12 Apr 2016


Potpourri 47 Comments

==> Daniel J. Mitchell tries to stay friends with everybody in this post (by linking to Ed Stringham’s work at the end). I really liked the way he flipped the Oliver Wendell Holmes quote about taxes and civilization; check it out.

==> Speaking of Dan, he joined Tom and me on the latest Contra Krugman to discuss whether Obama has had such a great record after all.

==> George Selgin takes on David Graeber.

==> See free-market economists discuss voluntary transactions that occurred during Holy Week but are morally odious (one being the worst in human history). Note that “JC” in the interview is not Jesus Christ.

==> Guys like Don Boudreaux and me have been mad at Krugman for throwing free traders under the bus, when he used to lead the pack. But Thomas Palley gets mad at Krugman for the opposite reason. This part in particular is hilarious: “Even as he [Krugman] tries to slip in to a new skin, the politics remains unchanged. Senator Sanders, the longtime opponent of neoliberalism, is described as irresponsible and feckless. Hillary Clinton, the longtime advocate of neoliberalism, is portrayed as a model of trade policy responsibility.”

In context, Palley is talking about a Krugman column where Krugman had argued that Sanders was being irresponsible for pledging to rip up any existing trade deals that hurt US workers. But, at the same time, Krugman was saying those deal *were* bad for US workers and so President Clinton should think really hard before signing any more.

47 Responses to “Potpourri”

  1. Bob Roddis says:

    “Lord Keynes” practically concedes the final nail in the coffin of “The State Theory of Money”:


    • LK says:

      Yes, by pointing out that real money in the Mengerian sense in ancient Greece was the creation of Lydian and Greek city-state governments.

      Sounds like you never read it, you bloody idiot

      • Bob Roddis says:

        Thank LK. I finally get it! The government ordered people to value gold, silver and hot young naked slave girls. If it weren’t for the government, everyone would have valued buckets of mud and dead cats.

        • Bob Roddis says:

          That should have been: “Thanks, LK”.

        • Major.Freedom says:

          LK still hasn’t learned that states cannot tax what has not already been first valued prior to them taxing that particular commodity.

          • Bala says:

            You can’t get a man to understand something if his very survival depends on his not understanding it. In LK’s case, his head would literally explode if he did understand it. So…..

          • LK says:

            You wouldn’t understand Menger’s theory if your life depended on it, Major_Idiot.

            For Menger, money emerges from actual barter spot trades as commodities with a high degree of saleableness emerge, and then the most saleable good (or goods) becomes the physical medium of exchange (Menger 1892: 249).

            Menger concludes that precious metals have arisen as a medium of exchange among many peoples because “their saleableness is far and away superior to that of all other commodities” (Menger 1892: 252). However, electrum in Lydia (where coins were first minted) was produced in state owned mines and stockpiled by the state. Electrum money didn’t emerge from private barter spot trade but was imposed from above.

            Menger’s theory is not that all a commodity requires before becoming money is to have a market value in some sense (such as occasional use as a normal barter good).

            For Menger, money is a medium of exchange emerging from private active and widespread market exchanges in barter spot trade.

            • Bob Murphy says:

              LK I give you a lot of latitude, but c’mon, don’t call people “idiot.”

              • Craw says:

                I agree. “Major Freedom” would suit LK’s needs perfectly.

            • Adrian Gabriel says:

              Interesting LK. So you are suggesting that when a farmer came across a gold nugget (the manner in which they were typically found), he did not place any value upon this and use it to later fulfill his IOU transaction. As early as 3100BC the code of Menes describe a gold to silver ration which can only lead one to conclude that people were already valuing those commodities and perhaps using them as a medium of exchange. Please dig deeper into history, Mises’ Regression Theorem is realistic.

            • Major.Freedom says:


              “For Menger, money emerges from actual barter spot trades…”

              False. Member’s theory is that money emerges from barter, not spot barter.

              What you are doing LK is trying take Graeber’s theory that credit preceded money spot exchanges, and whore it out in order to attack a theory you are seemingly incapable of describing honestly and correctly. By falsely portraying Member’s theory of money as deriving from spot barter, that allows you to use Greaber’s theory as a challenge.

              Nowhere in Menger’s theory is there any dependency or requirement of “spot” barter. It is just barter, which when unqualified means ALL timespans between initiating and completing an exchange, from spot all the way to indefinite credit.

              Your silliness on this point was already demolished before. Why do you repeat it again as if that did not occur? DId you think I wouldn’t notice?

              • LK says:

                You are a laughable pathological liar, Major_freedom.

                (1) Graeber stated that contrary to the Mengerian theory money-less communities often do not come to have economies dominated by barter spot trades from which money emerges, as in Menger’s theory.

                Robert Murphy says:

                “This is an excellent point, and Graeber is right: In the standard exposition of a barter economy, economists typically think in terms of spot transactions. … Graeber is also right that the possibility of credit transactions expands the scope of a moneyless economy, and mitigates the problem of finding a double coincidence of wants.”

                (2) in Menger’s 1892 paper
                the starting point and explicitly stated
                assumption running through the paper is that a money-less human society would be one where goods are obtained to a significant extent by *barter spot transactions*. This is clear from the beginning (Menger 1892: 241–243).

                If Menger thought the economy was just based on gift exchange or debt/credit transactions there wouldn’t be any significant double coincidence of wants problem in the first place.

              • guest says:


                Do you suppose, in Menger’s worldview, that people worked for several hours in a row before getting paid at the end of the day?

                If so, don’t you think that Menger included in his definition of “spot transaction” trade agreements based on credit *for* specific goods?

                Menger would have to be pretty dense to miss the fact that, even in barter economies, people sometimes don’t get paid on the second for every second they work.

              • Bala says:

                “You are a laughable pathological liar, Major_freedom.”

                And you must have unimaginable chutzpah to even think of saying this, leave alone actually say this, LK.

  2. Bob Roddis says:

    Just days before discovering this article, I faced a phalanx of MMTers who insisted that the entire edifice of the Austrian School depended upon the false theory that pure spot trade “barter” preceded the invention of money when, in fact, the more complicated “barter for credit” process preceded the invention of money. The fact that “barter for credit” is an example of pure subjective exchange and actually reinforces Austrian analysis completely escapes them. Surprise.

    • LK says:

      No, they told you the Austrian theory of money is flawed, which is correct. But clearly you’re too dim to understand what is said to you.

      Even Menger’s more nuanced treatment in his article “Geld” of 1909 is flawed:


      • Major.Freedom says:

        No, it is not correct. Barter on credit is still barter.

        • LK says:

          Gift exchange is not barter spot trade, as in Menger’s 1895 theory, and as still in his 1909 theory.

          It doesn’t matter how much bizarre stupidity you spit out Major_Headcase, Menger’s theory is refuted by empirical evidence.

          • Bob Roddis says:

            Austrian analysis does not depend upon the existence or non-existence of barter spot trades.

            • LK says:

              I never said all “Austrian analysis” or all Austrian theories are refuted by the failure of the Mengerian theory of the origin of money they did. Don’t lie.

              • Major.Freedom says:

                Roddis is saying you are wrong to claim that SPOT barter is the origin of money. No, it is just barter.

                Before states sanctioned gold or silver or anything else as money, those commodities were already valued and exchanged. It is how states learned what to tax in the first place.

                States cannot tax what people never had in the first place. The onset of taxation was the onset of territorial theft of what people already had on their persons.

              • LK says:

                Robert Murphy says:

                “This is an excellent point, and Graeber is right: In the standard exposition of a barter economy, economists typically think in terms of spot transactions. … Graeber is also right that the possibility of credit transactions expands the scope of a moneyless economy, and mitigates the problem of finding a double coincidence of wants.”

              • LK says:

                “Before states sanctioned gold or silver or anything else as money, those commodities were already valued and exchanged. “

                It is false that in Menger’s theory all a commodity requires before becoming money is to have a value. That is not Menger’s argument. You are a laughable clown.

          • Major.Freedom says:

            Barter spot trade is not Menger’s theory of the origin of money.

            Barter trade is Menger’s theory of the origin of money.

      • Major.Freedom says:

        Any theory or observation that

        X form of barter precedes Y form of money

        where X and Y can be each either of credit or spot

        is not a theory that refutes or falsifies the theory that barter precedes money.

        • guest says:

          I noticed that, too.

          But I think LK is trying to say that barter for “credit” is the basis for credit, itself, being the money. Just represent the “credit” with pieces of paper and ta-da.

          The problem is that barter was never for some thing called “credit”, but the term credit expressed an as-yet-unpaid earned wage in terms of some actual good.

          So, it wasn’t barter for “credit”, but barter for credit TOWARD some good (or maybe service, depending on what was being earned).

          • LK says:

            No, Guest, you understand virtually nothing about the issues here nor about my argument.

            The argument is not that credit/debt exchanges gave rise to money,

            • guest says:

              LK, you told Bob Roddis that the MMT’ers told him the Austrian theory of money is flawed after he recounted how they appealed to “barter for credit”.

              That you would still find fault with his position and not address his point about “barter for credit” implies that you agree with the MMT’ers’ position.

              Roddis seemed to be granting the MMTers’ position (and, by extension, yours) that one could barter for something called “credit”.

              Roddis thought that showing barter before credit disproved the MMTer position that credit preceded money because the credit is deriving *its* value from things that have actual use-value.

              Not thinking MMTers to be that dense, I supposed that what they really meant was that if “credit” can become a medium of exchange, then it doesn’t matter if its value originally derived from use-value since its obviously not being valued for its use-value now – “credit” has no use-value.

              That would prove the bigger point that money doesn’t have to have a use-value to enable economic calculation.

              But since “credit” isn’t a thing, that’s not the case.

              Apology accepted.

          • Bob Roddis says:

            LK, you do you understand our position. We accept that Menger and Rothbard might have been wrong (more likely just superficial) on barter spot trades due to the existence of barter credit. Further, the fact that a state (which was the only type of protection agency around in the olden days) might have fashioned coins of fixed weight and purity out of materials highly valued by individuals does nothing to refute Austrian analysis of the way the world works and has always worked. This more detailed archeological evidence only further supports Austrian economic analysis. Some guy named Robert P. Murphy brilliantly explained this years ago.


            • Bob Roddis says:

              Typo in first sentence which should read:

              LK, you do NOT understand our position.

    • guest says:

      Also, credit TOWARD what? Credit toward chickens? Credit toward labor tasks or hours?

      Credit isn’t a thing, in itself.

  3. Bob Roddis says:

    This is just another pathetic attempt by LK to give the impression to low I.Q. “progressives” that there is still a real “problem” with Austrian analysis. It goes along with these other brilliant themes:

    1. Keynesian price distortion has nothing to do with the socialist calculation problem;

    2. Austrian theory is refuted when entrepreneurs hold back inventory for better times instead of having a fire sale;

    3. THE natural rate of the interest vs. natural rates of interest.

    4. “Mark up pricing” refutes Austrian analysis.


    • LK says:

      Wait, you just admitted above that the Mengerian / Misesian / Rothbardian theory of money is probably wrong, but now you say there are no problems of any kind with Austrian analysis? lol.

      • Bob Roddis says:

        I never said there were “no problems” of “any kind” with Austrian analysis. Don’t lie.

        My point is simple: Any alleged historical mistakes in the Mengerian / Misesian / Rothbardian theory of the origin of money do not negatively impact present day Austrian economic analysis, or the nature of human action and/or of economic calculation etc…. The richer historical record instead substantiates present day Austrian economic analysis.

        Bob Murphy said it best when he pointed out that you are not going to accept from a stranger something without society-wide value in exchange for your prize cow. Also, see my post above about gold, silver and slave girls.

        • LK says:

          What other problems are there with Austrian theories? Do tell.

          • Major.Freedom says:

            It does not automatically generate understanding of it in the reader’s mind.

            • Bob Roddis says:

              1. Hahahahahahahaha

              2. It tends to cause brain freeze in snooty know-it-all types by blaming them and their authoritarian cures for most of humanity’s problems and because it proposes giving free reign to the working class rabble so that they can generate undistorted prices.

    • guest says:

      “Mark-up pricing”


      Do businesses have to bring in more than it costs them to operate?

      I realize a priorism isn’t useful in the real world, and all, but maybe *this time* I have a point.

      Maybe LK can go check all the empirical data again just so he can’t be accused of relying on a priorism to claim that “the empirical evidence still says you’re wrong; no need to re-check”.

  4. Bob Roddis says:

    George Selgin: After I published my recent post on “The Myth of the Myth of Barter,” I tweeted the link to it to David Graeber himself, as I thought his response might be interesting.

    Was it ever! Before you could say Jack Robinson, Graeber let loose a fusillade of tweets, each more vicious than the last, calling my post “wildly simple-minded & wrong,” “one of the most embarrassing examples of ideological blindness & arrogant stupidity I’ve ever read,” and that sort of thing. Graeber even asked, in apparent disbelief, “This guy was a professor somewhere?” Think what you will of his understanding of monetary economics, or of his scholarship in general: when it comes to vitriolic hyperbole, Professor Graeber is no dilettante. Indeed, there were a lot more barbs besides these, and there have no doubt been others since. But as Graeber has blocked me on Twitter, presumably to prevent me from replying, I can no longer retrieve most of them.*


  5. Bob Roddis says:

    Have you noticed how the left uses the term “neoliberal” to describe our present Keynesian/Clintonista regime which they proceed to blame on Hayek? The left Keynesian Mr. Palley provided a link to his paper about “Gattopardo economics”:

    After 1980, the virtuous circle Keynesian growth model was replaced by a neoliberal growth model. There were two key changes. First, policymakers abandoned the commitment to full employment and replaced that commitment with a focus on low inflation targeting. Second, policy helped corporations sever the link between wages and productivity growth. These changes created a new economic model (Palley 2005). Before 1980, wages were the engine of demand growth. AFTER 1980, DEBT AND ASSET PRICE INFLATION BECAME THE ENGINES OF DEMAND GROWTH. [Emphasis added].

    So Hayekian.


    • LK says:

      There is no reference to Hayek or Austrian economics anywhere in the paper you cite. Would are you even talking about?

      As for asset bubbles, Hayek, Mises and Rothbard’s ABCT have jack to say about asset bubbles in their Austrian business cycle theory.

      This is well known. See Vaughn, K. I. 1994. Austrian Economics in America: The Migration of a Tradition, pp. 87–88.

      • Major.Freedom says:

        1. There doesn’t need to be a reference to Hayek in every left wing paper that attacks neoliberalism, just like you don’t need to cite Keynes in every post before such posts become a product of Keynes’ claims. Wow LK, your “critiques” are very petty.

        2. You are conflating the level of your understanding of ABCT, I.e. “jack”, with what ABCT actually says about asset bubbles. ABCT explains asset bubbles as the result of state induced below market interest rates and credit expansion. Assets are capital goods. Hayek’s “triangle” analysis is explicit in how expansion of “higher order” (read: assets) production puts the economy beyond the production possibility frontier, making a correction inevitable. Stocks are of course claims to the assets of businesses. The more asset prices rise, the more claims to those assets rise in value.

        • guest says:

          “Assets are capital goods. … expansion of “higher order” (read: assets) production puts the economy beyond the production possibility frontier, making a correction inevitable.”


      • Bob Roddis says:

        Prof. Barkley Rosser: Varieties Of Neoliberalism

        So we have these two strands of what the term means. Wiki says that Thatcher and Reagan were neoliberals, although neither ever associated themselves with the term. Those following the Peters line such as Brad DeLong would say they were not neoliberals, at least of their type. The problem or issue for Brad is whether or not his current freak flag flying is really a continuation of this Lippman-Eucken-Peters version of the idea, or whether in the current situation such flying is not just pushing himself into the Hayek-Friedman-Pinochet version of it.


  6. Adrian Gabriel says:

    It’s nice that Selgin mentioned you in one of his responses to Graeber, yet I am a bit skeptical in the conclusion Selgin draws in regards to Credit. Credit was not used prior to money. Money came before Credit, Credit just facilitated the delay of payment with a medium for a later time.

    Let us harken Mises, “This applies in the first place to the function fulfilled by money in facilitating credit transactions. It is simplest to regard this as part of its function as medium of exchange. Credit transactions are in fact nothing but the exchange of present goods against future goods.” – LVM

    Thus one can conclude that there must be a money in use, and credit was used to delay the payment of present goods, for future goods. Indeed one will exchange credit for factors, yet fulfill the credit in the future with cash flows (i.e. what we call commodity money). One could even suggest that if chickens were money, then that would fulfill the credit contract. There is always a medium that fulfills the credit contract. Yet at present, credit money becomes the medium until the contract is fulfilled.

    Hence, “Credit money, finally, is a claim falling due in the future that is used as a general medium of exchange.” -LVM

  7. Tel says:

    I tried having a look at the history rewrite but come on, no one can even start to take that seriously. Indian long houses sticked with food supervised by collective councils of the womynsis? Talk about a politically correct narrative… and therefore we owe it all to government… figures huh?

    Look, the value of studying recent cultures that did NOT invent money, and using this to make convenient presumptions about ancient cultures that DID invent money is laughable. Kind of like asking a cave painter about their design for a 3D computer graphics game console. Like asking the guy with a bow and arrow to discuss the finer points of multiple independently targetable reentry vehicles.

    At any rate, we can be confident that barter did exist in Europe because we have evidence of flint mines from around 3000BC where clearly very intense industry took place (as well as local manufacture of axe heads, arrow heads, etc). The product from these mimes and local manufacturing facilities was far too large for any nearby consumption. It could only have been traded… not just small time exchange amongst close knit tribal groups, but long distance trade with specialist merchants and long distances covered.

    Check out some history like the Grime’s Graves site, and many others. It makes perfect sense that flint rich areas would be exploited and the goods shipped as far and wide as could be achieved at the time. No coins or.other tokens were associated with this, certainly no paper money. The scope of the trade routes was larger than any village sized government at the time could supervise. We are talking Neolithic age here. They had no metal to speak of and no metallurgy.

    I seriously doubt they would have been able to.maintain a large scale and long term system of credit either, especially across so many unrelated jurisdictions.

  8. Bob Roddis says:

    Yes, but….

    Me: ” In order to engage in significant commercial activity WITH STRANGERS AND FOREIGNERS, one requires a medium of exchange that all parties to the transaction deem valuable AND know that other third parties will also deem valuable in the future. “

    LK: No, they don’t. The anthropological evidence shows that in large parts of the world for centuries and centuries people simply used barter in long distance trade and never invented money.

    A. H. Quiggin in A Survey of Primitive Money: The Beginnings of Currency:

    “Barter develops between areas of contrasted produce, such as coastal and inland, forested and open country. We see the barter of fish or shells for vegetables, game for bananas, &c., in Melanesia or the Congo, and the establishment of regular markets. Trading voyages such as those of Torres Straits and New Guinea take us a stage further by the introduction of conventional presents. But so far there is no need for any medium of exchange such as is commonly described as money.

    This is the state of affairs over about half the world at the present day. Barter suffices for most of the natives of Australia, New Zealand and the islands of the Pacific, and for the less-advanced peoples of Africa, Asia and the Americas, where native economy is not upset by the trader and the missionary.”
    Quiggin 1949: 321.

    March 31, 2016 at 1:58 AM



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