Murphy Repeats His Famous Tom Woods Story
This is the second and last time I tell this anecdote. But this crowd was gushing over Tom so I couldn’t resist.
Note: In order to understand my initial joke, you need to know that when Tom introduced Dan McCarthy (the previous speaker), he said something like, “I don’t say this lightly, but Dan is one of my ten favorite people in the world, who I just love to have lunch with and discuss whatever comes to his mind.”
The C4L people posted my talk in several short YouTubes. If you don’t have the subsequent ones appearing above, go here. (Above I’ve embedded Part 5, so the next one is Part 6, etc.)
Krugman Has Booted the Hackers From His Blog Account
[UPDATE below.]
OK I finally figured it out: Hackers must have left the CRU scene of the crime, and had temporarily gotten control of Krugman’s NYT blog account. But now things are back to normal. Today Krugman writes:
So here’s where we are: China has done nothing to change its policy of massive currency manipulation, and its exports are surging. Meanwhile, Europe is going wild for fiscal austerity. Angela Merkel says that budget cuts will make Germany more competitive — but competitive against whom, exactly?
Exactly! Who in his right mind would think that European fiscal austerity would somehow boost European exports? Well, I guess this guy:
Some thoughts on the fiscal austerity mania now sweeping Europe: is anyone thinking seriously about how this affects the rest of the world, the US included?
We do have a framework for thinking about this issue: the Mundell-Fleming model. And according to that model (does anyone still learn this stuff?), fiscal contraction in one country under floating exchange rates is in fact contractionary for the world as a whole. The reason is that fiscal contraction leads to lower interest rates, which leads to currency depreciation, which improves the trade balance of the contracting country…
Note the exasperated tone of Krugman (writing 48 hours ago): Not only does he know that a country implementing fiscal austerity will gain a competitive advantage vis-a-vis the rest of the world, but it is so OBVIOUS that he asks rhetorically, “Doesn’t anybody read this stuff anymore?”
So clearly, the person writing that couldn’t have been Paul Krugman. Either that, or in 48 hours Krugman forgot the time he read the Mundell-Fleming model.
I know we’ve all chuckled about Krugman voting against the housing bubble after he voted for it, etc. etc., but I actually think he has committed an even more extreme contradiction on this issue. The two differences are:
(1) This is a lot more technical so the layman can’t really say one way or the other, and
(2) This reversal happened in 48 hours, whereas most of Krugman’s other contradictions take at least a few months to manifest themselves.
UPDATE: *sigh* OK Gene Callahan in the comments calls my bluff and says that Krugman’s latest post is consistent with his post of 48 hours ago. I actually don’t think it is–i.e. I still think Krugman is contradicting himself–but Gene is right, you wouldn’t know that for sure if you just read these two posts in isolation.
Specifically, what happens is that after Krugman asks (quoted above) “competitive against whom, exactly?” he goes on to explain that it’s competitive against the US. So Gene thinks Krugman is being perfectly consistent with his post from 48 hours ago, in which he said the Mundell-Fleming framework shows us that fiscal austerity in Europe will lower their budget deficits, lower interest rates, and stimulate their exports.
However, Gene should read one paragraph more, where Krugman says, “This isn’t going to work.” I am 95% sure Krugman says this, because he has been arguing for at least a year that we are in a liquidity trap and so budget deficits don’t raise interest rates. Thus, I claim that Krugman is saying in today’s post, that Merkel is wrong for thinking fiscal austerity will help Germany even in the short-run. (And then on top of that, it will hurt the rest of the world too.)
However, Krugman is very confusing at the end of today’s post, when he says Europe can’t export its problems to us.
So all in all, Gene is right that Krugman is not “clearly” contradicting himself here. That’s one of the advantages of writing in such a mysterious manner. At this point I don’t even know what the heck his argument is, and I really do try to understand where he is coming from.
Reynolds Doesn’t Think A Double Dip Is Coming
All Reynolds does in this piece is pick apart people who claim that unemployment figures are indicative that we are about to double dip. (HT2 DRH) OK, that’s fine as far as it goes.
Anyway I think we are definitely in store for a “double dip.” I think this is the second Great Depression.
I really don’t know what more the government and Fed would have to do, to set the economy up for a massive crash. 0% interest rates for a long time, trillion-dollar plus deficits, taking over banks, car companies, health care, energy sector… I really don’t understand why so many free market economists are still bullish about the economy. If all of the above really don’t make a big difference, why are we spending so much time “getting the message out”? If the most interventionist administration in 75 years is only going to give us a sluggish recovery, on the margin shouldn’t we be teaching kids to read or something?
The one indicator Reynolds gives of how he actually forecasts double dips, is that it seems to be due to Fed interest rate hikes. So I think Reynolds is saying as long as the Fed keeps interest rates down, we won’t have another recession.
I suppose that might be true in the sense that massive price inflation could kick in (because of Bernanke’s insane policies) and then the Fed would jack up interest rates, at which point the economy would collapse. But that’s not jumping out of Reynolds’ article. He seems to be saying, “As long as Bernanke doesn’t do something dumb like jack up interest rates, there’s nothing to worry about.”
A Krugman Kontradiction?
In which the author does his best impersonation of Scott Sumner…
I am really really trying to understand Krugman on his recent jihad against fiscal austerity proponents. (See this for example, when Krugman begins eating his own. His point is, “Hey, I’m not being partisan, I’m saying everyone is dumber than me.”)
Of course as an Austrian, I think there is a solid argument to be made for raising interest rates; so yes I can come up with a “model” in which tight money and tight fiscal policy is the right thing to do, notwithstanding high unemployment.
But I am open to the possibility that Krugman is right, and that using conventional mainstream models, there is no such case. That wouldn’t prove to me that Krugman’s colleagues are bozos, it would prove that their intuition is better than their formal models.
Yet I think I might be giving Krugman too much credit. For check out this post:
Some thoughts on the fiscal austerity mania now sweeping Europe: is anyone thinking seriously about how this affects the rest of the world, the US included?
We do have a framework for thinking about this issue: the Mundell-Fleming model. And according to that model (does anyone still learn this stuff?), fiscal contraction in one country under floating exchange rates is in fact contractionary for the world as a whole. The reason is that fiscal contraction leads to lower interest rates, which leads to currency depreciation, which improves the trade balance of the contracting country — partly offsetting the fiscal contraction, but also imposing a contraction on the rest of the world. (Rudi Dornbusch’s 1976 Brookings Paper went through all this.)
Now, the situation is complicated by the fact that monetary policy is up against the zero lower bound. Nonetheless, something much like this transmission mechanism seems to be happening right now…
This is Klassic Krugman. Look at the parts I’ve put in bold above. In order for Krugman to make his point in this particular blog post, it’s necessary that when European countries rein in their deficits, this will lower interest rates. Yes, he admits this step in the argument is a little tricky because of the zero-bound right now on interest rates, but he waves his hands and says it doesn’t affect his argument.
Yet, I am confident that if I spent an hour, I could come up with at least five Krugman posts from the last year, in which he accused other economists of being liars and fiends if they suggested that rising budget deficits would lead to higher interest rates. (Here’s one, I could come up with four more no problem.)
So this is Klassic Krugman: He can make some particular complication be decisive, in order to blow up somebody else’s argument when he doesn’t like that guy’s policy conclusion. But, if Krugman needs to ignore that complication in order reach Krugman’s desired policy conclusion, then it’s fine to safely set it aside for the moment.
What do you think kids? Fair or unfair? (Talking about me in this blog post.)
Who’s Afraid of Sticky Wages?
I am at the Rothbard Graduate Seminar, and I’m also wrapping up the manuscript for the book with Carlos Lara, so blogging will be light this week. In the meantime, I refuse to back down in my dispute with Greg Mankiw today at Mises.org:
The argument of sticky wages does not justify the existence of a central bank. Market prices, including wages, are flexible enough to smooth out macroeconomic disturbances. To the extent that workers hold out for a better job, rather than take a pay cut, this too reflects a legitimate outcome on a free market. Only in a simplistic macro model, with ad hoc assumptions about wages and prices, can the central bank improve the economy.
God Doesn’t Waste a Tear
The pastor at my old church used to frequently say that “God never wastes a tear in your life.” (That’s tear as in salty water from your eye, not tear as in a rip in your jeans.) His point was that all of the bad things that happened to you, can be turned around and made to serve a good purpose in God’s plan for the universe.
This is definitely true in my life. I was pretty miserable in grad school, reaching a very low place psychologically. And yet, as awful as that was, in retrospect I’m glad I went through it, because now I’m equipped to help other depressed people much better than if I had been happy-go-lucky my whole life. I view it as God dipping me down into a pool of despair to learn how to swim in it, but then yanking me back up when He saw I was really in danger of drowning.
I have lived a fairly sheltered life, relative to most of the world’s population, so I obviously do not have the credibility to speak for others. But I have seen footage of people surviving massive earthquakes or tidal waves, where their families get wiped out, and they come out saying, “God is great.” So I think that everyone has the ability to bounce back from these terrible experiences, even though they seem unbearable to people on the outside.
Naturally this observation isn’t an argument for the Christian worldview; you could just as easily pose the obvious question, “Why would a loving God let all this bad stuff happen?” I’m just saying that if you already believe on other grounds, it gives you incredible strength and endurance.
No matter what you have done, or what has happened to you, you can renew your life by accepting Jesus. Look at the conversion of Saul. He literally persecuted Christians. So in any “proper” system of morality and justice, that kind of guy should go kill himself when he realizes the truth of what he was doing.
But of course that’s not at all the “proper” response, in the Christian worldview. Saul became Paul and one of the greatest evangelists and promulgators of Christian doctrine in history. The author of those epistles needed to be an expert in Jewish law, and he needed to be utterly fearless. Knowing what he had done, and seeing that God rescued him from his error and gave him a second chance, allowed Saul to become Paul and do just that.
When I was an atheist, it was for intellectual reasons. I simply thought I could “prove” that belief in God was irrational.
But I know there are many non-believers who say, “Even if there is a God, he would want nothing to do with me. The things I have done are unforgivable.”
That is simply false. If you will accept the truth, if you will admit the obvious that this universe–not only the billions of stars but also the intrinsically fascinating and unexpected properties of abstract mathematics–was created by an intelligent Being, then it’s not that much more of a leap to realize that He knew full well every awful crime you were going to commit before you were even born.
And He has designed a beautiful path of atonement, not because you need to earn your salvation–it’s free–but because He knows you need to “do something” to help make up for, and make sense of, your previous life.
Think of it like this: At our high school every year they had the corny DARE anti-drug campaigns, when they’d ask us to sign pledges saying we wouldn’t drink that weekend etc. (I used to hate it because I didn’t drink but refused to sign on principle, whereas a bunch of kids signed the paper and got hammered that weekend.) The only speakers that the kids actually listened to, were people who came in and explained how their lives had gone off the rails because of drug and alcohol abuse. Since those people were for real, they actually had credibility and might have steered some of the students onto a safer path.
Get on the Tom Woods Train Before It Leaves the Station
I predict that Tom Woods’ forthcoming book on nullification is going to be huge–and I am more confident in this than in my CPI predictions. Many Free Advice readers surely know this already, but I have seen firsthand (in my not-so-random samples) that there are some seriously angry people scattered across the country. The beauty of nullification is that it is something local governments can actually do that is not asking for a can of Sherman but also not completely pointless like, “Call your senator.”
You can pre-order the book at Amazon for $16.47. (Note I’m not even making money if you click that link. It’s not that I am against commissions, it’s that I’m lazy.)
Here is the publisher’s description (HT2 LRC):
Unconstitutional laws are pouring out of Washington…but we can stop them. Just ask Thomas Jefferson. There is a “rightful remedy” to federal power grabs—it’s called Nullification.
In Nullification: How to Resist Federal Tyranny in the 21st Century, historian and New York Times bestselling author Thomas E. Woods, Jr. explains not only why nullification is the constitutional tool the Founders envisioned, but how it works—and has already been employed in cases ranging from upholding the First Amendment to knocking down slave laws before the Civil War. In Nullification, Woods shows:
* How the states were meant to be checks against federal tyranny—and how a growing roster of governors and state attorneys general are recognizing they need to become that again
* Why the Tenth Amendment to the Constitution reinforces the rights of states to nullify unconstitutional laws
* Why it was left to the states to uphold the simple principle that an unconstitutional law is no law at all
* Why, without nullification, ordinary Americans will continue to suffer the oppression of unjust, unconstitutional laws
* How, through nullification, “stimulus spending,” Obamacare, and other unconstitutional expansions of federal power can be rolled back
* PLUS thorough documentation of how the Founding Fathers believed nullification could be appliedNullification is not just a book—it could become a movement to restore the proper constitutional limits of the federal government. Powerful, provocative, and timely, Nullification is sure to stir debate and become a constitutional handbook for all liberty-loving Americans.
Incidentally, your last chance to meet Tom Woods face-to-face will probably be at the Nashville “Night of Clarity” in July, when he will have loads of his new book to sign. After that, with all the stalkers and marriage proposals, I’m sure his wife will insist he become a recluse. So come to Nashville in July! I know there are a few Free Advice readers who have already bought their tickets. Aren’t you just dying to meet Bob Roddis to discuss ’60s music and money dilution?
Thoughts on Dr. Seuss
* Although in many respects The Cat in the Hat is his classic work, I can’t help but feel that he spent too much time on plot development and not enough on the internal cadence. It was no One fish two fish red fish blue fish, that’s for sure.
* Speaking of the Cat (the one in the hat, in case you were unclear), how do we feel about him? Was he really reckless in the beginning–dropping the fish in the pot, and sinking the ship into the cake, etc.–only because he knew his special car would clean everything up? Or did those kids just get lucky? Let me put it this way: Would you let the Cat in the Hat do your taxes? On the one hand, you don’t want to be that guy in the story, who can only think about the downside to having Thing One and Thing Two running around the house. But on the other hand, it’s a Cat. In a Hat. And oh dear something is wrong with that.
* Does Seuss have an MD or a PhD? I can’t decide which I would prefer.
* It’s not so much that I care why the hand in Marvin K. Mooney Will You Please Go Now! is normal-sized on the first page, and ginormous on the second-last page. What I would like to know, is whether Dr. Seuss could give me a reason. If I asked him, would he say, “Oh, it’s because Marvin’s vision was being influenced by the hostility, and so he perceived the hand as ginormous when there was anger, but once Marvin decided to leave–choosing to walk, even though he had been offered numerous interesting options throughout the book–there was no more conflict, and so he perceived the hand as normal-sized once again.” OR would Dr. Seuss say, “What the heck are you talking about? Lemme see that. Hmm, I guess you’re right, I drew the hand way too big in that frame.” ?
I would be crushed if it were the latter.
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