Potpourri
==> In the last third of this Tom Woods podcast on book publishing, he goes off on his critics who accuse Tom of “just writing books to get money from the liberty movement.” (Just think about what kind of a person would make such a comment.) I love it when Tom goes off on Internet commenters.
==> Joe Salerno has a good article on the alleged stable (real) price of gold. I didn’t realize people believed the misconceptions that Salerno (rightly) explodes. I think a true liberal arts education would force kids to not only read Macbeth, but also to learn about the classical gold standard.
==> The irascible John Cochrane has an amusing reply to a recent Krugman jab.
==> Not only did David R. Henderson work in the Reagan Administration, but more important, he was interviewed by Joan Rivers!
==> Speaking of David, he puts numbers to it and quotes Scott Sumner’s own linked survey to show that only 6.6% of business economists agreed with Sumner about what went wrong with monetary policy in 2008. (Remember that Scott had recently complained that conservatives were listening to the “5%” of climate scientists who disputed the standard view.)
==> Perhaps due to my patronizing double-standard, for some reason I have tended to pull back from bashing Hillary Clinton. But c’mon, listening to her praise Henry Kissinger is just plain creepy.
==> Sheldon Richman also was perplexed by Dan McCarthy’s article on liberalism & empire.
Dan McCarthy is no libertarian -he has opposed civilian trials for terrorists on the grounds that they might compromise sensitive intelligence gathering methods.
Also, the WaPo published an investigative piece on (legal) police highway robbery a couple days ago.
http://www.washingtonpost.com/sf/investigative/2014/09/06/stop-and-seize
Empire might erode free society at home. But does anyone think either the Spaniards or the Equatoguineans benefited from Equatoguinean independence? Did these African countries:
http://consultingbyrpm.com/blog/2014/08/mises-on-empire-and-liberalism.html#comment-858543
benefit from premature independence? I think not. Barbados, Namibia, Botswana, Singapore, and Vietnam were ready for independence. But many African countries weren’t.
Also, it is to be remembered that the conquest of Africa began, quite literally, as a white man’s burden. The burden was to build some minimal physical and social infrastructure and to open these countries up to trade. Does anyone seriously think Africa would be more free or prosperous were it not conquered by Europeans? More likely, it would be like Vanuatu or Papua New Guinea or some unexplored part of Brazil. The best conceivable possibility of Africa without European colonization is a dozen or more states like Tonga.
I lol’d after reading one of Krugman’s statements linked to by Cochrane:
“The point is that using hedged language doesn’t insulate you from the consequences.”
Oh the chutzpah…
Wow. My jaw drops to the carpet.
There is no way he doesn’t get that. He’s taunting us, waving his fanny about, just begging for the question: Hey Paul, didn’t you say…?
The Salerno article is just further proof that no non-Austrian in the galaxy understands economic calculation, subjective value or their implications. We’re not going to accomplish much with the rest of society until that is no longer the case.
Yes, I am sure no neoclassical economist in human history has ever understood “subjective value” — despite the fact that the neolcassical founding fathers like Jevons, Marshall and Walras were inventors of subjective utility. lol.
Then why is it typical of neoclassical economists to ignore subjective utility when it comes to capital theory?
Maybe they are familiar with it, but they don’t fully understand it.
Which is different from what bob said:
“The Salerno article is just further proof that no non-Austrian in the galaxy understands economic calculation, subjective value”
He is making the absurd statement that no non-Austrian in human history has ever understood the concept of subjective value.
That is absurd. Neoclassical economists understand “subjective value” well: as I said, the neoclassical founding fathers like Jevons, Marshall and Walras were co-inventors of diminishing marginal utility theory.
LK,
Not that you would care, and this is more for the benefit of other readers, but your list of “co-founders of marginal utility economics” is wrong.
Jevons and Walras are correct. Marshall is not. And you ommitted Carl Menger. Menger, Jevons and Walras independently “discovered” marginal utility based economics, and published in the early 1870s (worked on it during the late 1860s).
Marshall is not a “co-founder” of marginal utility economics. He read what the marginalists wrote, and in his first work, Principles of Economics, published in 1890 but whose work was begun in 1881, he actually incorporated a stronger classical notion of costs of production playing a role in prices. One of Marshall’s claim to fame was reconciling classical economics with “modern” (i.e. subjectivist) economics, and providing various diagrams many profs still use today.
You may have mixed up Menger and Marshall.
I accept that Marshall was not a co-founder of marginal utility theory (though he did understand it), so on the former point I was wrong.
But I perfectly well aware, thanks, that Menger was one of the developers of marginal utility theory; I just did not mention him because the discussion was about neoclassical economics, **not** Austrianism.
Of course it speaks volumes that you can’t also tell roddis he was wrong in his absurd statement above, but, then,”not that you would care”, would you? lol.
I think Roddis’s point at face value can be interpreted as inaccurate if the assumption is made that neoclassicals understand not only the theory as it is typically explicated, but also the full implications of marginal utility theory in areas that almost all neoclassicals have shown themselves to balk at.
You’re right, strictly speaking neoclassicals do understand marginal utility theory. In that interpretation Roddis’s statement was wrong. But I think Roddis was getting at more than just the supply and demand curves, and other pedagogical explanations. He was talking about how to incorporate marginal utility theory in capital and money, which you should agree is almost always treated by neoclassicals in a very non-marginalist manner.
For capital and money, those economists who are predominantly neoclassical oriented use a Keynesian and Monetarist approach, respectively. Individual subjective marginal utility goes out the window.
For consumer goods, you’re right, they’re marginalists and they know how to incorporate marginalism properly.
Roddis could have been clearer. But he’s exasperated, so like I do with you, I give him some leeway.
Sorry for the hyperlinks, my tablet seems to have become infected.
In a public wifi spot right now.
Recommend not clicking those links.
The Salerno article would not have been necessary nor ring true if people understood THE IMPLICATIONS of the concept of subjective value (and thus economic calculation) especially in the realm of voluntary exchange.
I stand by my statement. Apparently because no one but Austrians bother to think about it, no one but Austrians understand THE IMPLICATIONS of subjective value.
You’re right about that.
LK is just asserting that they MUST know.
While officially all neoclassicals understand marginal utility theory, hardly any actually apply it to money. Money is a blindspot for virtually all mainstream schools of thought.
Austrians understand better than any other school the implications of marginal utility based economics on money specifically. LK hasn’t the faintest clue. He still thinks of money as a type of economic blood for the economic body, or oil for the economic engine, where aggregate flows are how we are to understand money. Subjective utility considerations go right out the window.
Well, we all know that you still don’t understand it. And these others seem incapable of applying the logical implications of subjective valuation.
BTW, if market systems “have no necessary tendency to full employment equilibrium, and … they normally have considerable involuntary unemployment” it means that workers are indeed too stubborn to cut their wage demands and will soon die off in a mass starvation.
http://tinyurl.com/p3cjwtz
“BTW, if market systems “have no necessary tendency to full employment equilibrium, and … they normally have considerable involuntary unemployment” it means that workers are indeed too stubborn to cut their wage demands and will soon die off in a mass starvation. “
hmmm.. in a system with social security? Clearly that slipped your mind.
And even if there were no social security, yes, some of the unemployed may well die of starvation, but people still demand the necessaries of life and businesses will still produce those necessities, and even some of the unemployed may well be able to pay for these necessities via savings, borrowing money, private charity etc, so Murphy’s argument that Keynesian theory predicts massive starvation during every recession is just risible nonsense and caricature.
There is generally a floor, as Keynes said, below which market economies normally do not fall.
“in a system with social security?”
Intentions aside, tax financed welfare is actually one of the major reasons prices DON’T adjust sufficiently downward to eliminate unemployment. If employers and employees know that there is an effective cost floor for everyone, then there is no reason to offer or accept a lower price because people can just go on welfare and eat, rather than work and eat.
This is one of the many empirical facts that you fallaciously interpret as a failure of price adjustments in free markets.
By the way, things are not so rosy in countries with welfare:
http://www.worldhunger.org/articles/Learn/us_hunger_facts.htm
In the extreme case, in socialist countries where everyone is “taken care of” by government, poverty and starvation tend to go to extremes. But for the true believers, this is a coincidence, or even better, outright lies from bourgiosie apologists who want to attack the revolution.
(1) Keynesianism is not communism and (2) since the communism nations were poor, undeveloped third world nations at the moment they become communist, it is not surprising that they had problems with scarcity.
Some command economies were indeed failures, while others (e.g., the Soviet Union) did for many decades achieve real output growth and rises in real per capita output.
Red herrings.
One wonders why we had all these Russian PHD cab drivers in NYC, if things were going so swimmingly in the good ol’ USSR, LOL.
haha.. you are aware that the Soviet Union dissolved in 1991, right?
Yes, it ended in some pretty bad economic problems, but after 1991 they also had some severe economic and social problems owing to brutal market shock therapy.
And Keynes himself said his theory is “easily adopted” in totalitarian states.
Not an intentional endorsement by any stretch, because what he meant is that his theory of aggregate production is more easily adapted to totalitarian states than is the theory of production and distribution adaptable to laissez-faire.
But, I think there is a deeper reason his theory is easily adapted to totalitarian states that most of his critics did not think about, including especially those who interpreted this as a ringing endorsement of fascism or communism.
I think the reason is not because Keynes’ theory is “general” the way Austrian praxeology is general. But rather, because of its philosophical underpinnings. The epistemology and ontology.
Austrian praxeology is “most easily adapted” to laissez-faire. This is because Austrian economics is a theory grounded epistemologically and ontologically on individual action.
Keynes’ General Theory is “most easily adapted” to totalitarian states. This is because Keynesianism is a theory grounded epistemologically and ontologically on “collective” action (which of course is a confused understanding of what is actually individual action).
The intellectual affinity between state control and Keynesianism is due to the fact that both are grounded on collectivist philosophy, which Rationalism understands as fundamentally flawed.
Keynes’ “general” theory is not actually “general” at all. It is confined to aggregates and cannot explain most of what takes place in market economies.
LK: “haha.. you are aware that the Soviet Union dissolved in 1991, right?”
Yes, LK, I am aware. Which is why I used past tense.
I lived in Europe at the time, and I remember driving to countries like Romania with my friends during the 80’s, sell all my old jeans,tshirts and other crap for big money, and get free vacations out of it.
” it ended in some pretty bad economic problems”
My turn to laugh. For years and years, people had to line up for basic necessities like bread, butter and eggs.
Empty supermarkets were the rule, unless of course you could afford to go to the US Dollar stores. That was only for party members though… I’d venture their “GDP growth” consisted mostly of tanks and rockets. Please LK, get a grip. And yes, the dissolution caused some major dislocations, primarily because a) industries were basically handed to kleptocratic cronies and b) Stalin had cunningly designed supply chains to touch as many republics as possible. So a car maker in Russia would be dependent on parts from Ukraine and Belarus, etc. It took a while for these dislocations to be resolved, and they’re still many issues. But you can’t possibly argue that things are worse now than the 80’s, no way.
If you like communism, go move to North Korea, I hear it’s nice this time of year.
LK’s defense of Keynesianism and attack on Austrian analysis clearly depends upon defining a mixed economiy full of violent interventions as “the free market” and defining both a truly free market and violent intervention out of existence. It’s Orwellian.
Roddis::
It is Orwellian, but it is just a consequence of positivism and intellectual laziness.
Positivism asserts that the only statements we can know are true are those falsifiable by experience (let brains explode asking what kind of a statement THAT is, lol).
So they limit themselves to what happened in history.
The laziness is when they start to shoehorn in all theories into history. The “real world market” is a way of shoehorning in the free market into observable history, where history becomes the only thing worth thinking about against one’s opponents. It is ok to talk about non-empirical what ifs with one’s allies, because there the A PRIORI beliefs gel and there is less of a chance for any of them to feel stupid, since they agree a priori.
-Peter, though your second comment here is correct, this one is just disingenuous. Of course the U.S. offered a higher standard of living than the U.S.S.R., but things were going quite swimmingly there:
google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&met_y=ny_gdp_pcap_pp_kd#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_kd&scale_y=lin&ind_y=false&rdim=region&idim=country:LVA&ifdim=region&tstart=-136065600000&tend=1347163200000&hl=en_US&dl=en_US&ind=false
Sure, there were shortages in stores and most R&D was directed to military&aerospace (pretty much all everyday technology was cheap Western knockoffs), but everyone had a job, the vast majority saw no reason to move to the Capitalist West, and hardly anything was getting worse.
Enopoletus:
“but things were going quite swimmingly there”
THAT is disingenuous.
LK:
“Murphy’s argument that Keynesian theory predicts massive starvation during every recession is just risible nonsense and caricature.”
Keynesian theory predicts that for FREE MARKET economies.
Thank you, MF. I had held back on stating the obvious. .Recall that LK is MR. EMPIRICAL:
all this is like arguing about how many angels can fit on the head of a pin: ultimately, it is of very little interest to AN EMPIRICAL ECONOMICS CONCERNED WITH THE REAL WORLD, rather than unrealistic abstract models.
http://socialdemocracy21stcentury.blogspot.com/2014/07/john-hicks-on-hayeks-business-cycle.html
.. which only underscores how feeble and worthless M_F’s comment is.
Keynes was talking about REAL WORLD market economies for which we have empirical evidence, but instead you want to shift the argument to purely imaginary flying unicorn Rothbardian economies?
As I said, one could use inductive argument by analogy to make qualitative predictions about what would happen in a Rothbardian system.
I would be inclined to think there would be a lot of suffering in a Rothbardian system and serious economic problems, yes, but not necessarily mass starvation.
It *might* happen in extreme cases, but even then that is far from predicting the making the absurd case that Bob does in falsely saying Keynesian theory predicts that mass starvation would result in every recession.
LK:
“Keynes was talking about REAL WORLD market economies for which we have evidence.”
Except real world markets do not exist. We have in the real world economies with government interventions.
One cannot use inductive reasoning about what would happen in a free market using hampered market historical data.
You invariably end up using a priori methods to understand that which does not apply empirically. Induction only permits constancies, meaning you can only induce to the future if the same relations that generated your first observation hold. Not applicable to individual action, and thus markets.
Keynes’ theory is grounded a priori. Governments a priori improves everyone’s lives by borrowing and spending and paying back debt via taxation and inflation. It also a priori claims government agents are more intelligent than market actors.
There is also the baseless Keynesian assumption that “economies” have, lack or can be provided with “traction” or “momentum”. This ignores the self evident empirical fact that all Keynesian cures are nothing but temporary and unsustainable wealth transfers that may spur temporary spending which otherwise would not have occurred but which will stop working once the artificial transfer process ceases. See 1937.
Also, the Keynesian narrative ignores the prior government interventions that led up to the 1930s. Actually, it completely suppresses such analysis while blaming “the market”. Shades of 2009.
http://bobroddis.blogspot.com/2014/02/being-polite-to-keynesians.html
“Except real world markets do not exist. “
Yes, they do. When I said “markets” I meant in the standard basic sense used by economists: spheres of human activity in which private people buy and sell goods (e.g. as in the “Oxford Dictionary of Economics (2nd edn, Oxford, 2002, p. 288). These markets of course might be subject to government intervention to varying degrees, from being virtually non-existent, to very low to high, but that does not mean markets do not exist. In fact, some government institutions (e..g, law and order and justice) facilitate and underlie markets.
By contrast, you have simply used a fallacy of equivocation by refusing to accept my definition of “market” and using your own, which by arbitrary re-definition says that a “market” cannot exist while a government exists.
Fallacies of equivocation do win arguments and prove your intellectual bankruptcy.
LK,
You’re equivocating. When Roddis makes arguments about markets, you respond by using a different definition and then claim he is wrong in what he said that assumes the definition he utilized.
You wrote (about whether markets exist)
“Yes, they do. When I said “markets” I meant in the standard basic sense used by economists: spheres of human activity in which private people buy and sell goods.”
That is textbook equivocation. Roddis is not using your definition of “markets” that includes all possible political systems. He is referring to free markets.
According to your equivocation, Soviet Russia was a “market” because “private persons bought and sold goods.” They of course did so under threats of violence, and many were killed, but in terms of empirical events, the Soviet Union according to you was a “market.”
Clearly Roddis is not referring to communist command economies when he refers to markets. You just want to evade dealing with the argument by pretending the validity of the argument is subject to observations of history. Roddis makes an argument about free markets, and you fallaciously assert a heavily hampered economy is sufficient grounds for claiming the events in that economy can refute or falsify the argument being presented.
Your approach is totally fallacious down to the core.
A free market does not in fact exist, but it is a free market that all you statists attack when justifying state intervention in the first place, and you keep falsely claiming that history of hampered economies entitles you to claim the free market arguments can be falsified that way.
The truth is that you cannot claim history falsifies or confirms any economic theory, because you need to work with isolated and controlled experiments where only one variable can be changed while all others are held fixed. You can’t do that with whole economies.
Induction fails for economies.
You said so yourself when you said the problem of induction is “particularly acute” for systems such as whole economies.
What you call “real world markets” is when analyzed really just “any economy whatever where two people are found to have traded goods, under threat of violence if caught, or not under threat if caught.”
All you’re doing is trying to avoid dealing with free market arguments by pretending that you are saying anything about free markets by making observations of command economies and all other economies we can observe.
You are not respecting the requirement for UNHAMPERED trading for all of the “free market” arguments you are responding to with antagonism all the time, as valid.
You hilariously asserted that because Roddis is not using your definition of market, that HE’S equivocating. By that logic, so are you, because you are both responding to and initiating comments to the other.
What you call “real world markets” is just “the observable world”.
You are claiming that the observable world can be used to falsify free market theory and confirm Keynesian theory, even though neither has ever existed in their PURE, i.e. their stated theoretical, forms. No, not even the “golden age” of Keynesianism 1945-1971 was perfect Keynesianism in practise. The “real world” was neither textbook Keynesian policies nor free market policies in their purity.
You, just like free market theorists, are working with data that induction cannot be used to prove or disprove free market theory, Keynesian theory, or any other economic theory
The only “theory” that history of human action CAN be used inductively, is the trivial theory of historicism, that is, whatever happens and end up happening is what this theory “predicts”.
In the real world of economic theory on the other hand, all theorizing is grounded a priori. Your mind is the datum. You cannot explain the perfect cause and effect relations that lead to you being the pundit you are today. You must take your goal oriented activity as a given that cannot be understood causally. You cannot coherently regard yourself as past causally determined.
Any history that results from this truth is history that induction is LEAST suited to handle. East proof is that no economist has ever, or will ever, discover an economic physical constant, the way physicists and chemists have done so.
What you falllciously believe is sufficient for you to make your statist claims as gospel, is nothing, and I mean nothing but your a priori beliefs.
Your beliefs are not supported by knowledge of historical data. Your knowledge of historical data is supported by your beliefs. You bring your beliefs with you and that is what forms your understanding. This is not a “distortion” of reality, unless your a priori theory is internally inconsistent, which in your case it in fact is.
You conceded this when you criticized Murphy for understanding data in a chart incorrectly in that you believe he didn’t have knowledge of the right theory to make proper sense of the data.
The claim that one needs the proper theory to correctly understand a chart and its data, is no less true for understanding history as such. You need a proper theory to understand any historical economic data whatever. This logically implies that historical data is NOT the fundamental grounds for economic knowledge. The ultimate grounds is in fact the logical structure of our minds.
You can’t consistently logically argue that every theory is based ultimately on observation. For that very claim is not an observation, but a theory of knowledge. It cannot be observed. You cannot observe your own observation. The concept of observation must be understood, and is only understood.
Guess what? Comsumer Demand doesn’t actually fall that much in a recession. Further, Pilkington and LK just love an empirical chart showing a serious collapse in investment during the latest bust. Sounds familiar.
Philip Pilkington September 8, 2014 at 10:41 AM
Um, it’s even more wrong than you think. Murphy writes:
“After all, their theory is that consumers for some inexplicable reason get spooked and reduce their spending.”
Um. No. In the General Theory Keynes assumes a fixed consumption function. There are problems with this but I won’t get into them here. This is what is assumed.
The fall in demand begins as private investment falls. Consumption then falls, to a limited extent, due to the contraction in income caused by the unemployment. This is in most mainstream macro texts, I would imagine.
Philip Pilkington September 8, 2014 at 10:47 AM
P.S. Here is some nice data highlighting the mechanism:
http://bit.ly/1oZcb9k
Not that ‘Ol Crazy Bob would care much for data or anything, but perhaps some reality-based earth-dwellers among us might.
LK September 8, 2014 at 11:23 AM
Excellent point and excellent graph!
Thanks for this.
Welcome to the wacky world of Major_Freedom where no real markets have ever existed in modern human history.
And, no, M_F, nobody said a “market economy” is one where only two private people are exchanging goods.
A “market economy” is where the majority of capital goods are owned privately and where the majority of goods are traded privately in trades between private buyers and sellers.
The Communist world was not a market economy, so your bizarre rant above is another pathetic straw man.
The point is: Keynes argued that in modern REAL WORLD market economies “we oscillate, avoiding the gravest extremes of fluctuation in employment and in prices in both directions, round an intermediate position appreciably below full employment and appreciably above the minimum employment a decline below which would endanger life. ” The empirical evidence supports him.
LK:
“Welcome to the wacky world of Major_Freedom where no real markets have ever existed in modern human history.”
You haven’t shown how that is “wacky.”
“And, no, M_F, nobody said a “market economy” is one where only two private people are exchanging goods.”
You did. You said “private persons exchanging goods.”
That took place in the Soviet Union, and Nazi Germany.
“A “market economy” is where the majority of capital goods are owned privately and where the majority of goods are traded privately in trades between private buyers and sellers.”
Private citizens in Nazi Germany “owned” almost all of the capital goods there.
According to you, a market economy is one where myself and every other citizen owns capital goods, but we’re told what to do with them.
Private ownership but no private control is not a market economy LK.
See? You are confused. You don’t even know what a market is.
A market is a very specific thing. It is not just private ownership. It is private ownership and control.
It is that control aspect that you ignore and pretend that private owners being threatened and cajoled, who are effectively “owners” in name only, is a market.
Private property, what free market economists mean by that, is private ownership and control over the means of production. That means government hampering ELIMINATES private control, because it goes from private control to government control.
“The Communist world was not a market economy,”
I know. According to your ORIGINAL definition you provided before being shown how it includes the Soviet Union, yes the Soviet Union was included.
It is precisely why you changed your definition to refer to capital goods.
“The point is…”
Oh we’re on point here. You are just wrong about it.
“Keynes argued that in modern REAL WORLD market economies “we oscillate, avoiding the gravest extremes of fluctuation in employment and in prices in both directions, round an intermediate position appreciably below full employment and appreciably above the minimum employment a decline below which would endanger life. ”
“The empirical evidence supports him.”
He was talking about economies hampered and made worse by state intervention. Yes, we agree on that.
“Private citizens in Nazi Germany “owned” almost all of the capital goods there.”
Right. And private decisions were made on what to produce and most transactions were private for a long time right down to the late 1930s/thewar.
This is why Nazi Germany WAS, in essence, still a market economy right down to the late 1930s/1940s, though with an increasing degree of government intervention and planning.
It passed from a market economy into a hybrid market/command economy during the war.
Only those with unsubtle minds cannot understand that market systems can in degrees too, and that even hybrid economic systems can exist.
LK: What one calls something is irrelevant so long as it accurately describes what is being described and how it is different from other things. It is not difficult to differentiate examples of voluntary exchange from examples of violent intervention. The statist case is based upon the unfounded claim that problems result from voluntary exchange that require violent intervention to solve. Your purpose here, as always, is to obfuscate the differences between voluntary exchange and violent intervention so that you can blame problems caused by intervention upon voluntary exchange.
Your tactics are old, boring and pathetic.
Oh, yes, by “free markets” you mean the imaginary Rothbardian system that has never existed?
In my post, I am talking about what Keynes’ theory predicts for REAL WORLD market economies, not bizarre flying unicorn Rothbardian economies.Therefore, you have not refuted anything I was talking about.
Of course, one could use inductive argument by analogy to make qualitative predictions about what would happen in a Rothbardian system, but this is a different question.
Real world free markets being markets where at minimum,one half of every single transaction is firmly controlled by a central authority? Got it.
Keynes market is only real when centralized violence is the norm.
Rothbard is chasing a non- violent unicorn, I don’t blame him. It is the only way for those of that have chosen peace.
Keynesian economies don’t exist.
LK:
“Of course, one could use inductive argument by analogy to make qualitative predictions about what would happen in a Rothbardian system, but this is a different question.”
You fail at even this task, because you are “inducing” from phenemona caused by the state, and yet claiming to be saying what will or will likely happen in an absence of states.
Well, we now have an impeccable source in LK for the claim that government handouts cause unemployment.
Or: Bob roddis is caught just making up garbage?
Regarding Hillary (who shows up at 7:52), this youtube is either:
a) An SNL skit;
b) Doctored; or
c) Real.
Which is it?
https://www.youtube.com/watch?v=inu9vKXsrFA
Whichever one promotes the state and attacks free trade.
Sheldon Richman, vice president of The Future of Freedom Foundation, discusses his rebuttal to Daniel McCarthy’s article in The American Conservative that asserts that a liberal democratic society requires empire on the Scott Horton Show.
http://scotthorton.org/interviews/2014/09/04/090414-sheldon-richman/
One thing you can say for Krugman is that he is adopting MMT talking points.
http://www.correntewire.com/paul_krugman_adopts_key_mmt_talking_point
I always laugh at how these “modern” monetary theorists are repeating stuff economists have known can occur since 1971.
Another view of Hillary:
Currently, under Obama, the top ten recipients of US aid are all torture regimes and major human rights violators, like the USA.
Hillary Clinton is simply part of this system of not only personally committing but also supporting others in the commission of torture, repression, and all human rights violations in service of plutocratic gain.
Clinton, like all major corporate-backed US politicians, often pretends to be opposed to various governments or figures because they are “dictators”, or “human rights violators”, and the like. Her (and their) opposition is fraudulent, because Clinton supports the very worst dictators, despots, fascists, and human rights violators worldwide, even aside from her own human rights violations and other crimes. Therefore, it is not dictatorship and human rights violations that she opposes, but something else, which is in fact quite obvious: Clinton simply opposes anything that presents an obstacle to US plutocratic gain, to integrating the world into the anti-democratic US system of enriching US plutocrats through impoverishing populations.
http://www.whateverittakeshillary.org/2014/06/support-for-dictators-despots-and-other.html
“Currently, under Obama, the top ten recipients of US aid are all torture regimes and major human rights violators, like the USA.”
In ancapism it is likely that the top 11 such regions will be the biggest recipients of charity.
Checkmate, statists.
And as Daniel Kuehn noted, these atrocities are all funded by the funny money:
The austerity depression of 1920–21
During WorldWar I federal expenditures ballooned and although the new income tax was able to partially finance the war effort, most of the financing was done through federal borrowing and by the highly accommodating monetary policy of the Federal Reserve. The role of the Federal Reserve at this time was expressed unambiguously by the New York Federal Reserve Bank Governor Benjamin Strong, who told a Congressional committee in 1921 that ‘I feel that I, or the bank at least, was their [the Treasury’s] agent and servant in those matters’ and further added that the wartime inflation caused by the low interest rates maintained by the bank were ‘inevitable, unescapable, and necessary’ for prosecuting the war (Strong, 1930)
http://bobroddis.blogspot.com/2012/08/daniel-kuehn-provides-factual-basis-for.html
It must have been so difficult on their consciences to press the “print” button.
So, so difficult.
So statist economists had to invent a justification. Constant, “managed” inflation is necessary and good.
Governments get what they want, and the citizens, to borrow from Mencken, get what they want good and hard.
In addition, I believe that Keynesianism was crafted as a replacement for the failing Marxist religion in the form of a new and incomprehensible justification for “reasonable” statism to be recited by authoritarian intellectualoids.
Yep, that makes sense. States welcome Keynesianism because it tells them that their destructive spending is beneficial to everyone.
I intended the Hayek quote and video to go here, not below.
…except in the 1930s Marxism was not “failing”, it was probably close to reaching its zenith, just after WWII.
Therefore the belief that “Keynesianism was crafted as a replacement for the failing Marxist religion” just makes no historical sense.
In 1936, the Ukrainian famine was several years passed and the Great Terror was about to begin. The fact that Keynesianism swept academia without the slightest reference to the substance of Austrian analysis proves my point.
Further, in the 70s, college hipsters were all Marxists. Now they are all Keynesians. And it all happened without the slightest reference to the substance of Austrian analysis.
“The fact that Keynesianism swept academia without the slightest reference to the substance of Austrian analysis”
lol. I guess all those papers and discussion and criticism of Hayek’s work* in the 1930s just slipped your mind?
Plenty of economists and academics referenced “Austrian” work: they just were not convinced by it.
* Just a sample:
Sraffa, P. 1932. “Dr. Hayek on Money and Capital,” Economic Journal 42: 42–53.
Sraffa, P. 1932. “A Rejoinder,” Economic Journal 42 (June): 249–251.
Myrdal, G. 1933. “Der Gleichgewichtsbegriff als Instrument der geld-theoretischen Analyse,” in F. A. Hayek (ed.), Beitrage zur Geldtheorie, Vienna. 361–487.
Keynes, J. M. 1931. “The Pure Theory of Money. A Reply to Dr. Hayek,” Economica 34 (November): 387–397.
Knight, Frank H. 1935. “Professor Hayek and the Theory of Investment,” Economic Journal 45.177 (March): 77-94.
Kaldor, N. 1939. “Capital Intensity and the Trade Cycle,” Economica n.s. 6.21: 40–66.
Kaldor, N. 1940. “The Trade Cycle and Capital Intensity: A Reply,” Economica n.s. 7.25: 16–22.
Kaldor, N. 1942. “Professor Hayek and the Concertina-Effect,” Economica n.s. 9.36: 359–382.
So where’s the analysis of economic calculation/miscalculation? It does not exist.
Unfortunately for us and the rest of mankind, it took Hayek too many years after TGT to finally focus upon the broad application of “The knowledge problem” and economic calculationi instead of business cycle minutiae.
Hayek’s “The knowledge problem” is well known in mainstream economics and by Keynesians. The idea that nobody read it or that it refutes Keynesian theory is palpable nonsense.
No Keynesian understands the application of the knowledge problem and/or economic calculation to central banking, artificial credit creation and/or Keynesianism.
And you sure don’t.
At least we understand our disagreement. It’s pointless to carry on the debate unless and until you finally produce a Keynesian with such an understanding. I don’t think such person exists. But I’m always open to new evidence.
Bob, the real problem is that you have no understanding at all of what you are talking about.
This is what you consider to be a sophisticated economic argument:
“funny money causes distortions because it distorts prices from what they would be without funny money. This is bad because it is not voluntary and based on violence, therefore it distorts economic calculation”.
It’s meaningless circular gibberish which has nothing to do with economics.
Philippe:
“funny money reduces distortions because it reduces distortions of prices from what they would be without funny money. This is good because it is state controlled and based on democracy, therefore it helps economic calculation”.
Yeah, much better
equally meaningless nonsense.
Except I don’t straw man you with that.
That’s the difference.
What I wrote is the sort of meaningless garbage Bob roodis comes out with on a regular basis. He thinks he is making intelligent arguments to do with economics. .
Philippe:
I have never seen you post a quote of Roddis saying that.
I think you’re making it up.
Oh boy.
http://theweek.com/article/index/267720/america-is-running-out-of-jobs-its-time-for-a-universal-basic-income
What a remarkably crappy piece of writing. Economic ignorance at its finest.
The more the state messes up the economy, the more cockamamy state interventions become reasonable.
Logic checks out.
Mr. Hayek: You’re perfectly right, but I’d like to add one thing. You see, another political element was that, of course, politicians just lapped the argument and Keynes taught them if you outspend your income and run a deficit, you’re doing good to the people in general. The politicians didn’t want to hear anything more than that – to be told that irresponsible spending was a beneficial thing and that’s how the thing became so influential!
https://www.youtube.com/watch?v=N364sN5E0hQ
Yes, no politicians in the 1930s or 1940s ever sincerely thought that Keynesianism was, economically and morally speaking, the right theory, and Austrian theory wrong.
It is just a mark of ideologues to blame their opponents as “immoral” just because they do not accept some theory.
Some theory?
Even if that theory is a theory of moral behavior?
Dismissing one’s opponents as “ideologues”…tell me, what “mark” is painted on the doors of folks who do that?
Do you even know what an ideologue is? One who adheres to a set of ideas, especially someone who is uncompromising and dogmatic. Now tell me LK, how in the world can anarchists and statists “compromise”? It is literally impossible. Is it not completely and totally understandable that each would appear as ” uncompromising” towards the other?
Anarchism and archism are pure dichotomies. Both would of course appear as “dogmatic” to the other.
No offense intended, but I have no qualms appearing as “dogmatic” or as an “ideologue” to yourself, when it comes to ethics. There is no way I could possibly “compromise” with you on anarchist principles without me becoming an archist (minarchist or otherwise) because of that compromise.
Can I “compromise” with someone who wants to take from me by force and not consent? If someone wants me to pay $1000 by force, and we “compromised” by me paying only $500, what has really happened here? Am I getting what I want of no theft?
Or should I respond to demands I pay others by force, by saying “Well, I want to be given $1000 to me by force, so let’s compromise and split things right down the middle, i.e. I give you nothing by force and you give me nothing by force.”
Compromise is not always moral and ethical. Compromising with looters leads to looting. Compromsing with statists leads to statism.
I am not going to compromise on non-aggression, so there is no point in debating the issue anymore. Bring your guns and practise what you preach, or shut up already (I don’t mean that in a jerk way, but in an honest and upfront way).
There’s talking the talk, and then there is walking the walk.
More rambling rubbish that is a perfect example of the red herring fallacy.
Roddis says that all politicians and economists only accepted Keynesian theory because they were all being insincere and never really believed it., and just used it as figleaf for “evil” increased spending.
This is rubbish. Very many politicians and economists accepted Keynesian theory because they sincerely believed it was, economically speaking, right and correct.
LK:
It was not a red herring at all. It was a response to what you said about Roddis’ response.
You made assertions regarding people calling other people immoral, in that you said they are “ideologues” for calling others immoral for not accepting some theory.
Roddis did not actually mention immorality at all in the post you responded to. You brought immorality up.
No, Roddis did not say that politicians accepted Keynesianism because they were insincere, and he did not say they don’t really believe it. I can fully understand how you would reasonably interpret what Hayek wrote that way, but Roddis per Hayek was not saying it is because politicians are immoral as the reason they accepted Keynesianism.
A politician can actually believe their spending helps everyone, with the encouragement of Keynesian theory, not necessarily because they are immoral (they are), but because of the fact that what the politicians egoistically want, to increase their spending, for power and to be in control of people’s lives, is given intellectual justification from Keynesianism.
Most politicians are economically illiterate. If they are told by an economist that their selfish pursuits based on initiations of force actually benefits everyone, especially their contingency and voters in general, then that is enough, it is sufficient, for them to then spew the Keynesian one liners that they really don’t understand, but do so because it serves their own interests.
Yes, very many politicians do think Keynesianism is correct, but most of those think it is correct because they have already believed they are helping everyone by spending. Yes, they may help, in the short run, those people the politicians give the checks to. So the politician then tends to make the fallacy of composition and claim that their spending has no victims of cost, and that their spending helps everyone, as per Keynes.
Keynes’ fallacious gobbledygook took what many politicians already were doing and wanted to do and thought was right, and gave them a “your actions are helping everyone” economic justification for it.
THAT is what Hayek meant, and that is what Roddis was talking about by quoting Hayek. The immorality of politicians is a tangential point to all of this. It is not as you claim what Roddis is saying.
Roddis:
Keynesianism is like that “all persons fictitious” disclaimer you see in the small print in movie credits.
“All characters appearing in this work are fictitious. Any resemblance to real persons, living or dead, is purely coincidental.”
MF: Did you get a chance to luxuriate in this interesting exchange and chart?:
http://consultingbyrpm.com/blog/2014/09/potpourri-228.html#comment-904072
They don’t have a rational theory for why investment should suddenly fall either.
“Animal spirits” is a fudge factor. It is a “I don’t know”.
Or perhaps more accurately, “My career depends on me not knowing.”
‘animal spirits’ has to do with action in the face of uncertainty about the future.
Is it really right to say no Keynesian understands Austrian economics? Or is it just that.orthodox economic theories, of which I guess Keynsianism would be one, just don’t agree with much of current Austrian thinking. I mean, Austrianism is heterodox,right? It’s taught in few schools. The vast majority of professional economists don’t agree with much of the theory as a Bob Roddis understands it. Is the argument that they’re all ignorant, or is it that, right or wrong,nthey just don’t agree?
Academics here and there may know a superficial version of the Austrian Business Cycle Theory but no one seems to understand (or wants to understand) how it is derived from the basic principles of economic calculation/miscalculation or the importance of unadulterated prices as information.
http://consultingbyrpm.com/blog/2012/09/tom-woods-keeps-krugmans-feet-to-the-fire.html#comment-45198
Phillipe:
“animal spirits’ has to do with action in the face of uncertainty about the future.”
That just moves the same problem to another level.
It doesn’t explain why people would suddenly develop so much more uncertainty about the future.
You’re not explaining anything, you’re just restating “animal spirits” in umpteen different ways.
Besides, sudden rises in uncertainty are typically in response to the very declines in spending and risd in unemployment that the “animal spirits” is supposed to explain, thus making the argument circular: Declines in spending are caused by rises in uncertainty and rises in uncertainty are caused by declines in spending.
Keynesianism has no objective grounds for the business cycle either.
“It doesn’t explain why people would suddenly develop so much more uncertainty about the future.”
Any number of factors… For the owner/manager of a business, it is likely to be falling or expected falling demand of their product. If you anticipate falling sales, many businesses will cut production and employment. That feeds into a general mood of pessimism and negative feedback effects mean investment falls even further.
This is the reality of business life. M_F is is so ignorant he has no idea about the real world.
“Declines in spending are caused by rises in uncertainty and rises in uncertainty are caused by declines in spending.”
First, increased uncertainty in any particular industry, could be due to many different factors in addition to falling demand for output, e.g., a falling stock market, bad export figures, problems with credit or debt, increased competition, big interest rates changes, etc. etc.
Secondly, the only type of circularity that is a problem is vicious circularity in logic.
The type of circularity that M_F refers to presents no problems: it just like chickens and eggs: chickens come from eggs and eggs form chickens.
According to M_F’s harebrained rambling, that couldn’t possibly be true!! Why? Because it is
circular!
No, dumbo, that is how the real world actually works.
If you don’t thoroughly understand economic calculation (and no Keynesian or non-Austrian does), read “Economic Calculation: The Austrian Contribution to Political Economy” by Peter J. Boettke which can be downloaded for free here:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1531112
The biggest uncertainty is always what the Klepto-Keynesian-Warmonger state is going to do next. State intervention is quite a different type of activity and cause for worry than wondering about what styles will be in fashion next spring. Again we see LK obfuscating the essential differences between voluntary exchange and violent intervention as he completely excises the latter from his “empirical” narrative. Butler Shaffer’s book ($2.99 Kindle ed.) demonstrated the massive pro-business “rent seeking” occurring during 1918-1938. These were violent interventions which distorted the market that Keynesians always fail to acknowledge in order to blame those distortions upon “the free market”.
http://consultingbyrpm.com/blog/2013/10/outrage-over-outrage-over-government-shutdown-im-starting-with-the-man-in-the-mirror.html#comment-75073
LK:
In neither of your two recent posts here did you actually respond to the challenge. You just reiterated the same circular logic of explaining causes of heightened uncertainty as declines in spending and declines in spending as cause for uncertainty, and then you tried to justify it with a banal analogy to a fallacious use of the “chicken or the egg?” problem.
First, it is in fact a problem to rest content on the circle of “chicken came from egg and egg came from chicken.” If you had bothered to read up on what evolutionary biologists have found (long ago in fact):
http://sciencebasedlife.wordpress.com/2012/03/10/which-came-first-the-chicken-or-the-egg-evolution-has-the-answer/
Therefore, it is NOT in fact a law of nature for such infinitely looping circles o exist. There is an answer.
Second, it is the mark of an economic reasoning failure to fall back on facts established by biology. Economics is the study of human action as such, whereas biology seeks to explain the circumstances for why certain actions were taken. Those are related, but distinct fields of inquiry.
Third, I will reiterate the challenge, in light of your newfound knowledge that your heretofore use of analogies in biology in order to justify your circular logic is flawed:
I asked what causes sudden decreases in spending in the aggregate, and the answer given was increases in uncertainty. I then asked what causes the increases in uncertainty, and I was given the answer of “many things, such as declines in spending”.
As of this time, you have provided no explanation for why spending would decrease and why uncertainty would increase. Chicken and egg does not work. Do you have anything else? Or is that it?
There is nothing circular about a feedback loop. Uncertainty at time t causes extra caution reducing spending at time t+1, causes uncertainty at time t+2 etc.
Lots of feedback loops exist. Noise from the speaker gets into the microphone cause noise to the speaker cause noise at the microphone etc
Have read it.
It confirms, along with a lot of other things, that you are ignorant of basic Austrian theory, like the role of flexible wages and prices that must adjust towards market clearing levels for the Austrian theory of economic coordination to be a proper explanation of how modern economies mainly equate supply and demand.
Humans seek PSYCHIC profits. That may include monetary profits.
From “In Defense of ‘Extreme Apriorism’”
By Murray N. Rothbard:
The fourth–and by far the least fundamental–postulate for a theory of the market is the one which Professors Hutchison and Machlup consider crucial–that firms always aim at maximization of their money profits. As will become clearer when I treat the Fundamental Axiom below, this assumption is by no means a necessary part of economic theory. From our Axiom is derived this absolute truth: that every firm aims always at maximizing its psychic profit. This may or may not involve maximizing its money profit. Often it may not, and no praxeologist would deny this fact. When an entrepreneur deliberately accepts lower money profits in order to give a good job to a ne’er-do-well nephew, the praxeologist is not confounded. The entrepreneur simply has chosen to take a certain cut in monetary profit in order to satisfy his consumption–satisfaction of seeing his nephew well provided. The assumption that firms aim at maximizing their money profits is simply a convenience of analysis; it permits the elaboration of a framework of catallactics (economics of the market) which could not otherwise be developed. The praxeologist always has in mind the proviso that where this subsidiary postulate does not apply–as in the case of the ne’er-do-well–his deduced theories will not be applicable. He simply believes that enough entrepreneurs follow monetary aims enough of the time to make his theory highly useful in explaining the real market. p. 4
Bob Roddis,
“If you don’t thoroughly understand economic calculation (and no Keynesian or non-Austrian does), read “Economic Calculation: The Austrian Contribution to Political Economy” by Peter J. Boettke which can be downloaded for free here”
That paper presents a series of arguments against centrally-planned communist command economies which don’t have private property.
It does not discuss modern-day economies with private property and both private and public sectors, nor does it discuss Keynesian economics (or policies).
Neither does it show that capitalist ‘laissez-faire’ economies are optimal… in fact it states that they exist in a state of disequilibrium which in economics is suboptimal by definition.
I see no mention in the paper of your sophisticated and intelligent argument that violent funny money squirtings distort economic calculation through violence. Perhaps you could link to another paper which does discuss this very intelligent and grown-up theory of yours which economists do not understand.
Philippe:
You have no clue. The Boettke article does not deal with the problems of Keynesianism. Read Hayek from 1975 here on page 7 where he talks about “some distortion in the price system that has directed resources to false uses”.
The missing link to Hayek:
https://www.flickr.com/photos/bob_roddis/7534880182/sizes/l
That page is so clear that it is what set off LK on so many ventures in obfuscation (and that we need not revisit),
Bob, it would be good if you could write down your ‘understanding’ of economics in an extended text. Then we could learn more about your very intelligent and educated theories regarding the violent distortions of violent funny money squirtings which actual economists just don’t understand.
Given that the paper you linked to presents a series of arguments against centrally-planned communist command economies without private property, it is odd that you thought it was particularly relevant here. But then again your thought processes usually are quite odd aren’t they.
“the primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept.
The point I want to make is that this equilibrium structure of prices is something which we cannot know beforehand because the only way to discover it is to give the market free play; by definition, therefore, the divergence of actual prices from the equilibrium structure is something that can never be measured.”
So what Hayek is saying here is the standard simple neoclassical view that flexible prices and wages result in an economic equilibrium in which there is little unemployment. According to this view, the cure to unemployment is flexible wages, and a flexible labor market in general. And the cause of unemployment is rigid or sticky wages, what Hayek refers to as a distortion in the price structure (i.e. wages being kept from moving to equilibrium levels).
The problem most mainstream economists recognize is that wages are not flexible downwards, so mass unemployment can occur in neoclassical models. There are different explanations for why this is the case.
This is a separate issue to that of the general price level, which you seem to be confusing it with. The equilibrium structure of prices is a structure of relative prices – A is more expensive than B, etc. It doesn’t necessarily matter whether A is $10 or $1, so long as the structure of relative prices is in equilibrium.
In ‘The Denationaliztion of Money’ Hayek argued that a stable general price level, meaning no inflation or deflation overall on average, was ideal for successful economic calculation, as the overall nominal stability would make it easier to plan successfully for the future.
Geroge Selgin summarizes:
“Hayek himself eventually came to support a zero-inflation ideal. During the last decades of his career, and after having said little on the matter of price-level policy for several decades, Hayek began to distance himself from the productivity-norm: in The Constitution of Liberty (1960, 337) he recommended stabilization of an index number combining prices of both factors of production and final goods–a measure half-way between a productivity norm and zero inflation. Still later, in Denationalisation of Money (1978, 66-70) Hayek joined advocates of zero inflation, quietly abandoning his earlier arguments against such a policy together with the business-cycle theory connected to those arguments: attempts to stabilize the price level in face of productivity changes may lead to forced savings, but the problem is, after all, “of minor practical significance” (ibid., 83; see also White 1998, 17-20). In summary, Hayek came at last to accept a view of optimal price-level behavior that was practically the same as the one he had found wanting in Keynes almost half a century before.”
http://btindex.org/files/beb9b16b092af4cfc25bf3e5c36d3be8eb901d1b/25_Hayek%20Versus%20Keynes%20On%20How%20the%20Price%20Level%20Ought%20To%20Behave.pdf
Mainstream economists usually think a relatively low level of inflation is better however, to stop the economy from sliding into recession and deflation.
Good thing we’re all Rothbardians here and don’t buy into Hayek’s wacky social democratic public policies.
Anonymous:
Hi Ken B, glad you’re here to break the rule of your ban.
“There is nothing circular about a feedback loop. Uncertainty at time t causes extra caution reducing spending at time t+1, causes uncertainty at time t+2 etc.”
But what caused that initial widespread, aggregate uncertainty that brought about this flawed analogy “feedback loop”?
No answer.
Hayek argued that in his imaginary system of private currency issuers, they would generally aim to maintain a stable price level for their currencies, i.e. no inflation or deflation overall, and that this would be ideal for successful economic calculation.
BTW…..
Joe Salerno has a good article on the alleged stable (real) price of gold. I didn’t realize people believed the misconceptions that Salerno (rightly) explodes.
Perhaps Philippe is a CIA paid provocateur sent here to drive us mad.
Roddis
Philippe did let it slip a while back that he is a taxpayer paid astroturfer.
huh? I never said any such thing. Maybe you read it in a dream.
the Salerno piece is pretty dumb. Apparently we don’t measure value in terms of dollars. So no one ever says: ‘this car is worth $X dollars’, for example.
And then he throws in the assertion at the end that any increase at all in the supply of money necessarily ‘distorts capital markets’ and ‘leads to asset bubbles’. What a joke.
oh and of course it’s “according to austrians”, even though
1) Hayek thought a stable general price level would be ideal for successful economic calculation.
2) Mises stated that an increase in the money supply was inflationary if it resulted in a fall in the purchasing power of money (not if the purchasing power of money remained stable).
Philippe:
“huh? I never said any such thing.”
You did say some such thing.
“the Salerno piece is pretty dumb. Apparently we don’t measure value in terms of dollars. So no one ever says: ‘this car is worth $X dollars’, for example.
And then he throws in the assertion at the end that any increase at all in the supply of money necessarily ‘distorts capital markets’ and ‘leads to asset bubbles’. What a joke.”
He didn’t say that.
Dr. Murphy,
What do you think of this: http://www.adamsmith.org/research/reports/quids-in/
Remember, Rob Roy is your favorite movie, so you should give this some thought…Thank you.
DeLong produces a long quote from a Charles Kindleberger: Anatomy of a Typical Financial Crisis: explaining LK’s hero Minsky. DeLong also makes a substanceless attack on Hayek in the post and (of course) there is no mention of economic calculation anywhere to be found. In fact, Minsky’s “theory” is the Austrian theory but with the concept of economic calculation/miscalculation excised down the memory hole:
http://delong.typepad.com/sdj/2014/09/over-at-equitable-growth-is-lm-as-obfuscation-no-thursday-focus-for-september-11-2014.html
LK’s pal Pilkington attacks “goldbug culture” with no reference to economic calculation:
http://newint.org/features/2014/09/01/bunker-economics-worshipping-gold/