War Doesn’t Solve the Socialist Calculation Problem
My latest at FEE. An excerpt:
The logic of voluntary market arrangements holds in the case of conscription as well. Suppose a foreign nation has amassed millions of soldiers on the border, and is preparing to invade. Wouldn’t even a classical-liberal government have to hold its nose and impose a draft on its citizens, just to deal with this emergency?
The answer is no. To see why, change the example: If a foreign nation drafted millions of its people into working on collectivized farms, would the United States need to do the same, if it wanted to grow more food? Of course not. The way to maximize food production (especially if we care about quality) would be to get the federal government out of agriculture as much as possible.
A similar pattern holds in military struggles. A free society could easily defend itself from, say, two million poorly equipped conscripts with little training, by using only, let’s say, 100,000 elite, volunteer troops supplied with advanced weaponry and vehicles from 400,000 civilians working in factories cranking out helicopters, body armor, tanks, and artillery. Foreign dictators’ reliance on a large labor-to-capital ratio for their military hardly means that is an efficient practice for a freer nation to emulate.
You’d think with an actual invasion, one actually threatening the existence of the polity, there’d be if anything a surplus of eager volunteers.
Tragedy of the commons.
“The way to maximize food production (especially if we care about quality) would be to get the federal government out of agriculture as much as possible.”
-Wouldn’t the conventional answer be “agricultural subsidies”?
“If the government had raised all the funds needed for the conduct of war by taxing the citizens and by borrowing from them, everybody would have been forced to cut down his consumption drastically. ”
-But the poor would suffer hardest.
“Indeed, if it were true that the Roosevelt administration needed to establish controls on steel, rubber, oil, and so forth to ensure an adequate supply for the war effort, then it is hard to see why such controls shouldn’t be maintained in peacetime for equally important tasks — such as providing adequate food and shelter to Americans”
-War has one goal: victory. Prosperity has many goals; it is not a single output target. Viewing production as an output target optimizes the people work for the economy; it does not optimize the economy to work for the people.
“On the other hand, if we can agree that a decentralized market economy, in which individual entrepreneurs strive to earn profits, is the best way to “leverage” our available resources when it comes to cars, radios, and sweaters, then likewise it would be foolish to impose top-down bureaucratic controls when fighting Hitler.”
-That’s nuts. Optimizing the people to work for victory makes sense. Optimizing the victory to work for the people doesn’t.
“If a foreign nation drafted millions of its people into working on collectivized farms, would the United States need to do the same, if it wanted to grow more food?”
-Nah, it’d just boost crop subsidies. The U.S. and the U.S.S.R. both had similar crop yields, but the U.S.S.R. had many more people working per acre to produce those crops.
“A free society could easily defend itself from, say, two million poorly equipped conscripts with little training, by using only, let’s say, 100,000 elite, volunteer troops supplied with advanced weaponry and vehicles from 400,000 civilians working in factories cranking out helicopters, body armor, tanks, and artillery.”
-That was actually tried during the Vietnam War. The Communists had three million fighters, most of whom knew nothing about fighting, and one million of whom died. The U.S. had a mostly-volunteer force that killed multiple Communists per every American killed by Communists (~50,000 Americans were killed by Communists during the war).
“A nation relying on involuntary servitude (that is, military conscripts) to fight its wars will not be nearly as effective, other things equal, as a nation relying on free labor — where anyone can accept or reject the terms of employment, or negotiate for a better deal.”
-The goal of war is not to be efficient, it is to overwhelm the enemy.
And this is why I don’t like ideology. It makes people blind to reality- it expands the holes in their brains.
And the Vietnam War was a defensive war (from the American/South Vietnamese perspective) -exactly the kind of war Murphy is talking about.
No, it was a hostile war.
Gulf of Tonkin.
Invasion.
Which N. Vietnamese did what to which US citizens prior to the US army invasion?
I’m still waiting to hear back from you, Major.
E. Harding wrote:
And this is why I don’t like ideology. It makes people blind to reality- it expands the holes in their brains.
I don’t have time right now, but within the next few days E. Harding I will return to this and show how you have turned things exactly upside down with your argument about Vietnam, which makes your quip above rather ironic.
Actually I know I’m not going to have a lot of time later, so I’ll just be brief:
You know when someone points to the (ideologically motivated) Viet Cong guerilla fighters fending off an invasion of a better equipped army of U.S. conscripts, to attack my claim that free fighters could fend off invading conscripts, then it’s time to call up Orwell.
Yes, we can get more nuanced and talk about the NVA as well as the Viet Cong, and how the Tet offensive involved a defensive war from the South Vietnamese perspective, but no matter what:
Vietnam involved U.S. conscripts invading another country. So the fact that the U.S. lost (or at best tied) has no bearing on my claim that free U.S. fighters could repel invading conscripts.
The U.S. military in Vietnam was, as I said, mostly a volunteer force (not sure about the South Vietnamese, though).
Sure, the Communists were ideologically motivated, but there’s simply no way to get three million fighters on your side without a massive element of coercion. My example stands.
OK I’m not going to bother arguing with you on this E. Harding. If other people want to take up the torch, I salute them. I would say that your picture of volunteer Americans sitting in South Vietnam, yelling across the border to NVA conscripts, “You guys better stay out,” and then being overwhelmed by the invading conscripts, is hardly a representative sketch of the Vietnam experience. Yet that is what you need in order to zing my article.
Anyone wanna take up Murphy’s torch?
[waits.]
The fact someone is taking up Murphy’s torch does not mean I’m going to reply to him, as this is a fool’s errand.
Booooo!
I looked it up and about one third of the American force in Vietnam were conscripts, same for the Australian forces.
So let’s suppose you are playing basketball and you have five players on court, one on rotation at the side. Out of the six total, two of them don’t want to be there at all, they are playing because Warren Mosler posted a guy at the door with a nine who intends to shoot them if they stop playing. Also, those two guys never really learned to play basketball… Mosler’s guy ran their car off the road last week, yanked them out and locked them in a gym with a ball and shouted at them a lot for a few days. During that time they learned how to keep their sports uniform very clean and presentable.
How do you think that basketball game is going to work out?
Getting back to Vietnam, by the statistics it should have been winnable, several things held the US troops back:
* No real connection between American language/culture/attitudes and the South Vietnamese they were supposed to be teamed up with.
* Generally poor discipline, compounded by plenty of drugs.
* No experience of jungle war, totally unfamiliar with the terrain.
* Many troops had only about 6 months training (often less)
* Large protest movement at home, at least in part triggered by conscription. Not just conscription but the unfairness that almost anyone wealthy could get out of it.
As for defensive war, clearly the North Vietnamese never had a chance of invading the USA. The Vietnam War was a proxy war where Russian and China wanted to spread Communism, and the USA was “defending” in the vague notion that they should contain the Communists. To some extent the North Vietnamese did also claim they were “defensively” throwing off the colonialist yoke… which they were. If everyone was so “defensive” all the time, why was the South Vietnamese government built on colonialist lines?
Why Warren Mosler? 🙂
It depends on the organization of the other team. In this case, the other team has dozens of replacement players on the sidelines in case of injury, most of them conscripted. And they get injured a lot. Remember, a million Communist fighters died in the Vietnam War.
“As for defensive war, clearly the North Vietnamese never had a chance of invading the USA.”
-O.K., you’re right, I admit it. The Vietnam War’s parallel with Murphy’s description of
“A free society could easily defend itself from, say, two million poorly equipped conscripts with little training, by using only, let’s say, 100,000 elite, volunteer troops supplied with advanced weaponry and vehicles from 400,000 civilians working in factories cranking out helicopters, body armor, tanks, and artillery.”
Is not perfect, but it’s close. South Vietnam was not a free society, but it was defending itself using several hundred thousand comparatively elite volunteer troops (who, admittedly, pulled out in the 1970s) supplied with advanced weaponry and vehicles by numerous American civilians.
“To some extent the North Vietnamese did also claim they were “defensively” throwing off the colonialist yoke… which they were”
-Well, the colonialist yoke was gone. The government in the South was mostly independent. So the Vietnam War from the North’s side wasn’t a defensive war, as there was no colonialist yoke to overthrow.
There might be others onto the same business of selling protection for fiat money, I dunno, seems like a good earner so probably Mosler wouldn’t be the only one doing it. He is the only one out there bragging about it … more obvious example I guess.
Hmmm, problem with that is the elite landowners and the structure of government put in place by the colonialists was still seen as unfair property distribution. The point about property rights is that they link back to something you worked for. If you spend all your life working for the landowner and he’s always got the property and you always do the work, then those property rights don’t seem attractive.
Also, there was no U.S. invasion of South Vietnam, as the government invited U.S. forces in, and there was no U.S. invasion of North Vietnam, either (only aerial bombing).
E. Harding:
“Wouldn’t the conventional answer be “agricultural subsidies”?”
Who cares about the “conventional” answer? This is about what is most right, not necessarily the most popular.
“If the government had raised all the funds needed for the conduct of war by taxing the citizens and by borrowing from them, everybody would have been forced to cut down his consumption drastically. ”
“But the poor would suffer hardest.”
War burdens the poor the most.
“Indeed, if it were true that the Roosevelt administration needed to establish controls on steel, rubber, oil, and so forth to ensure an adequate supply for the war effort, then it is hard to see why such controls shouldn’t be maintained in peacetime for equally important tasks — such as providing adequate food and shelter to Americans”
“War has one goal: victory.”
Victory has more than one interpretation. What you consider a victory might be a failure in the eyes of someone else, including someone on “your team”.
“Viewing production as an output target optimizes the people work for the economy; it does not optimize the economy to work for the people.”
Economies don’t do anything. Individual people do.
Individual people don’t work for the economy. They work for others in exchange for what others work for them.
“That’s nuts. Optimizing the people to work for victory makes sense. Optimizing the victory to work for the people doesn’t.”
What does not make sense to you is not identical with what is false or wrong. And Murphy never said anything about “optimizing the victory to work for the people.”
And which people are you referring to specifically? Clearly you’re excluding Murphy, and everyone else who wants something else for themselves than what you want for them. You are in no position to declare that what you want for me, is more important than what I want for myself. But if you say you respect what I want for myself, then you and I would be in a relationship of no authority over the other, i.e. a state of anarchy.
Well, what would be the case between you and I, would be the same between all possible sets of individuals.
“If a foreign nation drafted millions of its people into working on collectivized farms, would the United States need to do the same, if it wanted to grow more food?”
“Nah, it’d just boost crop subsidies. The U.S. and the U.S.S.R. both had similar crop yields, but the U.S.S.R. had many more people working per acre to produce those crops.”
Because the workers had less capital to work with, because the USSR state was hostile to capital accumulation.
“A free society could easily defend itself from, say, two million poorly equipped conscripts with little training, by using only, let’s say, 100,000 elite, volunteer troops supplied with advanced weaponry and vehicles from 400,000 civilians working in factories cranking out helicopters, body armor, tanks, and artillery.”
“That was actually tried during the Vietnam War. The Communists had three million fighters, most of whom knew nothing about fighting, and one million of whom died. The U.S. had a mostly-volunteer force that killed multiple Communists per every American killed by Communists (~50,000 Americans were killed by Communists during the war).”
False. The US is not and was not a free society during the 1960s and 1970s.
A volunteer army does not a free society make. It is a necessary, but not sufficient, condition. The problem with the US army is that it held a monopoly on dispute resolutions between Americans and the Vietnamese, but more importantly it manufactured conflict precisely because it had the incentive to start a conflict that it itself would be judge over.
“A nation relying on involuntary servitude (that is, military conscripts) to fight its wars will not be nearly as effective, other things equal, as a nation relying on free labor — where anyone can accept or reject the terms of employment, or negotiate for a better deal.”
“The goal of war is not to be efficient, it is to overwhelm the enemy.”
Efficiency and “overwhelming” are not mutually exclusive. Increasing the efficiency of an army increases its military effectiveness.
“And this is why I don’t like ideology. It makes people blind to reality- it expands the holes in their brains.”
Then why are you an ideolgue? Your entire post was an ideology based critique. You are spewing your ideology of war.
The Iraq War had one simple goal: the stop the weapons of mass destruction, because Tony B Liar’s magic dossier says they can be deployed in just 15 minutes.
No wait, the Iraq War had one goal: the depose the dictator, because he was a bad man.
Hmmm, actually the Iraq War had one goal: winning the hearts and minds of Muslims so they would look favourably on America as their saviour.
No no, that isn’t working, OK the Iraq War had one goal: figuring out an exit strategy, which we never even gave a passing thought about to begin with.
Wait! The goal is training and equipping the Shiites to help them kill the Suni, errr isn’t it?
Or should the Suni be killing Shiites? I keep forgetting, which are the good Muslims?
Democracy! I know, we can bring Democracy to these people!! That’s the one goal right there.
“The Iraq War had one simple goal: the stop the weapons of mass destruction, because Tony B Liar’s magic dossier says they can be deployed in just 15 minutes.”
-Check. This was helped by their paucity.
“No wait, the Iraq War had one goal: the depose the dictator, because he was a bad man.”
-Check.
“Hmmm, actually the Iraq War had one goal: winning the hearts and minds of Muslims so they would look favourably on America as their saviour.”
-Check. Sorta. Maybe. With death squads. And the government still kicked the U.S. out.
“No no, that isn’t working, OK the Iraq War had one goal: figuring out an exit strategy, which we never even gave a passing thought about to begin with.”
-Check.
“Wait! The goal is training and equipping the Shiites to help them kill the Suni, errr isn’t it?”
-Training Sunni and Shiite fighters on the Iraqi government’s side to help them kill the Sunni and Shiite fighters against the Iraqi government.
-Check.
“Democracy! I know, we can bring Democracy to these people!! That’s the one goal right there.”
-Several steps closer, but far from there. So, no check.
Ha ha, as if those fighters were ever loyal to government. Remember all those news stories about people being kidnapped by “men in police uniforms”? Well, there was a very simple reason why those men were wearing police uniforms.
Oh come on now, we all saw the election. The Shiite majority got to kick three shades of $#!+ out of the Sunni minorities in Baghdad … that’s yer Democracy right there, working exactly as intended: rule by the majority.
A lot of people go out of their way to avoid full consideration of the implications of Democracy, but that’s another story.
“Ha ha, as if those fighters were ever loyal to government.”
-Yeah, they were all in it for the money.
You are studying Middle East politics and you don’t understand the concept of an inter-tribal grudge?
“War has only one goal.”
And then…
“Check”
“Check”
“Check”
Etc.
Yup, it would indeed have been a fool’s errand.
You you pointed out in the post the problem with conscripted troops…more troubling is the bureaucracy that the government starts with and builds down. While I find your insurance solution untenable, it would be interesting to see the business of war put out for bid.
FWIW: I don’t personally care what is the most effective way to protect “your country”. However if someone does conscript me to a war against my will, he has declared himself to be my enemy No 1!
The major assumptions you make about real world market economies are things which destroy much of your argument.
Take just one example: price controls (though you don’t mention it specifically in the post). The arguments you and other Austrians would make against price controls require that all or most prices really are highly flexible, responsive to demand and that prices move quickly to clear markets. This is garbage.
The vast majority of prices are cost-based mark-up prices, generally speaking inflexible with respect to demand. The evidence for this is overwhelming. Once we understand this, the general Austrian/neoclassical argument against price controls collapses (or at most it might have some relevance only to flexprice markets).
I never seen you ever address this point, and I suspect you never will — because you prefer to live in your ignorant bubble insulated against the real world.
Meanwhile, for those who actually care about the real world, you can read here a description by John Kenneth Galbraith (who helped to administered US prices in WWII) about how mark-up pricing in 1940s America made price control an effective policy for many markets:
http://socialdemocracy21stcentury.blogspot.com/2013/12/john-kenneth-galbraith-on-price-controls.html
LK
“The vast majority of prices are cost-based mark-up prices, generally speaking inflexible with respect to demand.”
Correct (except for liquidation activity). But your statement only applies to goods already produced and not future goods. The chief argument against price controls is the effect it will have on future production once inventory is cleared. And what exactly is “cost-based”? It is the sum of the price components that make up the product. Those sub costs are a function of supply-demand.
You understand this very simple concept if you operate in the real world of producing goods and services in the marketplace.
So when you make the statement: “… because you prefer to live in your ignorant bubble insulated against the real world.” Please pause and look in the mirror.
“Correct (except for liquidation activity). “
The extent of liquidation activity is grossly overrated. Often “clearance”/”liquidation” sales amount to mere psychological tricks and a few discounts here and there.
“But your statement only applies to goods already produced and not future goods. “
Of course it applies to the prices of most future goods. There is no rational reason to think the current widespread use of mark-up pricing will suddenly change tomorrow or next week or next year.
“And what exactly is “cost-based”? It is the sum of the price components that make up the product. Those sub costs are a function of supply-demand.
Many sub costs can just as often be mark-up prices as well: e.g., durable manufactured capital goods (machines tools etc.) will tend to have mark-up prices. “Cost-based” means the prices are set and calculated on total average unit costs at a given level of sales volume plus a profit markup.
” The chief argument against price controls is the effect it will have on future production once inventory is cleared”
Then that is a feeble argument. Where demand exists or is increasing, the average mark-up firm simply ramps up production and increases capacity utilisation.
“Where demand exists or is increasing, the average mark-up firm simply ramps up production and increases capacity utilisation.”
-No matter how much money they get, eh, Lord Keynes?
LK
“The extent of liquidation activity is grossly overrated”
My comment on liquidation was anecdotal exception to a hard and fast cost based mark up. Whether you think it’s overrated or not is irrelevant to the broader point.
“There is no rational reason to think the current widespread use of mark-up pricing will suddenly change tomorrow or next week or next year.”
No kidding? Thank you for stating the obvious implication of my point.
“Many sub costs can just as often be mark-up prices as well”
Again no kidding. Really?
“Then that is a feeble argument. Where demand exists or is increasing, the average mark-up firm simply ramps up production and increases capacity utilization”
What’s feeble is your obfuscation of the effect price controls have upon the real world marketplace. Where prices are controlled so that a supplier of goods and services cannot wither meet their costs or return expectations, no supply will be forthcoming. Demand is then irrelevant. Take a trip to Venezuela this year to do your holiday shopping. I hear the prices are great. A little thin on selection though.
“Where prices are controlled so that a supplier of goods and services cannot wither meet their costs or return expectations, no supply will be forthcoming.”
And effective price control theory ALREADY recognises that businesses need to cover costs and made an acceptable profit.
Businesses don’t need price controls to do this. In fact, price controls create economic chaos because the coordinating forces from market prices cannot function.
Cost based prices are flexible, as flexible as the flexible factor prices on which they are based.
Cost based prices are composed of goods that are themselves either cost based, or direct supply and demand based, or a combination of the two.
And for those factors that are cost based, then the factors of those factors are again either cost based or direct or a combination of the two.
Taking the whole set of factors of any good, ultimately the entirety of what determines cost based prices, are direct supply and demand factor prices.
When the demand for a cost based good rises, say, then this increase in demand will not instantly cause a rise in demand for every single input. It takes time. The rate of profit of that good rises temporarily. Then, as this rise in profit attracts additional investment, that temporarily increases the costs and reduces the rate of profit back down.
But over time, the additional investment, which redirects real resources into the production of that good, helps to increase the productivity in making that good, and unit selling prices fall. This is what happens in electronics that even moron Keynesians can grasp, albeit incredibly reluctantly on average.
Your model is just so crude that it does not even explicitly incorporate the concept of TIME. Everything in Keynesianism is concurrent, a circle, a left over from outdated general equilibrium ideology.
When you do attempt to explicitly speak about time, and you are engaging your opponents, any time longer than your myopic mindset, is intolerable. That since you do not and cannot think in the long term, that even Austrian theory must too be so constricted, and hence all the concepts and arguments must be about events occurring “quickly” with “highly” dynamic changes so that you can get your psychological fix of equilibrium mindset.
But oh look, prices actually do change over time, so that means the very myopic mentality you yourself shoehorned into Austrian interpretation, straw manning the crap out of it in the process, is somehow an accurate description of Austrianism.
Prices are set by acting individuals. They are not guided by forces external to man’s actions. That is your fundamental flaw. You are trying to understand prices as data that is “out there”, changing according to some mathematical equation.
You don’t even know what prices are. Prices don’t change by themselves. People change them. If people do change the prices, or if they do not change the prices, today or tomorrow or whatever, there are always very good reasons for doing so.
Since you hate others having the freedom to set prices without asking for your permission, since you not being able to control all prices is intolerable to you in your pathetic worldview and sense of self, you crave and worship a ” powerful” group of people who can do what you yourself are too weak to do by only persuasion and convincing others by way of argument.
Your arguments are total garbage, which is why you feel obligated to find meaning of your life through what “powerful” men do, as if you are empowered when you sit in a theatre and watch what they have gotten away with.
If your theory was so good, then you would not need a government to bring it about. It could be brought about by pure private property and peaceful coexistence, like my theory. My theory does not need violence, precisely because it is superior to yours that does.
Hi Major,
LK is a post keynesian and most post keynesians are not general equilibrium theorists.
Those Keynesians who adhere to general equilibrium models are neo-classical Keynesians (Old Keynesians) and New Keynesians (rational expectations Keynesians).
Post Keynesians are interested in how economies move through historical time.
John Arthur
Dear John Arthur,
Post Keynesian models do not explicitly incorporate time.
Regards,
Major-Freedom
Mark-up prices changing — mainly upwards — when costs change is not a point of debate here.
The point is that such prices are not sufficiently flexible to bring about a general tendency towards market clearing in product markets.
You have no response to this, except pathological lying, fraud and red herrings
“Post Keynesian models do not explicitly incorporate time.”
That, John Arthur, is epic pathological lying from Major_Idiot.
PK models — unlike many timeless GE models — explicitly take time into account — that time is dynamic, irreversible and economies path dependent in time.
In fact, this is frankly acknowledged by the Austrian economists Gerald P. O’Driscoll and Mario J. Rizzo in The Economics of Time and Ignorance (2nd edn; Routledge, Oxford, UK., 1996), p. 9.
“effective price control theory” = oxymoron
“The point is that such prices are not sufficiently flexible to bring about a general tendency towards market clearing in product markets.”
I see so YOU know what that is better than the marketplace
The mark-ups themselves are flexible, and then you have all sorts of discounts some of which are liquidation, but others are loss leaders, or promotional discounts, or bundling and packaging (very rarely is the price of the bundle equal to the price of all the components), or rewards for good customers… all sorts of things go on.
This stuff happens all the way up the supply chain. At the retail level they are pressing the suppliers for discounts, while the suppliers have tiered status for their preferred channel partners, and all the little guys are tying to get up to a higher tier to access better prices.
As far as I can judge LK has no real-world experience of any supply chain oriented business.
Just go to the supermarket every day and make a note of the prices of a dozen items: cans coke, block chocolate, tin of tuna, stuff like that… prices on those items change regularly, right there at the supermarket. That’s not even getting into places like wholesale fish markets, meat markets, etc.
“The vast majority of prices are cost-based mark-up prices, generally speaking inflexible with respect to demand.”
-Then let’s set an NGDP target of 12-15% per year and keep it that way. Forever. That’ll raise trend RGDP growth! Right?
“Once we understand this, the general Austrian/neoclassical argument against price controls collapses (or at most it might have some relevance only to flexprice markets).”
-LOL. Even the mild Nixonian price controls resulted in shortages.
So as usual, the Lord Keynes is taking something that isn’t mentioned in Murphy’s article, and making a fallacious case against it.
(1) I am not a market monetarist. NGDP targeting is rubbish.
(2) if you’re thinking of gas line-ups, in such flexprice markets I’ve already admitted that conventional analysis may well have merit, if you had bothered to read what I said. But most markets are not flexprice, therefore those arguments don’t work.
(3) thirdly, I already stated that Murphy did not mention price control specifically in his article, but that it is directed against what he and other Austrians have argued elsewhere — so yet again one wonders if you even read what I said.
(1) Is not an argument (or an answer).
(2) Is not an explanation (or an answer).
(3) Is not a denial.
Come on, LK, just answer the question: will a permanent NGDP target of 12-15% raise trend RGDP growth? Why or why not?
Also, can you name me any price control outside of monopoly and oligopoly cases which
1) Significantly lowered the price of any good or service
2) Did not result in any shortages of it.
E
I would add a third
3) or did not materially affect the quality of the subject matter negatively
(1) no. NGDP targetting is flawed and false, because it presumes the flawed quantity theory and loanable funds.
(2) successful price control occurred all over the Western world in WWII. Price controls on all sorts of agricultural produce exist in, say, the EU today, but people in Europe are not living under shortages of agricultural produce. People like you are deeply ignorant of the real world.
NGDP targeting doesn’t “presume” anything, except that central banks can control the path of nominal GDP. Unless you believe printing trillions of dollars will not do anything to prices, or that the central bank is insolvent, the central bank can, indeed, always control the path of nominal GDP (and does, even if the central bankers don’t realize it).
And that still isn’t an answer to my question. Imagine that, for any reason or reasons you can think of, NGDP growth remained from 12 to 15% per year from now to eternity. Would that raise trend RGDP growth? Yes or no? Why or why not?
“successful price control occurred all over the Western world in WWII.”
-LOL. When there were massive shortages in all categories of consumer goods.
-As far as I’m aware, those are price supports, LK, meant to make food more expensive for the consumer and profitable for the farmer. Obviously, these sorts of price controls lead to surpluses, not to shortages.
“NGDP targeting doesn’t “presume” anything,”
Tell me another fable. Your statement is stupid beyond words. NGDP targeting doesn’t “presume” the QT or loanable funds? if that were true, then why would you assume open market operations would have any effect on investment or credit growth?
LK wrote:
Your statement is stupid beyond words.
And yet, you keep typing…
“Tell me another fable.”
-Like hyperinflation never happening?
“if that were true, then why would you assume open market operations would have any effect on investment or credit growth?”
-Because, as Sumner would say, they do.
And those aren’t answers to my question. Jesus, Lord Keynes, are you just going to evade the question all day so as not to shine light on the ludicrous nature of your ideas?
“NGDP targeting doesn’t “presume” the QT or loanable funds?”
-What is “the quantity theory of money”?
http://www.themoneyillusion.com/?p=2167
And loanable funds clearly has nothing to do with NGDP or targeting it. Sumner says “banking is a sideshow”. I don’t agree, but it clearly isn’t this big, magical obstacle to proper monetary policy.
LK, you are misusing the term “presume”.
NGDPLT not “presuming” the loanable funds does NOT imply or suggest that NGDPLT doesn’t affect loanable funds.
Keynesianism does not “presume” economic calculation, but that does not imply or suggest that Keynesianism has no effect on economic calculation.
Your writings do not presume an adequate education, but that does not mean that you writing what you are writing is having no effect on the adequacy of your education.
http://www.independent.ie/business/world/europe-to-buy-new-butter-mountain-26508571.html
Artificially diverting tax money into an industry has been know to create an unwanted surplus in that industry. Harder to trace where the shortage is because you would need to know what the same tax would have been spent on.
LK wrote:
(1) I am not a market monetarist. NGDP targeting is rubbish.
You know, LK, you’re all right.
Nonsense, Bob! Scott Sumner is the most brilliant gentile economist on the Internet!
“The arguments you and other Austrians would make against price controls require that all or most prices really are highly flexible, responsive to demand and that prices move quickly to clear markets. This is garbage.”
Garbage straw man.
“…highly…”
“…quickly…”
These are garbage terms that mean whatever you want them to mean depending on what ideology serves the day for you.
Price controls would not even be necessary if prices did not fluctuate in response to demand.
No Austrian theory or principle predicts the timespan that elapses before any price changes a particular percentage or amount.
You continually contradict yourself and spam out of two parts of your mouth. Prices are not flexible prices are flexible. Prices change prices do not change. Prices change but they don’t change by some made up quickness I am straw manning Austrians as claiming.
Cost based prices are as flexible as the flexible factor prices of which the cost prices are based.
If costs change, then cost based pricing by definition changes, or else you’re not even talking about cost based prices at all.
You have not actually engaged the Austrian theory, nor have you responded to the rank contradictions in your writings that ironically only the Austrians have explained to you.
Meanwhile, for those of us who care about real world!d pricing, we know and have written about the flaws in Galbraith’s beliefs.
Keynesian intervention in aggregate nominal demand, Monetarist intervention in aggregate prices and demand, are both designed to prevent falling prices that would otherwise take place, and have taken place during the period of 2007-2009.
Keynesians advocate for central bank to intervene to prevent falling proces, precisely because in a free market without central banks prices tend to fall as productivity increases.
Again, there is NOTHING in Austrian theory proper that makes any prediction on how “quickly” in terms of days or weeks or whatever, for proces to fall.
You know this, but you’re too dishonest and an intellectual fraud to admit it, which is exactly why you use the weasal words “quickly” and “highly”, so that you can hedge your bets and deny and pretend that whatever response you get, isn’t what you meant.
There is no way to have a reasonable, accurate and detailed debate with you because you are too afraid to do it, and that is because you know you can’t win.
I wonder how ” quickly” you will come to understand that your entire post above is absolute cesspool drivel masquerading as insight.
Very good question. If the world works according to LK’s “fixprice” theory, then why are governments constantly finding reasons to introduce price controls? The mystery deepens.
No no no Tel.
We have to use weasal words like “most” prices.
Then as you list counterexample after counterexample, LK can then say “Yes but most are not like that!”
Sure, you got me. I should have said “most governments”.
The concept of “most” (> 50%) is somehow illegitimate or unclear to you? Too stupid to understand a word that any other normal human being can understand? Wait, perhaps you are.
No, the concept is not lost, it is your selective use of it.
It does not matter if “most” goods that are flexible priced, are cost based flexible priced, if the point of the argument is about flexible pricing.
Cost based pricing that is itself flexible because the factor prices are flexible, means that all prices are in fact flexible, and that divorcing goods into cost based on the one hand, and direct supply and demand on the other, does not in any way shape or form prove or confirm or suggest that pointing guns at people so as to have “powerful” people print more, borrow more, and spend more, is either economically or ethically rational.
So if large numbers of cost-based prices are highly inflexible with respect to demand, and are not moved by businesses to clear markets, this according to you means that they are in fact “flexible” in a way that is totally consistent with Austrian price theory and economic co-ordination theory?
And as pointed out before many times (which you naturally suppress) nobody denies that mark-up prices do change when companies wish to change the profit markup or if unit costs have risen to the point where they wish to increase prices.
You, Major_Freedom, are a laughably and pathologically dishonest individual, who presumably cannot provide any actual counterarguments and are reduced to endless red herring and straw man arguments, and plain lying.
Cost based prices are flexible with respect to demand by way of the factor prices being flexible with respect to demand, including demand for both the good priced by cost and the factors priced by direct supply and demand.
No, they are not: all the evidence shows that mark-up prices tend to be highly inflexible downwards, and have a strong tendency to rise over time, not fall. Mark-up prices cannot have a tendency to clear product markets by falling, if they do not have a tendency to fall, idiot.
We’ve already been through these same laughable lies from you:
http://consultingbyrpm.com/blog/2014/09/potpourri-231.html#comment-964982
“No Austrian theory or principle predicts the timespan that elapses before any price changes a particular percentage or amount.”
So Austrian theory — that flexible wages and prices provide a reliable, effective and rapid way to clear markets — is perfectly consistent with the idea that this market clearing might take 100 or 1000 years?? lol
So straw man the Austrians, then when you accept the fact that you did straw man them, you still believe they’re wrong for not believing in the straw man?!?!
Yes, Austrian theory is in fact perfectly compatible with ALL timespans that it takes for a price to change. This is because Austrian theory is not implicitly political and warped by morality, unlike your worldview.
Austrian theory is a theory of human action.
IF it is possible for humans to act in such a way that the price of a hotdog at Costco remains $1.50 for 20 years, or even 100 years, or even 1000 years, then unlike your garbage worldview, Austrian theory can accommodate it.
You write as if people choosing to not reduce prices is proof that prices are in themselves inflexible. But the only inflexibility is your refusal to accept what other people do to maximize their utility.
Market clearing prices, again, for the millionth time, ARE NEVER ACTUALLY REACHED.
If you are going to sit with gun in hand, waiting for this straw man idealized world of markets actually clearing as opposed to tensing towards clearing but never reaching clearing, then you will be waiting until you die from old age.
It is simply astounding how after all these years, you are still utterly clueless about the most BASIC of Austrian concepts.
“Yes, Austrian theory is in fact perfectly compatible with ALL timespans that it takes for a price to change. “
That is a blatant lie. Austrian theory requires that markets tend to clear and involuntary unemployment will tend to fall effectively and rapidly during recessions/depressions.
Here is an actual Austrian economist:
“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.
If Austrian theory made no such requirements, then Krugman would be right.
You, Major-Freedom, are an utter intellectual fraud. You do not know Austrian economics. You do not speak for actual Austrian economists. The garbage that comes out of your mouth has very little relation to actual Austrian economics.
“Austrian theory requires that markets tend to clear and involuntary unemployment will tend to fall effectively and rapidly during recessions/depressions.”
That is a blatant lie. There are no predictions in Austrian theory that terms such as “rapidly” imply there are.
Here is an ACTUAL Austrian:
“Praxeological knowledge makes it possible to predict with apodictic certainty the outcome of various modes of action. but, of course, such prediction can never imply anything regarding quantitative matters.” – Mises
There are no predictions in Austrian theory that predicts quantifiable statistics such as time.
What you are doing is taking the blog post comments of someone who thinks Austrian theory is the best, and then you want to convince me that whatever he said in that particular point, somehow becomes official Austrian theory.
All you are doing is cherry picking a blog comment and self-servingly hoisipting it up as the true Austrian theory.
You LK are a dishonest, lying pedant who has no business engaging in anything that requires academic honesty, and a modicum of memory.
The fact that you continually contradict yourself and straw man the Austrians proves you have no interest in anything but obedience, and agreement.
For the benefit of other readers:
When LK says “So Austrian theory is ” consistent” with prices not changing for 1000 years”, what he in fact means is that he cannot tolerate Austrian economics being value free and not judging such a thing from a normative standpoint. That precisely because Austrian theorizing is not moralizing, that this constitutes its flaw.
That only if Austrian theory introduced morality like his “economics”, that then he would be capable of having something to say because he cannot think from a basis of rationalism.
There are no predictions in Austrian theory that predicts quantifiable statistics such as time.
The assumption in Austrian theory made by Bob Murphy in that quote above that flexible prices and wages will lead to an effective and rapid tendency to market clearing (at the very least WITHIN 2 or 5 years) is a qualitative prediction, not a quantitative one. So your quite proves me right.
But it also demonstrates once again: you are a pathological liar.
“There are no predictions in Austrian theory that terms such as “rapidly” imply there are.”
You are a liar:
“The market is always tending quickly toward its equilibrium position, and the wider the market is, and the better the communication among its participants, the more quickly will this position be established for any set of schedules.”
(Rothbard 2009: 143).
“Generally, a market tends to ‘clear itself’ quickly by establishing its equilibrium price, after which a certain number of exchanges take place, leading toward what has been termed the plain state of rest—the condition after the various exchanges have taken place.” (Rothbard 2009: 143, with n. 29).
“And, if a price is displaced from equilibrium, it is quickly impelled by market forces to return to that point—just as an equilibrium point in physics is where something tends to stay and to return to if displaced.” (Rothbard 2008b: 21–22).
“As we have indicated, because of uncertainty and ignorance, firms will experience shortages and surpluses about as often as market-clearing. In a free market, such disequilibrium outcomes would tend to be shortlived or temporary.” (Shapiro 1985: 209).
Quickly TENDING towards equilibrium is not the same thing as quickly recovered, nor is it the same thing as quickly reaching some absolute endpoint that you keep mistakingly inferring from these quotes.
Yes, markets in fact do QUICKLY and EXTREMELY rapidly TEND towards equilibrium. This is because human action itself in a free market is a present concept. Action takes place in the now. If people are free to make their own decisions for their own persons and property, this then has the immediate results of markets TENDING towards equilibrium.
Recovery INCLUDES setting prices that do not change within a week, or even a year. It all depends on the coordinating actions of people who have values that differ from yours that you cannot tolerate.
And Shapiro? Really?
Austrian theory makes no empirical predictions. Stop lying and stop misconstruing the words you read. They don’t mean what you claim they mean.
Equivocation, look into it?
“The assumption in Austrian theory made by Bob Murphy in that quote..”
No, that was YOUR mistaken interpretation of what that quote said.
You bolded “quickly” that was used in a historical context of what happened, as evidence that Austrian theory predicts such a thing.
You are a liar. A dishonest intellectual fraud of epic proportions, straw manning up the wazoo, pretending that this all constitutes honest debate.
“Yes, markets in fact do QUICKLY and EXTREMELY rapidly TEND towards equilibrium. This is because human action itself in a free market is a present concept.”
So now all your nonsense above is revealed as the lying it is. You claimed above that “Austrian theory is in fact perfectly compatible with ALL timespans that it takes for a price to change”. But now prices and wages must adjust so that markets “QUICKLY and EXTREMELY rapidly TEND towards equilibrium.”
You’re incoherent, fraudulent and incapable of stating basic Austrian theory.
“You bolded “quickly” that was used in a historical context of what happened, as evidence that Austrian theory predicts such a thing.”
So now Austrian theory does NOT make the qualitative prediction that flexible wages and prices would lead to effective and rapid market clearing? lol…
Your answers change in every comment.
You are still being dishonest and still lying.
The fact that Austrian theory is COMPATIBLE with all time horizons, is not incompatible with prices in the past from having quickly adjusted to some new tendency, nor is it incompatible with prices immediately TENDING towards market clearing.
Prices immediately TENDING towards market clearing does not imply that absolute price levels must quickly reach some quantifiable number or numbers.
You are confused, ignorant, and unable to engage in basic logic.
You cited Murphy speaking of a past event, and in your totalyl dishonest and fraudulent manner, you asserted that this was evidence that Austrian theory makes timespan predictions.
Nothing of what you have ever cited proves what you straw man claimed it proved.
My answers are not changing. What is changing is your confusion, from one confusion to another.
And that quote from Murphy was not a prediction. Your illiteracy abounds.
That quote was a HISTORICAL claim. It was a statement of historical fact that may or may not be true.
The fact that Murphy said the economy quickly recovered in history, is not a prediction that they will always quickly recover.
Are you drunk?
Of course Murphy’s analysis depends on assuming that in the future flexible prices and wages will lead to an effective and rapid tendency to market clearing in real world countries.
If it did not, there would be no reason for anybody to accept his policy prescriptions.
Yet again you show us: You do not know Austrian economics. You do not speak for actual Austrian economists. The garbage that comes out of your mouth has very little relation to actual Austrian economics. I imagine actual Austrian economists privately think you are an utter fool and idiot, and are embarrassed that you speak for them.
The quote you cited was a HISTORICAL claim about what happened in the past.
You misconstrued the quote, and now you’re claiming “of course Murphy believes this will always repeat in the future.”
What Murphy believes will happen in the future, in terms of timelines and how fast economies recover, has NOTHING to do with Austrian economics proper, for Austrian theory does not permit dpsuch predictions.
You are conflating what people say, as if everything they say is in the name of the theory they think is correct.
I can make predictions that economies will on average recover within two years in a totally free market, and not be making predictions “based on” models in Austrian theory.
You fail to even admit you made a blatantly obvious mistake on how you interpreted that quote from Murphy.
Saying that economies recovered, in the past, within x number of years, is not a prediction that they will always so recover within that timeframe.
Austrian economics does not make prediction on quantifiable variables.
You are engaging in nothing but straw men.
“What Murphy believes will happen in the future, in terms of timelines and how fast economies recover, has NOTHING to do with Austrian economics proper, “
And now your so unhinged you’re actually saying that Bob Murphy’s economic analysis of what will happen in the future has “NOTHING to do with Austrian economics proper”. I suppose he is using Keynesian economics is he? lol
You are now equivocating the term “using”.
The fact that one ” uses” say mathematics, when making predictions, does not imply that mathematics itself is a predictive science.
The fact that someone “uses” Austrian theory to make a prediction, does not imply that Auatrian economics is a predictive science.
You are still confused and too dishonest to admit you are wrong.
“The fact that someone “uses” Austrian theory to make a prediction, does not imply that Auatrian economics is a predictive science.”
Austrian economics IS a predictive science. You are an ignoramus, liar, an idiot, and a fraud.
All the Austrian economists say that Austrian economics CAN make qualitative (but not quantitative) predictions about the future:
“Praxeology can make certain predictions about the future, but they are necessarily qualitative. For example, it can tell us that (other things equal) a fall in the demand for apples will lead to a lower price of apples. But praxeology alone can never tell us that (say) a particular change will yield a 9 percent drop in apple prices. Such quantitative forecasts are possible with the aid of understanding, but then of course they are no longer certain.” (Murphy and Gabriel 2008: 47–48).
The Austrian view that flexible wages and prices should lead to a rapid and effective tendency to market clearing is a qualitative prediction.
People spending trillions of dollars on weapons of war so as to prepare for an alien invasion, is also something Austrian theory can handle.
But that does not mean that Austrian theory has to make a normative judgment.
What you are trying to do, obviously, is to show that because Austrian theory does not advocate for “powerful” people to print, borrow and spend more with coercion and violence than what they otherwise could have printed, borrowed and spent through persuasion and peace, that this constitutes a flaw in the theory.
To you, all valid economic theories must at least advocate for that morality. If it doesn’t, then by definition it is willing to accept dogs marrying cats, I mean willing to accept other people setting their own prices in such a way that the temporal change in those prices moves in ways you personally do not approve even though it is none of your business.
Millions of people are in your mind stupid and unintelligent. That the majority of people are so stupid that they would be willing to choose death by starvation than cutting their asking prices. That the majority cannot be trusted to manage their own affairs.
That they need a small “powerful” group of people to rule, rather than the majority ruling themselves.
Social democracy for the 21st century means Socialism from the 20th century.
I don’t think Vietnam is a good example.
1: Just because you have a “professional” army instead of conscripted army doesn’t mean it is really voluntary. Or was(is) it possible for US soldiers to quit while in Vietnam(anywhere/anytime)? If you can’t quit when you want it is still far from voluntary. (And critics often criticize libertarians who argue for anarchism because of voluntary slavery!… If there exists such a thing you find it in the US army!) So the US army is very far removed from what Bob has in mind.
2: Just because you have conscription doesn’t mean people conscripted do not believe in the cause! I don’t know about North Vietnamese people from that time but I guess at the very moment the US was involved I can imagine they were kind of motivated. Not to forget I am sure they were also very brainwashed by the propaganda of their government. You can have conscription and commitment at the same time! (That one goes against Vietnam as example but also somewhat against Bob)
3: Just because you have military conscription doesn’t mean that you have socialized and ineffective economy and therefore bad weapons. (That goes more against Bob of course). So someone might argue you can have maybe not the best but very good weapons and masses with a free economy and a conscripted army.
All in all I think if you are a moral and consistent person the answers to such questions are easy, if not it is a bit more complicated than that of course.
Your comment is not really helping Murphy’s case. One of my few disagreements with Rothbard on libertarian theory was on the military and contracts. By my view (the correct interpretation), contracts are contracts, and they cannot simply be violated at whim. So there’s no requirement in libertarian theory that someone may “quit when they want”.
On 2) -exactly! But that doesn’t help Murphy’s case.
3) Does not apply to the Vietnam War (except that the Vietnamese Communists did have AKs, which were better than the Americans’ M16s).
Right, it is mainly my first point that should make clear why Vietnam is not a good case to prove or disprove Bobs thinking.
I wanted to make the other points as well because I think they are true, and I mentioned that they are going against Bob as well. As I have made clear above, this is for me a moral question not one of effectiveness.
No, contracts are not just contracts and you can put in whatever you want. If contracts don’t contain exit clauses they are void (what happens if one party doesn’t keep to its commitments). If they contain illegitimate clauses e.g. whoever doesn’t honor the contract will be beheaded are void as well.
“If they contain illegitimate clauses e.g. whoever doesn’t honor the contract will be beheaded are void as well.”
-Why?
I for one have no intention of enforcing such a contract, nor would I allow anyone else to enforce it.
I guess we are talking of private law systems or in general?
Because I would switch to a different PDA if I find out that they would enforce such contracts. Among other reasons most importantly I want to be protected from illegitimate clauses, since I am signing a ton of contracts during my whole life and I might miss a line here and there. I guess so would you.
This is one area of Rothbardian libertarianism where I struggle. It seems the average time preference of an aggregate society is too high to put aside the savings necessary to build the equipment needed for modern warfare. While I do believe time preference has been distorted by modern governments, I’m not sure eliminating that affect mitigates the issue enough to win the war.
And the advancement of technology isn’t going to slow. The problem worsens as we speak.
The question is easily answered when you ask just who/what is being protected…..
E. Harding wins this thread.
Yup
Depends on the game.
In E Harding’s game, yes he is “winning.”
I’m not sure what’s more hilarious, that LK holds up World War II as a great example of the benefits of price controls, or that he can’t tell the difference between the price theory of Austrians and that of Léon Walras.
My grandparents loved having a lower standard of living during the war in part because of the price controls, than they did during the 1930s.
I think..
Bob, so you must be pleased with the largely free market approach the USA has taken with regards to war since the Vietnam war?
Nah, because those were offensive wars in which the U.S. wasn’t threatened. And they generally caused more harm than good.
Well Halliburton was able to purchase a Secretary of Defense and a Vice President, but the question remains whether that was a free market sale, or government run auction. It gets tricky at times separating one from the other.
Draft – What is the purpose of War? War is the destruction of a countries assets in the hope that they capitulate. A great example of this can be found in War and Peace. When Napoleon invaded Russia he did so with superior troops, better supplies, etc and so on. There was a major battle outside of Moscow, in which the Russians did not give up, five Russians died for every French soldier. Now you can claim it a victory for Napoleon but the truth is because the Russians did not capitulate they ‘won’ and Napoleon lost enough troops that he n longer could field an effective fighting force. So along the same lines, does ‘drafting’ make for a more ‘effective’ fighting force? No, but that is not what matters in War, what matters in war is to stop one group from ‘winning’ whatever that meant. Death, or the amount of deaths does not matter so long as you have more people sent in to die.
As to Bob’s point, of course it is possible that a small fighting force with effective weaponry can win a war, but to be honest when It comes to war I agree with Rudy Giuliani and Lawrence of Arabia. It is the number of people you have, boots on the ground etc ans so on.
In terms of ‘economics’ is there a better way to wage war? Probably, but in the end it is NOT about economics. It is about capitulation, it is about figuring out when there is no more will to fight. By destroying the other sides economy you have a pretty good shot of that… But that is different.