Economics, Selfishness, and the Gospel
The comments on my first attempt got swamped. (Hey kids, can we please drop the potty talk?)
The problem is that people started arguing about something that was irrelevant–I could say “orthogonal” to impress you–to my criticism of Bryan Caplan. So let me state it again. Maybe I’m wrong, but none of the critics (in particular Gene Callahan) in the comments of my original post addressed the crucial issue.
There are at least three similar questions revolving around this discussion:
(1) Is there a useful distinction between selfish and altruistic actions? Yes I think there is. Bryan and Gene agree with me.
(2) Do most people exhibit predictably selfish actions in many aspects of life? Yes I think this is probably true, depending on how we define “selfish.” (E.g. is it selfish if I would choose to give my newborn one bottle of milk instead of giving three babies in Australia a bottle each?)
(3) To be useful in understanding the world, does economic theory need to assume that people are selfish? I say NO, Bryan says YES, and I’m not sure Gene understood that this was the point I was making in my first post.
For example, it doesn’t matter how selfish or altruistic people are, price ceilings (if placed below the market-clearing level) will generate a shortage. Bryan’s post would have you believe that this textbook outcome only occurs if people are selfish, but Bryan is wrong (I claim).
Bryan says, “Rent control leads to shortages and/or declining quality – if landlords are selfish. If they loved their tenants as themselves, it’s a different story.”
I want Bryan (or his defenders) to spell this out a bit. It only makes sense to talk about price controls if there is a market with an equilibrium price in the first place.
I think if Bryan thought it through, he’d end up saying that the supply curve of rental units would be a horizontal line at $0, going over to the right and stopping at the total number of units in existence. But then in that case, the rent ceiling wouldn’t be below the equilibrium price.
OK so Bryan says, “Right, that’s basically what I meant. The theory could be true technically, but vacuous, in a world where everyone is totally altruistic.”
But hold on just a second. What if a parent allows a college dropout to move back home, but charges the kid rent? Does that prove the parent is selfish and actually doesn’t love the child?
More generally, what if we have a landlord who does indeed have an upward sloping supply curve, because he is familiar with the Misesian calculation argument and believes property and prices help coordinate the use of material resources? And then he ekes out a very humble existence, and donates the vast bulk of his after-tax income to charities around the world? Is that guy “selfish” and do we conclude that he loves himself more than the tenant whom he charges rent?
I am stressing all this because I think Mises was correct to argue that economic theory is a subset of a theory of human action. I think economic principles do indeed shed light on all human interactions, and don’t require an assumption of selfishness in the everyday sense of the word.
I am prepared to debate this; maybe Bryan is right. But his post seemed a bit too quick to me, and I wouldn’t want to misunderstand the foundations of our entire discipline because of a hasty mistake.
I am actually running this post on a Sunday, which is reserved for religious posts, because for a while I have been toying with the idea that the anti-capitalists are right when they deride the “philosophy of scarcity” of bourgeois economists. If everyone really followed the commands of Jesus, it’s entirely possible that society would be so incredibly transformed that humans would live on a different plane of existence.
Please don’t say, “Even if we had spaceships, there would still be tradeoffs.” You’re narrowly focusing on technological things here. Imagine if there really were a world in which not only were there no wars and taxes, but there were also no insults or hurt feelings. Ever. The people growing up in such a world wouldn’t know what it was like to be excluded from a game of tag, let alone would they know about the draft and fiat money.
I submit that we can barely conceive of what a relative paradise such an existence would be, compared to our current hell–designed by the prince of this world to fulfill his own agenda and unleash as much suffering on us as he can trick us into imposing on each other.
In a world where everyone truly lived as Jesus commanded, it is possible that the writings of free-market economists would seem naive or very limited. However, it’s important to note that even in that scenario, it’s not that the libertarian tenets would be violated. For example, people wouldn’t take from the rich to give to the poor (even though those terms probably wouldn’t mean anything at that point); the rich would voluntarily give to the poor.
Remember that “Thou shalt not steal” was in the 10 Commandments, as well as “Thou shalt not covet thy neighbor’s goods.” It’s not that Jesus was overturning property rights, He was pushing us beyond them.
Surprisingly Close Agreement Between Rowley and Murphy
[UPDATE below.]
The well-read von Pepe has been sending me links from Charles Rowley. I will have more to say on them in the future, but this one on stagflation got me excited. At first I was very pleased that Rowley’s arguments were so similar to my own. But then I got a little concerned.
Here’s an excerpt from my Washington Times op ed of February 19:
Prices rose 2.7 percent during 2009, according to the Bureau of Labor Statistics’ recent update of the Consumer Price Index (CPI). This is a worrisome fact because last year’s unemployment rate averaged more than 9 percent. This trend may signal a return of “stagflation,” a merger of stagnation and inflation.
…
To underscore that the U.S. economy has not been in deflation for some time, consider this: In the past decade, there were five years in which prices rose less than they did just last year. Does that sound as if the U.S. is still balanced on the edge of a deflationary cliff?
…
Some readers may remember the “misery index,” the sum of the unemployment and inflation rates. The official unemployment rate in 2009 averaged 9.3 percent, for a total misery-index rating of 12.0. This is the highest misery rating in 26 years, going all the way back to 1983 when it was 13.4.
Compare with Rowley’s blog post on February 20, the very next day:
For the time being the world sleeps, as money exerts its slow influence in the manner identified by Milton Friedman. First, monetary expansion will impact on real output, as already is the case. Then it will impact on the price level, slowly at first, but then with increasing venom. The first signs are already evident: the CPI rose 2.7 per cent in 2009, according to the recent update by the Bureau of Labor Statistics, and it did so against a backcloth of 9.3 per cent unemployment. This is a first green shoot of stagflation. A 2.7 per cent rate of price inflation is above the rate achieved in 5 out of the past 10 years in the United States. It does not signify a nation teetering on the edge of deflation.
Do you still remember the Misery Index that became such a central feature of economic evaluations during the stagflation era? This Index is the sum of the unemployment and the inflation rates at any point in time. In 2009, the Misery Index is measured at 12.0. This is the highest level of the index over the past 26 years, going right back to 1983, when it was 13.4, immediately before Paul Volcker’s monetary refrigerator conquered inflationary expectations.
OK not a smoking gun, I grant you. And I don’t even believe in intellectual property; I don’t own the idea of looking at the last decade to see how many years CPI rose less than in 2009.
But I’m not exactly a household name, Mr. Rowley. If indeed you had read my op ed before writing your own post, how ’bout a little something for the effort?
UPDATE: Actually there is a smoking gun. Rowley’s post came out on February 20, when the BLS the day before had registered the January price level.
So in my op ed, I refer to the 2.7% CPI increase during 2009 as due to the “recent” release from the BLS, but that was because I actually wrote the first draft of that op ed in late January. It just took a long time for my colleagues at PRI to vet it etc., and then place it in a newspaper.
So I’m pretty sure that’s conclusive heavy lifting of my piece, right?
Like I said, no big deal, I’m glad Rowley liked my points. There’s no “I” in Internet.
"Terrorist" a Meaningless Word
Glenn Greenwald documents the contradictions in the Establishment’s use of the word “terrorism”–which it denied to Joseph Stack, the Austin plane crasher:
Contrast the collective hesitance to call Stack a Terrorist with the extremely dubious circumstances under which that term is reflexively applied to Muslims. If a Muslim attacks a military base preparing to deploy soldiers to a war zone, that person is a Terrorist. If an American Muslim argues that violence against the U.S. (particularly when aimed at military targets) is justified due to American violence aimed at the Muslim world, that person is a Terrorist who deserves assassination. And if the U.S. military invades a Muslim country, Muslims who live in the invaded and occupied country and who fight back against the invading American army — by attacking nothing but military targets — are also Terrorists. Indeed, large numbers of detainees at Guantanamo were accused of being Terrorists for nothing more than attacking members of an invading foreign army in their country, including 14-year-old Mohamed Jawad, who spent many years in Guantanamo, accused (almost certainly falsely) of throwing a grenade at two American troops in Afghanistan who were part of an invading force in that country. Obviously, plots targeting civilians for death — the 9/11 attacks and attempts to blow up civilian aircraft — are pure terrorism, but a huge portion of the acts committed by Muslims that receive that label are not.
In sum: a Muslim who attacks military targets, including in war zones or even in their own countries that have been invaded by a foreign army, are Terrorists. A non-Muslim who flies an airplane into a government building in pursuit of a political agenda is not, or at least is not a Real Terrorist with a capital T — not the kind who should be tortured and thrown in a cage with no charges and assassinated with no due process. Nor are Christians who stand outside abortion clinics and murder doctors and clinic workers. Nor are acts undertaken by us or our favored allies designed to kill large numbers of civilians or which will recklessly cause such deaths as a means of terrorizing the population into desired behavioral change — the Glorious Shock and Awe campaign and the pummeling of Gaza. Except as a means for demonizing Muslims, the word is used so inconsistently and manipulatively that it is impoverished of any discernible meaning.
(BTW GG gives hyperlinks to the claims above; I’m too lazy to copy them all in.)
I have a couple more thoughts on this:
1) The reason I think this was legit, rather than a false flag operation, is that the government isn’t immediately calling it terrorism and using it to round up militia groups etc. I think they were caught flat-footed, and so their immediate response was to downplay it until they could figure out how they were going to play it. Fortunately for them, it’s fine if they call it terrorism and pass the Building Protection Act of 2010 in a few months (in which all owners of private jets must donate a kidney to the federal government). Nobody will remember the initial reaction and think twice.
2) I was having lunch with someone who pointed out another reason that the government and major media weren’t instantly labeling this a terrorist attack: It might cause too much cognitive dissonance among Americans who look like Stack. In other words, it’s very convenient to whip people up into a frenzy over brown guys named Mustafa who worship Allah and think the US government is evil. But a white guy named Joe who (it seems) is secular and thinks the IRS is evil…well, people might not reflexively hate that kind of person so much. So the government might not want to taint the wonderful word “terrorist”–which they’ve built up over the last few years through careful conditioning–by applying it to the latter guy.
Notes on Privatized Banking Through Whole Life, part 1
Carlos Lara is a businessman in Nashville who contacted me out of the blue back (I think) in late summer 2008. He was a student of Austrian economics and saw on one of my books that I also lived in Nashville. It was Carlos who introduced me to Nelson Nash’s concept of “infinite banking,” in which a household uses whole life insurance policies as a personal bank. In particular, Nash says that individuals should finance their car and (once they are really into it) home purchases through policy loans, rather than relying on loans from auto finance companies or mortgages.
Carlos and I are writing a book on this, due out in early summer. The more I learn about it, the more I think it’s a no brainer for every household where at least one person is still in prime working years to buy at least one whole life policy, as early as possible. In particular, a whole life policy gives people who run their own businesses a lot of flexibility because of the way the tax code works. (Yes, Carlos and I both have whole life policies.)
Given our intentions, it’s appropriate that I start laying the groundwork now. Not only will this help introduce you to the (initially odd) idea, but it will also make it easier for me to write my portions of the book.
As this series progresses, I’ll tackle specific topics in more depth, and handle some of the typical objections (like “buy term and invest the difference” and “the rate of return on a whole life policy is awful–are you nuts?!”). At this point, let me just paraphrase a point that someone at the IBC conference made to me (and yes I think he sells policies for a living): If Dave Ramsey is right and whole life is such a stupid place to put your money, then why did the government cap how much cash you could put into a particular policy before the tax exemption phases out? If the government wanted to prevent something from being used by super rich people, doesn’t that make you a bit curious to explore this thing?
In the next post I’ll discuss what a whole life insurance policy actually is. But if you can’t wait, try this.
Potpourri
* If you want to be a Summer Fellow and join the elite club, look here.
* Chip Knappenberger argues that it is far from obvious that late 20th century warming is mostly due to human activity.
* Krugman made the point I could not (for reasons of truce). Namely, people recently were making fun of the economists who had predicted the Eurozone was not a stable arrangement. And then, well, you know.
* Bob Roddis sends this Detroit News article on asset forfeiture policies. There is a bill afoot to say police can’t seize your property if they admit no crime occurred. (And this is news, mind you.)
* Jeff Tucker has some great one-liners in this blog post on medical costs. (I originally wrote “medical prices” to be more accurate, but c’mon it’s a blog post. I may type out “ain’t” before the day is done.)
* Jeff also gushes over the Hayek/Keynes rap video. OK OK, I had no idea it would get that many views. It is obviously a success. My initial reaction was totally totally wrong.
* Speaking of Russ Roberts, did you know he was the lyingest economist alive? (HT2 von Pepe)
* Just when you thought you’d nailed down Silas Barta’s position on climate science…
* About a week ago all the gold bugs were going nuts over this Tyler Durden discussion of a 1995 article on economic history (!!). The thing that I don’t get is, why did the Bank of England pressure the Fed to cut rates in 1927? That’s the theory I endorsed in my Depression book, thinking that the BofE was hurting because of the overvalued pound and so wanted the Fed to weaken the dollar by cutting US rates (thus fueling the stock market boom in the late 1920s). But if this prof whom Tyler Durden has found is right, then the Bank of England was actually suffering from a massive inflow of gold. So what’s the deal? Sure, it’s great to get new evidence that central bankers are naked liars, but Austrians need to do some soul-searching if they want to endorse this guy’s paper.
Conspiracy Section
* Imagine a dystopian novel where the government sends laptops home with kids, and then remotely activates the camera to spy on them and their families, and then punish the kids for things they were doing in their house. Oh wait, that’s the allegation in a lawsuit filed in Pennsylvania. (HT2 Tony G)
* Did you know that the Fabian Society’s stained glass window features a coat of arms with a wolf in sheep’s clothing?! Griffin in The Creature from Jekyll Island claimed this, and so I went to the Internet to confirm. I found a bunch of conspiracy websites saying it, but this site seems pretty neutral and there it is, bright as day.
* I was watching a documentary that was talking about how the bankers rammed through the Federal Reserve Act with as little fanfare as possible, in fact doing it two days before Christmas. Yep, checks out: The Act was enacted on December 23, 1913.
* The Georgia state senate recently passed a bill outlawing the involuntary implantation of microchips. Maybe you’re thinking it has to do with cattle or something. No, it’s humans. And you should be very relieved, only two people voted against the bill. (Not sure if they opposed bans on involuntary microchip placement, or if there were something odious tied to the bill.)
* I also tried to verify this inconceivable (I don’t think that word means what I think it means when the speaker is David Rockefeller) quotation I saw in a documentary. I don’t know how airtight this procedure is, but Wikiquote says it is sourced (whereas some other quotes attributed to Ben Franklin on fractional reserve banking were undocumented according to Wikiquote):
We are grateful to The Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years. But, the world is now much more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries. –David Rockefeller
Triple Play From Moderate Murphy
These media hits accumulated in my PRI inbox while I was at the Infinite Banking seminar. The op eds ran on different days, and hence do not constitute a true triple play–I know some of you are purists.
* In this Townhall article I talk about lessons from Hugo Chavez’ price control experiment.
* In this Buffalo News piece I talk about the “surprise” job losses in December (I wrote this a while ago), and the possible connection to the health care bill. (I think a version of this op ed may have also been published someplace else, and I had to paste it in to a blog post because there was no online version.)
* Whoa! My first op ed in the Washington Times. (The topic is stagflation.) If I get any more mainstream they’ll let me host the Grammys.
Are Consumer Prices Collapsing?!
If you just read the headlines, you would be under the impression that we were once again tottering on the brink of a deflationary cliff. Darn that Fed for raising the discount rate! CNBC says for example: “Core Consumer Prices Show First Drop in 28 Years”
(The actual text of the article was fairly neutral, I should concede.)
Here’s the actual situation: The raw CPI level rose 0.3% from December 2009 to January 2010. If that one-month change were to occur 11 more times, the CPI would rise a total of 4.2% for the year. Not Weimar Germany, but hardly a lack of “price pressures.”
Now all this talk about “the first fall in core CPI since December 1982” is referring to this fact: If you first seasonally adjust the data (which suppresses price hikes because prices typically rise in the first quarter of the year), and then strip out energy and food prices, then that (largely meaningless) number fell from December 2009 to January 2010.
For what it’s worth, the raw CPI rose 2.6% from January 2009 to January 2010. Obviously my warnings about runaway price inflation have yet to come to fruition, but the deflationist camp is hardly sitting pretty either.
And remember, we have been conditioned to think that 2009 was a period of dancing with deflation, when even the official price index has been rising at a decent clip. With this mindset, the Fed won’t “have” to take aggressive action to drain away excess reserves until the genie is not only out of the bottle, but has built a condo and renewed his driver’s license.
Angus, Thorn in Glenn Beck’s Side, Gives Us the Rest of the Story
I believe this guy is the real deal; the two phones calls sound like the same guy, and everything he says is consistent as far as I can tell. So let’s assume this is legit.
Remember “Angus” who called in to Glenn Beck and asked him why he had supported the bailout? If you didn’t see my original post, please go skim that and come back…
OK now that we’re all up to speed, Angus just emailed me the other day and said this (reproduced with permission):
Dr. Murphy,
This is [omitted] AKA Angus McClure. I was the Angus caller who called into the Glenn Beck show…
I wanted to give you a “bigger picture” of that call. The day before I called in to the Glenn Beck show…& tried to have a civil discussion with him right after he slandered MY choice and candidate for Governor Debra Medina (by the way she has the endorsement of Ron Paul) THAT call is here, I am the 2nd caller…
[I suggest starting it around 2:00 to hear Glenn yell at the previous Medina supporter and hang up on her, and then take Angus’ call.–RPM]
I called in as Angus (I couldn’t call in as Phil, I would have never gotten past the call screener) to treat him exactly the way he treats his callers with rival opinions. I am not a “truther.” I am just as irritated with truthers obsession with 911 as I am with Glenn Beck’s witch hunt to “expose” 911 truthers. I wanted to expose Beck for the fake that he is. He is a Neo Con, but sells himself as a Quasi-Libertarian.
** YES, I did attend the Patriotic event where you spoke. I was the guy who asked you your opinion about Reverse Mortgages. Remember? [Yes I do remember. How could I forget a real estate broker wearing a tin foil hat?–RPM]
…Yes, I am a Saved Christian and a member of Christ Presbyterian Church, the Church you referred to as the hotbed of libertarian subversion : )
I answered Angus and asked him whether my hunch was right, when Beck hung up on him and then cited Angus’ silence as proof of his idiocy. Here’s the answer:
HE hung up on me. I had a business associate in my office when I was on the call. She was listening on her iphone to the call real time with the delay, so she could hear both conversations (the time delay & the actual “real time” conversation) at the same time. She was shocked that they tried to make it sound like I hung up. I was very fired up! I wish I could have responded. “Why did you support the bailout Glenn? The reason is because you are a Fake Neo Con masquerading as a Quasi Libertarian.[“] Any conservative or libertarian would never give a proper excuse for being FOR ANY bailout…..but I did not get that opportunity. My business associate was actually more offended by something else Beck said. After gathering his thoughts after the call, Beck took a jab at the name “Angus.” He said something to the effect of “…you would think that someone named after a hamburger would be smarter than that.” Angus is a hamburger? NO! It is a type of cattle. My associate’s family does Cattle Ranching & has in Texas for several decades. She was appalled…..
So there you have it, kids, straight from Angus’ keyboard. I think we all must agree that this guy is from Texas, as no one else would have focused on the cattle stuff.
(BTW of course I am kidding about the tin foil hat. I forget that some readers are missing the irony gene so I have to always clarify.)
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