of either.
Further, because no Keynesian in the galaxy understands the basic Austrian concepts, no Keynesian in the galaxy has ever calmly and fairly set forth the Austrian analysis of government induced price distortions and found it lacking (as long as we are discussing “intellectual honesty”).
No, Hoover’s policies were not officially “Keynesian” because … he raised taxes like crazy in 1932.
Correct, since raising taxes in a recession is not Keynesian policy.
Bob roddis does not understand basic Keynesian concepts.
He got that one right though.
If Roddis is right about that, how does that show he “does not understand basic Keynesian concepts”?
What Keynesian concepts do I not understand, as opposed to the ones I reject?
“Correct, since raising taxes in a recession is not Keynesian policy.
Bob roddis does not understand basic Keynesian concepts.”
If Roddis does not understand basic Keynesian concepts, then he would have written that Hoover did the Keynesian thing by raising taxes.
Truly remarkable that you claim someone is correct and wrong about THE SAME THING.
Agreed. If LK doesn’t resolve this incongruity, then he needs to be dismissed as a dishonest fraud. LK, please speak up. What little credibility you have rests upon it. I predict you will not correct your error though, as I’ve seen you demonstrate zero integrity since I’ve seen your blogs.