Potpourri
==> I had briefly toyed with the idea of ignoring Krugman in 2014, but then I realized: You guys want me on that wall, you need me on that wall. For now: A while ago someone exclaimed with horror in the comments here that Krugman was referring to his opponents as cockroaches, and that this was the type of dehumanizing move in which Nazis engaged etc. I rushed to Krugman’s defense and clarified that no, strictly speaking, Krugman was referring to cockroach ideas; he wasn’t calling his actual opponents cockroaches. Well, Krugman just put up a post titled, “Jean Baptise Say, Cockroach.” (But maybe that’s just because nobody can remember that famous idea with which Say is associated, so Krugman had to make it about the man, not the idea?)
==> I’ve karaoked with one of these people.
==> I see that I have been focusing too much on Krugman, and not enough on Scott Sumner. Now the latter has a platform at EconLog. But guys, I can prove that Scott’s analysis is wrong: After all, we still have a horrible economy. So clearly Scott’s blog output has been suboptimal, by definition, regardless of whatever nice things David has to say about him.
==> This Walter Oi sounds like an absolute riot. David R. Henderson provides a tribute, and so does Steve Landsburg. From Steve’s post:
He must have cultivated these traits for a very long time, because the Economics Department at the University of Chicago has a long (but sometimes broken) tradition of awarding, at the end of each academic year, the “Walter Y. Oi Award” to the graduate student who has asked the most irrelevant question — presumably in commemoration of something Walter asked in his own student days at Chicago over half a century ago. I’m not sure anybody knows what that question was, but according to one rumor, it came in the midst of a fairly technical lecture in Milton Friedman‘s Price Theory class, where Walter suddenly raised his hand and asked “Do you just make this stuff up as you go along, or what?”.
If I recall, poor Jean-Baptiste was not relentlessly insulted in that post.
We are still talking ideas.
It was a good post.
How many times calling him a cockroach counts as “relentless”?
I think three but I’ll have to check the blogosphere user’s manual.
Krugman says: There are real debates in economics — for example, about how much slack remains in the economy, how effective unconventional monetary policy really is, etc..
I request that the Keynesians prove in a deeply philosophical manner and with either a priori logic and/or empirical evidence that economies actually have “slack”.
Further, I request that the Keynesians prove in a deeply philosophical manner (or even in their usual phony, dishonest and superficial manner) and with either a prior logic or empirical evidence that “monetary policy” can possibly be “effective”.
In all seriousness, I think the fact that every single Keynesian on the planet (just like the scoundrel Krugman) either ignores, evades and/or distorts our arguments is pretty conclusive evidence that they have no counter-argument and that they know it.
“Our arguments”? .. lol.. you do not even understand the published arguments of Mises, Hayek, Rothbard or Kirzner, so you are in no position to judge whether anyone else understands them,
Bob Roddis’s version of Austrian economics has precious little to do with actual Austrian theory, and everything to do with a invented, imaginary version that exist only in his mind.
“you do not even understand the published arguments of Mises, Hayek, Rothbard or Kirzner,”
Roddis has educated you, mostly unsuccessfully, on the writings of Mises, Hayek, Rothbard, Kirzner, and other Austrians.
You don’t understand their writings.
I mean, you falsely asserted that prices ARE economic calculation. You don’t understand ABCT. You don’t understand economic calculation, as pointed out many times.
You’ve made so many errors that you have no business claiming you are able to identify anyone as not understanding Austrian theory.
” you falsely asserted that prices ARE economic calculation.”
Another lie from a laughable fool.
Here is what I said:
“(1) The primary purpose of prices in Misesian economic calculation is to enable calculation of profit and loss. And every economist understands this concept.”
http://consultingbyrpm.com/blog/2013/12/would-a-keynesian-lie-to-advance-his-political-agenda.html#comment-129254
In no sense am I saying that “prices ARE economic calculation”.
Lord Keynes wrote:
Another lie from a laughable fool.
Here is what I said…
This is all I can say…
I forgot a word, my bad. I had in my mind “you falsely asserted that prices ARE FOR economic calculation.”
The purpose of prices in Misesian economics is for individual actors to achieve their subjectively determined ends in an exchange economy. The “purpose” of a seller and buyer agreeing to exchange $5.00 for a hamburger is for the seller and buyer to individually gain more than they otherwise would have had they not exchanged.
Every “purpose” of X in Misesian economics is individual action, i.e. seeking gains and avoiding losses.
Economic calculation is present in a barter economy as well, but it’s less effective. Here too the purpose of trading sheep for cows is not to calculate, but to gain.
Prices are related to economic calculation not in the way you describe, but by way of an unintended outcome of individuals having economic freedom AND having the specific knowledge, technology, and preferences that result in one or some commodities becoming relatively highly valued in the market such that they become used as a medium of exchange. Here, the individual can calculate their gains and losses in market activity using a common denominator. But that doesn’t mean the purpose of prices is to calculate. The purpose is to make gains and avoid losses.
If people exchange money for goods, it is not necessarily because they want to economically calculate, it’s necessarily because they want to make gains and avoid losses. Economic calculation, that has a purpose as well. It is to track one’s gains and losses, or, in general, to plan activity so that gains are expected and losses are avoided.
(1) So you are retreating from your absurd claim that I “falsely asserted that prices ARE economic calculation.”
(2) your rambling comment above just confirms what I said: in Misesian economic calculation prices are used to enable calculation of profit and loss.
I made a mistake.
And I notice you just changed your number (2) argument.
You’re getting closer.
In Misesian economics, calculation of gains and losses is still somewhat possible in barter, but is radically improved with money that makes it seem like calculation of gains and losses is only possible with money/goods prices.
Mises argued that money allows individuals to calculate gains and losses using a common denominator specifically. I don’t believe this conclusively rules out calculation in barter according to Mises, although I could be wrong.
I made a mistake.
And I notice you just changed your number (2) argument.
You’re getting closer.
Mises argued that money allows individuals to calculate gains and losses using a common denominator specifically. I don’t believe this conclusively rules out calculation in barter according to Mises, although I could be wrong.
If you guys could go through 2014 without arguing about flexprice economic calculation, that would be great.
That would happen if:
A. LK finally learns that price adjustments take time, or
B. I get tired of posting responses to his errors.
Both are long shots.
“A. LK finally learns that price adjustments take time
Another outright lie from a deeply dishonest individual. I have never stated nor implied that Austrians think price adjustment happens instantly or without time.
As noted by this Austrian, however, the adjustment process is normally thought to be within 2-5 years:
““Generally speaking, most depressions (or “recessions” as they came to be redefined after the New Deal) in U.S. history were over within two years, and all of them within five ….”
Krugman’s “explanation” for the stagnant investment of the 1930s can’t explain why the U.S. economy managed to quickly recover from all of the earlier depression in its history”
-Robert Murphy, The Politically Incorrect Guide to the Great Depression and the New Deal, pp. 112-113
Of course, M_F thinks Austrians set no time limit: adjustment can take 20 years or 40 years, or 50 million, and everything’s just fine! No economic problems in sight!
LK,
Go run a business, any business. When I fill my truck up in the morning and diesel is up 10 cents, my quotes for that day are higher. Will I lose a bid, maybe. Only God understands 4 trillion economic calculations per second. Go figure…
“I have never stated nor implied that Austrians think price adjustment happens instantly or without time.”
I didn’t say you did LK. Why do you keep accusing me of accusing you of saying so?
I said you haven’t learned that price adjustments IN AUSTRIAN THEORY (as well as reality of course) take time.
Every “fixed price” argument you have presented as a counter to Austrian theory is predicated on you mischaracterising Austrian theory. If you learned that price adjustments in Austrian theory takes time, then you should finally see that all your fixed price arguments are wrongheaded.
“As noted by this Austrian, however, the adjustment process is normally thought to be within 2-5 years:”
“Generally speaking, most depressions (or “recessions” as they came to be redefined after the New Deal) in U.S. history were over within two years, and all of them within five ….””
That is not an Austrian economics argument. That is an argument of what happened in history, made by someone who just happens to be an Austrian. Anyone can study history and conclude what Murphy concluded. You are totally misunderstanding that point. You are saying that it’s an Austrian prediction going forward, which is not only wrong because Austrian economics makes no predictions, but it’s also wrong because it’s not even a prediction at all.
Austrian economics do not make predictions. Arguing that price adjustments take time is not a prediction, for time is a category of action. It is implied in action, and thus of price formation.
If Murphy claims that most recessions IN HISTORY have ended within 2-5 years, then this says nothing of economics theory. It says something about economics history, which is different.
“Of course, M_F thinks Austrians set no time limit: adjustment can take 20 years or 40 years, or 50 million, and everything’s just fine! No economic problems in sight!”
That’s a straw man. I didn’t say everything is fine. I don’t think everything is fine even in a perfectly peaceful laissez-faire economy. For to believe that everything is fine, would mean there is no more reason to do anything to alter the course of history. You are saying I have to think action comes to an end.
Austrian economics does not set any time limits. Humans learn in a priori unpredictable ways, and so they act in a priori unpredictable ways.
By the way, even though we cannot scientifically predict what people will learn and thus what they will do, it doesn’t mean 20 years, let alone 40 years or 50 million years is a reasonable estimate for how long it would take for someone who wants to hire labor, and another who wants to perform labor, to find each other and trade. All you’re doing is trying to make it seem like people will die, or become comatose vegetables for 40 years, unless the government threatens some people with violence to bring about real wealth transfer. You’re being dishonest.
LK:
This argument you made:
“As noted by this Austrian, however, the adjustment process is normally thought to be within 2-5 years:”
“Generally speaking, most depressions (or “recessions” as they came to be redefined after the New Deal) in U.S. history were over within two years, and all of them within five ….””
Proves that you not only don’t understand the difference between theory and history (which is what all empiricists fail to understand), but you can’t even understand it WHEN IT IS RIGHT IN FRONT OF YOU.
Read again what Murphy wrote, and pay attention to the fact that it’s a historical claim. That is, an assertion of what has already taken place.
Then read how you introduced that quote. You presented it in a way that would suggest it is an ongoing thing, about how short recessions should be “normally”.
Your theory is so warped, it is actually causing you to fail to understand the English language.
Most of the time I agree with everything you say, but in this instance I must raise 2 objections:
1. price adjustments take time
Price adjustments occur instantly according to the Austrian/Misesian price theory,especially in the further exposition of the theory set fourth by Rothbard and later Hoppe. This follows simply from the definition of what prices are: an exchange ratio between money and a good/service. Prices are always an historical event therefore they always reflect past valuations. They change instantly as valuations change. It is nonsensical to say it takes time for them to change. That is very different from saying that it takes time for “prices to clear”, which basically assumes the time it takes to reach the long steady state equilibrium/ or the evenly rotating economy.
2. There is economic calculation absent money, i.e., in barter.
Not according to the calculation problem set forth by Mises. Absent a common denominator, such as money, no economic calculation is possible, e.g. you cannot compare apples and oranges, add/subtract tables and chairs, etc…. it does not simply make calculation less effective or efficient as you have claimed but impossible. That is not to say that people still don’t make psychic valuations in their mind about goods and services in a barter economy and on the basis of such valuations, they act, however, they cannot resort to calculations since the lack money.
As noted before, you could settle this issue easily by telling Bob Roddis whether a flexible wage and price system in which prices and wages adjust over time **towards** market clearing levels (even if the final state of rest is never reached and disequilibrating tendencies exist too) is an important part of Austrian theory.
The fact that you will not tell him that these ideas ARE an important part of Austrian theory shows us how disingenuous your comment is, bob murphy.
Just look at your statement here:
“Generally speaking, most depressions (or “recessions” as they came to be redefined after the New Deal) in U.S. history were over within two years, and all of them within five ….”
Krugman’s “explanation” for the stagnant investment of the 1930s can’t explain why the U.S. economy managed to quickly recover from all of the earlier depression in its history”
-Robert Murphy, The Politically Incorrect Guide to the Great Depression and the New Deal, pp. 112-113
How else does this recovery from recession happen in Austrian theory except by a flexible wage and price system tending towards market clearing levels and the interest rate tending towards a market clearing rate?
We’ve answered that question 1000 times 75 different ways. I asked some questions. Answer those questions.
And as long as we’re got that jovial holiday spirit, this is pretty funny (and marginally new):
The significance of this passage is clearly that price control was relatively easy in many US markets precisely because these were markets that already had private sector price administration: that is, relatively inflexible mark-up prices that are relatively easy to calculate and infrequently changed, and, when changed, are done so because of changes in total average unit costs or the level of the profit mark-up.
In these markets, prices are not conveying information about supply and demand or performing some Hayekian informational and allocative role (Dunn 2011: 131).
When US bureaucrats like Galbraith found so much of the US economy under private price administration, as he says above, their controls were much easier to calculate and implement.
http://socialdemocracy21stcentury.blogspot.com/2013/12/john-kenneth-galbraith-on-price-controls.html
“As noted before, you could settle this issue easily by telling Bob Roddis whether a flexible wage and price system in which prices and wages adjust over time **towards** market clearing levels (even if the final state of rest is never reached and disequilibrating tendencies exist too) is an important part of Austrian theory.”
You’ve already admitted that mark up prices adjust when costs adjust, and you have also already admitted that costs eventually adjust over time when demand changes.
That is what Austrian theory holds.
We won that argument. That argument is over.
You mean you think you have won the argument by denying that Austrians regard flexible wages and prices tending towards market clearing levels as an important part of their theory? You’ve proven my point about your ignorance.
It’s an important part of Economics 101, let alone Austrian theory. And it is not disproved because some prices and wages remain fixed for a period of time before reacting to changed market conditions.
I believe (if you go far enough back), LK was attempting to demonstrate that markets fail to clear (based on his definition of “market clearing” which is NOT the same as the Austrian definition of “market clearing”).
The really whack thing is that if you go by Mises, it is literally impossible for any market not to clear, and therefore all prices are automatically “market clearing” by definition… which is a bit like arguing against an accounting identity.
“The really whack thing is that if you go by Mises, it is literally impossible for any market not to clear”
That is only under a trivial definition of the plain state of rest.
However, Mises certainly has a clear notion of supply and demand equilibrium in product markets by flexible prices too:
“The price structure of the market decides what will be produced, how, and in what quantity. Through the structure of prices, wages, and interest rates the market brings supply and demand into balance and sees to it that each branch of production will be as fully occupied as corresponds to the volume and intensity of the effective demand. Thus capitalist production derives its meaning from the market. Of course, a temporary imbalance between production and demand can occur, but the structure of market prices makes sure that the balance is reestablished in a short time. Only when the mechanism of the market is disturbed by external interventions is the effect of market prices on the regulation of production prevented; they are disturbances that no longer can be remedied by the automatic reactions of the market, disturbance that are not temporary but prolonged.” (Mises 2002a [1931]: 170).
(2) “The changing prices of the market bring supply and demand into equilibrium … interventionist policy prevents the attainment of an equilibrium situation.” (Mises 2002b [1933]: 209).
(3) “Price control measures paralyze the working of the market. They destroy the market. They deprive the market economy of its steering power and render it unworkable.
The price structure of the market is characterized by its tendency to bring supply and demand into balance.” (Mises 1998 [1940]: 26).
http://socialdemocracy21stcentury.blogspot.com/2013/12/austrians-and-markets-tendency-to.html
That’s pretty good research LK, it would be unfair of anyone to call you lazy.
If I correctly understand your point, what you are saying is that Austrian economics is incomplete to the extent that no proof of convergence exists.
We can say that a “Plain State of Rest” (PSR) is axiomatic, or at least it is a simple tautological derivation from primitive axioms. However in a mathematical sense the “Final State of Rest” (FSR, which might be regarded as an “equilibrium” state for some economic schools) is the theoretical solution of whatever system equations are at work (regardless of whether we know those equations or not, in general we don’t know them but the market participants between them presumably do, even if they can’t or won’t write them down). We have yet to find any mathematical proof to conclude that FSR even exists, and it may not be unique, or might quite likely be a strange attractor (Mises couldn’t fairly be expected to know about strange attractors but we know them now). Indeed there’s good reason to believe that no universal proof of convergence exists for arbitrary system equations (e.g. Steve Keen will happily show a simple system that does not converge).
For what it’s worth I agree that Austrian economics is incomplete to the extent that it cannot guarantee convergence. Mises tended to wave hands and jump over that bit, asserting that convergence should happen, but personally I would argue only an empirical study of real economies can decide that matter. We may through empirical study discover additional constraints that can lead to a proof of convergence, maybe those additional constraints will be useful in designing laws that optimise trading between individuals.
I might point out that as a statist, you can’t offer any fundamental proof that government is capable of doing better. Sure, government can (and does) enforce stability, simply by tying everything up in rules and regulations… but that isn’t any better at solving the deeper problem at hand.
If you are happy to allow a government to declare a force majeure solution they why not offer Mises the same benefit of the doubt with his free market solution?
I might further point out that government itself is a gestalt entity composed of individuals, each with his/her own proclivity toward pocket stuffing, cronyism, personal pride, greed, envy, prejudice, and any other human weakness you care to name. Thus, you can’t prove convergence of government either… there’s no particular reason to believe government itself will not zoom off into some nasty far from equilibrium condition, and in the past governments have done exactly this. You only have to look at North Korea to see an excellent example of seriously non-optimal governance.
Bob, maybe you need a separate website just to cover that topic.
http://wiki.mises.org/wiki/Economic_calculation
Perhaps the Mises Institute people could make available their discussion page … actually I think it is already available, just need to teach the relevant characters to talk wiki.
No Bob! They always make my comments look calm and erudite in comparison! They can’t stop!
Right.
If you are suspicious of Abraham Lincoln, you are going to have a hard time convincing me you care more about liberty than me.
http://factsandotherstubbornthings.blogspot.com/search?q=liberty&max-results=20&by-date=true
But Abe Lincoln freed the slaves! Well, at least the ones in territories controlled by the Confederacy. Well, actually it might have just been temporary, since he claimed it as a “war measure” in his emancipation proclamation. But it’s the thought that counts!
But Murphy, didn’t you know that if taxes are reduced, but the state intervenes in other ways that reduces productivity that ways that are ignored by Krugman, that it is true that “the evidence” shows that reducing taxes does not increase production?
I predict that Say’s Law will remain much more widely known than Krugman’s Law.
That Krugman is referring to people, not ideas, as cockroaches seems pretty clear to me. First of all, only cockroaches, like people, can move away from an idea. Ideas can’t move or retract themselves. Secondly, he says “Next thing you know, however, the roaches have invaded all over again.”
Green Martin Krugman says :”Menzie deals with a prime example, the assertion that government spending can’t, as a matter of principle, increase demand, because government borrowing must always crowd out an equal amount of private spending.”
Soon nobody, other than guv employees and guv contractors, will have any money to spend. Have fun keeping your closed loop system running…
Speaking of prices, this is priceless…
WASHINGTON—Americans enter 2014 with a profoundly negative view of their government, expressing little hope that elected officials can or will solve the nation’s biggest problems, a new poll finds.
Half say America’s system of democracy needs either “a lot of changes” or a complete overhaul, according to the poll conducted by the AP-NORC Center for Public Affairs Research. Just 1 in 20 says it works well and needs no changes.
http://www.denverpost.com/breakingnews/ci_24831732/poll-americans-have-little-faith-government