Breakin’ the Law, Breakin’ the Law
So as I reported here a while back, I only put the number of people in our household when filling out the Census form–and I sent it it late too. Fight the power!
Now we’ve got Census guys snooping around our house. I came home when one of them was dropping off a card. He wanted me to answer a bunch of questions, but it was raining and 5pm so I said it wasn’t a good time.
The card suggests that all I have to do is call the number and tell them how many people are in my household. This is odd, since I already did do that on the original form, and the government has already spent a good $60 in manpower following up.
Does anyone know what my actual legal obligations are? Has anybody else played this game of chicken with the Census before? (And if so, did you foolishly discuss your strategy on a blog that may very well have a readership in excess of 200?)
Betting on Deflation
Krugman has been on the warpath the last few days, confirming my suspicion that my email is tapped. I had just told Jeff Tucker that I was done writing Mises Daily submissions for a while (I still have a bunch in the queue), and then BAM Krugman starts writing about Hayek.
Anyway in this post Krugman is (understandably) patting himself on the back about being right on interest rates and price inflation. As I’ve said before, I’m going to defer talk about CPI movements until I finish studying the Japanese Lost Decade. But in the meantime check out this from Wikipedia (which I found when looking up something prompted by reader Jacques Fournier):
In addition to the debt increase required to fund government spending in excess of tax revenues during a given year, some Treasury securities issued in prior years mature and must be “rolled-over” or replaced with new security issuance. During the financial crisis, the Treasury issued a sizable amount of relatively shorter-term debt, which caused the average maturity on total Treasury debt to reach a 25-year low of just more than 50 months in 2009. As of late 2009, roughly 43% of U.S. public debt needed to be rolled over within 12 months, the highest proportion since the mid-1980s.
That’s rather alarming, if the inflation-fear-mongers end up being right (and just off on their timing). Suppose price inflation starts kicking in and the Fed jacks up short-term interest rates. Before, I had been thinking only in terms of financing new debt issues. But if that quote is right (and still in the ballpark), that means more than $3 trillion in federal debt held by the public would need to be rolled over at a higher APR too, within a year of the hike.
Scott Sumner Writes My Hatchet Job For Me
Prodded by an exchange (which I can’t find right now…) in the comments with Silas Barta, I sent the following email to Scott Sumner:
Hi Scott,
I am thinking of doing a Mises Daily article explaining what would actually happen if you were made Fed chairman. Obviously I don’t think we would get out of the recession. So I want to walk step by step through what you *think* would happen, and what would *actually* happen. Then, for bonus points, I would show how you would accommodate the new data in your model, without realizing that you were nuts all along. : )
For an analogy, if I had done it with Keynesians, I would have said in December 2008, “They will go ahead and borrow and spend a bunch of money, and then they will be surprised at the low multiplier. That won’t make any sense, so they will say that private demand was falling faster than they had anticipated, and GDP would have fallen that much more had they not intervened.” etc.
So, can you point me to where you are the most specific about the actual implementation of your ideas? I.e. I know I’ve seen you get more specific than just, “They should target NGDP.”
Thanks,
Bob
Scott then answered (re-printed with permission):
Bob, First of all, I favor NGDP targeting regardless of whether it gets us out of the recession or not, and regardless of whether it produces deflation or hyperinflation. In fact deflation would be great, as our RGDP would be soaring, and if it produced hyperinflation we’d all starve to death in about 6 months anyway.
But in that case I doubt 5% NGDP growth would be the cause of the mass starvation. I favor 5% NGDP growth because I think NGDP measures what most people assume the CPI is measuring–nominal instabilityMy preferred proposal would be to have the Fed peg the price of an NGDP futures contract, and then adjust the monetary base in such a way as to keep the market equilibrium NGDP futures price equal to the policy goal (say 5% NGDP growth.) So I’d essentially be having the market determine the monetary base.As far as how I would accommodate new data, I guess if over a period of a few business cycles the economy seemed more unstable than under the previous policy regime, then I would go back to the previous regime.Scott
The Economics of Libertarianism, Confused
Today at Mises.org I respond to Ed Glaeser’s recent piece on libertarianism, in which he pointed to the BP oil spill as proof that we need government regulation:
We’ve seen this rhetorical move so often that it no longer shocks, but I ask the reader to stop for just a moment and consider what Glaeser has done. In order to “prove” that heavy-handed government intervention works — in contrast to a world of libertarian laissez-faire — Glaeser points out that our present system allows massive oil spills and corrupt judges.
This is really amazing when you comprehend it. It would be as if we were arguing about capitalism versus socialism, and Glaeser said, “Well, the greed of the Communist Party officials in the USSR clearly shows that the profit system can’t be trusted to provide a fair society.”
Let me make the point from a different angle. We can argue theoretically all we want about a purely private “regulatory” framework, in which insurance companies and private judicial rulings constrained businesses in their narrow pursuit of profits. But we also would want to occasionally check our theoretical musings against reality.
Now then, what system is currently in operation — the unregulated utopia of the libertarians? Or the highly regulated, social-democratic world of the interventionists? It is clearly the latter.
Suppose for the sake of argument that the libertarians are right, and that big government can’t be trusted to provide us with a safe environment, a drug-free world, inner cities free of crime and poverty, and a well-educated citizenry. In that case — if the libertarian critique of big government were correct — then wouldn’t the world look exactly like it currently does?
More Confirmation That Firing Frum Was the Right Thing to Do
I was reading Scott Sumner’s blog when I came across this quotation from David Frum:
The Obama administration is fretting over what to do next. More aid to states? Some kind of second stimulus? Or just hang on and hope for the best?
My own Republican Party is equally perplexed. It opposes more government spending. It wants the Bush tax cuts extended. But the Bush tax cuts are in place now — and they do not seem to have helped very much through these terrible two years.
I have a suggestion. I think we should overcome our inhibitions and rediscover the positive side of inflation. I know! I know! I’m a child of the 1970s too! I remember when menus came with little stickers affixed in a stack atop the original price. I remember crazed auction rooms where bidders scrambled to buy something, anything with their depreciating currency: paintings, suits of armor, Austro-Hungarian postage stamps.
But as awful as double-digit inflation was, single-digit deflation is worse. As triumphant as the victory over inflation was, we can’t always be re-fighting the last war.
This is a country deeply in debt. Inflation reduces the burden of debt — anonymously, impersonally, and across the board. I hope I don’t sound too nationalistic when I note that a lot of that debt is held by our Chinese friends. They ran huge trade surpluses with the United States when times were good. Time now for them to contribute a little back.
That last part (which I’ve put in bold) is my favorite. Forget Frum not understanding how the gold standard works–here he has descended into crude mercantilism. When times were good, the Chinese sent us TVs, clothes, and other goodies in exchange for pieces of paper promising that we would send them other pieces of paper (these latter with U.S. presidents on them). Now Frum thinks it’s time for those Chinese rascals to return the favor.
I don’t like a lot of AEI’s decisions, but, “If you canned David Frum, you made the right call.”
A Weak (But Common) Argument Against Christian Pacifism
[UPDATE below.]
Today the pastor of a church I have been attending recently went off on a bit of a tangent to explain why he thought Christianity did not imply pacifism. I happen to think it does, but I want to be clear that in this post, I am NOT making a case. All I’m doing is pointing out that one of the pastor’s trump cards is, in my view, really weak.
Specifically, he said something along these lines: “For me, one of the strongest pieces of evidence that Jesus was not commanding us to be pacifists, occurs in His exchange with the centurion. After the centurion says that he is familiar with authority and that all Jesus need do is say the word, Jesus turns to those present and says, ‘In all of Israel I haven’t seen such faith.’ Surely this would have been a great time for Jesus to condemn military service, if He really had a problem with it.”
I have heard Christians make this argument a lot. I think it’s incredibly weak, to the point of not being worth repeating. (Again, I am NOT saying you are wrong if you think it’s OK to be a Christian in the military, in this particular post. All I’m doing is pointing out that the above argument is very weak.)
First of all, it’s always dangerous to have evidence based on what someone did NOT do or say. We quite clearly have Jesus ordering us to turn the other cheek, etc. Jesus didn’t explicitly endorse the centurion’s career, He simply didn’t criticize it in the midst of praising the guy’s faith.
Second, it’s not as if General George Washington interacted with Jesus. This was a centurion serving the Roman Empire, which quite clearly conquered other nations and maintained law and order through crucifixions. So are we to say that Jesus had no problem with aggressive military empires?
Third, let’s use this same logic in two other cases. When Jesus was questioned by Herod and Pontius Pilate, He didn’t tell them they ought to resign. So are we to conclude that Jesus has no problem with the governmental institutions at that time? In particular, can I challenge American evangelicals of today that our form of government departs from the Biblically preferred method of monarchy? (Note that I’m not here taking a stand on monarchy versus democratic republicanism–I’m just pointing out that American evangelicals who love the U.S. military would not use the centurion argument in these other contexts.)
Also, Pilate famously asked, “What is truth?” and the Bible records no answer from Jesus. Are we to conclude that Christianity is compatible with relativism, because Jesus had a great opportunity there to set Pilate straight on truth, and chose not to?
What was really frustrating to me about the sermon was that the pastor said at least twice that “eye for an eye, tooth for a tooth” was “sewn into us,” meaning that it just cries out as just that the criminal should receive a proportionate punishment. This astounded me, because the whole point of the Sermon on the Mount is that we are supposed to rise above that mentality.
The pastor didn’t sweep this under the rug completely; he said something about a distinction between it being just to do something, versus actually enforcing the punishment. OK fair enough.
But when I say I think Jesus wanted us to be pacifists–at least as a general rule–I mean that’s what He wanted us to strive for, at the height of commendable behavior. I am not saying it would be unjust to kill a murderer, I’m saying Jesus didn’t act like that when He lived among us as a role model, and He quite explicitly told us not to act like that ourselves:
38 “You have heard that it was said, ‘An eye for an eye and a tooth for a tooth.’[a] 39 But I tell you not to resist an evil person. But whoever slaps you on your right cheek, turn the other to him also. 40 If anyone wants to sue you and take away your tunic, let him have your cloak also. 41 And whoever compels you to go one mile, go with him two. 42 Give to him who asks you, and from him who wants to borrow from you do not turn away.
43 “You have heard that it was said, ‘You shall love your neighbor[b] and hate your enemy.’ 44 But I say to you, love your enemies, bless those who curse you, do good to those who hate you, and pray for those who spitefully use you and persecute you,[c] 45 that you may be sons of your Father in heaven; for He makes His sun rise on the evil and on the good, and sends rain on the just and on the unjust. 46 For if you love those who love you, what reward have you? Do not even the tax collectors do the same? 47 And if you greet your brethren[d] only, what do you do more than others? Do not even the tax collectors[e] do so? 48 Therefore you shall be perfect, just as your Father in heaven is perfect.
UPDATE: You know, is the apparent dichotomy between the Sermon on the Mount and Old Testament law, really as simple as the distinction between legality and morality? In libertarianism, I like to preface an argument for drug legalization by saying, “Just because something should be legal, doesn’t make it moral. I don’t think adultery should be a crime, either, but I’m not thereby condoning infidelity to your spouse.”
So do we have the opposite thing going on here? God lays down the Law–literally–to Moses, and Jesus comes along and assures us that He’s not overturning it. However, is He teaching us that the moral thing to do is refrain from meting out the punishment that someone deserves–just as God has spared us from hell?
In other words, going back to the pastor’s sermon today, we can say, “Yes God told us it would be legal to kill a murderer, but Jesus said it would be immoral.”
Can you Biblical experts tell me how this squares with Paul, Luther, etc.?
A Fed Puzzle
If I were paid to blog, I would whip up a really fancy post for y’all, with purdy charts and commentary. But I’m not, so I won’t.
The intriguing Von Pepe sends me this very important Zero Hedge article looking at the Fed’s activities from numerous angles. It is truly a “must read” for those who are trying to figure out exactly what Bernanke’s up to, and when the inflation is going to hit.
However, something doesn’t add up. The guy shows a chart where total Fed assets and Excess Reserves move in tandem, but then starting in early March, Excess Reserves decline while total Fed assets continue to rise. This leads the guest author to write:
The net printing shown above has come through a decline in bank Excess Reserves. Whereas before such declines in Excess Reserves were met by Fed sterilization through a shrinkage of the Fed’s own balance sheet (for example, see May – July 2009), nothing of the sort has happened this time. That money is just being allowed to enter the system, period.
This stunned me, because I have been watching this stuff on FRED like a hawk. I thought that the Excess Reserves were still bottled up nicely.
I went and checked again; yep, the gap between Total and Excess Reserves is the same, up through the data points that this guy is using.
So what’s the deal? Since March, apparently total Fed assets have been rising, while Total Bank Reserves have been falling. Does anyone know this stuff enough to explain what’s going on?
A Sneak Peek at “Principles of Economics”
[The following was posted at the Mises blog.]
We have just added the finishing touches to the syllabus for Principles of Economics, the online Mises Academy class that I will be teaching which begins September 7, and which is open for enrollment now. You can click here to see a screenshot (If your browser automatically shrinks the image, click it to view it fully-sized). I think you will agree that this is going to be an exciting economics class. (And no, that’s not an oxymoron.)
The one thing missing from the syllabus is the links to various chunks of my soon-to-be-released book, Lessons for the Young Economist. The manuscript is done, and right now the graphics people are laying it out, inserting the artwork, etc. But Jeff Tucker reviewed the manuscript when he first saw it, and his praise actually made me blush.
Obviously, if you know students from about 7th through 10th grades, they are the ideal candidates for the book and accompanying class. But I suspect even older students–including grownups–would benefit as well. In all honesty, I learned some economics just writing the book. Richard Feynman once said that if physicists couldn’t teach something to undergraduates, then they didn’t really understand that phenomenon very well. In the same way, I had to fill in some gaps in my own understanding, in order to break down difficult concepts for junior high readers.
For example, when talking about methodological individualism (without using such intimidating vocabulary), I had to deal with things like people with multiple personalities. And when discussing the consequences of drug prohibition, I ended up explaining (in a footnote) why drug dealers couldn’t simply deposit their cash with a trusted third party to avoid shoot-outs during drug deals in parking garages. I had never worried about these details before, because economists typically discuss them at such a high-brow level that we breeze right through the mechanics.
Let me say a few words about the potential for the Mises Academy in general. At first this seemed like a great way to supplement the Mises Institute’s current activities, but the more it progresses, the more revolutionary and significant it becomes. Because of the economies of scale, a popular professor could actually make a living just teaching one of a standard selection of classes (on a rotating schedule) every four months.
At first this seemed like a good way for current faculty to make some extra dough, and for fans of the Institute to receive more specialized instruction than they could get just from reading Mises.org articles. But the implications are much deeper. The bigger the Academy grows, the more professors it can support. That means students who are now in high school and love Austrian economics, can pursue their dreams with much more job security.
In other words, it is still the case that a promising young person might shy away from pursuing a PhD in Austrian economics, because he or she doesn’t want to go into traditional academia. After all, there are only so many resident scholars that can live in Auburn, AL or the few other friendly places scattered across the world. Yet as the Academy grows, more and more people can actually support themselves by becoming world experts in Austrian economics (and related fields). For example, right now it would be incredibly risky to get a PhD in philosophy with a dissertation on Rothbardian ethics. But in five years, if the Academy takes off us we hope it will, that might not be so risky after all.
For those of you who like the idea of the online Academy, but aren’t sure if it will live up to its promise, here are some of the evaluations from my students from the business cycle class that wrapped up in June:
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I thought this was an awesome class. Bob is THE MAN! Not only does he have an amazing understanding of economics – HE CAN TEACH as well. I once congratulated one of my professors for getting his doctorate while I was taking his class in college. I’ll never forget what he told me…. that any moron can take a test and get his doctorate – but what truly sets the great professors apart is the ability to TEACH and pass the knowledge on to the students. Bob has that gift and that is so important for those of us that want to learn. Most of us here are econ geeks so the material is not dry for us, but for those who are new – it’s easy to get lost in this stuff and become bored very quickly. Bob prevents that from ever happening with interesting lectures and well chosen assignments.
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I loved the lectures and how open professor Murphy was with answering questions. He was able to switch from addressing introductory level questions to much more in depth questions without talking down to anyone or talking too much over anybody’s head.
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The syllabus was amazing in how it progressed from the core principles of capital and monetary theory to the impact of an increase in genuine savings to the impact of a credit expansion to criticisms of ABCT to empirical evidence.
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Murphy was fantastic in both lectures and Q&A. I’ve listened to and appreciated the presentations of many different lecturers in the audio library on mises.org. But those are generally conventional lectures with perhaps a short Q&A session at the end. Dr. Murphy’s clarity, candor, and focus were really showcased in the extended Q&A sessions after lectures and during the office hours. He is very precise in his use of language, thinks quickly, and gives complete and patient answers
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“I love Dr. Murphy’s practical approach to teaching, the selection of reading, podcast, and PowerPoint materials were outstanding, the lectures were well-organized and conversational in tone, and the course itself was seamlessly integrated into a coherent whole. The online venue is also well-organized and easy to navigate.
At this moment, I am one course and one paper away from a master’s in _______ from ______ University. This is the only online _______ training program with full accreditation, and each 10-week class costs $1700.00. Yet not one of the classes I have taken in that program even remotely compares in quality to this class on the business cycle, though the latter costs only $255 (all materials included!). From literally every standpoint — quality of materials, teacher involvement and interaction with students, discussion forums, and use of multi-media, Mises wins hands down, and at a small fraction of the cost. I couldn’t be more satisfied. Thank you for a wonderful learning experience — seriously.“
As a final thought, you should know that we are expecting a large demand for the Principles class. Although the Institute has the ability to handle a large student load, there is a technical upper limit because of the live video lectures. We are going to start promoting the class with a full-court press in about two weeks. If you (or a young person you have in mind) want to take part in September, I encourage you to register now and reserve your spot.
I hope to see you in September!
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