Krugman Admits His Model Has Been Wrong Since Great Depression
Them’s fighting words, huh? It’s not worth summarizing; if you are into this stuff, click the link and read.
David Stockman on Debt-Fueled Growth
From a recent post at David Stockman’s blog:
“Monetary central planning is failing to achieve Keynesian “escape velocity” because it has deeply impaired the engines of capitalist enterprise. Nowhere is this more apparent than in the grotesque financialization of American business that has occurred since the 1980s. As usual, this deformation is rooted in the massive growth of debt carried by non-financial businesses.”
Remember everyone, David Stockman (plus Tom Woods and other Austrian speakers) will be in Nashville for our annual “Night of Clarity” event August 15. Details here.
Money Doesn’t Really “Go Into” Other Financial Assets
This is one of those posts where I’m really nit-picky about commentary that typically comes from people on “my side.” Not trying to tear people down, just trying to raise the bar on precision of language. An excerpt:
[A] booming stock market doesn’t actually mean that there is an accumulation ofactual money in Manhattan. For one thing, stock prices are set on the margin. If XYZ stock has 1 million outstanding shares and is originally trading at $100, and Smith comes along and spends $120,000 buying 1,000 shares of XYZ from a previous owner, then the price of XYZ just jumped 20%, causing the total “market cap” to jump by $20 million. It’s not as if $20 million in currency just “went into” XYZ. No, it was the transfer of a mere $120,000 that did the trick, and even there, the $120,000 in actual money isn’t going to now be “in” the company XYZ, or even in the possession of the previous owner of the stock (for very long).
About That Intriguing Solar Panel Map Floating Around Social Media…
Did you catch this neat-o graphic a couple of weeks ago?
The total area of solar panels it would take to power the world, Europe, and Germany:
If you wanna see what’s wrong with this kind of demonstration, see my post.
“But Without the State, Who Would Lay the Tracks?”
Radical libertarians who spend a lot of time online (or do I repeat myself?) have developed a joke where they will say in parody, “But who will build the roads?” (Some of the Images in this Google search are funny, but your mileage may vary. Pun intended.) For a more recent example of when I myself entered this comedy genre, see this Tweet, which at least 40 people enjoyed.
The reason anarcho-capitalists find “Who will build the roads?” hilarious is that this is such an obviously silly justification for the State. Sure, it is reasonable for someone to ask, “How could there be a rule of law?” It’s perfectly understandable for someone to wonder, “Wouldn’t a small libertarian paradise be conquered by a neighboring State?” (Indeed, I considered these such good questions that I published a pamphlet in grad school addressing them.)
But to wonder how a fully privatized economy would build roads?! C’mon. Such a question doesn’t require a pamphlet (though Walter Block, as is his wont, has written an entire book). It can be settled in three sentences from Tom Woods: ““Who will build the roads?” is the question that belongs at the top of every libertarian drinking game. If we didn’t have forced labor, the argument runs, there would be no roads. There’d be a Sears store over there, and your house over here, and everyone involved would just be standing there scratching their heads.”
In this context, then, you can imagine my amusement to see economist Noah Smith give the following examples as he chides libertarians for their narrow focus on restricting government intervention in the economy:
But there are other kinds of freedom that matter a lot for the vast majority of people — people who don’t try to derive their ideologies from axioms, or spend time curled up with a Hayek book. For example, social freedom — the ability to express your individuality without having people ostracize you — is hugely important in most people’s lives…
Nor is the state always a destroyer of human freedom. It’s liberating to be able to hop in a car and drive to another city without stopping to pay a toll every few miles. It’s also liberating to be able to hop on a train and jaunt across a city without sitting in traffic.
Normally I italicize block quotes from other authors, but in this case I retained the original formatting. That italicized “train” is Noah’s. It would be foolish to suggest that I truly understand how this man’s mind works, but I *think* what he is doing there is to shake the reader, as it were. “You know, a TRAIN, for heaven’s sake. You like the option of taking a TRAIN, right? So maybe we need taxes after all, Mr. Stop-Taking-My-Money-At-Gunpoint.”
This is truly astounding. Noah’s not even (apparently) making an argument, say, about eminent domain reducing construction costs. No, he seems to be suggesting that we need the State if we want trains to exist. I feel as much need to argue with him on this point, as if he had claimed, “It’s also liberating to be able to buy nonfat yogurt, so I wish libertarians would stop focusing on limiting the State all the time.”
For those who want to see an excellent historical discussion of train builders–one who turned to State subsidies, the other who relied on good ol’ capitalism–see Burt Folsom’s The Myth of the Robber Barons.
Adam and Jesus
Going along with last week’s post, let me just extend the discussion. Looking at various portions of Christian doctrine in isolation, they seem nonsensical. However, putting them together yields at least a symmetry. I don’t expect this post to resonate with agnostics or atheists, but it may click with some Christians who have never thought of it this way. (By the way, I am here just repeating things I have heard others say; this isn’t new with me by any stretch.)
==> Adam was the first (created) man, who alone truly had free will. Yet he disobeyed God, and through him sin and death entered the world. The humans who came after Adam are condemned to eternal death, even though they personally didn’t commit his sin.
==> Jesus is the second Adam. He was the only man to fully obey God, and through Him righteousness and life entered the world. The humans who came after Jesus are blessed with eternal life, even though they personally didn’t perform His good works to merit such a reward.
More on FDIC
I wrote up my stance more at LibertyChat. The conclusion:
FDIC as implemented thus gives us the worst of both worlds: It lulls depositors into a false sense of security, so that there is little market discipline reining in reckless lending by the banks. Yet at the same time, given that the system is pushed to embrace risk, FDIC nonetheless carries a very paltry defense against defaults. In the event of a major downturn, the government would have to freshly dip into taxpayers in order to take money from us, so that it could give us our money back.
Argentina: Another In a Long Line of Keynesian Blogger Success Stories
An excerpt from my latest Mises CA post:
This sort of thing happens a lot with Keynesian policy recommendations. In addition to this latest episode involving Argentina, let’s not forget that Krugman in 2002 infamously called for a housing bubble (and then later tried in vain to walk it back). That didn’t turn out too well.
Also remember that Krugman in 2011 pointed to the VA as a “huge policy success story, which offers important lessons for future health reform.” Speaking of health care reform, let’s circle back to Matt Yglesias, who predicted in July 2013 (!): “I’ve got a new column up about the White House’s plans for the rollout of the Obamacare exchanges and I wanted to once again take the opportunity to lay down a marker and say once again that Obamacare implementation is going to be a huge political success.”
Yes, I agree with Krugman that there is an important lesson here, and it is this: Read Krugman and Yglesias religiously, then do the OPPOSITE of what they recommend.
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