Does Austrian Economics Just Need a Name Change?
For a while I’ve thought Austrian economics just needs a new name. Arnold Kling got way more thoughtful reaction to his “recalculation argument” against stimulus spending, even though (as he himself acknowledged when he first unveiled it) his story and Austrian business cycle theory are almost identical once the bust ensues. So it seemed that the very name “Austrian business cycle theory” was an albatross around the neck of the particular set of ideas. (That, and the fact that some of the Austrians pushing it are fairly annoying.)
And then Stephan Kinsella relays this anecdote about Tom Woods’ debate with ING Chairman Tom McInerney (HT2 Bob Roddis):
McInerney had mentioned that Bernanke was a diligent and knowledgeable student of the Great Depression. So, when it came time for the Q&A, one audience member asked Woods to briefly explain the Austrian view of Great Depression and how it might differ from Bernanke’s view. After Woods did this, McIerney took the stage, and as if he were about to unload a devastating blow against Woods, said to him, “this might seem like a bit of an attack. Don’t take it too personally.” And then…. he began to rant about … the relatively small size of the country of Austria. I kid you not.
Some audience members began to laugh; others cringed, as McInerney dug his hole deeper while under the illusion that he was unleashing a deadly zinger. Woods kept trying to stage whisper that Austria had nothing to do with the school of Austrian economics, but McInerney, undeterred, plowed on. Thus, when Woods took the stage he said, “this might seem like an attack, but don’t take it too personally…” And then Woods commented that we may as well say we shouldn’t listen to Milton Friedman, since the GDP of Chicago is pretty low.
It’s even worse than the above suggests. Someone in the comments of Stephan’s post said:
I was there as well and unfortunately there was no video camera that i am aware of, so no video. But the above story is 100% true; one could feel the collective cringe when McInerney was spouting off about Austria. And it wasnt short. He spent a good 5-7minutes in his diatribe, trying to get audience participation by asking “Does anyone know the GDP of france…How about Italy….and austria….” It was very sad because people were snickering and he had no idea it was at him.
So that settles it, we need a new name. I suggest “reality-based economics.” Who could possibly oppose that?*
* Yes I am kidding.
Federal Government Overrides Executive Compensation Packages
CNBC reprints a NYT article:
Responding to the growing furor over the paychecks of executives at companies that received billions of dollars in the government’s financial rescue, the Obama administration will order the companies that received the most aid to deeply slash the compensation to their highest paid executives, an official involved in the decision said on Wednesday.
Under the plan, which will be announced in the next few days by the Treasury Department, the seven companies that received the most assistance will have to cut the annual salaries of their 25 best-paid executives by an average of about 90 percent from last year. Their total compensation — including bonuses and retirement contributions — will drop, on average, by about 50 percent. The companies are Citigroup…, Bank of America…, American International Group…, General Motors, Chrysler and the financing arms of the two automakers.
I don’t have the time to look into this more carefully, but I’m really hoping that the “pay czar” is only overriding compensation packages at companies that still have tax money (as opposed to ones that paid it back).
Regardless of the legal niceties, this is a very bad development. Now the unruly masses get a taste of seeing the noble DC crusaders pushing back against the corporate fat cats. Hip hip hooray! People not profits!
Oh one question: Where does the clawed back money go? I’m assuming it goes to the corporate shareholders, and not (say) a fund for baby formula for the homeless.
Those Dirty Rotten Taxes
It’s funny how tax codes explain a lot. I’m doing this state tax policy analysis for PRI. On the Tax Foundation’s list of state corporate income tax rates, they have notes about Miscellaneous stuff. Here’s the extra info on Michigan, besides its 4.95% corporate income tax:
There is an additional modified gross receipts tax (sales minus purchases from other firms) at a rate of 0.8%. The income and gross receipts taxes are subject to a 21.99% surtax on the calculated liability, with the maximum surtax being $6 million. Banks pay a tax on net worth at a rate of 0.235%.
In case you don’t know, Michigan’s economy isn’t so hot right now. (In fairness, Nevada and Florida also have awful unemployment, yet their tax codes are relatively decent, so taxes aren’t the whole story. Still Michigan’s not exactly welcoming businesses in.)
Wall Street Journal Defends the Predator State
I explain here. The intro:
In my last article on these pages, I offered criticism of a New York Times article that had praised the Lincoln administration’s property violations in pursuit of military objectives. Today I want to focus on a regular Wall Street Journal columnist who praises the Obama administration’s plans to violate property rights in pursuit of socializing medical care. The conventional dichotomy between “liberal” and “conservative” newspapers is spurious: all major news organizations support the welfare-warfare state.
I Stand Corrected: Tyler Cowen Does Support the Warfare State
A while back I had a tantrum because there were back-to-back posts in which both contributors to the ostensibly libertarian, free market blog “Marginal Revolution” supported the bank bailout and government health care. (Of course Tyler and Alex’s posts were nuanced; I’m not saying they quoted Chairman Mao. But follow the links if you don’t believe me.)
To illustrate what I thought was horribly wrong with Tyler and Alex’s rhetorical approach, I satirically started my post by saying they supported the use of torture, under certain conditions, and mimicked their arguments on the bailout and health care to “prove” that government torture–done properly, with an economist setting up the proper incentives–was just dandy. Since Tyler especially is a compassionate, open-minded, small-l libertarian, I thought this was a pretty good move.
Yet somebody either in the comments or in email said to me something like, “Bob, I’m not so sure Tyler opposes torture. It seems he has no problem with Big Government in principle.” I told the guy he was wrong, that Tyler seemed to be anti-militaristic and had even written posts saying it would be OK to let Guantanamo prisoners free even if we thought there was an x% chance of them going back to fight. (Don’t repeat that without finding the original Tyler post, which I can’t do right now; I don’t want to put words in his mouth, but he was definitely dismissive when Republicans were warning that the Gitmo detainees would kill more Americans if released. I.e. Tyler wasn’t challenging the premise that they were guilty, he was saying even if they were, blah blah blah.)
Well I stand corrected. In response to a reader who asked Tyler to list some successful government bureaucracies, Tyler writes:
Wars aside, here is a short and very incomplete list: the NIH, the Manhattan Project, U.C. Berkeley, the University of Michigan, Fairfax County, the World Trade Organization, the urban planners of postwar Germany, some of the Victorian public works and public health commissions, most of what goes on in Singapore, anywhere that J.S. Bach worked.
I am astounded. According to the official version of events, the multi-hundred-billion-dollar-per-year US defense apparatus let 19 guys with box cutters take out the Twin Towers and hit the Pentagon. Then our intelligence agencies gave totally wrong information, and moreover were so confident in their false info that the US military conquered another country because of it. It’s now been x years since President Bush declared “Mission Accomplished” in Iraq. The CIA has been caught engaged in a worldwide network of torture and coverup. And in this environment, the voracious reader Tyler Cowen, who is up to speed on Public Choice and libertarian writings, still subscribes to the typical view that, “Say what you will about government inefficiency, but the military gets the job done!”
Here’s what I wrote in two separate comments:
In what sense are war bureaucracies successful? In major wars it is two government bureaucracies fighting each other, so the fact that one side wins doesn’t prove anything. A coalition of the world’s most powerful militaries hasn’t been able to catch one guy (Osama bin Laden). (And for those who want to chastise my naivete and say he’s never existed or been dead for 5 years, OK, but then that just underscores my point that Tyler shouldn’t be citing wars as examples of government efficiency in achieving stated public aims.)
And:
Another thing, how is the Manhattan Project an example? Yes, they ended up creating an atomic weapon. But did they do it for less money than it would have taken a private company to do, if that had been legal and the company could reap the profits from selling A-bombs?
Tyler, have you read Richard Feynman’s autobiographical books? If so you know how absurdly bad the security was on the atomic secrets, right?
To say the Manhattan Project is a government success is like saying Amtrak is a success. After all, I just took it the other day and the train didn’t break down; I got from point A to point B.
OK now I’ve calmed down. Time to go to work. Fortunately the government was kind enough to pave me a road. High five!
Scott Sumner on Climate: So Close, Yet So Far Away
Scott you’re killing me, man. Folks, I was so thrilled that I could unambiguously endorse Scott Sumner’s latest blog post, where he talks about climate change rather than printing money. (In fact I was working on a joke in which the Fed creates trillions of carbon-eating dollar bills in order to simultaneously fix the economy and the climate.)
He starts out great. After all, he’s responding to Matt Yglesias so that earns him a B- alone. Then Scott shows that he’s no punk on the issue, either; Scott drops terms like “radiative forcing” and “albedo” like they’re Cobb-Douglas production functions. (Geek econ joke.) The climate ninjas’ heads pop up and say, “This one has skills. Proceed with caution, Shrill Tiger and Smearing Bear.” (Yes I am surely mixing up cultures.)
Scott then goes on to suggest that, properly computed, the optimal carbon tax might well be near zero! Woo hoo! That’s (sort of) what I’ve been saying [.pdf]!
And just as I’m firing up Blogger to shower hugs and kisses on Scott, he goes and says:
[A]s a good utilitarian I am going to use this blog platform to push two issues over the next few years. One you already know about; a forward-looking monetary policy targeting NGDP. And my second obsession will be a global tax/subsidy scheme based on the impact of various activities on global temperatures.
Waa, waa, waaaaaaaaaaaaa. (That’s music, not me whining.)
Potpourri
* A blog touting capitalism that was (according to an email I got from the author) inspired by my book.
* David Frum is astounded: “People think of gold not as a metal, but as an alternative form of money.” (HT2 Bob Roddis)
* As if in response, EPJ reports with delight: “I never thought I would see the day this happened. A major exchange is for all practical purposes accepting gold as a currency.”
* Mort Zuckerman says, “The free market is not up to the job of creating work.” That’s right, Morty. The free market creates goods and services. What kind of numbskull wants to create work? (Sorry I don’t remember who emailed me this one.)
* Mesa wins the thread: “Re: the recent climate geo-engineering debates, it’s kind of amusing to see so many instant experts on these subjects in the blogosphere (Matt Yglesias!, Ryan Avent!). There’s no subject that can’t be analyzed and put to bed in a 3 paragraph blog posting! It’s kind of the modern day analog of the all night dorm room bull session, without the pizza but with about the same level of expertise.”
Charlie Rose Interviews Charlie Rose
I was hoping for one more trick, but even so the below is pretty funny. (HT2 Gene Callahan.) I just love what these crazy kids can do nowadays with the intertubes.
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