Wednesday, December 21, 2011

The "stimulus" that failed to "fix" the economy

Paul Krugman is at it again, claiming that the Obama "stimulus" of 2009 would be too weak to push the U.S. economy back to full employment. Why? The government did not "spend" enough money.

From what I have read of Krugman's commentary on this particular issue, he is trying to claim that he was some sort of prophet, and that had Obama listened to him instead of his unworthy "advisers," the government would have pumped another $400 billion into the economy and that new money magically would have transformed everything. Yes, out of the trillions and trillions of dollars that have been spread around the world since 2008, it all came down to a measly $400 billion.

While it is true that Krugman accurately noted that this downturn would last for a long time, he got his reasoning wrong. The problem is that Krugman, as a Keynesian macro guy, cannot see anything but aggregates, which is not economics at all. There is no such thing as "aggregate demand" and "aggregate supply," or at least something with such terms that can be represented in the crude "Keynesian Cross" or an AD-AS graph.

With the Keynesians, spending is spending, period, and it does not matter where the spending occurs, just as long as someone somewhere is SPENDING. This is the crudest form of analysis, and I can say forthwith that anyone who believes this is not an economist.

In a couple of links, Sheldon Richman explains first why the "stimulus" did not turn around the economy, and, why more "stimulus" money would fail to have made a difference.

Richman understands something that Krugman and his followers do not: that the creation of new money does not create real wealth, but rather serves to transfer wealth:
But it’s more than that. Since the new money gets into some hands rather than others first, monetary expansion — that is, inflation — changes the pattern of prices and production that would have resulted from voluntary exchange under sound money. Among the prices distorted are interest rates. By doing so, inflation transfers resources from those who produce wealth to others.

Inflation, therefore, is one more government income-distribution program. The lucky early recipients of the fresh fiat money gain purchasing power — command over scarce resources — at the expense of everyone else.
Economies do not grow because government showers them with new money; they grow when people can take existing resources and use them in ways to create more wealth than they did before, or they find new ways to use these resources, often turning them into new kinds of resources. For example, before entrepreneurs found a way to turn crude oil into a useable fuel, kerosene, and to make it widely available at a good price, petroleum was seen as a nuisance, not a resource.

This is something that I have concluded Krugman and others are incapable of understanding. To these people, entrepreneurs are nothing more than parasites, people who somehow profit at the misery of others. In their minds, the State is the creator of all wealth, period.

Under this kind of thinking, production and consumption are two separate and unrelated things. More production does not enable people to consume more; in the Krugman-Keynesian view, more production actually is bad, because then it means that consumers have to find ways to "buy back" the goods that have been created.

Krugman also confuses consumption, which is purposeful activity, with "spending," which is activity that exists not to satisfy the needs and wants of individuals, but rather is a mechanism to "buy back" that which was produced and to enable producers to make more stuff, and so on.

As I said before, this is not economics. It is the creation of mechanistic models that fail to reflect human action. Unfortunately, it is what dominates the thinking in government and academe and even Wall Street, and as long as policies are being made under such direction, this depression not only will continue, but get worse.

85 comments:

American Patriot said...

Like I said before, if government spending, planning, etc. were the answer to our ills, places like the Soviet Union, Cuba, N. Korea, Venezuela, etc would have been paradise by comparison to lesser nations like the U.S.A.

Krugman is such political hack that his mere mention gives me neausea!

ayassos said...

I suppose that $400 billion figure you are using is the famous Krugman Shortfall. I have read elsewhere that the number Krugman was after as pure stimulus was $1.3 trillion, as opposed to the $800 billion mix of spending, transfer payments and tax breaks. I can't help but agree with you. Prof. Anderson, that the government has, in fact, spent multiples of the formal ARRA "stimulus" in a futile attempt to jump start the recovery. The problem, as you note, is that unfocussed spending into the economy does not necessarily create self-sustaining conditions or new industries that will actually create wealth on an ongoing basis. I can't think of much in ARRA that had that kind of focus. Most of it (such as unemployment extensions) was aimed obviously at just buying time until the economy recovered on its own, some way, somehow. Krugman is one of those who believes strongly in the Growth Fairy; it's found in the textbooks where he finds his textbook economics, so that the actual conditions in the world, with high energy prices, resource constraints, and unprecedented levels of public and private debt make no difference because they're not in the "model."

Of course, Krugman is very grateful that the U.S. did not spend as much as he apparently recommended. This allows the rather preposterous argument that the $400 billion shortfall, or so, was the crucial difference, and since he knows the theory will never be tested, he can trumpet his "victory" forever. Which, as we all have noted, is mainly what his writing is about.

Lord Keynes said...

The problem is that Krugman, as a Keynesian macro guy, cannot see anything but aggregates

Yeah, right, Krugman doesn't know any microeconomics. Tell us anotehr fable.

which is not economics at all. There is no such thing as "aggregate demand" and "aggregate supply," or at least something with such terms that can be represented in the crude "Keynesian Cross" or an AD-AS graph.

Is there or is there not such thing as:

(1) volume of goods and services produced within the economy or the aggregate value of total factor payments received for producing a given volume of output = aggregate supply

(2) total demand for goods and services produced in the economy over a period of time or value of final goods and services bought in a period of time.

Since the concepts of aggregate demand and aggregate supply are the same in both Say's law and Keynesian analysis, either BOTH the use of them in Say's law and in Keynesian analysis is valid, or it is not. Make up your mind.

With the Keynesians, spending is spending, period, and it does not matter where the spending occurs, just as long as someone somewhere is SPENDING.

That is rubbish: Keynesians are in favour of socially and eocnomically beneficial spending: public infrastructure or social spending.

"Richman understands something that Krugman and his followers do not: that the creation of new money does not create real wealth, "

Same rubbish idea refuted here:

http://socialdemocracy21stcentury.blogspot.com/2011/05/william-l-anderson-flunks-keynesian.html

Bala said...

"Since the concepts of aggregate demand and aggregate supply are the same in both Say's law and Keynesian analysis"

Does Say's Law attempt to put AD/AS on a graph? That, incidentally, is what Prof. Anderson is talking of. Looks like you have a very poor level of comprehension.

"That is rubbish:"

This is real rubbish. When Y = C + I + G + (X-M) and growth in Y is all that matters, then it is rubbish to claim otherwise. Do please educate me as to why I would be wrong.

"Keynesians are in favour of socially and eocnomically beneficial spending: public infrastructure or social spending."

How do you figure out if a particular spend is "socially and economically beneficial"? Just trying to understand your criteria. I am sure they must be as hilarious as they are ridiculous. Incidentally, I am just curious to know how you classify any spending at all as NOT "socially and economically beneficial".

"Yeah, right, Krugman doesn't know any microeconomics."

First define economics. Then state what is the proper method of economics. Then show us that Krugman does that. When you reach that point, we will believe you. As of now, all I can see is voodoo chants.

Dan said...

It must be wonderful to be a Keynesian, you can never be proven wrong. Oh, see the stimulus wasn't big enough, if you spent 2 trillion it would have worked. Oh, 2 trillion didn't work, I clearly said 4 trillion, I mean how else can the economy improve without the wonderful knowledge of government experts. I mean sure there were plenty of recoveries from recessions in the 19th and 20th century without government intervention, but see if they had only spend money on bridges to islands with 40 people, they would have recovered faster.

Keynes was a god send to the statists. Look at all this magic multiplier of building tanks to kill Muslims overseas, without this spending on tanks, how would wealthy ever be created. I mean hell, opportunity cost, what opportunity cost the government as clearly spent the money better than an private citizen could, therefore opportunity cost doesn't exist for us wonderful follower of Keynes.

Major_Freedom said...

LK:

"Keynesians are in favour of socially and eocnomically beneficial spending: public infrastructure or social spending."

Absolute rubbish. No individual knows what is "economically beneficial" to others. Only the individual themselves knows what is economically beneficial to them. If they value "infrastructure" type goods and services, then they will pay for them voluntarily on an unhampered market.

You are arrogating yourself and your fellow Keynesian cultists to have knowledge you cannot ever have. Even if you can identify that "most people" want good or service X, that doesn't mean that the state can know exactly where, when, how, and of what exact nature X should be for various people. People want DIFFERENT goods and services that you categorize into X. If "firefighting services" is X, then this doesn't mean that every individual would want the same exact X as a government run system would necessarily require. Individuals would want different services, which only a competitive market can offer that gives the individual the freedom to decide for themselves.

Your worldview is utterly absurd.

Bob Roddis said...

1. How nice. I already responded to LK's nonsense back in May in the first comment:

http://socialdemocracy21stcentury.blogspot.com/2011/05/william-l-anderson-flunks-keynesian.html

2. LK never responds to my question as to how the government overseers have better information (or morals) than the private economic actors who actually own and/or control private assets. He simply presumes a priori that "progressive" experts are simply smarter and better people than the rabble. Just another alienated pseudo-commie intellectualoid.

Mike M said...

LK I for one appreciate some of your postings because they continue to give me insight into the progressive, statist, elitist mindset. In addition they occasionally provide amusement so thank you.

“Keynesians are in favour of socially and eocnomically beneficial spending: public infrastructure or social spending.”

And who shall we anoint to be the omnipotent decision maker of what is beneficial to us in the great unwashed, intellectually inferior masses? YOU??? Those like YOU??? How arrogantly presumptuous of you.

You also refuse to accept or understand that MACRO economics is nothing but the sum of all of us little MICROs making our economic decision. Macro is not some separate identifiable entity you can manage and manipulate like a chemistry experiment. Then again that’s what statists need to believe. They need, want and desire to pull the levers behind the curtain pretending they are the great and powerful Oz.

LK your reason skills never evolved beyond that of a precocious 10year old. Or sure it was cute back then, but now it’s annoying. The fact that the statist progressive mindset has infected our lives at every turn is no longer just annoying but will breed a Galt like revolution if the infection is not eliminated.

Lord Keynes said...

Mike M said... And who shall we anoint to be the omnipotent decision maker of what is beneficial to us in the great unwashed, intellectually inferior masses?Bob Roddis said.. LK never responds to my question as to how the government overseers have better information

The state gathers a vast amount of social and demographic information, which is used to good effect in its public infrastructure and social spending programs.

Major_Freedom said...
LK:
"Keynesians are in favour of socially and eocnomically beneficial spending: public infrastructure or social spending."

Absolute rubbish. No individual knows what is "economically beneficial" to others.


What garbage.

Is the existence of a road, free for use at the point of delivery, from point a to point b allowing transportation of commodities for export not eocnomically useful to exporters? Of it is.

"Even if you can identify that "most people" want good or service X, that doesn't mean that the state can know exactly where, when, how, and of what exact nature X should be for various people"

LOL.. The same might be said of the private sector, idiot.

"Bala said...

"Since the concepts of aggregate demand and aggregate supply are the same in both Say's law and Keynesian analysis"

Does Say's Law attempt to put AD/AS on a graph?"


That is not the issue. Anderson asserts that "There is no such thing as "aggregate demand" and "aggregate supply".

That is a risible, ignorant and false statement. Not even all Austrians agree.

Bob Roddis said...

There might be a statistical category of aggregated sales prices that is called "aggregate demand", but there is no "thing" as "aggregate demand". It has no unique characteristics beyond that of each individual sale. Further, an alleged lack thereof is the result, not the cause, of a depression or recession.

LK still won't explain why his statist overlords have special knowledge that enables them to run other peoples' lives and he still does not understand economic calculation or the central concept of human exchange.

Further, if people are so dumb as to run off the cliff into an alleged free market bust, where do they get the knowledge to select their "progressive" economic overlords at election time?

Lord Keynes said...

Bob Roddis said... "There might be a statistical category of aggregated sales prices that is called "aggregate demand", but there is no "thing" as "aggregate demand""

LOL.. so you're saying that AD exists and yet does not exist at the same time.

This is called a violation of the law of non-contradiction.

http://en.wikipedia.org/wiki/Principle_of_contradiction

Mike M said...

LK said: The state gathers a vast amount of social and demographic information, which is used to good effect in its public infrastructure and social spending programs.

Wow! Really? That’s your foundation for your argument? Brilliant. If so you could have a computer make these “wise” decisions and we could all use the extra free time to dream up new and creative ways to control people’s lives.

And by the way LK, please cite the authority by which these Federal omnipotent overseers have the right to engage in social spending and dictate to me decisions about my personal life.

Lord Keynes said...

"Further, if people are so dumb as to run off the cliff into an alleged free market bust, "

People engaging in deleveraging or saving in current circumtances are not "dumb" from the individual/microeconomic perspective: in fact, its makes sense to do so for the individual under certain circumstances.

The problem is when very many people do it and has deleterious macroeconomic effects.

This is the paradox of thrift (or paradox of saving), which demonstrates the difference between micro versus macro effects.

Bala said...

LK you genius,

" "That is not the issue. Anderson asserts that "There is no such thing as "aggregate demand" and "aggregate supply". "

Naughty boy!! Still busy misrepresenting and selectively recalling sections that suit your brain-dead purpose? Here's what Prof. Anderson said.

"There is no such thing as "aggregate demand" and "aggregate supply," or at least something with such terms that can be represented in the crude "Keynesian Cross" or an AD-AS graph."

Do you read or do you just select that which fits your propaganda for zombies?

What is risible is your pathetic attempt to cover up for the glaring deficiencies in your master's "theory".

Lord Keynes said...

Lord Keynes said.. And by the way LK, please cite the authority by which these Federal omnipotent overseers have the right to engage in social spending and dictate to me decisions about my personal life

That is just shifting the argument to moral/ethical issues:

http://socialdemocracy21stcentury.blogspot.com/2011/10/hoppe-on-argumentation-ethics.html

http://socialdemocracy21stcentury.blogspot.com/2011/08/rothbards-argument-for-natural-rights.html

http://socialdemocracy21stcentury.blogspot.com/2011/05/coercion-and-taxation-is-theft-argument.html

http://socialdemocracy21stcentury.blogspot.com/2011/05/more-on-taxation-is-theft.html

Lord Keynes said...

'"There is no such thing as "aggregate demand" and "aggregate supply," or at least something with such terms that can be represented in the crude "Keynesian Cross" or an AD-AS graph."

And that statement is itself contradictory. If Anderson now admits that "aggregate demand" and "aggregate supply" DO in fact exist, then he has retreated from the earlier absurd statements on this blog denying their existence.

Mike M said...

LK said: The problem is when very many people do it and has deleterious macroeconomic effects.

So according to you, the state must counter the collective act of smart individual decisions with a macro dumb one because the “wise” think the aggregate effect of all those smart people is unpleasant.

Brilliant. BTW your authority to do this is where?

Bala said...

"And that statement is itself contradictory. If Anderson now admits that "aggregate demand" and "aggregate supply" DO in fact exist, then he has retreated from the earlier absurd statements on this blog denying their existence."

This is the most idiotic statement I have ever seen, especially since it is made with the intent of denying that you have egg on your face.

You genius, the point has always been that AS/AD as you idiotic whatever-Keynesians (pardon the redundancy) talk of is what we Austrians have always ridiculed. Your attempt at twisting arguments is (as usual) turning into more egg on your pathetic face.

Mike M said...

LK said: “That is just shifting the argument to moral/ethical issues”

Nonsense! It is the issue. If you don’t have the Constitutional authority to engage in what you advocate then all you espouse is nothing more than an intellectual circle jerk, which includes the egghead content of your citations.

Cite for me the Constitutional authority.

Major_Freedom said...

LK:

"LOL.. so you're saying that AD exists and yet does not exist at the same time."

No you idiot, he is saying that there is a statistic called aggregate demand, but there is no THING that is aggregate demand.

It is an abstract universal, a mental concept, that only has meaning if the individual components to which the abstract universal refers to, are themselves real and exist in their own right.

It is not a thing that has a driving force of its own. Idiots like you believe that if this statistic can be altered, then it will have desired effects such as "stimulating employment", "stimulating investment", etc.

You suffer from what logicians call "hypostatization", which is the cognitive flaw of ascribing substance or real existence to mental constructs or concepts.

"People engaging in deleveraging or saving in current circumtances are not "dumb" from the individual/microeconomic perspective: in fact, its makes sense to do so for the individual under certain circumstances."

"The problem is when very many people do it and has deleterious macroeconomic effects."

False. It has no "deleterious macroeconomic effects". If people BENEFIT by deleveraging and saving, then whatever COULD have happened to OTHERS had the deleveragers and savers NOT deleveraged and NOT saved, then their new reality is not interfered with, hampered, nor are they deprived of their property. The other group of people who don't deleverage and don't save will just have to adapt their actions now that others are deleveraging and saving.

There are no aggregate negative consequences. Not if people are actually benefiting from deleveraging and saving without depriving others of any property by force!

"This is the paradox of thrift (or paradox of saving), which demonstrates the difference between micro versus macro effects."

The "paradox of thrift" is based on a series of catastrophic errors concerning money, spending, investment, saving, and prices. The fallacies it is built on are typically referred to as the unemployment equilibrium, the declining marginal efficiency of capital, and the savings/investment relationship, and the conflation of saving with hoarding.

Saving is a GOOD thing if people voluntarily save. This is true even if "A LOT" of people deleverage and save.

Major_Freedom said...

LK:

"That is just shifting the argument to moral/ethical issues"

You do that every time your economics are refuted.

"http://socialdemocracy21stcentury.blogspot.com/2011/10/hoppe-on-argumentation-ethics.html"

Nonsense.

"http://socialdemocracy21stcentury.blogspot.com/2011/08/rothbards-argument-for-natural-rights.html"

Garbage.

"http://socialdemocracy21stcentury.blogspot.com/2011/05/coercion-and-taxation-is-theft-argument.html"

Rubbish.

"http://socialdemocracy21stcentury.blogspot.com/2011/05/more-on-taxation-is-theft.html"

Idiocy.

Every single one of those links contain arguments in the comments that easily demolish your myths.

Bala said...

"LOL.. so you're saying that AD exists and yet does not exist at the same time."

ROFLMFAO. If there is a demand for 20 million different goods, there is a demand for 20 million different goods. The idiotic part (which you whatever-Keynesians) indulge in is to say that these 20 million demands can be consolidated into 1 number called aggregate demand based, that the 20 million associated prices may be aggregated into 1 aggregate "price level" and that you could then go on to draw a graph of the former versus the latter.

Tell me something. Were you born this insane or has an overdose of Keynesian gobbledygook cooked your pea brain?

Bala said...

Oops.... please ignore the word "based" in my previous comment.

Major_Freedom said...

LK:

"The state gathers a vast amount of social and demographic information, which is used to good effect in its public infrastructure and social spending programs."

It is used to bad effect, because the data shows that there are many, many people who don't consent to what the government is doing.

And the data that the government collects is necessarily historical, and not equal to the information that now exists due to people's new knowledge, new preferences, new desires, new technologies, new needs, new methods of production.

You said: "Keynesians are in favour of socially and eocnomically beneficial spending: public infrastructure or social spending."

I said: "Absolute rubbish. No individual knows what is "economically beneficial" to others."

You said: "What garbage."

It's not garbage you moron. It's reality. People in the state are not omniscient Gods. They're human.

"Is the existence of a road, free for use at the point of delivery, from point a to point b allowing transportation of commodities for export not eocnomically useful to exporters? Of it is."

You're not paying attention to the argument you tool. There is a difference between knowing that most people value "roads" and knowing exactly where people want them, what price they are willing to pay for them, which means what resources they are willing to give up and not produce other things they need, so that resources are freed up to produce more roads. Only the profit and loss system can give people a rational set of information on what they are willing to buy, where and when.

Your idiocy is so acute, that by your logic, because most people desire "food", it means that the government should take over food production and tax people to finance it, or that because most people desire "clothes", it means the government should take over clothes production and tax people to finance it, or that because most people desire "shelter", it means the government should take over shelter production and tax people to finance it.

Your worldview is based on an inability to separate "food" from "the exact food that individuals want, the exact price individuals are willing to pay, where individuals are willing to buy food, and from whom they want to buy it from."

Identifying a widespread human desire does not imply that the state can or should offer it to everyone and steal people's money to finance it, and if anyone wants to go their own way, they have to leave the country. You don't see me telling you what food to eat and what clothes to wear and what shelter to live in, why are you arrogating yourself to demanding that one group of people called the "government" steal my money to finance a road that they didn't even ask if I am willing to pay for it at that price, and have it in that location?

I said: "Even if you can identify that "most people" want good or service X, that doesn't mean that the state can know exactly where, when, how, and of what exact nature X should be for various people"

You said: "The same might be said of the private sector, idiot."

No you moron, the same cannot be said, because the private sector is not some monolithic entity controlled by one group of people. It is a competitive world where individuals have the CHOICE to either accept what an individual provider offers, or reject it and not have to leave the country. With the state, you are forced to pay for what they are offering, and if you don't want it, then unlike with providers in the private sector, you do have to move out of the country, or else you'll get thrown in a cage.

The difference is like night and day, and you are equating them. How utterly imbecilic.

At this point, you'll probably contradict yourself and inject some nonsensical ethical pleas to defend your anti-economics beliefs.

Mike M said...

LK I just read your 11/22/11 1:07 am post on http://socialdemocracy21stcentury.blogspot.com/2011/05/coercion-and-taxation-is-theft-argument.html

You stated: Consequentialism justifies taxation.

You know what; you don’t have to bother answering my question on Constitutional authority. You don’t respect the concept. You’re of the “ends justify the means” ilk.

Do really believe people take you seriously?

There are some new openings in North Korea due to recent events. You should apply. I’m confident they will embrace your brilliance.

Bala said...

MF,

Let me try to condense your argument. LK is making the mistake of confounding the broad category of a good with particular units of the good. Looks like he never understood the most basic concepts of value, especially the resolution of the water-diamond paradox.

That's one hell of a way of demonstrating that he is a complete economic ignoramus.

Major_Freedom said...

Bala, LK cannot understand condensed arguments. He needs to be shown the tedious arguments because his mind is so utterly warped that it will fall back on fallacies the moment steps are omitted for brevity.

Oh, and "complete economic ignoramus" is an understatement.

Lord Keynes said...

"LK is making the mistake of confounding the broad category of a good with particular units of the good."

I am doing no such thing.

A business can sell units of a good. It can also calculate the volume and monetary aggregate of its sales in any given period. It is the same with demand for final goods and services (AG).

Just because the monetary aggregate of the sales of a business in a financial year is an abstract thing does not mean it has no real existence: it just has no concrete existence like a concrete particular.

Lord Keynes said...

"It is the same with demand for final goods and services (AD)."

Bala said...

"I am doing no such thing."

You are, you idiot. When you say

"Is the existence of a road, free for use at the point of delivery, from point a to point b allowing transportation of commodities for export not eocnomically useful to exporters? Of it is."

you are talking of the general category of the good "road". You are not talking of the particular road and the particular people who need to make trade-offs when it comes to the decision of whether or not to apply scarce resources to build the road.

Your argument is "A road is definitely of value to its potential users". That is by no means a reference to a specific unit of a road, you doofus. By that yardstick, any thing is of value to its potential users. You could extend the argument to every good imaginable and make a case for government to produce them (which is what MF has done, incidentally)

Lord Keynes said...

Mike M said...
....
If you don’t have the Constitutional authority to engage in ...
Cite for me the Constitutional authority.


Section. 8.

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow Money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;


Constitution of the United States:
Section. 8.

Bala said...

"It is the same with demand for final goods and services (AG)."

You cannot talk meaningfully of "price" of ALL goods and services. Hence, any attempt to draw graphs of AD/AS versus Price is nothing but prize idiocy.

That I guess is par for the course for whatever-Keynesians. After all, what else do you expect from a brain completely cooked by over-exposure to Keynesian gobbledygook?

Lord Keynes said...

"By that yardstick, any thing is of value to its potential users. You could extend the argument to every good imaginable and make a case for government to produce them"

Which is why screaming about subjective utility values (the usual tactic of Austrian cultists) won't provide any counterargument against government public goods. You're just shooting yoruself in the foot.

Public goods do provide utility to people, and things like universal health care to the vast majority of people.

The argument just comes back to

(1) ethics; and/or
(2) some kind of measure of the objective economic or social benefit of any particular public good.

E.g., universal health care is justficiable on both grounds. Providing universal health care makes people more productive by ensuring thay get treatment when ill, cutting down the losses in labour time owing to illness.

Lord Keynes said...

"There is a difference between knowing that most people value "roads" and knowing exactly where people want them, what price they are willing to pay for them, which means what resources they are willing to give up and not produce other things they need, so that resources are freed up to produce more roads. Only the profit and loss system can give people a rational set of information on what they are willing to buy, where and when."

This is the idiocy of assuming that only something profitable can have social and economic benefits - non-profit charities can do socially useful thinsg without profit.

Major_Freedom said...

LK:

"LK is making the mistake of confounding the broad category of a good with particular units of the good."

"I am doing no such thing."

Yes you are. You are taking the concept of "roads", and confounding that category with the particular units of that category, which are specific roads in specific locations for specific prices and specific costs.

"A business can sell units of a good. It can also calculate the volume and monetary aggregate of its sales in any given period."

In competition with other businesses, whereby the consumer has the choice to NOT buy ANYTHING that producer is selling.

"It is the same with demand for final goods and services (AG)."

There is no such "thing" as demand for final goods and services. There is only particular demands for particular goods, whereby each particular demand is mutually exclusive of other particular demands.

"Just because the monetary aggregate of the sales of a business in a financial year is an abstract thing does not mean it has no real existence: it just has no concrete existence like a concrete particular."

False you moron. The sales for an individual firm are in competition with the sales of other individual firms. There is no causal force or real existence of the total sum of the demands apart from the reality of the particular demands. Just because they are both composed in dollars, it doesn't mean that by adding them up, you are ending up with some real concept that can be manipulated and changed, such that it helps the individuals who are responsible for the aggregate concept having meaning.

"It is the same with demand for final goods and services (AD)."

AD has no reality on its own. The only reality is the individual demands for particular goods and services. No investor invests into, and no seller sellers into, "AD." AD can go up or down, and the individual investor and seller will still be only concerned with the expected demand for his particular goods and services, which he then uses to calculate what prices he is willing to pay for the factors of production he needs.

If "aggregate demand" rises, it does not mean that "investors" and "sellers" are better off. If in a depression I print and spend money on fake dog poop, and I print and spend so much money that "aggregate demand" rises by 5% compared to yesterday, then this doesn't mean that the economy is now "better off." If I print and spend money on "roads", such that "aggregate demand" rises by 10%, that also doesn't mean that the economy is "better off."

Not all spending grows the economy. Consumption spending consumes real resources and shrinks the economy, and investment spending produces real resources and grows the economy.

If everyone took their incomes and spent everything on consumption, aggregate demand would be the same, but the economy will collapse because CAPITAL WILL HAVE BEEN CONSUMED AND NOT REPLACED.

Government spending WASTES resources, and private spending PRODUCES resources. This is because government spending is financed through coercion, and private spending is financed by consent. Coercion destroys values and consent allows them to flourish.

Lord Keynes said...

"You said: "The same might be said of the private sector, idiot."

No you moron, the same cannot be said, because the private sector is not some monolithic entity controlled by one group of people. It is a competitive world where individuals have the CHOICE to either accept what an individual provider offers, or reject it and not have to leave the country. With the state, you are forced to pay for what they are offering"


Again: hand waving red herring. Suddenly the issue becomes not whether you can plan and provide public goods, but government is THEFT!! THEFT!!

LOL.

Major_Freedom said...

LK:

"If you don’t have the Constitutional authority to engage in ... Cite for me the Constitutional authority."

"Section. 8."

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;"

The general welfare clause as it used today is not what the original writers intended. This is clear from their writings.

"By that yardstick, any thing is of value to its potential users. You could extend the argument to every good imaginable and make a case for government to produce them"

"Which is why screaming about subjective utility values (the usual tactic of Austrian cultists) won't provide any counterargument against government public goods."

False. Subjective value does not mean that any value is as good as any other value. It is purely a formal statement that value is determined by the individual subject.

Within that matrix, some individuals have values that conflict with the values of others, in the realm of private property rights. Those whose values conflict with private property rights are actually shooting themselves in the foot.

There is no such thing as "public goods" that distinguishes it from "private goods."

All goods that are valued fall under the rubric of economic science, of costs, of scarcity.

"Public goods do provide utility to people, and things like universal health care to the vast majority of people."

The argument is not whether universal healthcare provides utility to "people." It wouldn't even be advocated if it didn't.

The real argument is WHO does universal healthcare benefit. Clearly not those who would rather not pay for it.

"The argument just comes back to"

"(1) ethics; and/or"

"(2) some kind of measure of the objective economic or social benefit of any particular public good."

EVERY SINGLE CLAIM YOU MAKE concerning economics "just comes back to ethics, and some kind of measure of objective economic or social benefit."

"E.g., universal health care is justficiable on both grounds."

It is justifiable on neither ground.

"Providing universal health care makes people more productive by ensuring thay get treatment when ill, cutting down the losses in labour time owing to illness."

False. Competing healthcare on the basis of free exchange and no coercion makes people better off.

Stealing money from people (which universal healthcare requires) does not make them better off you moron.

Major_Freedom said...

LK:

"There is a difference between knowing that most people value "roads" and knowing exactly where people want them, what price they are willing to pay for them, which means what resources they are willing to give up and not produce other things they need, so that resources are freed up to produce more roads. Only the profit and loss system can give people a rational set of information on what they are willing to buy, where and when."

"This is the idiocy of assuming that only something profitable can have social and economic benefits - non-profit charities can do socially useful thinsg without profit."

You moron, profit and loss are not necessarily monetary. If people derive gains for themselves by offering voluntary charity, then that is a "psychic" profit for them. They will however still be operating in a matrix of monetary calculation, because resources are scarce, and they are not government so they cannot just steal other people's resources.

Bala said...

"Which is why screaming about subjective utility values (the usual tactic of Austrian cultists) won't provide any counterargument against government public goods. You're just shooting yoruself in the foot.

Public goods do provide utility to people, and things like universal health care to the vast majority of people.

The argument just comes back to

(1) ethics; and/or
(2) some kind of measure of the objective economic or social benefit of any particular public good. "

ROFLMFAO. It does not come to ethics, my genius. It is just about the absolute impossibility of demonstrating any objective economic or social benefit. The reason for that is simply that all "economic benefit" is nothing more than a subjective assessment of well-being that every individual has.

Having additional roads or "more" healthcare services does not automatically make people better off, especially of it means that they forgo something else of greater value to them. That "value" is the subjective preference for one end over another and hence cannot be objectively measured. Remember that value is ordinal and subjective and any attempt to treat it as an objective, measurable quantity is the hallmark of an economic ignoramus.

Hence, your attempt to talk of the "objective economic or social benefit of any particular public good" is in fact the perfect case of shooting yourself in the foot and revealing your utter economic ignorance for all to see.

Major_Freedom said...

LK:

You said: "The same might be said of the private sector, idiot."

I said: "No you moron, the same cannot be said, because the private sector is not some monolithic entity controlled by one group of people. It is a competitive world where individuals have the CHOICE to either accept what an individual provider offers, or reject it and not have to leave the country. With the state, you are forced to pay for what they are offering"

You said: "Again: hand waving red herring. Suddenly the issue becomes not whether you can plan and provide public goods, but government is THEFT!! THEFT!!"

Again, hand waving red herring. Suddenly the issue becomes not whether there is even such a thing as "public goods" that are distinguished from "private goods", the claim becomes "Taxation is not theft! Taxation is not theft!"

Lord Keynes said...

"You moron, profit and loss are not necessarily monetary. If people derive gains for themselves by offering voluntary charity, then that is a "psychic" profit for them."

You moron, profit and loss are not necessarily monetary. If people derive gains for themselves by voting for public goods, then that is a "psychic" profit for them.

Bala said...

"You moron, profit and loss are not necessarily monetary. If people derive gains for themselves by voting for public goods, then that is a "psychic" profit for them."

Ahem.... People do not vote for public goods the way they vote for other goods. In the latter case, they vote by deciding where to spend their money. In the former case, the wise and omniscient bureaucrat or politician gets to vote on whether or not to spend on that good.

Major_Freedom said...

LK:

"You moron, profit and loss are not necessarily monetary. If people derive gains for themselves by voting for public goods, then that is a "psychic" profit for them."

You idiot. The "people" you are talking about who "vote" are not 100% of the population.

You cannot claim that with 100 people if 51 of them "vote" to have another group of people enact some plan, that the other 49 people will necessarily derive gains. Especially when the plan is enacted by force, financed by theft, and run by idiots with guns.

One does not have a right to gain by coercing others.

Lord Keynes said...

"The reason for that is simply that all "economic benefit" is nothing more than a subjective assessment of well-being that every individual has. "

In which case: you lose.

Public goods do provide subjective utility to people; things like universal health care to the vast majority of people.

Time to pack up your Austrian shop and sell off its assets: you can get a few bucks for all those copies of Human Action
by selling them as firewood.

Lord Keynes said...

"You cannot claim that with 100 people if 51 of them "vote" to have another group of people enact some plan, that the other 49 people will necessarily derive gains. Especially when the plan is enacted by force, financed by theft, and run by idiots with guns.

One does not have a right to gain by coercing others."


Yeah, yeah: this just reinforces what I've said above. You're forced to retreat to ethical arguments. The argument then just becomes one for philsophy of ethics. Just as Keynes said: economics is a moral science.

Major_Freedom said...

LK:

"The reason for that is simply that all "economic benefit" is nothing more than a subjective assessment of well-being that every individual has."

"In which case: you lose."

No, he wins. You are trying to arrogate your own subjective values into an objective set of values for everyone else, who must have their values infringed upon by violence.

"Public goods do provide subjective utility to people; things like universal health care to the vast majority of people."

You keep saying "people" as if they are 100% of the population. Of course public goods provide benefits to "people." If they didn't, then they would not exist. But the same thing can be said about slavery. Slavery also derives benefits to "people." But that doesn't justify it.

The subject matter of ethics are individuals in interactions, not the vague and undefined "people".

"Time to pack up your Austrian shop and sell off its assets: you can get a few bucks for all those copies of Human Action
by selling them as firewood."

It's not surprising a statist idiot like you would advocate burning books.

Bala said...

"In which case: you lose."

Nonsense. I lose only if you forget Bastiat's dictum of the seen vs the unseen. The subjective utility to some people has to be balanced against the subjective disutility to those harmed by the project (because they have their resources taken away from them through violent exchange).

Hence, the subjective utility to the beneficiaries is NOT sufficient justification for provision of the public good. There is NO way to demonstrate economic benefit because you cannot engage in interpersonal comparison of value or utility.

What an ignoramus!!!

Major_Freedom said...

LK:

I said: "You cannot claim that with 100 people if 51 of them "vote" to have another group of people enact some plan, that the other 49 people will necessarily derive gains. Especially when the plan is enacted by force, financed by theft, and run by idiots with guns."

"One does not have a right to gain by coercing others."

You said: "Yeah, yeah: this just reinforces what I've said above. You're forced to retreat to ethical arguments. The argument then just becomes one for philsophy of ethics. Just as Keynes said: economics is a moral science."

YOU ARE ALWAYS FORCED TO RETREAT TO ETHICAL ARGUMENTS YOURSELF YOU HYPOCRITE.

Your claim that because the majority want good or service X, that the state OUGHT to impose that on everyone else, is a moral claim you stupid putz.

Bala said...

"There is NO way to demonstrate economic benefit"

Please add "of public goods" to this phrase.

Lord Keynes said...

"The subjective utility to some people has to be balanced against the subjective disutility to those harmed by the project (because they have their resources taken away from them through violent exchange).

Hence, the subjective utility to the beneficiaries is NOT sufficient justification for provision of the public good. There is NO way to demonstrate economic benefit because you cannot engage in interpersonal comparison of value or utility."


That argument, if taken seriously, would apply to all private sector goods production:

The subjective utility to some people has to be balanced against the subjective disutility to those harmed by the project (because they have negative externalities imposed on them without consent).

Hence, the subjective utility to the beneficiaries is NOT sufficient justification for provision of the private good.

Just because alcohol provides subjective utility to people who drink does not mean this provides any justification for its production: There is NO way to demonstrate economic benefit because you cannot engage in interpersonal comparison of value or utility.

LOL. Idiot.

Major_Freedom said...

LK:

"The subjective utility to some people has to be balanced against the subjective disutility to those harmed by the project (because they have their resources taken away from them through violent exchange)."

"Hence, the subjective utility to the beneficiaries is NOT sufficient justification for provision of the public good. There is NO way to demonstrate economic benefit because you cannot engage in interpersonal comparison of value or utility."

"That argument, if taken seriously, would apply to all private sector goods production:"

No, it wouldn't you moron, because in the private sector, you are not forced to buy what others buy.

"The subjective utility to some people has to be balanced against the subjective disutility to those harmed by the project (because they have negative externalities imposed on them without consent)."

The balance is had in the private market by realizing that in the market, one person's seeking of values for themselves, does not deprive another person of their values. It just means that others have to offer something else to earn their own values.

"Hence, the subjective utility to the beneficiaries is NOT sufficient justification for provision of the private good."

It is sufficient. You just misunderstood the argument because you don't read.

"Just because alcohol provides subjective utility to people who drink does not mean this provides any justification for its production: There is NO way to demonstrate economic benefit because you cannot engage in interpersonal comparison of value or utility."

False. It does provide justification for its production. Those who want alcohol and buy alcohol are not imposing this on others by force, the way the state does when they claim to have support from the "voters".

LOL moron.

Bala said...

"That argument, if taken seriously, would apply to all private sector goods production:"

Hey genius. Want to know the truth? Of course it applies to private sector goods production and exchange. But the difference is that private sector goods production and exchange is a case of..... now listen carefully..... VOLUNTARY EXCHANGE.

In voluntary exchange, both parties to the exchange benefit ex-ante from the exchange. This much is derivable from the action axiom. So, it is possible to demonstrate that private sector production and exchange confers net economic benefit.

In contrast, in the case of public goods, while on one side (in provision of the service), there is a clear benefit because a good has been provided, on the other side, resources have been taken away using violence. In simple terms, the people whose resources were applied to produce the public good were victims of violent exchange initiated by government. It is clear that their subjective utility is lowered by the violent exchange.

So, unlike in the case of private sector production and exchange, in the case of production and provision of public goods, you have 2 groups - one which attains greater utility from the provision of the public good and another which suffers from a loss of utility because their resources have been taken away through violence.

To demonstrate economic well-being in this case, you need to engage in interpersonal comparison of utility which you CANNOT.

Now do you get why your statement which I highlighted further highlights why I call you an economic ignoramus?

Lord Keynes said...

"False. It does provide justification for its production. Those who want alcohol and buy alcohol are not imposing this on others by force, the way the state does when they claim to have support from the "voters"

This requires that Bala's objection to government publci good againjust boils done to screaming "taxes are theft!"

The assertion that "they have their resources taken away from them through violent exchange" is just question begging.

The assertion "There is NO way to demonstrate economic benefit because you cannot engage in interpersonal comparison of value or utility" is making a differnet claim.

Major_Freedom said...

LK:

I said: "False. It does provide justification for its production. Those who want alcohol and buy alcohol are not imposing this on others by force, the way the state does when they claim to have support from the "voters""

You said: "This requires that Bala's objection to government publci good againjust boils done to screaming "taxes are theft!"

That response requires that your objection to Bala concerning government "public" goods again just boils down to screaming "Taxes are not theft!"

"The assertion that "they have their resources taken away from them through violent exchange" is just question begging."

No, I think the fact that if you don't pay, you will eventually have armed goons come to your door, and threaten you with violence, is not question begging at all. It's pointing out the truth, which you seem like you can't handle.

"The assertion "There is NO way to demonstrate economic benefit because you cannot engage in interpersonal comparison of value or utility" is making a differnet claim."

That argument just refutes your claim that "society" benefits from "universal healthcare."

Lord Keynes said...

"So, unlike in the case of private sector production and exchange, in the case of production and provision of public goods, you have 2 groups - one which attains greater utility from the provision of the public good and another which suffers from a loss of utility because their resources have been taken away through violence."

And yet you can't know if people decide that the provision of the public goods is a benefit that in the end they rank more highly than the loss of some spending power through alleged violence, unless you ask them. If they all declared that the benefit exceed the cost, then there is empircal evidence they in the end felt a benefit had happened.

Or the question would relate to a minority who don't agree: again a question of the philosophy of ethics.

Major_Freedom said...

LK:

"And yet you can't know if people decide that the provision of the public goods is a benefit that in the end they rank more highly than the loss of some spending power through alleged violence, unless you ask them."

Which neither you nor the state nor any of your ilk even do. You just seek to impose the state's "services" on people whether they want it or not.

"If they all declared that the benefit exceed the cost, then there is empircal evidence they in the end felt a benefit had happened."

THEY DON'T ALL DECLARE THAT, which is why taxation is taken by force, and not consent. If a single group of people calling themselves government were voluntary, not everyone would accept it, just like if one group of people calling themselves "food producers", not everyone would accept them and not everyone would deal with them.

"Or the question would relate to a minority who don't agree: again a question of the philosophy of ethics."

You are imposing your own ethics of "If 51% of a population agrees to X, then they OUGHT to impose it on the remaining 49% whether they want it or not."

In fact, in practise, it is rarely 51%. In the US, only 40-50% of the people vote on average. Out of that, 51% of those people decide the outcome, which means an elected government typically has the consent of only 21-26% of the entire population.

So it's a minority rule (government) which has the consent of the minority (21-26% of the population).

So even your Utopia fails in the real world.

Bala said...

"Just because alcohol provides subjective utility to people who drink does not mean this provides any justification for its production:"

Sorry, genius. It does to the person who chooses to produce alcohol and offer it in exchange. He who values the money he could get in exchange higher than the alcohol he would offer the buyer would be a producer who would benefit ex-ante from the voluntary exchange.

You seem to forget that 'justification' is justification to SOMEONE.

Lord Keynes said...

"In fact, in practise, it is rarely 51%. In the US, only 40-50% of the people vote on average."

And yet there are plenty of elections historically where turnout exceeds 50%. Rought half from 1960.

http://www.infoplease.com/ipa/A0781453.html

Funny how you don't mention the vast majority of other developed nations where the majority people DO in fact on average vote.

As for the US, the low figures have more to do with the apathy and disillusion of the poorer classes of citizens. If they did vote, their voting preferences won't, by and large, relfect your Austrian/libertarian hogwash.

Bala said...

"This requires that Bala's objection to government publci good againjust boils done to screaming "taxes are theft!""

No, genius. If there is an an exchange and it is not voluntary, it is violent. The 2 categories, voluntary exchange and violent exchange, are mutually exclusive and collectively exhaustive.

Whether you choose to label it as "theft" is a further decision that has no bearing on the logical point that government taking resources from people through taxation or inflation is a form of violent exchange.

morse79 said...

So nice to have bala back posting. It really reveals volumes about your confidence when "idiot" is every other word in your post.

There are a number of issues here -

1) Aggregate measures do not "exist" in any real terms as observable physical units. They always have to convert an individual preference or observation into a non-tangible and more abstract measure. This is true of AD and AS, but also demand for specific goods (food vs. apples), the money supply, voting preferences, social class, and ethics. We know that some phenomenon act differently at an aggregate level than at the individual level.

The real issue is whether the process of aggregation is justified (i.e. is there a clear path from the individual to the general), and whether the aggregate measure has any analytic usefulness. What happens when we act as-if there were concrete AD and AS? It seems to me that AS-AD provides a useful analytic tool with clear empirical expectations that have been repeatedly validated. When they are not, rather than rejecting the model it is more useful to update the model rather than rejecting it out of hand.

2) The question of whether the government can stimulate so-called demand is a separate question from whether there is such a thing as aggregate demand. So let's be honest, the government cannot objectively know what the best resource utilization is going to be. It can only make a subjective or educated guess. Just like producers and consumers do every day.

But, so what? Government intervention during periods of crisis, the provision of public goods, the mitigation of externalities, or protection of common goods does not always strive for efficiency. In addition, the argument is that these goods are not always provided efficiently or without enormous start up costs and coordination by a free market, requiring imperfect government intervention.

And while sometimes government do build "bridges to nowhere," there is such a thing as research and expertise. It is a gross caricature to think of government as entirely consisting of either nameless bureaucrats or public cronies.

3) There is also an argument here that the state has no moral basis for intervention. It is hard to argue with someone who thinks that taxation is equivalent to living under a police state. It leaves no room for nuance, but also ignores a fundamental principle - we live in a democratic state. It is an imperfect democratic state, but nonetheless provides a moral basis for the extraction and distribution of resources. It allows for a balance of order (i.e. the use of state force) and consensus.

Major_Freedom said...

LK:

"In fact, in practise, it is rarely 51%. In the US, only 40-50% of the people vote on average."

"And yet there are plenty of elections historically where turnout exceeds 50%. Rought half from 1960."

LOL, I knew you would ignore the substantive parts of my post, and focus on the tangential comment.

Even if the "turnout" was 99.99999999%, and out of that, 99.9999999% vote for the winning government, it still would not justify the state imposing its rule on the remaining people not in those groups.

Nobody has the right to impose their rule on others, regardless of if they are in a large group or not. If 90% wanted to enslave the remaining 10%, that wouldn't make it justified.

LK: "B-b-b-b-b-b-but my ethics are inconsistent! I am allowed to be against democracy when I disagree with the outcome!!!" LOL

"Funny how you don't mention the vast majority of other developed nations where the majority people DO in fact on average vote."

The "vast majority" does not have the right to impose anything on the "vast minority" by force.

"As for the US, the low figures have more to do with the apathy and disillusion of the poorer classes of citizens. If they did vote, their voting preferences won't, by and large, relfect your Austrian/libertarian hogwash."

LOL, they are apathetic and disillusioned because of the hopelessness derived from the incessant statism being inflicted on them, day in, day out. They tried voting, it doesn't solve the problem, because the problem isn't the people in government, the problem is government itself.

And if you knew your history, the US government was founded on the principle of liberty (although they made the catastrophic error of advocating violence against innocent people), not your stupid Euro trash socialism garbage. And even if most people chose the state, that still would not justify the state being imposed on the rest of the population.

Bala said...

"And yet you can't know if people decide that the provision of the public goods is a benefit that in the end they rank more highly than the loss of some spending power through alleged violence, unless you ask them. If they all declared that the benefit exceed the cost, then there is empircal evidence they in the end felt a benefit had happened."

Utter nonsense. Total balderdash. Complete economic hogwash. The way you know what an individual values higher and what he values lower is by observing the individual in action. That which he chooses is deemed to be valued higher and that which he forgoes is deemed to be valued lower. What an individual says or reports on how he "feels" is not a way to know his value scales.

Value is as is demonstrated in concrete action. Anything else is nonsense.

The only demonstrated value scales here are of the people who had to be coerced to give up their resources in order to make the public good available. It is clear that these people are forced into a state of lower total utility. On the other hand, you are only in a position to make vague claims about benefit to the alleged group of beneficiaries.

So, there we have it. You have 2 groups whose value scales you need to compare in order to talk of ner economic benefit but, unfortunately for you, you cannot do so because value is subjective and ordinal.

Bala said...

"We know that some phenomenon act differently at an aggregate level than at the individual level."

Wow!!! And how do we "know" that?

Bala said...

" It seems to me that AS-AD provides a useful analytic tool with clear empirical expectations that have been repeatedly validated."

Plotting AS/AD against price is the most useless analytical tool because te very concept of "price" is not applicable to aggregates like AS and AD. You can only talk of them in loose, disaggregated terms.

And incidentally, how does empirical validation justify an logically meaningless tool?

Bala said...

" It really reveals volumes about your confidence when "idiot" is every other word in your post."

Wrong. I use "genius" more often than I use "idiot".

Bala said...

" It can only make a subjective or educated guess. Just like producers and consumers do every day."

Keep up the good work of obfuscation through equivocation.

morse79 said...

@bala

If there is a clear pathway to aggregation, and it provides usefulness it is worth acting as-if those aggregate measures actually existed in concrete terms.

All AD and AS does is make assumptions about aggregate behavior and employs them into a model with clear empirical expectations and predictions. Unless you can concretely show that those foundations are completely nonsensical or provide an alternative theory that can either more efficiently predict those facts or predict new facts not covered by the prior theory, you are just drawing at straws.

It is not far-fetched to think that there could be a general level of demand for a certain quantity of goods (or their monetary value), or a certain amount of spending that consumers are willing to engage in given the prices sellers are willing to sell at. In fact, these assumptions are used by Austrians all the time with mid-range aggregations (the demand and supply of food, the demand and supply of labor). You can sharpen the aggregation if you think that certain classes of goods fundamentally behave differently, but that is not a rejection of the concept of aggregation.

Empirical validation is one of the only way to adjudicate between competing claims, especially when there is ambiguity surrounding the core terms of a certain paradigm. In another sense, if you cannot agree on what really drives human behavior, what assumptions about that behavior give you the most bang for your buck in terms of empirical validity?

As far as obfuscation, you are the one who argued that government needs and objective measure of economic utility. Why? I agree with you, government can only make a subjective judgment (sometimes influences by politics), but so what? Its not like people are just blindly guessing about where to employ government resources.

Tel said...

"The 2 categories, voluntary exchange and violent exchange, are mutually exclusive and collectively exhaustive."

Accidental exchange?

Bala said...

"Accidental exchange?"

is that really "exchange"? Or is the "accidental" a more effective description?

:)

Hoodnick said...

LP,

I am having trouble posting on your blog even though I have a google account. Please help. I would like to post on your blog.

Thanks

Ken

Bob Roddis said...

Its not like people are just blindly guessing about where to employ government resources.

Right. Like when they built the St. Lawrence Seaway. A comment rerun:

http://tinyurl.com/cwlwbcg

The St. Lawrence Seaway has been an economic bust and environmental disaster for the Great Lakes.

http://www.mlive.com/news/muskegon/index.ssf/2009/03/environmentalists_blast_seaway.html

But you can’t sue the government, can you? Especially the Canadian government.

In 2009, I saw five of these Chinese monster ships on Lake St. Clair and the St. Clair River in one day. I thought maybe Obama sold the lake and river to the Chinese.

http://www.flickr.com/photos/bob_roddis/4016754003/in/set-72157605866047732

I can just imagine all the cute foreign critters floating inside that thing. All that just to ship wheat from Manitoba to wherever which could have gone by rail to ships in Montreal.

http://www.great-lakes.net/teach/pollution/ans/ans_1.html

Remember how the progressives used to deny that Stalin was evil even after he slaughtered virtually every hip foreign commie who moved to the USSR? Slaughter and pillage are the main problems facing mankind, not "lack of aggregate demand". Keynesian policies mandate the surrender of basic property rights that are essential to precluding slaughter and pillage. Keynesians are oblivious to these problems because they see themselves as the commissars of everyone else and cannot conceive of average people being free of control by the smart set.

"Progressives" must really hate poor people. Most rich and upper middle class people have fairly secure property rights but poor and third world people do not. This is primarily because of the export of "social democracy" to the third world which has resulted in predictable ethnic slaughter and grinding proverty.

http://tinyurl.com/88m5ogl

Bala said...

"If there is a clear pathway to aggregation"

A big IF you have out there. If it is plotting AS/AD against Price that you wish to do, be clear that you have no clear pathway. As Obelix says "It's clear as mud". And that's simply because the term "price" has no meaning when you are talking of aggregates. The absolute meaninglessness of price level leaves you with no path to meaningful aggregation. So, there goes your IF.

"and it provides usefulness"

Since it is meaningless, it can have no usefulness because "useful" is to be judged by man according to what a thing means to him.

"it is worth acting as-if those aggregate measures actually existed in concrete terms."

Heard of the fallacy of conceptual realism? You are just indulging in it big time.

"All AD and AS does is make assumptions about aggregate behavior and employs them into a model"

Ah!!!! The never ending attempts to "model" human behaviour using assumptions. How much more silly can it get?

"with clear empirical expectations and predictions."

Looks like no one ever taught you that applying empirical methods to the study of economics, especially to the development of economic theory is as hare-brained as it gets. Empirical methods work in the natural sciences where
1. the subject matter is inanimate objects with no volition of their own
2. past regularity can be extended to assume future regularity
3. repeatability may be reasonably assumed
4. constant quantitative relationships exist between causes and effects.

Since none of these exist in the realm of human action, empirical methods have no place in the development of economic theory except to identify new areas of study. They do not prove or disprove theories.

The only proper method to study human action is to apply the deductive method to sound axioms identify universal laws of economics. These laws, since they are the product of deductive reasoning applied to sound axioms, are not disproved by random empirical data. Nor do they need the support of random empirical data for them to be considered valid. They are valid as long as the underlying axioms are valid and the reasoning that led you to them is correct.

By talking of applying the empirical method to economics, you are engaging in scientism.

And on account of the 4 points up there, it is impossible for economics to make predictions, especially precise, numerical predictions.

" Unless you can concretely show that those foundations are completely nonsensical"

I have done this in the preceding paragraphs of this post.

"or provide an alternative theory that can either more efficiently predict those facts or predict new facts not covered by the prior theory"

Oh!! I do have a theory, except that it recognises that the attempt to make "efficient" and accurate predictions is hare-brained. What it does is to help you make broad predictions of long-term outcomes. It's like, you see, it can tell you that if you impose a minimum wage above the market clearing rate, you will have unemployment, though it can't tell you how much and in how much time.

And as a first step towards understanding real economics, try getting out of this unhealthy obsession for precise quantitative predictions where none are possible.

Bala said...

"Empirical validation is one of the only way to adjudicate between competing claims"

And it is nonsense when applied to the study of human action, especially in economic theory.

"As far as obfuscation, you are the one who argued that government needs and objective measure of economic utility"

Oh no!! I said that any claim that the provision of public goods provides net economic benefit rests on the fallacious assumption that it is possible to compare utilities of different individuals and come up with a meaningful "net social benefit". I said that the very fact that value and utility are subjective and ordinal renders any attempt at interpersonal comparison of values devoid of any meaning. Thus, I said that LK's claims that there is "net social benefit" due to provision of public goods by the government are as hare-brained as they get.

morse79 said...

Roddis, this comment is bad even for you!

You are denying the mean based on the extreme and ignoring the improvement in government program efficiency and success. More specifically, the verdict on the St. Lawrence Seaway is not as clear cut, something you would have discovered with minimal research (http://www.marinedelivers.com/sites/default/files/documents/Econ%20Study%20-%20Full%20Report%20Final.pdf)

Why do you find the need to tell me what I believe? Why can't I be concerned with " low aggregate demand" (or as I look to put, a depression) and pillaging and violence?

I also don't see myself as the commissar of everyone else, but it is abundantly clear that 1) democratic consensus does not equal totalitarianism; 2) property rights alone cannot ensure economic efficiency or satisfy our moral needs; and 3) individual decision making can at times lead to bad collective outcomes.

Why you feel the need to demonize and vilify a large number of your fellow citizens is beyond me. The only answer I can come up with is seek anger management.

Major_Freedom said...

"You are denying the mean based on the extreme and ignoring the improvement in government program efficiency and success."

You are ignoring opportunity costs and economic scarcity.

"I also don't see myself as the commissar of everyone else, but it is abundantly clear that 1) democratic consensus does not equal totalitarianism; 2) property rights alone cannot ensure economic efficiency or satisfy our moral needs; and 3) individual decision making can at times lead to bad collective outcomes."

Wrong on all three counts when the context is the free market.

"Why you feel the need to demonize and vilify a large number of your fellow citizens is beyond me"

That's rich, coming from someone who wants to attack a HUGE number of people who just happen to be in the minority.

Mike M said...

LK your 12-22-11 12:31 am
Congratulations. You have mastered the art of cut and paste. Now move the next step of thinking.

Explain and cite the Constitutional authority for the Feds engaging in social spending.
I’ll help you out. It’s not the General Welfare clause. And spare me your “Consequentialism” garbage.

morse79 said...

Oh geez bala where to start! I don't have much time so it might be easier to do this numerically.

1) Aggregating from individual demand is, I agree, not as straight forward as say combining individual voter preferences to an election outcome. But, it is not in the mud either. As I pointed out, this aggregation takes place all the time even in Austrian theory for certain general goods (food, clothing, shelter).

2) Usefulness refers to whether those assumptions that underlie the model satisfy what we expect from a theory - precision, universality, parsimony, etc...We can hold multiple standards for good theory. For instance, I don't think the generation of universal laws is applicable in the social world. I prefer theories that explain bounded and limited phenomenon.

3) Social science vs. natural science - first, the same issues of intentionality (not to mention chaos) sometimes plague even the natural science. But, that is not an argument against a theory based social science. It is precisely because of the fickle nature of human behavior that empirical analysis takes an even greater role - to identify the limitations of said theory.

What you are suggesting is a radical post-modern departure from any attempt at social theory, while I still adhere to a limited form of scientific positivism.

4) Deductive methods - but you are going to either be plagued by the same issues with regard to assumptions about human behavior or "discover" a law as vacuous as "man acts." That leaves you with no room for anything that looks like theory. Your other "axioms" are simply assumptions in other clothing. Besides, how would you ever know whether your axioms were in fact hard laws unless you tested them - logic alone?

5)Predictive value - not all theories have predictive value, but in the case of liquidity traps and the implications of AS/AD, these predictions have panned out. How else do you explain them?

6) Fallacy of conceptual realism - that is a term taken straight from the Mises playbook! Again, we know the assumptions and concepts are often proxies for something that is intangible. Yet, acting as if they were real has led to significant progress.

7) Austrian "theory" - so all Austrians can do is continually warn us about the future and tell us the day is nigh? Or simply advocate for the dismantling of modern states and a return to...?

morse79 said...

@Major Freedom,

Thanks for telling me what I REALLY think.

Mike M said...

Morse79 said: “1) democratic consensus does not equal totalitarianism; 2) property rights alone cannot ensure economic efficiency or satisfy our moral needs; and 3) individual decision making can at times lead to bad collective outcomes.”

#1 Three wolves and a sheep voting on what to have for dinner is a democratic consensus. Go ahead and tell the sheep he is not subject to totalitarianism. Never heard of the the concept of tyranny of the majority?

#2 Silly statement. Property rights are part of the foundation of a free market system. Just digging a basement does not satisfy your “needs” for a comfortable house to live in.

#3 So what. Statist decision making leads to bad outcomes. Any system designed by humans will be inherently flawed. Which one assures the maximum liberty for the individual? That should be your concern.

Bob Roddis said...

I don’t see a break-down for ocean ships originating or ending in the Atlantic Ocean and ending or originating in the lakes. In fact, a shipment from Duluth to Cleveland counts twice, but would not involve foreign critters getting into the lakes which is my concern.

For example, one ton of cargo moved to or from Europe is counted as one ton handled by a Great Lakes-Seaway system port, while one ton of cargo moved from Duluth, Minn., to Cleveland, Ohio, is counted as two tons (one ton exported in Duluth and one ton imported in Cleveland). p.2

In 2010, 86,006 jobs in Canada and the United States were in some way related to the cargo moving via the St. Lawrence Seaway to and from ports and marine terminals located on the Great Lakes-Seaway system.

• Of the 86,006 jobs, 37,344 direct jobs were generated by the marine cargo moving through the St. Lawrence Seaway.

• As the result of the regional purchases by those 37,344individuals holding direct jobs, an additional 21,830 induced jobs were supported in the regional economy.

• 26,832 indirect jobs were supported by US$2.8 billion (Cdn$2.9 billion) in regional purchases by businesses supplying services at the ports and marine terminals.

This section focuses on the 37,344 direct jobs created by cargo handled at the ports and marine terminals on the Great Lakes-Seaway system that moved via the St. Lawrence Seaway. Exhibit IV-3 shows the direct jobs impact by commodity. As this exhibit shows, the movement of iron ore, which represents the largest tonnage handled at the ports and marine terminals, created the largest number of direct jobs — 18,957 jobs.

Pages 61-62

37,344 TOTAL jobs to move iron ore to make steel at plants that can dump crap back into the lakes.

As if these jobs wouldn't exist in some form if the grain was shipped direct to Montreal on trains for loading on ocean-going ships. How does the stuff get to Duluth and Thunder Bay to be loaded on ships in the first place?

Just to be clear, I don't care about shipping between Duluth and Cleveland. My concern is shipping between The Black Sea and Cleveland.

Fearsome Tycoon said...

Austrians don't recommend a return to anything. They recommend a resumption of the increasing progress in liberty and individual rights that was ended in the early 20th century when Progressives decided we all needed to regress to feudalism.

Bala said...

Evasion seems to be the ultimate tool of the Statist/whatever-Keynesian

"1) Aggregating from individual demand is, I agree, not as straight forward as say combining individual voter preferences to an election outcome. But, it is not in the mud either."

Yeah!! Throwing an assertion of this kind is a fantastic answer to the fundamental point made about the meaninglessness of "price levels" and hence the utter foolishness of plotting AS/AD versus "price levels".

"As I pointed out, this aggregation takes place all the time even in Austrian theory for certain general goods (food, clothing, shelter)."

Care to explain which part of Austrian theory DEPENDS on aggregation to be meaningful? More assertions pulled out of.....

"Usefulness refers to whether those assumptions that underlie the model satisfy what we expect from a theory - precision,"

How does this address the fundamental point about the impossibility of precise prediction in economics given the fundamentally unpredictable nature of human choices?

"We can hold multiple standards for good theory"

How does this address the fundamental unsuitability of the empirical method in economics? More assertions, once again from....

"I don't think the generation of universal laws is applicable in the social world"

Yeah!! The law of diminishing marginal utility and the law of comparative advantage are the products of a mind gone insane. These are not really universal. Yet another assertion pulled out of.....

"I prefer theories that explain bounded and limited phenomenon."

Yeah!! Even though it is clear that it is asinine to use them.

" But, that is not an argument against a theory based social science."

It is an argument against the inductive method in the social sciences.

"but you are going to either be plagued by the same issues with regard to assumptions about human behavior"

There are no assumptions made in the deductive method of developing economic theory. The only assumptions are in your failed "virgins in the volcano" methods.

"or "discover" a law as vacuous as "man acts.""

Nothing as vacuous as this statement. "Man acts" is not a "law". It is an axiom. It is the starting point of an entire chain of deductive reasoning. Your scorn for this statement belies your anger over your inability to prove it wrong and consequently your total failure in bringing down Austrian economic theory.

"That leaves you with no room for anything that looks like theory."

Nonsense.

"Your other "axioms" are simply assumptions in other clothing"

Which other axioms? You seem to have an infinite supply of assumptions that you keep pulling out of your.....

"not all theories have predictive value"

A risible attempt at sidestepping the point about the impossibility of precise predictions.

"liquidity traps and the implications of AS/AD, these predictions have panned out"

OMG!! More assertions pulled out of your......

"How else do you explain them?"

Learn real economics, for starters.

"Yet, acting as if they were real has led to significant progress."

Sh1t man!!! Your supply of assertions stuffed up....... seems inexhaustible.

"so all Austrians can do is continually warn us about the future and tell us the day is nigh"

No. They can explain the way the world works and why things go wrong. Except that it is all beyond knuckleheads who have spent too much time in the cess-pool of whatever-Keynesianism.

Bala said...

"Or simply advocate for the dismantling of modern states and a return to...?"

Liberty and (the consequent) prosperity.

Anonymous said...

So when, like today, when Krugman brings up the IS-LM Model and states that "definicts should have no effect on interest rates when you're in a liquidity trap"...what happens when you're out of one?

At some point then, we would leave the fabled liquidity trap and be faced with a wall of deficit-related issues wainting on the other side (and on a much worse footing to deal with them), right?

Or, is perhaps an idea to perpetuate the liquidity trap scenario where government always needs to spend more and can never crowd out anyone else because they just sit back, keep cash on the sidelines, and just let it all happen...

Dennis said...

I just read a Vanity Fair article by Keynesian Joseph Stiglitz, which is interesting in that it lays out pretty much the same nonsense that Krugman does:

http://www.vanityfair.com/politics/2012/01/stiglitz-depression-201201

In the article, Stiglitz blames the Great Depression on the alleged demon of technological innovation in agriculture. In analyzing today's economic collapse, he trots out the usual villians like deregulation of banking. The solution? More of the same Keynesian garbage: higher taxes, vastly more government borrowing and spending on "infrastructure" and plenty of regulations. The article is remarkable in that it packs so many evasions into such a compact space.