16 Aug 2018


Potpourri 33 Comments

==> The latest Lara-Murphy Show is on stumbling blocks Carlos and I encountered when learning IBC.

==> Tom and I debate Bitcoin (is it fiat?) at the end of this episode.

==> Glenn Greenwald documents how MSNBC is an arm of the Democratic establishment.

==> I haven’t had a chance to read, but David Andolfatto on heterodox vs. orthodox monetary theorists.

==> There Will Be Blood

==> At IER, I tried to come up with an analogy to show what’s wrong with the claims about how much a carbon-tax-and-dividend program would “benefit” typical households:

Warren Buffett and the Milkshake Tax

Just to make sure my basic point goes through, let me use an even more exaggerated analogy: Suppose in an effort to crack down on obesity, the federal government levied a $325 million tax on milkshakes, to be enforced with draconian severity. Clearly, just about nobody in America would drink milkshakes anymore. However, suppose that every year, Warren Buffett (perhaps as part of a publicity stunt, or just to be funny) bought and drank one single milkshake on national television, and paid the huge “milkshake tax” afterwards. The government would then take the milkshake tax revenue, and send an equal dividend check of $1 to all 325 million Americans.

Now in this exaggerated example, defenders of the tax could truthfully say: “The average family of four will gain $4 every year from the milkshake tax.” This is because they wouldn’t pay any of the tax (since they would buy 0 milkshakes), and each person in the household would get $1 from Warren Buffett’s annual contribution.

But clearly, most Americans would not be happy with this scheme. In exchange for “gaining” $1 per year, they would never again get to enjoy a milkshake.

33 Responses to “Potpourri”

  1. Andrew says:

    This is my new favorite Murphy analogy.

    • Andrew says:

      Nice. It even has that signature couple of commenters who didn’t quite catch what Bob was getting at.

  2. Major_Freedom says:

    It’s not just MSNBC.

    Operation Mockingbird has corrupted most of the media networks.

    Just wait until the full CoC is revealed.

    Designed to keep the population asleep and blind.

  3. Transformer says:

    Suppose that each milkshake causes $325 million of environment damage and that without the tax everyone has 1 milkshake per year, and with the tax Warren Buffet is the only one.who has one.

    Without the tax everyone spends $1 on their milkshake and sustains $325 million dollars per person of environment loss. from all the shakes consumed

    With the tax they get $1 from the tax distribution, no milkshake , and $1 of environment damage each from Warrens’ milkshake.

    Unless they have lost $325 million of consumers surplus from their foregone milkshake (and if my maths is correct) then they are better off with the tax. I think the same argument would hold with a smaller tax and a smaller amount of environmental damage per milkshake.

    • Harold says:

      Transformer, I was about to make a similar comment.

      Bob’s legitimate gripe here is that some people advocating for the carbon tax are trying to sell it as though it would be a good thing even if there were no external costs. I think it should be clear that inventing arbitrary taxes then re-distributing the income is not going to make everyone better off, otherwise why stop at carbon? It is reasonable to point this out. The argument is valid against this selling of the tax, not against the tax itself.

      The reasonable case for redistribution is to offset the regressive aspects of a carbon tax which would otherwise disproportionately affect the poor.

      “And even for that portion of the population that are net recipients, they will still alter their behavior in light of the carbon tax, which reduces their standard of living.”

      The whole point of the tax is to change behaviour in the presence of an externality. Without this external cost it would reduce the standard of living. With the external costs it should not do so if the tax is at the right level. The good will then be consumed at the efficient level that would have occurred if the costs were internalised (I think).

      On a philosophical note: “If most Americans decided to get rid of their vehicles and take the bus, the tax wouldn’t “cost them” but it would still make them miserable.” It is possible it would make them happier, we don’t know. A society with excellent public transport and shared taxis may be a happier one, because the bus service would definitely get better if everyone was using it. There is no way to test this out as we cannot get there from here, but we do observe that many people in cities choose not to have a car, with only 23% of Manhattan households owning one.

      • The Original CC says:

        “but we do observe that many people in cities choose not to have a car, with only 23% of Manhattan households owning one.”

        Yeah, but it’s not b/c we’re taking buses. The buses here are terrible! 🙂

      • Andrew says:

        Europeans and urban Americans have near zero awareness of the infeasibility of public transport in the wide open expanses of the rural United States.

        • Harold says:

          ““Rural areas cover 97 percent of the nation’s land area but contain 19.3 percent of the population (about 60 million people),” Census Bureau Director John H. Thompson said. ”

          There would be immense difficulties arranging public transport for this thinly spread population. I concede that arrangements would need to made to allow rural dwellers to continue to afford a vehicle, but as it is less than 20% of the population this should be possible. Meanwhile the other 80% may get along fine.

      • Transformer says:

        Assuming for the sake of argument that taxing externalities is a practical way of controlling them then given the choice between the tax money raised being spent by politicians on lavish parties or returned to the taxpayers as a “environmental-tax dividend’ I am sure most poeple would prefer the latter.

        Calling it a “dividend” is perhaps a bit misleading since people are just getting their own money back but in the context of taxing externalities you can see the point that is being made – these taxes really could (in theory) make people better off.

  4. The Original CC says:

    Re. the milkshake tax: Your opponent would argue that if consuming a single milkshake honestly produced a negative externality of $325 million (per shake) than the welfare calculation changes: People were spared billions or trillions of damages from other people drinking milkshakes, they missed out on a (comparatively) tiny benefit from consuming milkshakes themselves (I say “tiny” b/c clearly the benefit of drinking a single milkshake is much less than $325m), and finally Warren Buffet consuming a milkshake but then giving each person a dollar is a wash.

    Sounds like a big win.

    But I think you probably have an issue with at least one aspect of my analogy… Or are you just disputing the claim that “even if carbon has no negative externalities it’s *still* a win for people”? (In that case, I’d say I love your analogy.)

  5. Major_Freedom says:

    Meanwhile, in the Clinton’s home town of Little Rock, Arkansas, this was just constructed:


    Here’s Chelsea Clinton:


    And here is the Vatican:


    If a cabal of actual Satanists took over the world’s highest positions of power, would you notice?


  6. Major_Freedom says:

    Meanwhile, in the Clinton’s home town of Little Rock, Arkansas, this was just constructed:


  7. Major_Freedom says:

    The Navy asked for renovations to Guantanamo Bay to house 13,000 new people and 5,000 support staff last year.


    Who will be sent to this massive newly expanded prison?

    • Major_Freedom says:

      There are currently 45,468 sealed federal indictments and climbing every month (~5,000 per month). Normal for a year is about 1,000.


      Massive crime wave purge, human trafficking, ritual sacrifice, evil nobody thought possible is being conducted by the world’s “elite”

      • Major_Freedom says:

        There are almost 10,000 sex crimes/human trafficking arrests since January 20, 2017.


        Almost total MSM blackout. Why?

        • Major_Freedom says:

          Over 50 Congressmen/other politicians have decided to step down or not run for re-election.


          • Major_Freedom says:

            The Omnibus bill signed last year provides funding for hundreds of MILLIONS of dollars for witness protection during military tribunals.


            The omnibus bill was actually titled, “Targeted Rewards for the Global Eradication of Human Trafficking”.

              • Major_Freedom says:

                The gravity of what’s unfolding….I tend towards atheism but I think the most accurate one word description of what is happening is…biblical.

                The Old Guard of the Earth, the NWO, worships Satan.

                The world is not what we all thought it was. The extent of what can finally be revealed (because they lost control of the Presidency after at least 65 years of controlling it) is going to be very hard to swallow.

                This is not going to be easy for many people to accept once it becomes mainstream.

                I post this all here so you all can comfort your family and friends, to be the strong ones in your family to help them understand.

                Something very terrible has happened. Something even worse was going to happen under a HRC administration. They never thought she was going to lose. The size abd scope of the criminal activity is so vast that if all was released up front, the Operation Mockingbird MSM would have kept the population in the dark by labelling it a “conspiracy theory” (term coined by the [C]lowns [I]n [A]merica to stop investigations into the JFK assassination).

                This term then morphed into a crude set of magic words the population was trained by the MSM to associate with reality itself.

                To blind us. Intentionally.

                The reason the MSM has gone bats#!t insane, and getting worse, is because the controllers are implicated in this worldwide purge of evil. A blinded population is the only thing preventing their own executions.

                Satanists gradually took over most of the world’s political power structures and used them to cover their criminal activity. In this country, FBI, DOJ, C_A, State Dept, Presidency, etc.

                These agencies/depts needed to be cleaned first. This is why we have seen mass firings.

  8. Josiah says:

    Major Freedom is apparently having a debate/conversation with himself

    • Dan says:

      I scored it a draw. Looking forward to the rematch.

    • Major_Freedom says:

      Allows for better readability. Wanted to avoid the posts getting laterally compressed.

    • Ben J says:

      I miss the good old days when Major Freedom was a reliable (if shockingly voluminous) hardline Rothbardian posting angry comments about malinvestment on Scott Sumner’s blog.

      Now he appears to be having some sort of full-blown conspiracy theory breakdown.

      Come back to us Major!

      • Andrew says:

        You should expect to see more “breakdowns.”

  9. Andrew says:

    I’m really liking this Major_Freedom remake, but it’s nothing like the original.

    • Harold says:

      I am concerned about MF.

  10. guest says:

    Regarding Selgin’s article.

    Selgin says:

    “Both versions attribute cycles to excessive monetary expansion. But each defines “excessive” monetary expansion differently. According to one version, a constant money supply alone is capable of averting cycles. …”

    “… The other version of the theory maintains instead that cycles are caused, not by growth in the money stock per se, but by growth in the supply of unbacked (“fiduciary”) bank money. …”

    “… In this alternative version of the theory, what matters is whether new money is either made of or backed by some commodity, like gold, or not. In a gold standard system, growth in the stock of gold, no matter how rapid, can never set off a cycle; in contrast any decline in the ratio of gold reserves to readily-redeemable bank liabilities can set a cycle in motion. In the case of a fiat money system, the two versions of the Austrian cycle theory coincide, for in this case there is no question of any “commodity-money” driven growth in the total quantity of money, whether that growth is due to central bank expansion or to a reduction in commercial banks’ reserve ratios.

    In the emphasized part, Selgin sees what most Austrians apparently do not: that to say that fiduciary media causes business cycles is meaningless in a fiat money system where the whole supply is, essentially, fiduciary media.

    This will be a PR disaster for Austrians if they don’t acknowledge that Rothbard abandoned the logic of the Action Axiom in order to hold that money substitutes could, in theory, become money proper when the commodity backing is removed.

    The view consistent with the Action Axiom is that real money is always a commodity, and that a money substitute’s function as money is dependent on its promise to be redeemable in money proper.

    • guest says:

      Again, from Selgin:

      “The next step in countering the FR=ABC thesis consists of showing that a banking system’s reserve ratio and its rate of monetary expansion are largely independent of one another. One might have a banking system that rests on slimmest of reserve cushions, in which the monetary supply doesn’t grow at all. Alternatively one could have a 100-percent reserve system in which the money stock grows at a rapid rate.

      I’m not agreeing with his overall point, but in the emphasized part he is precisely right.

      These two systems are functionally equivalent! So, you can’t fault only one and be consistent. You have to accept or reject both.

      I reject both in favor of the view that money proper can never not be a commodity and that unbacked notes are not performing the function of money, but rather are entirely speculative and are necessarily causing losses to someone in the economy, even as some are benefitting off of those necessary losses.

      And while it’s true that nobody would *knowingly* enter into a trade in which they do not benefit, unbacked paper (or any other unbacked thing, *wink, wink*) hides those losses.

  11. Osterreiher says:

    Bob, what about LK’s review of your Mises lecture on the Rothbardians Vs. the Free Bankers?

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