12 Apr 2013


Market Monetarism, Potpourri, private law, Shameless Self-Promotion 42 Comments

==> Shawn Ritenour writes a lengthy summary and critique of Market Monetarism.

==> This guy sent me his critique of Gene Callahan and my conversation on Say’s Law. Eh, I’m going to be honest: I was a little annoyed at him using my first name in such a flippant manner, but what really pushed me over the edge was when he asked if I’d ever read Say’s Law. Yeah, I’m pretty sure I even photocopied the whole section of Say’s Law of Markets when I taught it in my History of Economic Thought course. I could be a saint, realizing that Smiling Dave’s gentle sarcasm is just his schtick and that I should spend a half hour trying to help him see the light…but I’d rather do another interview with Team Brittany instead. Not gonna lie to you.

==> Ben Powell sent me his Freeman article on anarchy. I like 95% of it very much, but unfortunately the title and opening hook I think are a huge non sequitur. Ben says, “Do you think the Cambodian people, faced with [the Khmer Rouge], would have been better off with no government at all? Congratulations. You are, sometimes, an anarchist.” OK Ben, would you rather eat your left arm or a hunk of spinach? Congratulations, you’re a vegetarian, sometimes. This is the first, and probably last, time in history that I will criticize an article on anarchy that the NYT favorably links.

==> Everyone’s flipping out about this McDonald’s story, but I for one am glad they’re raising their standards. I can’t stand it when I place my order and the kid stares at me.

==> Poors Lars Christensen thinks he’s blown open a hole in Austrian business cycle theory, by saying we should claim that price inflation goes up during recessions (if we look just at the supply side). If only I had written up an article on that…

42 Responses to “Potpourri”

  1. Adrian Gabriel says:

    Excellent piece by Shawn.

  2. Tel says:

    OK Ben, would you rather eat your left arm or a hunk of spinach? Congratulations, you’re a vegetarian, sometimes.

    I don’t see that as a legitimate comeback. The Cambodian people really were faced with the problem of a murderous central planning regime, not some phoney dichotomy cooked up to win an argument, but we are talking the big hooded guy with the scythe here. I think this one tops out R J Rummel’s per capita megadeaths for the 20th Century.

    The real comeback is that disliking a murderous regime does NOT imply anarchy, because the end result of any anarchy is that some gang of thugs takes control and you are back with a regime again. That’s the real problem… you end up having to eat your right arm anyway, even after you asked for spinach.

    • Tel says:

      I would also argue that Somalia is not anarchic. The nation/state of Somalia can’t honestly be said to exist any more, it fractured via civil war into three (I think?) smaller states, each of which claims self governance and one of which claims the other two (a meaningless claim without means to back it). These smaller states operate along tribal clanish lines and are backed by various religious principles (all based on Islam, but some are stricter than others, I would have to look up the details).

      Not anarchy by any means.

      • Jonathan Finegold says:

        This is a bit oversimplified. It’s not as if these clans are governments themselves, or as if there’s nothing that operates outside the scope of these clans. Prior to ~2006, certain aspects of Somalian governance were legitimately anarchic. Firms were providing infrastructure, including funding legal institutions (based on local and Islamic traditions), and providing private defense against warlords who were being funded by outside powers. There was a decentralization of power, and the backbone were the Islamic courts. Somalia certainly has different institutions than what others may have, but there it had anarchic resemblance nonetheless.

      • David Friedman says:

        The present situation of Somalia is complicated, with various people fighting over who will be the government. But if you look at the literature on the traditional legal system, as it existed before the British and Italian rule and, to a considerable extent, continued in the north under British rule, I think it is fair to describe it as a form of anarchy.

        For more details, see:


  3. Daniel Kuehn says:

    Glad I’m not the only one that thought that Powell article had an odd way of approaching it. My reaction was “isn’t this just as good for arguing why anarchists are liberal democrats?”. I suppose his target group was people who thought it was so outlandish it was just a joke, but convincing those people that they might prefer it to brutal autocracy doesn’t really seem like it’s moving the argument along all that much.

  4. Smiling Dave says:


    I’m sorry if your feelings were hurt.

    Be nice if you addressed the ideas in my article, as opposed to telling us your feelings.

    Your key flaw was writing:
    “The way to fix things is for prices to move. If businesses consistently hold too much inventory, and can’t hire workers, the problem is that the price of the inventory is too high, and wages need to fall.”

    No. The problem in a depression is not that inventories are too high, nor that wages are too high. The problem is that resources have been allocated to the wrong place, aka malinvestment.

    To end malinvestments, no price has to change. All that has to be done is nothing, meaning no new money put into the economy to sustain them. Of themselves, they will go broke. That’s why they are malinvestments in the first place, because left to themselves, they will go broke. Definition, really.

    • Gene Callahan says:

      “Be nice if you addressed the ideas in my article…”

      Dave, if there were any ideas there, I’m sure Bob would have addressed them.

      • Smiling Dave says:

        I’ve heard of you, Gene.
        Troll extreme.
        Your reputation precedes you,
        So I hereby leave you.

        • Ken B says:

          OK, this is annoying. Few here have disagreed as sharply or acrimoniously with Gene as I have on some issues. One thing Gene is not is a troll. And to head off MF, another thing Gene is not is stupid.

          • Smiling Dave says:

            Stupid? Way to straw man.

            As for your acrimonious bouts with Gene, did he dismiss you with “if there were any ideas there, bla bla”? That’s sheer trolldom. Address the ideas.

            • Adrian Gabriel says:

              I agree with Smiling Dave. Gene is a troll maximum. He is so in love with his overpriced education he can hardly even defend his own thought experiment Professor Murphy gives an inkling of credit to. Smiling Dave has great ideas and I suggest everyone read his blog. It’s way better and full of more realistic Austrian theory than Gene’s ever will be. Gene’s bog is a regurgitation of wasteful mainstream statist mechanics.

            • Ken B says:

              Yes he has done, and worse. On his blog he had described comments of mine he would not allow to be printed that way. I agree that is suboptimal behavior. It is not trolling.

        • Seymour says:

          Gene a troll? Maybe his comment to you was a bit off the cuff, but that’s quite an accusation. Could you explain? I find Gene to be a knowledgeable fellow despite the vehement disagreements that commentators have had with him in the past.

  5. Brent says:

    Oh c’mon. His point was merely that some states are so bad (some repeatedly become so bad) that clearly having no state would be preferrable. If someone told you spinach was the worst possible food, but then you got them to agree that sometimes it is preferrable to other (real) food choices, then you did in fact make a point. Mote so in the case of government, however, because there are real reasons why “liberal democracy”is unlikely to ever be a possible choice.

    • Major_Freedom says:

      I think Brent explains it the best.

      “If someone told you spinach was the worst possible food, but then you got them to agree that sometimes it is preferrable to other (real) food choices, then you did in fact make a point.”

      I think it is a good argument to help them realize that they would be for anarchy in certain cases, if you presented them with two alternatives, namely “Somali government or no government in Somalia” that actually occurred in real life.

      But to Murphy’s credit, a response can be given that doesn’t make one anarchist simply for choosing spinach over eating one’s arm. One could put government at the top, but then claim a foul has been committed by being forced to admit that our only alternative in principle is in fact anarchy. The anti-anarchist could grant you that anarchy in Somalia is better than the particular Somali government at the time, empirically speaking. But, they could always claim that “liberal democratic” government is better than no government in theory, and better than the particular Somali government at the time in theory.

      So I think Powell’s point is valid, just not as strong as it may at first appear to be. I agree with Murphy in this respect. Yes, you may get a lot of anti-anarchists to say they would rather have anarchy in Somalia than the particular Somali government at the time. But that doesn’t mean they can’t want liberal democratic government more than anarchy, thus maintaining their anti-anarchist ideology.

      I think Powell is talking more of real world examples, while Murphy is talking more of theory.

  6. Smiling Dave says:

    Your second mistake was writing:
    “The free-market economists who argue that “a general glut is impossible” are overlooking the fact that the economy might not exploit every resource to its fullest potential in a given period. For example, laborers don’t usually work an entire year at their maximum physically sustainable level. Instead, they typically choose to consume large amounts of leisure.”

    Here’s where Say’s Law comes in. It applies no matter if resources are exploited to their full potential or not. That’s because it talks about the bottom line [=what was produced], not how we got to that bottom line.[what resources were used to exploit it]. Given that desired resource X was produced, whether or not the economy exploited every resource to its full potential, that creates purchasing power in the hands of the producer to buy resources Y, Z, etc. Apply the same reasoning to desired resource Y, Z etc in turn, and you see that there is no general glut.

    Even if you read up on Say’s Law and wrote whole books about it. that does not change the validity of my argument. I hope you understand that.

  7. Silas Barta says:

    Re McDonalds: I sympathize, but I think you’re missing the broader context:

    1) You don’t need a bachelor’s in order to be a competent McD’s cashier. Really.

    More importantly,

    2) there’s an unfortunate trend for job postings to heavily overstate what’s actually required in the job. (Fun fact: I’ve seen the posting my employer uses for my position, and I *still* don’t come close to satisfying it, let alone when I applied!) Worse, the more realistic ones *expect* you to apply, despite not meeting their purported requirements. What? Guess who that selects for …

  8. Major_Freedom says:

    The McDonalds story reveals an irony: I wonder how many of the people complaining about McDonald’s new hiring practises, used to claim the country is going to hell because of the rise in “McJobs”, that we are turning into a nation of people with low qualification, low paying jobs.

    Now they’re complaining about McDonalds jobs becoming jobs with higher qualification requirements?

    Can’t win.

  9. Major_Freedom says:

    I look forward to your response to SmilingDave, because in all honesty, I think he’s got a point (snark and sarcasm aside).

    General gluts are indeed impossible, because there is no limit to people’s desire for wealth in general. No matter how much wealth is produced, people will always want more wealth in general than they have.

    Do the 3 people on the island who overfish serve as an example that refutes this? No. My response to claims otherwise would be to include the unseen, and not just the seen. Yes, they have produced too many fish than they want to eat, but this is not an example of a general glut. It’s an example of a partial relative overproduction of fish, and a partial relative underproduction of that which is by the nature of the case unseen. Instead of devoting their labor and resources to fishing those extra fish, they could have devoted their labor and resources to producing something else, and to make this as conservative and as faithful to the thought experiment as possible, they could have devoted their labor and resources to producing flat surfaces on the sand to lie around in the Sun the rest of the day in leisure. Say’s Law relates to all possible, conceivable goods that could be produced, not just one good in abstracta.

    • Smiling Dave says:

      Of course I’ve got a point.

      All I ask is show me where the flaw is in my reasoning, Bob, as I showed exactly where the flaw is in yours.

      I modified the prose in that article [not the ideas] to make it more readable.

      Have at it.

      • Major_Freedom says:

        What do you mean “of course” you’ve got a point? Are you saying that you are someone who should be treated a priori as always making points whenever he writes?

        • Smiling Dave says:

          “Are you saying that you are someone who should be treated a priori as always making points whenever he writes?”

          I speak only of this instance.

    • Bob Murphy says:

      Major Freedom, I’ll do a quick separate post to show why it’s really not worth my time to deal with this. If you have a problem with Gene and me, fine, you can argue it out–and you did, back when we first had that exchange.

      Dave wanders into the middle of a conversation, says I don’t know ABCT, and then even challenges my recapitulation of the standard approach. But, that standard free-market approach I literally took from Rothbard’s discussion.

      It’s like a guy overhearing two physicists arguing about gravity and saying, “Ho ho ho, don’t you guys know ‘mass’ is held on Sundays by Catholics? What the heck’s wrong with you?”

      Maybe the guy is right and the professional physicists are wrong, but you can see why they aren’t going to spend a lot of time figuring out if he’s really a genius. I routinely tell people who email me that I’m too busy to answer their polite questions. The only reason I posted Dave’s link is that it takes 2 seconds to relay it.

      • Gene Callahan says:

        “It’s like a guy overhearing two physicists arguing about gravity and saying, “Ho ho ho, don’t you guys know ‘mass’ is held on Sundays by Catholics? What the heck’s wrong with you?”

        Right, Major. Dave makes you look like a paragon of decorum! Meanwhile, he clearly doesn’t even understand what a model is, or what it is for. (He refers to models as “bizarro worlds”!)

        • Smiling Dave says:

          You don’t understand what a model is, or how to construct one.

          • Smiling Dave says:

            Ah, what the heck, I’ll explain it to you. A model is supposed to omit the unimportant features of what is being discussed, so one can focus one what is important.

            But a model that leaves out important stuff is not a model at all, but a Bizzaro world.

            And you, sir, constructed a Bizzaro World, with only one commodity. I explained in detail in my article why what you left out is important.

            • Smiling Dave says:

              To give you an idea of how bizarre Callahan’s model is, imagine if he was trying to model marriage with a simplified universe of Robinson Crusoe alone on island. Gene, it doesn’t work like that. Marriage requires two people minimum. You can’t model marriage with just one person.

              Same thing for a general glut. The very word “general” means that there are many items in our economy. You cannot model that with a one commodity economy.

              • Major_Freedom says:


                It is not required that there has to in fact be “many” goods in the economy. It is sufficient that it be possible to produce things other than the partially relative overproduced goods, given one’s body and material resources.

                Maybe in a universe where everything was made of fish, where the only actors are fishes, the Earth was made of fish, and anything that could ever be achieved as a goal is….eating fish, THEN Callahan’s model would be valid, and Say’s Law would be DEMOLISHED and EVISCERATED…and then turned into sushi and eaten, because that’s all anyone can ever do in Callahan’s model.

            • Ken B says:

              Models can only be discussed on this blog if they are not OLG models; ask Bob.

        • Major_Freedom says:


          “Right, Major. Dave makes you look like a paragon of decorum!”

          Yeah, well, that’s just, like, your opinion man.

          “Meanwhile, he clearly doesn’t even understand what a model is, or what it is for. (He refers to models as “bizarro worlds”!)”

          Can you explain how a one good model is adequate for explaining how “general” gluts are in principle possible, given that the argument against “general” glut does not exclude potential goods/services that can be created using scarce bodies and resources?

          If you are willing to concede that the 3 islanders are in principle capable of producing other things besides only fish, using their bodies and resources, other things that they as human beings might value (which human values only ONE consumer good, i.e. one end?), then you should understand why there might be people who would object to you calling your model a model of a “general” glut.

          Do the islanders not need water? Shelter? Clothing? Leisure activities? Beds?

          These are PEOPLE you’re talking about in your model, right?

          In my experience, it occurs quite often that people who believe that have refuted man’s desire for unlimited wealth, set up a model of man that isn’t man at all, but robotic automatons. (See for example Rothbard’s and Nozick’s criticisms of Rawls’ model of man in his “Veil of ignorance” theory. They show that Rawls wasn’t even talking about humans at all, but one-dimensional robot like entities.)

      • Smiling Dave says:

        I didn’t wander into the middle of a conversation. I was commenting on an article you publicly posted. Publicly, as in for the public.

        That standard free market approach is talking about a different problem, sticky wages, not malinvestments.

        I don’t care about Catholics, to each his own, but do you know the name of the logical fallacy you are committing here? Appeal to authority. “I am such a professional that I must be right always,” you are saying. Makes you look good. Not.

        I do thank you for posting the link to my article, very gracious of you.

      • Major_Freedom says:

        I only have a problem with the argument that general gluts are possible, that’s all. I don’t have a problem with you or Gene.

        Considering the snark and sarcasm, I would understand if you didn’t bother responding to Dave’s post in any detail.

        I just like ideas and debating ideas. I don’t want to play sides.

    • Gene Callahan says:

      “General gluts are indeed impossible, because there is no limit to people’s desire for wealth in general.”

      Since no one who theorized that general gluts are possible ever denied this, it is clearly irrelevant. It just shows that instead of paying attention to what people ACTUALLY meant by a general glut (which is what my example shows), instead you have substituted your own definition… and of course, by your invented definition, they are impossible. This is like refuting the theory of relativity by inventing your own version that says perpetual motion machines are possible, then saying, “See! Einstein was wrong!”

      • Major_Freedom says:

        Gene, it is actually not required that those who believe general gluts are possible, that they must explicitly or implicitly deny what I said about desire for wealth in general.

        It is just sufficient to show that those of you who do believe general gluts are possible, are not even talking about general gluts in the first place, but rather partial relative overproduction of wealth.

        Now, if you want to think in your mind that 3 people on a deserted island fishing too many fish is an example of a general glut of wealth, fine, but you would not be talking about Say’s Law, since Say in the course of his argument spoke about how “products are paid for with products”, whereas there are no exchanges of fish for other products being made in your example, and he also argued that “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another”, whereas there are no other products other than fish permitted in your example).

        In other words, Say’s Law doesn’t exclude all possible and conceivable alternative products, but that the case in your island example.

        So you’re not talking about general gluts and you’re not arguing against Say’s Law. What you are doing is akin to excluding time in your critique of why Einstein’s spacetime theory is flawed.

        If you want to prove Say wrong, you cannot eliminate a core component of his theory, which is including all possible and conceivable alternative products that could be produced using scarce bodies and resources.

  10. Blackadder says:

    That Smiling Dave post was hilarious, albeit unintentionally so.

  11. Danny Sanchez says:

    Why is everybody talking about Smiling Dave and not Ritenour’s article on market monetarism?

    • Bob Murphy says:

      Because the Internet is about personalities, not ideas.

      • Major_Freedom says:

        This blog isn’t on the internet?

    • Smiling Dave says:

      Because one more theory about why inflation is great is not big news.

      But for a major Austrian economist to say there can be a general glut, and present a deeply flawed argument to support it, should be looked into.

      As for Callahan. Say’s Law is that products are traded for products.Traded, meaning you have at least two different commodities in your economy. A corollary is that a general glut is impossible.

      So any model that will have relevance to Say’s Law has to allow for trade, which is impossible in a model which has only one commodity.

  12. integral says:

    >>Everyone’s flipping out about this McDonald’s story, but I for one am glad they’re raising their standards. I can’t stand it when I place my order and the kid stares at me.

    I know what you mean. It’s bad enough to feel the shame of eating at McDonalds, but the added indignity of being observed while doing so, and feeling their judging eyes telling me what a lazy fat loser I am, is really something that McDonalds should have addressed years ago.

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