Potpourri
==> This was a post I did on ethanol policy and food prices a few weeks ago. There’s a surprise.
==> Don’t worry about ethanol mandates causing high food prices. The US military is here to save the day.
==> There’s a famous econ blogger out there, who thinks the authorities need to boost Aggregate Demand, who links to one of my posts criticizing him and opens by saying, “So I see that the usual suspects…” Which blogger do I have in mind?
==> Dan McCarthy vs. Brad DeLong
==> Can’t remember if I already posted this…Anyway, I refuse to stick up BlueCross at gunpoint. Or at least, I won’t drive to the bank to do so.
When You Think a Lot About Liberty, Your Hair Falls Out
This is Stefan Molyneux, who for some inexplicable reason is a bigger star in the libertarian community than me…so far.
In all seriousness, this was a very pleasant interview. At the end we even dabble in religion, and no one is smited (though perhaps smitten).
Update on Scott Sumner Debate
A few people lately have been asking me about this. Well, I am still not yet ready to face Vader. I don’t want to lose a hand.
However, it occurs to me that I could win the debate just by saying, “Scott Sumner published this on his blog. And fans of the free market are looking to him as a guru?”
And what sort of consumption does China need more of? Obviously the urban middle class are doing OK. The big problem in China is the vast rural population, as well as the 100s of millions of migrant workers in the cities. Their living standards are quite low (albeit rising fast.) Most Chinese have enough to eat, and clothing is dirt cheap in China. So what comes next? If you are living in a ramshackle rural dwelling, then you dream of a sleek modern urban apartment. Yes, you might also want lots of other things, such as home appliances. And in the very long run you might want services like dog psychologists and spa treatments. But most Chinese are far from that level of consumption. So for now it’s a nice place to live and lots of stuff to put into your new house.
This is where George Carlin comes in. He pointed out that the only real purpose of a house is to have a place to “put all your stuff.” So if the Chinese need to consume far more goods (and they do) then they need a place to put all their stuff. That means more houses, lots more.
Of course there is a grain of truth in the skeptics’ critique. China has a state-dominated economy, and is building some houses in the wrong places. But that is certainly not the big story. Most houses are going up in big urban areas, where the Chinese are moving by the 100s of millions. Another criticism is that the Chinese can’t afford to live in these places. So print more money. The response is that this would create inflation. But weren’t you just telling me that Chinese housing prices were going to collapse? Is it a supply-side problem or a demand-side problem? Or a misallocation problem? I’ve tried to show that with many hundreds of millions of poor Chinese people still in need of housing, it’s not a major misallocation issue, as the vast majority of housing is being built in the cities where people are flocking in huge numbers.
In case that doesn’t convince you, check out the next post, where Sumner is more specific, and explains the type of dwelling-units that “China” “should” be producing. He’s actually over there right now, which is how he knows. He wouldn’t dream of being a central planner from across an ocean, for heaven’s sake. The guy has a PhD from Chicago!
Mises on “We Owe the Debt to Ourselves”
Wow, did I blog about this back when we had the fall of Western civilization? Anyway Mises–in a footnote of course–could have saved all of us a month of hassle:
The most popular of these doctrines is crystallized in the phrase: A public debt is no burden because we owe it to ourselves. If this were true, then the wholesale obliteration of the public debt would be an innocuous operation, a mere act of bookkeeping and accountancy. The fact is that the public debt embodies claims of people who have in the past entrusted funds to the govern- ment against all those who are daily producing new wealth. It burdens the pro- ducing strata for the benefit of another part of the people. It is possible to free the producers of new wealth from this burden by collecting the taxes required for the payments exclusively from the bondholders. But this means undisguised repudiation.–Human Action, Scholar’s Edition, p. 229
Yes Gene, God Knows the Future
Gene Callahan has an odd post where he writes:
It might seem that the doctrine of divine omniscience means that God knows the future. Many have so interpreted it.
I think that is wrong. God can only know what can be known. But the future is just a name we use for what has not yet happened and it does not, in fact, exist. What does not exist cannot be known.
God is surprised every moment, just like we are.
What’s even odder is that in the comments, Gene has no problem with viewing God as standing outside of time.
Well, I don’t have too much to say except, “I disagree with Gene on this one.” His whole argument rests on the premise that the future is, in principle, unknowable. But that’s sort of the thing under dispute. I claim that the future is, in principle, knowable–after all, God knows it!
My personal metaphor is that God is an author who wrote His story–history–and we are each one character in this amazing narrative. It’s not merely that we are in a certain chapter of a serial novel, where that author kinda sorta knows where things are heading. No, I think the novel is already written, and yet it seems to be unfolding in “real time” to us, just like Luke Skywalker really doesn’t know what he’s going to face at Cloud City. But those events are certainly “knowable”; George Lucas knew them for a while, and now so do those of us who have seen The Empire Strikes Back. (This is analogous to people who die and go to heaven. I think they become joined with God in some fashion, and suddenly see the whole divine plan. Among other things, now it is blindingly obvious why it was not only necessary, but a good thing for Awful Events XYZ to occur, even though we mortals, with our unimaginably small subset of the relevant information, get furious with God for allowing them to happen.)
In closing, here are some Biblical passages to show that Gene’s interpretation cannot be squared with standard Judaism or Christianity. (That doesn’t mean he’s wrong, but just pointing out how unusual his stance is.)
Jeremiah 1:5: “Before I formed you in the womb I knew you; Before you were born I sanctified you; I ordained you a prophet to the nations.”
Matthew 24:3 – 36 (with me editing out a lot):
3 Now as He sat on the Mount of Olives, the disciples came to Him privately, saying, “Tell us, when will these things be? And what will be the sign of Your coming, and of the end of the age?”
4 And Jesus answered and said to them: “Take heed that no one deceives you. 5 For many will come in My name, saying, ‘I am the Christ,’ and will deceive many. 6 And you will hear of wars and rumors of wars. See that you are not troubled; for all[a] these things must come to pass, but the end is not yet. 7 For nation will rise against nation, and kingdom against kingdom. And there will be famines, pestilences,[b] and earthquakes in various places. 8 All these are the beginning of sorrows.
…
23 “Then if anyone says to you, ‘Look, here is the Christ!’ or ‘There!’ do not believe it. 24 For false christs and false prophets will rise and show great signs and wonders to deceive, if possible, even the elect. 25 See, I have told you beforehand.
…
32 “Now learn this parable from the fig tree: When its branch has already become tender and puts forth leaves, you know that summer is near. 33 So you also, when you see all these things, know that it[d] is near—at the doors! 34 Assuredly, I say to you, this generation will by no means pass away till all these things take place. 35 Heaven and earth will pass away, but My words will by no means pass away.36 “But of that day and hour no one knows, not even the angels of heaven,[e] but My Father only.”
And this final example is pretty crystal clear, from Mark 14: 27-30:
Jesus Predicts Peter’s Denial
27 Then Jesus said to them, “All of you will be made to stumble because of Me this night, for it is written:
‘I will strike the Shepherd,
And the sheep will be scattered.’
28 “But after I have been raised, I will go before you to Galilee.”29 Peter said to Him, “Even if all are made to stumble, yet I will not be.”
30 Jesus said to him, “Assuredly, I say to you that today, even this night, before the rooster crows twice, you will deny Me three times.”
In that last example, not only does Jesus correctly predict what Peter will do in the near future–“correctly” of course if we are taking the Bible at face value in any way–but Jesus is giving one of many examples in the New Testament where He explains how He is fulfilling Old Testament prophesies.
I will stop here and let Gene speak for himself, because this obviously isn’t a matter of the weight of the evidence. In other words it’s not that Gene hasn’t come across passages in the Bible where the God of Moses or Jesus predict things that later come true. But, having given Gene the benefit of the doubt, I don’t know what else to do with his post. I cannot predict his response, that’s for sure…
Bursting Sumner’s Bubble, the Climax
I added the below in an update to my original post, but I want to make sure y’all see this one:
Thanks to the sleuthing of Dan, we are able to produce the following work of beauty:
(A) “I’m a believer in the EMH and hence skeptical of the idea of bubbles, a least as the term is usually interpreted. But I’m in the minority, the vast majority of people think bubbles exist.” — Scott Sumner, 9/7/2011.
(B) “Next we have to discuss what we mean by ‘bubble.’ Most people mean a sharp rise in prices, followed by a big decline. I agree with most people.” — Scott Sumner, 1/12/2012
(C) “I am constantly amazed that so many highly intelligent economists and finance-types seem incapable of understanding something as simple as an asset price bubble…[My argument] means that if bubbles are big price advances followed by substantial declines, then a world without bubbles would violate the EMH. Which means asset price bubbles do not violate the EMH.” — Scott Sumner, 8/9/2012
I submit that there are only two ways to reconcile (A) through (C):
Door #1: Sumner claims that not just his definition, but the definition of “bubble” used by most people, has changed during the last 11 months.
Door #2: Sumner claims that a “sharp rise in price, followed by a big decline” is quite a different thing from “big price advances followed by substantial declines.”
My work is done here.
Popping Sumner’s Bubble
[UPDATE below.]
I’m telling you guys, “Scott Sumner” is a computer program from another planet, sent to destroy the dollar and soften up Earth for the invasion. Today he writes:
I am constantly amazed that so many highly intelligent economists and finance-types seem incapable of understanding something as simple as an asset price bubble. There seems to be a common perception that bubbles are inconsistent with the EMH, and that you identify a bubble by noticing when an asset price has risen sharply, and then fallen. But suppose that asset prices never fell back after large advances? Suppose that at worst they leveled-off. In that case investors would have a surefire way of making money. Buy assets that were soaring in value. In that case only one of two outcomes could occur:
1. No price change.
2. Further increases in price.
A no lose proposition. That means that if bubbles are big price advances followed by substantial declines, then a world without bubbles would violate the EMH. Which means asset price bubbles do not violate the EMH.
OK, I am virtually certain that Sumner has written that the very term “bubble” is operationally meaningless, unless we throw the EMH out the window. But, I have a high opportunity cost for researching this.
So here’s my offer. For the first person to post evidence in the comments here, I will PayPal you:
(A) $10 if you find an example of what I’m talking about.
(B) $20 if we catch Sumner quite literally contradicting himself. For example, he might try to squirm out of it and say he is distinguishing between bubbles existing versus recognizing that we’re in one, in real-time. Or, he will say, “Ah, but notice in this recent post I said ‘if bubbles are big price advances followed by declines.’ In my earlier post, when I said bubbles were inconsistent with the EMH, I was using a different definition of bubble.”
I will be the final and sole arbiter of which category a Sumner post falls into.
You have your orders. Good luck, everyone.
UPDATE: Thanks to the sleuthing of Dan, we are able to produce the following work of beauty:
(A) “I’m a believer in the EMH and hence skeptical of the idea of bubbles, a least as the term is usually interpreted. But I’m in the minority, the vast majority of people think bubbles exist.” — Scott Sumner, 9/7/2011.
(B) “Next we have to discuss what we mean by ‘bubble.’ Most people mean a sharp rise in prices, followed by a big decline. I agree with most people.” — Scott Sumner, 1/12/2012
(C) “I am constantly amazed that so many highly intelligent economists and finance-types seem incapable of understanding something as simple as an asset price bubble…[My argument] means that if bubbles are big price advances followed by substantial declines, then a world without bubbles would violate the EMH. Which means asset price bubbles do not violate the EMH.” — Scott Sumner, 8/9/2012
I submit that there are only two ways to reconcile (A) through (C):
Door #1: Sumner claims that not just his definition, but the definition of “bubble” used by most people, has changed during the last 11 months.
Door #2: Sumner claims that a “sharp rise in price, followed by a big decline” is quite a different thing from “big price advances followed by substantial declines.”
My work is done here.
Tom Woods Gives Friendly Advice to Paul Krugman
Remember kids, it’s KrugmanDebate.com. From there you can go directly to the pledge page. I have plenty of fun ideas to promote this in the coming months, but I can’t do too much if the pledge total peaks. But if it keeps rising, then it’s still a “story” and I can work with it.
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