Why Money Doesn’t Measure Value
Marc Miles (an economist I’ve cited in some of my more mainstream policy work) was also flummoxed by the mischievous David Gordon, so I thought I needed to be the diplomat. The best part of the post:
[S]uppose the government follows Forbes and Ames’ advice, and pegs the dollar-price of an ounce of gold. Then a few years later, an asteroid containing 170,000 tons of gold lands on the earth, effectively doubling the amount of gold held by humans in just a few weeks. If the U.S. government did nothing, the dollar-price of gold would crash. To maintain the peg, therefore, the government would flood the world with new dollars, causing the dollar-price of everything BUT gold to skyrocket. Do Tamny and Miles deny that this would sure seem like “inflation” in the eyes of the general public, and that the objective “ruler” now seemed to have a malleable length after all?
*The Three Lads and the Lizard King*
I wrote a story for my son and decided others might enjoy it as well. At the risk of sounding melodramatic, let me say that this is the most important thing I have ever written; if I had to pick one item summarizing what I’ve learned so far in life, this would be it.
There’s actually a “Halloween hook” early in the story, so if you’re curious, I would encourage you to order it in the next day or two to get it in time for Halloween.
UPDATE: Here is the blurb at Amazon:
Three friends find themselves magically transported to a land where they learn of a prophecy–about them! The lads must use their newfound gifts of power in their battle against the Lizard King.
The Science Is Settled on the Threat of Man-Made Price Change
In a recent post I reproduced this funny excerpt from Cliff Asness’ thoughts on his 2010 open letter to Ben Bernanke warning of (price) inflation:
At the risk of enraging a whole different group (I promise I’m not denying anything I’m just making an analogy, and one I know is very far from dead on) I’m amazed that a Paul Krugman can look at 15+ years of the earth not warming and feel his beliefs need no modification or explanation, but 4 years of the CPI not inflating is reason not simply to declare victory, but to decry those who disagree with him as “Knaves and Fools.” In fact, rather than also anger Mr. Gore and Steyer, I hope they find this paragraph supportive as I’m saying these debates are rarely settled in either direction in short time frames. Now, if I were cheekier (cheek is not denial!) I’d ask if perhaps our letter was right and the inflation we predicted is in fact occurring in the depths of the ocean? Or, maybe we should ex post relabel our letter a warning of the risk of “extreme price action” including of course the extreme stability we have experienced in CPI these last few years.
As I was hoping would occur, a critic tried to respond to me that yes the climate models have too been right, since the warmest x years on record have occurred in the last 10 years. (The profanity-containing comment didn’t actually make it onto my post, incidentally.)
Indeed this is a standard move by the people defending the popular computer models predicting large increases in temperature if emissions do not slow significantly. OK great, then by the same token let’s look at the CPI:
Wow look at that! Yes, there was a one-off interruption in the constant evidence of man-made price change–which the inflation deniers called a “pause,” those dirty rotten anti-scientists–but the last three years have had the highest consumer prices on record. QED.
OK, ha ha, I’ve made my point. I’m not here arguing, “The climate models are all utterly insane and are funded solely by George Soros.” No, I’m just pointing out that if you’re the type of person who thinks the “warmest years on record” argument cinches it for the global warming warnings–even though the models predicted much warmer temperatures by now, given how much emissions have been–then you really can’t in good conscience love Paul Krugman for mocking the “derp” of analysts who still think we are in store for large-scale price inflation. Just be consistent, is all I’m asking.
A Carbon Tax Will Be Set By Politics, Not Science
In this latest IER post I walk through a blog from an enviro group in the Northwest, discussing revenue projections for Washington State if they impose a stiff carbon tax. My favorite part:
I encourage the reader to look again at the part I’ve put in bold from Eberhard’s commentary. Notice that she didn’t write, “After 2050, if we consult with scientists and economists and determine that the ‘social cost of carbon’ has risen then we can adjust our economically optimal level of taxing the negative externality.”
No, that’s not at all what she said. Rather, Eberhard wrote: “This scenario is the only one in which revenue tapers slightly in the final years…Washington could choose to continue de-carbonizing its economy even more after 2050 by pushing the price even higher. Doing so might result in a flat revenue stream.” In other words, Eberhard is trying to convince her readers to sign on for a carbon tax, because even if the revenue dries up prematurely, policymakers always have the option to jack up the rate of the tax in order to keep the dollars flowing in to state coffers.
Potpourri
==> This is a video I broadcast from a bunker to celebrate Mises’ birthday.
==> Ian Cioffi gives tips on how to make money hosting liberty events. So read up, and then hire me to speak!
==> Looks like I picked the right place to settle down. Apparently Nashville cops told the Secret Service to get lost after they were going to lie about having a warrant to harass an Obama critic. (At least one person asked me if I’m the guy in the story. No.)
==> In contrast, apparently this NYPD officer made a musician leave the subway even though he read that the man wasn’t breaking a law. (I say “apparently” because I couldn’t really hear the exact words when the musician claimed victory.) Notice how the public offers financial and moral support. If you click it, just “skim” through the first 4 minutes to get the gist. Unfortunately may be an omen for the future.
==> This Jimmy Kimmel bit with Eminem is actually pretty good. (Probably old, but I just saw it.)
==> Check out Cliff Asness’ half-apology for his 2010 (price) inflation warning to Bernanke. I love this part:
At the risk of enraging a whole different group (I promise I’m not denying anything I’m just making an analogy, and one I know is very far from dead on) I’m amazed that a Paul Krugman can look at 15+ years of the earth not warming and feel his beliefs need no modification or explanation, but 4 years of the CPI not inflating is reason not simply to declare victory, but to decry those who disagree with him as “Knaves and Fools.” In fact, rather than also anger Mr. Gore and Steyer, I hope they find this paragraph supportive as I’m saying these debates are rarely settled in either direction in short time frames. Now, if I were cheekier (cheek is not denial!) I’d ask if perhaps our letter was right and the inflation we predicted is in fact occurring in the depths of the ocean? Or, maybe we should ex post relabel our letter a warning of the risk of “extreme price action” including of course the extreme stability we have experienced in CPI these last few years.
To my knowledge, no one who (a) fervently believes the “science is settled on climate change” and (b) fervently believes “the evidence is on on the liquidity trap and austerity” has explained this tension.
What’s really interesting is that Asness goes on to make the ocean-analog argument, claiming that we do see price inflation in asset markets. The reason I like this so much is not because, “Phew, we can throw up that hypocrisy jab and run away from our bad CPI prediction.” Rather, I am truly fascinated by the psychology and rhetoric of both camps on this issue. I would appreciate more humility all around. I don’t expect Al Gore to jump off a bridge with each passing year, just like I shouldn’t be expected to fall on my knees in front of Krugman when the CPI comes out. On the other hand, everybody involved in these issues needs to deal with the fact that the incoming observations were not what some of us expected.
Be Like Ezra
We covered this in church today and it really struck me (Ezra 7: 9-10):
9 [Ezra] had begun his journey from Babylon on the first day of the first month, and he arrived in Jerusalem on the first day of the fifth month, for the gracious hand of his God was on him. 10 For Ezra had devoted himself to the study and observance of the Law of the Lord, and to teaching its decrees and laws in Israel.
Note that the gracious hand of God was on Ezra because he did the following, in this order:
(1) Study the Law of the Lord,
(2) observe it,
(3) teach it to others.
My pastor ended on a note of humility, saying, “Now if you’re like me, you’re probably thinking, ‘Well if I only preached what I practiced, I wouldn’t have too much to say.’ And that’s right, but I’d be saying it with much more power.”
Two LibertyChat Posts
==> In this one I explain that the term “Open Borders” has collapsed in face of the Ebola scare. And I don’t just mean among critics–Bryan Caplan himself literally admitted that he would be OK with a minor deviation from his principle because of Ebola. So…where does that leave the “Open Borders” movement?
==> In this one I relate how a cute story with my son turned into a sad commentary on humanity. I hate when that happens.
John Tamny Needs to Stop Lecturing People on Mises’ Monetary Views
You guys know I’m a big softie, but Tamny’s sarcastic finger-wagging at David Gordon was just too painful to bear. The specific controversy was whether Mises thought money was a “measuring rod” of value. (He did NOT.) Details here. But for my analogy:
I don’t mean to be histrionic about it, but for anyone who is intimately familiar with the work of Mises, the above musings from Tamny are simply breathtaking. It’s hard for me to come up with analogy to do it justice, but here goes: Imagine a scholar working for theAlbert Einstein Institute wrote a blog post arguing that gravity actually reflected the curvature of space-time. Then someone writes a rebuttal in Forbes, saying, “This is an odd claim, because Einstein himself taught us that everything is relative. One man’s curvature is another’s straight line.” Well, that analogy probably won’t do much for most readers, but I tried…
Recent Comments