One of the constant themes in Keynesian (and Krugmanian) economics is the evil of savings, and how government must manipulate the currency and the banking system in order to discourage people from saving money. On a number of occasions in his columns and blog posts, Krugman has invoked the hoary "paradox of thrift" which uses the Fallacy of Composition to declare that while it might be OK for a few individuals to save a few bucks here and there, it is disastrous if everyone saves at once.
In a recent blog post, Krugman once again claims that if the rate of savings goes up, GDP automatically goes down and the economy plunges into recession. (The post is primarily about the methodology of comparative statics, which all economists use in one way or another, but nonetheless his example is very telling. It is one thing to use comparative statics to demonstrate the effects of a tax on coffee and quite another to use the same method for savings and GDP, as they are not the same thing even though Krugman wants us to believe that we examine these things in exactly the same way.)
This example "proves" that if people save money, then GDP must fall. When people save money, Keynesians argue, not all of it is invested immediately, so when some current spending is eliminated but is not immediately spent as investment, there is a lull in which the economy is dragged down. Furthermore, they argue, once the economy starts to plunge, unless government immediately disrupts the pattern by spending and also inflating (which undermines savings), then aggregate demand will fall and investors will fail to create new capital, since they don't anticipate demand for the products it will help produce.
The Keynesian Multiplier, along with graphs such as what Krugman trots out, are shown as "proof" of this point. The Multiplier is expressed as 1/savings rate (Marginal Propensity to Save) which also can be expressed as 1/(1 - Marginal Propensity to Consume).
For example, say the MPC is 80 percent (or 0.8) and the MPS, then would be 20 percent (or 0.2). In other words, people in an economy would spend 80 percent of their income and save 20 percent. Thus, the Multiplier would equal 1/0.2 or 5. However, if people saved only one percent of their income, then the Multiplier would be 1/0.01 or 100, which "proves" that the less we save, the more prosperous we will be.
(I must admit that this reminds me of the saying we had when I was in high school, which began with "The more you study, the more you know," and finally was able to end, after some "logical" progressions, to "The less you study, the more you know. So why study?")
An obvious questions arises: If savings is bad, why not have a zero savings rate, which then would give us a multiplier of infinity? Keynes, when faced with that same question, declared that at that point, inflation would skyrocket, although he did not explain why that would be a bad thing, given that Keynesianism is based upon the "magic" of inflation, anyway.
This economic viewpoint, however, is based upon a nuanced view of capital, that it is homogeneous AND that the value of capital formation is in the spending that takes place, not with capital itself. And, Keynesians argue, because increased savings lower the value of the Multiplier, that the "solution" is for people not to save (or save as little as possible) and depend upon government or the central bank (or both) to manufacture the money needed for capital investment out of thin air.
All of this crashes, however, if capital is heterogeneous. Furthermore, if capital can be malinvested -- and Austrians argue that will be the case when capital is created via inflation -- then the Keynesian scheme is destined to end in disaster.
That is what we are seeing now. For more than two decades, the government has followed the pattern of inflating, running into malinvestments, inflating the economy into "recovery," and then dealing with future crashes that are larger. We have seen the Tech Bubble and collapse, the Housing Bubble and collapse, and now the governments around the world have created the Sovereign Debt Bubble which is destined to collapse.
Krugman can use all of the graphs and math that he wants, but he cannot get around the sticky problem of heterogeneous capital, nor does he have an answer for malinvestments. His M.0. has been to state his case and then attack anyone who disagrees, claiming that their disagreement is based upon their fundamental desire for people to suffer and to be out of work. That is not economics, but then Keynesianism is not economics, either.
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What Keynesians are even more ignorant about, is keeping consistent with their own story.
They attack savings and believe the more people spend, the more prosperous they will be. They advance the multiplier as part of this belief. But what they don't seem to even realize is that the only incomes that can possibly be raised by virtue of the multiplier is profit income, for that is the income that is earned on sales revenues.
They then try to get out of this reality by saying that what they really mean is that the extra profits will be used to pay for labor and for more capital equipment. But that is saving, the very thing they are attacking! For in order to buy labor and capital equipment, people have to abstain from consuming and save and invest instead.
To this they then reply that what they really really meant is that investors won't invest if there isn't a demand for output. Well sure, but this ignores the fact that demand doesn't collapse to zero. If expected demand falls to X, then investors will put forth a lower demand and hence lower bid prices for labor and capital equipment. If expected demand rises, then they will just put forth a higher demand and hence higher bid prices for labor and capital equipment. In real terms, there isn't any difference.
To this they then reply that what they really really really meant is that the market is not able to lower bid prices for labor and capital equipment, because prices are somehow sticky downward. But this ignores the fact that it is government that makes prices sticky downward, by enforcing minimum wage laws and rewarding unemployment with welfare benefits.
To this they then reply that what they really really really really meant is that lower wages generates a deflation spiral. But this ignores the fact that wages are also a business cost, and when wages are lower, so are business costs and hence prices, and when wages are higher, so are business costs and hence prices, which does not lead to a decrease or increase in real incomes.
To this they then reply that what they really really really really really meant is that economists just hate the poor and want to see them suffer for the sake of "ideology".
Gosh, Maj, I hate it when you use logic! That is just SOOOO unKeynesian!
"This example "proves" that if people save money, then GDP must fall."
I think you have just made Krugman's point by completely misunderstanding what comparative statics mean! GDP must fall if we keep investment constant, which is to be expected in a depression.
Do you really think it is not entirely plausible that when a shock hits an economy like a collapse in housing prices there were will be a sudden increase in savings across the board? Do you really think it is ridiculous to think that this increase in savings absent a commensurate increase in investment will not lead to a decrease in GDP? Is it really ridiculous to think that collective behavior can make a bad situation worse by everyone saving at once? Surely you realize that spending is an integral part of any economy?
Let me be clear, because nuance is often lost here. No one is arguing that savings lead to depressions, or that savings in of itself is a negative activity. Only that under certain conditions it can be. But, then I thought that type of thinking was the essence of economics.
Re: morse79
Let's not forget that it is the price distortions caused in the first place by the fiat money/FRD funny money loan process that causes the housing bubble followed by the housing bust. This process is necessarily going to cause some degree of impoverishment. All that government intervention can accomplish is to further misdirect resources and futher disrupt the reality-based price information system.
morse79:
"I think you have just made Krugman's point by completely misunderstanding what comparative statics mean! GDP must fall if we keep investment constant, which is to be expected in a depression."
That's incorrect. If investment SPENDING does not fall, then ceteris paribus neither does GDP.
"Do you really think it is not entirely plausible that when a shock hits an economy like a collapse in housing prices there were will be a sudden increase in savings across the board?"
Do you really not understand that shocks have causes, and that increased cash holdings is a part of the solution to the problem generated by that cause?
"Do you really think it is ridiculous to think that this increase in savings absent a commensurate increase in investment will not lead to a decrease in GDP?"
Do you really think that GDP is anything other than a crude aggregate spending measure that is separate from real production and standards of living?
"Is it really ridiculous to think that collective behavior can make a bad situation worse by everyone saving at once?"
Is it really ridiculous to believe that consumers capriciously drop their consumption spending for no reason, and that attempting to counteract voluntary actions will necessarily have destructive side effects, like setting into motion yet another crash later on that will again be labelled as an "unexplained shock"?
"Surely you realize that spending is an integral part of any economy?"
Surely you realize that people can't spend money on that which hasn't first been produced through saving and investment, and so attacking saving is ultimately an attack on consumption, right?
morse79:
"Let me be clear, because nuance is often lost here. No one is arguing that savings lead to depressions, or that savings in of itself is a negative activity. Only that under certain conditions it can be."
I guess the "nuance" is lost on you.
Voluntary saving can NEVER be a "negative" activity, under any circumstances.
By choosing not to trade with a producer of consumer goods, you aren't taking anything away from them. No wealth is lost. It is a POSITIVE activity only, because the individual generates a personal gain (by earning money and holding it for longer than you arbitrarily consider to be "justified", even though you are in no position to even make such a judgment), with zero reduction of wealth imposed on others.
As long as prices are free to fall, as they are in an unhampered market, then there is no cause for depression under any circumstance. If there is a depression, and it is associated with holding higher cash balances, then the economist should look to the cause for why people are suddenly holding higher cash balances, not mistake correlation for causation and chalk up the depression to saving.
Even in a crazy hypothetical world where consumers did suddenly hold higher cash balances for no reason, and it led to unemployment in the consumer goods sector, then saving would still not be a "destructive" activity. The labor and resource reallocation would be necessary for a HEALTHY economy to be maintained. Production in the near term would fall because people WANT production in the near term to fall. People are holding more cash because they want to be able to consume more in the future and less in the present. And so the labor and resource releases from the consumer good industries is exactly what is needed to change the economy to match people's new preferences. Those released labor and resources can be entirely absorbed into the higher order stages, provided prices are free to fall.
But this is all besides the point, because Keynesians aren't even proposing that government increases spending in these (never existing) scenarios. They wanted and achieved government deficits and inflation if the economy so much as whiffs of readjustment. Even if consumer price inflation drops from 2% to 0%, the government is supposed to print and spend. They are supposed to print and spend as much as is necessary to get consumer price inflation back up, even if market forces of consumer prices falling are so strong (on account of saving, investment, production, etc) that the government has to print trillions of dollars and blow up stock market and real estate bubbles, it doesn't matter.
Bob, that is besides the point. Do you agree with the underlying economic model that shows how a rise in savings, under certain conditions, can worsen a recession?
You have merely shifted the debate over to the catalyst of this "shock" to the economy, and have not engaged in the actual impact of the shock.
You are also utterly naive if you think that the magnitude of the housing bubble can solely be attributed to price distortions due to low interest rates and monetary expansion.
Geez Major Freedom, have you heard of brevity?
"That's incorrect. If investment SPENDING does not fall, then ceteris paribus neither does GDP."
OK. Then lets say that investment spending falls as well given the fact that there people are less likely to buy the products investors make.
"Do you really not understand that shocks have causes, and that increased cash holdings is a part of the solution to the problem generated by that cause?"
And do you not understand when I said that collective response to an economic downturn in the form of increased saving can make a bad situation worse?
"Do you really think that GDP is anything other than a crude aggregate spending measure that is separate from real production and standards of living?"
Now you are just arguing with terms instead of the underlying logic. So lets change them - a sudden economic downturn causes people to save more than they would otherwise. Businesses do not take that additional savings and invest it out of uncertainty whether people will actually buy what they are selling. This causes production and standards of living to fall.
"Is it really ridiculous to believe that consumers capriciously drop their consumption spending for no reason, and that attempting to counteract voluntary actions will necessarily have destructive side effects, like setting into motion yet another crash later on that will again be labelled as an "unexplained shock"?"
See above. And I am not talking about the response to this action, but the fact that what appears as an individually rational action can lead to collectively bad results
"Surely you realize that people can't spend money on that which hasn't first been produced through saving and investment, and so attacking saving is ultimately an attack on consumption, right?"
Of course. But if everyone lived like a hermit the economy would stall as well.
morse79:
"Geez Major Freedom, have you heard of brevity?"
Geez morse79, have you heard of no good ideas should go unmentioned, especially with what's been going on in the world?
"That's incorrect. If investment SPENDING does not fall, then ceteris paribus neither does GDP."
"OK. Then lets say that investment spending falls as well given the fact that there people are less likely to buy the products investors make.
But that is an assumption that is itself the conclusion being debated. Of course if you assume investment falls whenever consumption falls, then you cannot help but reach that conclusion!
"Do you really not understand that shocks have causes, and that increased cash holdings is a part of the solution to the problem generated by that cause?"
"And do you not understand when I said that collective response to an economic downturn in the form of increased saving can make a bad situation worse?"
So you don't understand that shocks have causes. Do you really not understand the fact that increased saving does NOT make a bad situation worse, but in fact is part of turning a bad situation good?
Voluntary saving is HEALTHY. Always. Period. End of story.
If an economic downturn ensues, then increased saving will be a part of economic recovery, because it will send signals throughout the market that consumers are placing a higher value on future consumption and less value on present consumption. By allowing people to save in peace, and not violently responding to it in order to reverse the effects of it, what happens is that investors will realize that producing for more near term consumption instead of long term consumption is THE WRONG THING TO DO.
So investors will cease devoting as many resources and labor to near term consumption, and by freeing up that labor and resources, investors in the higher stages, the stages devoted for future consumption, can buy them up (provided prices are free to fall).
This is what people WANT the economy's resources and labor to do. It cannot possibly be destructive that the economy be readjusted by investors on account of consumer's new preferences.
As the labor and resources are reallocated, consumers can get what they want. Isn't that why we produce all day in the first place? To consume what we want, given the law of scarcity and opportunity costs?
The point of working and producing is not merely to be employed. Yes, Keynesians want people to believe that, but that's only because they ultimately want a maximized source of taxation. They don't care about aligning production with consumption.
"Do you really think that GDP is anything other than a crude aggregate spending measure that is separate from real production and standards of living?"
"Now you are just arguing with terms instead of the underlying logic."
No, I am arguing with the logic. By your logic, a fall in GDP is somehow tantamount to a fall in prosperity, rather than what it actually is, which is a fall in nominal spending.
"So lets change them - a sudden economic downturn causes people to save more than they would otherwise."
WHAT CAUSED THE ECONOMIC DOWNTURN?
morse79:
"Businesses do not take that additional savings and invest it out of uncertainty whether people will actually buy what they are selling."
This is not what people do. They don't decide to abstain from consuming, then have cash, then decide how much of that cash to invest. They decide all three concurrently. They earn a nominal income, and they decide how to much to consume, invest, and add to their cash balances.
A rise in saving just means a drop in consumption. If people drop their consumption, they're still consuming. They just want to consume less in the present and more in the future.
If there is increased uncertainty, then that will only expedite the process of asset prices falling. At some point, the lower expected demand will eventually become higher than the now decreased costs to make investment worthwhile.
Owners of resources and labor won't hold out for higher prices forever. They will hold out until they realize they can't get them. If they knew and understood that they are no longer living in an inflationary economy, and if there were no minimum wage laws banning them from offering a lower price, and if they couldn't live on the dole for months and months on end, that will greatly minimize the holding out. Harsh? Perhaps, but the subject is economics, not psychology or morality.
"This causes production and standards of living to fall."
When people reduce their consumption and hold more cash, that means people WANT to consume less in the present and more in the future. OF COURSE people's standards of living, as measured by consumption, will fall!
It is like me earning $100,000 a year and blowing it all on hookers and booze, and then one year I start to reduce my consumption by $50,000 and save and invest instead. Yes, my standard of living just collapsed to half of what it was. But that is because I WANTED it to fall!
"Is it really ridiculous to believe that consumers capriciously drop their consumption spending for no reason, and that attempting to counteract voluntary actions will necessarily have destructive side effects, like setting into motion yet another crash later on that will again be labelled as an "unexplained shock"?"
"See above. And I am not talking about the response to this action, but the fact that what appears as an individually rational action can lead to collectively bad results."
No, that is not a "fact." It is a judgment of value. Individuals voluntarily saving more does not have "bad" results. It is only "bad" from the silly standard of means to ends being an end in itself, like employment in consumer goods industries, that must be sought after at the expense of people's actual ends, like less present consumption and more future consumption.
"Surely you realize that people can't spend money on that which hasn't first been produced through saving and investment, and so attacking saving is ultimately an attack on consumption, right?"
Of course. But if everyone lived like a hermit the economy would stall as well.
[Facepalm] If everyone WANTED to live like hermits, why should producers keep producing cars and movie theaters and iPods, and why should people be employed helping to produce these things? You're not making any sense. You're standard of reference for determining good and bad is not the individual, but some fuzzy Platonic realm of universals and aggregates.
The economy has no reality apart from the individuals in it.
You are spewing nonsense that you "learned" in first year economics that saving is somehow allegedly good for the individual, but "bad" for the macroeconomic sphere that technocrats are trying to manage.
morse79:
"Bob, that is besides the point. Do you agree with the underlying economic model that shows how a rise in savings, under certain conditions, can worsen a recession?"
Do you agree that government spending money designed to and succeeding in increasing consumption in the present, would go directly against people's preferences that include less consumption spending and more cash holding?
You have merely shifted the debate over to the catalyst of this "shock" to the economy, and have not engaged in the actual impact of the shock.
You have IGNORED the cause for the shocks, and are thus unable to give a rational solution for the shock. The reason why we bring up the fact that the causes must not be ignored is because people who are brainwashed with what you are brainwashed into believing, consistently and habitually recommend policies that caused the shocks in the first place.
You're like people who give cancer patients mercury to cure their cancer, and then when we say let's look to the cause of their cancer, you say "Don't shift the debate to the cause. I'm here to solve the problem with my mercury, so stick to the topic."
"You are also utterly naive if you think that the magnitude of the housing bubble can solely be attributed to price distortions due to low interest rates and monetary expansion."
YOU are utterly wrong and misguided if you believe that the housing bubble could have arisen at all in the absence of price distortions due to artificially low interest rates and credit expansion. Low interest rates and credit expansion were, and remain, NECESSARY ingredients to the business cycle.
Whenever I hear Keynesians rail against saving, it just makes me think that their view of saving is me cashing my paycheck, going home and putting my money in an old coffee can, and burying it in the backyard. Most money that is "saved" in this country is stored in banks or investment firms, who turn right around and put the money to work so they can afford your interest payments and make a profit.
How can saving be bad when this is the case?
Mikaelus:
"How can saving be bad when this is the case?"
It's actually not bad in either case. If people earn money and then go bury it in their backyard, they produced something of value for others, but then did not consume anything themselves from what they earned in exchange.
They are benefiting themselves, and not harming others, in both cases.
In fact, in the money burial scenario, they are actually making available more resources for other people's benefit, than would otherwise have been the case had they consumed with it.
"Whenever I hear Keynesians rail against saving, it just makes me think that their view of saving is me cashing my paycheck, going home and putting my money in an old coffee can, and burying it in the backyard"
i think of Scrooge McDuck swimming around in his silo filled with gold (presumably because hoarding all that cash is preferable to, i dont know, buying a swimming pool)
MJ, some of us have jobs and contribute to society. The accepted form for blog comments is normally short.
"If people drop their consumption, they're still consuming."
Need I say more?
" Of course if you assume investment falls whenever consumption falls, then you cannot help but reach that conclusion!"
Do you really think that is a stretch of the imagination? Credible surveys of business cite low demand as the main impediment toward more investment. Resources are lying idle.
"Voluntary saving is HEALTHY. Always. Period. End of story"
In the long-term, perhaps. But we live in the short-term and investors have no way of knowing when in the future consumers might start spending again! You imagine an environment of pure omnipotence on the part of all participants, when real economists deal with understandings the inevitable frictions of markets.
And from a Keynesian point of view the act of individual saving is not necessarily bad. Paying of debt is the right thing to do for many. But, there are short-term unintended consequences to collective saving.
"WHAT CAUSED THE ECONOMIC DOWNTURN?"
Again, the point is how individual decisions that seem rational to the individual can collectively make a bad situation worse. Notice the bad part - I didn't say that saving causes depressions only that it can prolong and worsen them.
"It is like me earning $100,000 a year and blowing it all on hookers and booze, and then one year I start to reduce my consumption by $50,000 and save and invest instead. Yes, my standard of living just collapsed to half of what it was. But that is because I WANTED it to fall!"
Well to each his own. But, imagine an economy consisting of only houses, hookers and booze and everyone stopped consuming them by half at once because housing prices deflated. Well, the producers of hookers and booze aren't about to start building new whorehouses and distilleries are they? In fact, it is likely that when you decide to start drinking again you will find it difficult to find a bar.
Would Dr. Anderson care to comment on today's NYT piece titled 'How Fares the Dream'?
morse79:
"MJ, some of us have jobs and contribute to society. The accepted form for blog comments is normally short."
morse79, some of us don't care about your personal life, and some of us know that when people relegate themselves to (weak) insults, it means they cannot argue using ideas and knowledge, because they lack them.
"If people drop their consumption, they're still consuming."
"Need I say more?"
You didn't say anything.
"Of course if you assume investment falls whenever consumption falls, then you cannot help but reach that conclusion!"
Do you really think that is a stretch of the imagination?
Do you really think isolated rhetorical questions are valid arguments?
Even if a fall in consumption spending were accompanied by a fall in investment spending, then provided the ratio remains unchanged (meaning provided people's time preferences remain unchanged), then there is nothing present to reduce overall productivity, profits, or employment.
"Credible surveys of business cite low demand as the main impediment toward more investment. Resources are lying idle."
You mean consumer goods businesses cite low consumer demand as the main impediment towards more investment. Well duh. But this doesn't mean that capital goods businesses will experience a fall in demand, and when savings increases, capital goods spending tends to expand.
"Voluntary saving is HEALTHY. Always. Period. End of story"
In the long-term, perhaps. But we live in the short-term and investors have no way of knowing when in the future consumers might start spending again!
No, it's true in the short term, medium term, and long term. Perhaps you don't understand the meaning of always, end of story?
If investors in consumer goods companies don't expect a rise in consumer spending in the future, then there is just no reason to invest more in consumer goods. But that doesn't mean that capital goods investment and spending has to fall.
You imagine an environment of pure omnipotence on the part of all participants, when real economists deal with understandings the inevitable frictions of markets.
Hahaha, the irony is that it is precisely you anti-market Keynesians who believe people in the government can be omniscient (you said omnipotent but you probably meant omniscience, which means your vocabulary is as bad as your economics).
You believe that "frictions" in the market can be overcome by wise overlords with guns and legitimated by once every 4 years popular vote.
morse79:
And from a Keynesian point of view the act of individual saving is not necessarily bad.
Who cares? The problem with the Keynesian view is that they fallaciously believe that saving in the aggregate is bad. That is the destructive mentality that is being disputed here.
Paying of debt is the right thing to do for many. But, there are short-term unintended consequences to collective saving.
GOOD. If there weren't any consequences of saving, then there would be no reason to even do it. And when you say "unintended", it is only "unintended" for those who don't adequately plan for it, and those who couldn't adequately plan for it because every time they try to hold more cash to reduce their risk and put aside a fund just in case of sudden shocks, the Keynesian inspired government calls for more inflation thus nullifying people's plans to reduce their risk.
"WHAT CAUSED THE ECONOMIC DOWNTURN?"
Again, the point is how individual decisions that seem rational to the individual can collectively make a bad situation worse.
AGAIN, WHAT CAUSED THE ECONOMIC DOWNTURN SUCH THAT THE SITUATION IS BAD?
Notice the bad part - I didn't say that saving causes depressions only that it can prolong and worsen them.
Not only you were already corrected on that error, but you also failed to answer what caused the "bad" situation to transpire.
"It is like me earning $100,000 a year and blowing it all on hookers and booze, and then one year I start to reduce my consumption by $50,000 and save and invest instead. Yes, my standard of living just collapsed to half of what it was. But that is because I WANTED it to fall!"
Well to each his own.
To each their own? Stop lying. You don't actually believe that, because you are positively advocating that people be deprived of "their own" if "their own" is to increase their purchasing power through holding more cash.
But, imagine an economy consisting of only houses, hookers and booze and everyone stopped consuming them by half at once because housing prices deflated. Well, the producers of hookers and booze aren't about to start building new whorehouses and distilleries are they?
Why not? They just had an influx of $50,000 in new capital per person. By investing that money for future production, people can reduce their consumption in the present, in exchange for more consumption in the future.
You ignorant Keynesians are so clueless that you actually believe that the reduction in consumption spending of $50,000 simply disappears from the economic system forever.
Even if people did reduce their consumption from $100,000 to $50,000 and accumulated more cash, that would have the effect of making capital goods industries relatively more profitable than consumer goods industries, and hence lead to a redirection of existing capital away from present consumption and into future consumption.
In fact, it is likely that when you decide to start drinking again you will find it difficult to find a bar.
But people are still spending $50,000 on hookers and booze. All hooker and booze establishments have to do is reduce their bid prices for labor and capital goods that go into hooker and booze selling. It is NOT the case that people reducing their nominal demand for hookers and booze will lead to a real reduction in the supply of hookers and booze.
"morse79, some of us don't care about your personal life, and some of us know that when people relegate themselves to (weak) insults, it means they cannot argue using ideas and knowledge, because they lack them."
Well Major, it always seems to me like it is you who carries the accusatory and insulting tone ("You ignorant Keynesians are so clueless" etc...). Can you not discuss without being civil or giving the other "side" the benefit of the doubt?
I was merely pointing out that the format of blog commenting does not really lend itself to lengthy posts such as yours. If you want, start your own blog and write as much as you want.
"But this doesn't mean that capital goods businesses will experience a fall in demand, and when savings increases, capital goods spending tends to expand."
Why would that hold if saving increased due to an economic crisis? You do understand that capital goods are used in the production of consumer goods? You also realize that capital good investment has dropped as well.
"No, it's true in the short term, medium term, and long term. Perhaps you don't understand the meaning of always, end of story?"
Because you say so? You have provided no reason why.
"But that doesn't mean that capital goods investment and spending has to fall."
But it did (http://www.indexmundi.com/facts/united-states/gross-fixed-capital-formation)
"(you said omnipotent but you probably meant omniscience,"
No, I meant all capable, not all knowing. Again, no need for insults.
"You believe that "frictions" in the market can be overcome by wise overlords with guns and legitimated by once every 4 years popular vote"
That is not what I believe, it is what you think I believe or a caricature of what I believe. From your statements it appears that you think these frictions do not exist - everything is effortlessly guided by the invisible hand, people can predict the future, have perfect information, politics is non-existent, preferences are exogenous, collective behavior is never detrimental, people always make the right choices, no one ever signs a contract, wages are not sticky, transitions are painless, transaction costs are zero.
morse79:
"morse79, some of us don't care about your personal life, and some of us know that when people relegate themselves to (weak) insults, it means they cannot argue using ideas and knowledge, because they lack them."
Well Major, it always seems to me like it is you who carries the accusatory and insulting tone ("You ignorant Keynesians are so clueless" etc...).
Well morse79, it always seems to me like it is you who carries the accusatory and insulting tone ("You are also utterly naive", etc).
Can you not discuss without being civil or giving the other "side" the benefit of the doubt?
Take your own advice.
I was merely pointing out that the format of blog commenting does not really lend itself to lengthy posts such as yours.
First, that is not the only thing you have been doing. Second, I think you should let the owner of this site decide such matters, but thanks for your worthless and unwanted advice anyway.
If you want, start your own blog and write as much as you want.
If you want, start your own blog and write as much as you want.
"But this doesn't mean that capital goods businesses will experience a fall in demand, and when savings increases, capital goods spending tends to expand."
Why would that hold if saving increased due to an economic crisis?
What caused the economic crisis?
You do understand that capital goods are used in the production of consumer goods?
You do understand that capital goods are also used in the production of other capital goods, so falling consumer demand does not necessarily mean a fall in capital goods demand?
You also realize that capital good investment has dropped as well.
Again, what is the cause for the rapid decline in the value of accumulated savings and capital?
You cannot ever understand the economy if you constantly ignore it.
"No, it's true in the short term, medium term, and long term. Perhaps you don't understand the meaning of always, end of story?"
Because you say so?
No, because economics says so.
You have provided no reason why.
I have. I said that if people reduce their consumption spending, to build up their cash balances, then it means that they want to consume less in the present, and more in the future. Since reducing consumer demand will generate a decline in the profits of consumer goods companies, less investment and thus lower production of consumer goods in the present will be had, which is exactly what consumers want.
You are calling this benevolent outcome "bad" because it requires short term correction, which we observe as temporary employment and temporarily idle resources. Rather than welcoming this correction as good, because resources and labor are being redirected towards the consumer's preferences, you call it "bad."
You have provided no reason why.
morse79:
"But that doesn't mean that capital goods investment and spending has to fall."
But it did (http://www.indexmundi.com/facts/united-states/gross-fixed-capital-formation)
*Sigh*, it fell but not because consumer spending fell. It fell because of the same cause that generated the fall in consumer spending, namely, a prevalence of malinvestment founded on monetary manipulation.
"You believe that "frictions" in the market can be overcome by wise overlords with guns and legitimated by once every 4 years popular vote"
That is not what I believe, it is what you think I believe or a caricature of what I believe.
It is what you believe, and you can stop lying about it.
From your statements it appears that you think these frictions do not exist - everything is effortlessly guided by the invisible hand, people can predict the future, have perfect information, politics is non-existent, preferences are exogenous, collective behavior is never detrimental, people always make the right choices, no one ever signs a contract, wages are not sticky, transitions are painless, transaction costs are zero.
No, that is a caricature of the free market position.
"Frictions" can only appear if you have a standard of judgment that is friction free. That standard is not what free markets require, depend on, or even argue is the case.
"Everything is effortlessly guided by the invisible hand" is also false, because free market advocates know that effort is carried out by individuals.
"People can predict the future" is not a foundation of the free market position. That people cannot predict the future is, ironically, precisely one of the foundations of the superiority of free markets and zero central planning.
"preferences are exogenous" is not a foundation of the free market position. Preferences are treated as residing in the individual
"collective behavior is never detrimental" is not a foundation of the free market position. If collective behavior violates the free market process of voluntary exchange and respect for private property rights, then such behavior is "detrimental."
"people always make the right choices" is not a foundation of the free market position. We know that people make mistakes, which is why we advocate for the system of profit and loss, to correct errors and reward good decisions.
"no one ever signs a contract" is just plain silly. The very foundation of the free market position is contracts.
"wages are not sticky" is not a position of the free market position. Wages are sticky relative to some otherworld dimension of instantly adjusting prices to every minute change in supply and demand. The free market position does not presume nor depend on such price dynamics.
"transitions are painless" is not a foundation of the free market position. In fact, it is only the free market position that can explain the painful transition from a free market economy to a centrally managed economy.
"transaction costs are zero" is not a foundation of the free market position. It presumes transactions have costs.
You are arguing against a giant straw man that is founded on the anti-free market caricature of "pure and perfect competition." You statist boobs attack that straw man as if the free market requires or depends on any of these things, and then you argue as if the government can overcome these issues by pointing their guns at people and printing funny money.
Why don't you instead address the actual free market position? Or are the transaction costs too high for you?
Major_Freedom:
"In fact, in the money burial scenario, they are actually making available more resources for other people's benefit, than would otherwise have been the case had they consumed with it.
So by not consuming, the demand for goods would decrease slightly, allowing for price to adjust downwards and allowing others to consume more?
Sorry, I'm only a Sophomore Econ student, I just want to be sure I understand your point.
I dont even understand the accusation that free market proponents assume perfect knowledge on behalf of market participants, when they, austrians especially, continue to point out that that knowledge is decentralized and not available in whole to anyone at anytime.
Didnt they give hayek a nobel for something he mumbled about that? It was probably just the nobel committees warped sense of humor to let that happen.
Mikaelus:
"In fact, in the money burial scenario, they are actually making available more resources for other people's benefit, than would otherwise have been the case had they consumed with it."
So by not consuming, the demand for goods would decrease slightly, allowing for price to adjust downwards and allowing others to consume more?
Yes, you can look at it that way.
This past February, the American Economic Review (specifically Kenneth J. Arrow, B. Douglas Bernheim, Martin S. Feldstein, Daniel L. McFadden, James M. Poterba, and Robert M. Solow*) named its top 20 articles of the last 100 years. Included therein was:
Hayek, F. A. 1945. “The Use of Knowledge in Society.” American Economic Review, 35(4): 519–30.
http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.101.1.1
Back in 1974, Friedrich Hayek won the same Nobel Prize that Krugman recently won. Hayek won it for his work on Austrian theory which basically holds that the boom/bust cycle is caused by Krugmanite policies. In the Austrian system, economics is basically a KNOWLEDGE problem, or a LACK OF KNOWLEDGE problem (you know, problems concerning the use of knowledge in society, to coin a phrase). Unadulterated market prices provide vital information that is distorted by the Keynesian system.
We’ve been nipple-feeding these Keynesians for years and they still cannot grasp our central argument.
Bob Roddis: Hayek won it for his work on Austrian theory which basically holds that the boom/bust cycle is caused by Krugmanite policies.
Not sure what "Krugmanite policies" are, but Keynesian policy is primarily fiscal, not monetary. Most economists reject Austrian theory, but still find value in Hayek's work in terms of distributed information in markets.
Bob Roddis: Unadulterated market prices provide vital information that is distorted by the Keynesian system.
Countercyclical policy skews, but otherwise levaes the market signal intact.
Countercyclical policy skews, but otherwise levaes the market signal intact.
It cannot leave the market signal intact. That's absolute nonsense. By definition of the Keynesians. People are buying stuff they wouldn't otherwise be buying. Those prices must different than what prices would have been without the intervention. Otherwise, why engage in the stupid policy in the first place?
Jonathan F. Catalan explains:
http://mises.org/daily/5123
Bob Roddis: It cannot leave the market signal intact.
Of course it can. If you transform something by skewing it, the relationship between the individual components are left intact, and the original thing can be recovered by applying a reverse translation.
Bob Roddis: Otherwise, why engage in the stupid policy in the first place?
To slow an overheated market and set money aside as a rainy day fund. Or the reverse. To even out the market cycle. It's important to realize that Keynesian theory is based on markets.
You see, in the black and white, simplistic world of the Keynesians, if you save, you do not spend. No consumption = recessions and depressions.
And this guy won a Nobel prize for this kind of thinking?
Oh, yes, I forget; they gave a prize to the boob st the White House as well. LOL.
"Of course it can. If you transform something by skewing it, the relationship between the individual components are left intact, and the original thing can be recovered by applying a reverse translation."
This implies that time never moves forward.
"set money aside as a rainy day fund."
That is what individuals used to do (not only for a rainy day funds, but also for retirment) until governments started engaging in Keynsian policies. Now, they gamble their savings in the stock market in an attmept to stay ahead of inflation.
[T]he original thing can be recovered by applying a reverse translation.
Pure and complete nonsense. There is no "going back" to what never existed or was never allowed to be expressed. No one can possibly have such knowledge. And we are talking about zillions of prices for all the factors of the capital structure. The statists engage in knowledge destruction to cure the problem that does not exist, alleged systemic unemployment in the free market. In that way, their policies CAUSE the problem that otherwise does not exist.
In a 1975 speech, Hayek stated:
“The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept. The point I want to make is that this equilibrium structure of prices is something which we cannot know beforehand because the only way to discover it is to give the market free play; by definition, therefore, the divergence of actual prices from the equilibrium structure is something that can never be statistically measured."
Zachriel:
"Of course it can. If you transform something by skewing it, the relationship between the individual components are left intact, and the original thing can be recovered by applying a reverse translation."
Is this person for real? He is viewing the real world as if it's some mathematical formula than be changed one way and then back again to its original state.
Totally and completely ignorant about economic science. He has no rational foundation whatsoever.
MF:
If Zachriel can do what he says, he should be able to predict exactly the scores of sporting events with alternatives for different weather conditions. If we hang with him, we can make millions on sports betting.
Prediction is very hard, especially about the future - Yogi Berra
"If Zachriel can do what he says, he should be able to predict exactly the scores of sporting events with alternatives for different weather conditions. If we hang with him, we can make millions on sports betting."
Oh but then we'll probably have to hear about information symmetry, transactions costs, and non-ergodic stochastic processes.
Then his magical centralized planning mind will be humbled by the reality of economic life, and of individual action.
It's too bad these things sometimes have be shown gently and without too much of a jolt. Their whole worldview rests on such a brittle reef. I bet Zachriel hasn't read a single Austrian economics textbook or paper.
Sam: This implies that time never moves forward.
Skew can apply to the time dimension, and in this case, countercyclical policy applies to the time dimension. Do you understand the meaning of skew?
Bob Roddis: And we are talking about zillions of prices for all the factors of the capital structure.
It's hard to know if you are even talking about the same thing. Keynesian policy does not set prices. A simple stimulus, for instance, is to cut taxes. This tends to increase demand with ripple effects through the economy. It skews the existing pricing structure, but doesn't change the relation between the various prices.
Major_Freedom: Then his magical centralized planning mind will be humbled by the reality of economic life, and of individual action.
Once again, you misrepresent our position.
Zachriel:
"Major_Freedom: Then his magical centralized planning mind will be humbled by the reality of economic life, and of individual action."
Once again, you misrepresent our position.
No, it's well represented. You don't have to deny it.
And who's this "our" you're referring to?
Major_Freedom: Then his magical centralized planning mind will be humbled by the reality of economic life, and of individual action.
Sorry, but your mangling of our position is not an argument. The most salubrious societies are those that include institutions working and competing at all levels, including a divided government with independent judiciary, local and area civic organizations, political parties, corporations, clubs, property, and individual liberties.
http://www.nytimes.com/2012/01/16/opinion/krugman-how-fares-the-dream.html?src=tp&smid=fb-share
Would a currency collapse using Keynesian policies falsify Keynesianism? If not that, then what would Keynesians accept as falsification of their theory? So far every time their prescriptions haven't worked, the excuse was the stimulus wasn't big enough. What then is an acceptable falsification? We know that stagflation is no longer acceptable, so what is?
Zachriel:
"Major_Freedom: Then his magical centralized planning mind will be humbled by the reality of economic life, and of individual action."
Sorry, but your mangling of our position is not an argument. The most salubrious societies are those that include institutions working and competing at all levels, including a divided government with independent judiciary, local and area civic organizations, political parties, corporations, clubs, property, and individual liberties.
I don't believe you're being upfront when you say these things.
Fascinating post and lively debate, as usual. As much as I think both sides of this and similar debates try to keep things on the positive or valueless side, I think this is difficult to do within the mind of any individual. For instance, I don't believe I have ever met a collectivist who thought Mises and Hayek were right on the money. Likewise, I've never met a solid individualist who thought Keynesianism was a sound recipe for prosperity. I don't know the answer, but is objectivity in these matters a pretense?
Unknown: Would a currency collapse using Keynesian policies falsify Keynesianism?
Keynesian countercyclical policy, which should be revenue neutral, shouldn't lead to a monetary collapse as it merely shifts resources somewhat in order to even out the market cycle. It's when countercyclical policy is abandoned in favor of procyclical policy, as it was during the Bush Administration, that the economy is disrupted.
Major_Freedom: I don't believe you're being upfront when you say these things.
We have been consistent in our views, and repeated them many times on this and other forums. If you want a theoretical basis, it has to do with how networks form (cf. network theory). Robust markets are essential, in this view, for the proper allocation of resources.
As Hayek pointed out, the amount of information in markets is vast. Not only is it impractical to centralize such information, it is not possible to update such information in a realistic time frame. In essence, markets are a form of distributed intelligence.
On the other hand, markets have serious deficiencies; for instance, with regards to the problem of common resources. From a market standpoint, people upriver should take all the water and dump their untreated sewage. This results in political tension, though, and is untenable in the long run. People downriver will either have a say in the allocation of resources, or the political tension will find its outlet in armed conflict.
Major_Freedom: I don't believe you're being upfront when you say these things.
That you consistently misstate our position is probably because you don't understand our position and insist upon making it fit one of your preconceived categories.
Daniel: I don't believe I have ever met a collectivist who thought Mises and Hayek were right on the money.
Most economists reject the conclusions of Mises and Hayek with regards to the market cycle.
Daniel: Likewise, I've never met a solid individualist who thought Keynesianism was a sound recipe for prosperity.
As Keynesian policy is collective action, then of course you won't. But what about all those who don't fit into your neat boxes of "collectivist" and "solid individualist"?
Zachriel:
"Major_Freedom: I don't believe you're being upfront when you say these things."
We have been consistent in our views, and repeated them many times on this and other forums.
Who is this "we" you keep referring to? Is there someone else there with you?
And yes, you have been consistent with your views, which is why I don't believe your latest string of assertions to be upfront.
If you want a theoretical basis, it has to do with how networks form (cf. network theory). Robust markets are essential, in this view, for the proper allocation of resources.
This is how a socialist says he wants centrally managed "markets."
As Hayek pointed out, the amount of information in markets is vast. Not only is it impractical to centralize such information, it is not possible to update such information in a realistic time frame. In essence, markets are a form of distributed intelligence.
And yet...
On the other hand, markets have serious deficiencies; for instance, with regards to the problem of common resources. From a market standpoint, people upriver should take all the water and dump their untreated sewage.
No, the market standpoint does not tell people that they should do that at all. The market standpoint says respect for private property rights. Which means, if there is a resource that is not privately owned, by either an individual, or more than one individual, or a community of individuals, then the tragedy of the commons can occur. The solution is to establish private property rights in accordance with original appropriation or trade.
The "deficiency" you are imagining is just a failure on your part to understand how the market actually works.
This results in political tension, though, and is untenable in the long run. People downriver will either have a say in the allocation of resources, or the political tension will find its outlet in armed conflict.
Or...gasp!...they might come to a peaceful solution in accordance with property rights. Oh the horror!
That you consistently misstate our position is probably because you don't understand our position and insist upon making it fit one of your preconceived categories.
"Our"? Is there someone else there? Who is this "our" you keep referring to?
And misstate your position? How is correctly identifying you to want central economic planning a misstatement? You just said above that you want central economic planning over water sources.
Most economists reject the conclusions of Mises and Hayek with regards to the market cycle.
Most economists are wrong.
As Keynesian policy is collective action, then of course you won't. But what about all those who don't fit into your neat boxes of "collectivist" and "solid individualist"?
You mean people who have some convictions that contradict their other convictions, and advance one argument when it suits their needs at the time, and advance a contradictory argument when it suits their needs at another time?
Keynesian countercyclical policy, which should be revenue neutral, shouldn't lead to a monetary collapse as it merely shifts resources somewhat in order to even out the market cycle.
"should" "should" "should". All this requires central economic planners to know the entire "complex" market, where it is headed, and what it even looks like.
You see? You claim that the market is too complex to be centrally planned, but then your heart is clearly in favor of central economic planning, which really means your core principles are pro-socialism and anti-market.
It's when countercyclical policy is abandoned in favor of procyclical policy, as it was during the Bush Administration, that the economy is disrupted.
No, it already was disrupted in the 1970s with stagflation.
Major_Freedom: This is how a socialist says he wants centrally managed "markets."
We are not socialist. Please quit misrepresenting our position.
Major_Freedom: No, the market standpoint does not tell people that they should do that at all.
People upstream claim they own the river in their territory. They find it profitable to take the water and dump their effluence. Now what?
Zachriel:
"Major_Freedom: This is how a socialist says he wants centrally managed "markets."
We are not socialist. Please quit misrepresenting our position.
"We"? "Our"? Who else is there with you?
Yes, you are a socialist, it is not a misrepresentation. You are against the free market, and want it to be centrally planned. Your particular socialist central planning worldview is soft fascism and soft communism. You know communism doesn't work, but you still believe socialism is the ideal.
"Major_Freedom: No, the market standpoint does not tell people that they should do that at all."
People upstream claim they own the river in their territory. They find it profitable to take the water and dump their effluence. Now what?
If the owner upstream dumps sewage into their section of river, but then that sewage travels downstream to other river section owners, then that represents a violation of property rights. The owners downstream have the right to charge the violators, and use force to stop them if they fail to cease and desist violating their rights.
As for "who" will enforce these property rights, in an anarchist society, it would be either the owners themselves, or it will be others who are hired to protect their interests.
Major_Freedom: Yes, you are a socialist, it is not a misrepresentation.
socialism, any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.
Nope. Not a socialist.
Major_Freedom: You are against the free market,
Nope. Free markets are essential to prosperity and innovation, as well as the development in poorer countries.
Major_Freedom: ... and want it to be centrally planned.
Markets can't be planned. However, governments have a responsibility to provide a common set of ground rules for fair trade, to protect common resources, and to temper the worse excesses of the markets.
Major_Freedom: The owners downstream have the right to charge the violators, and use force to stop them if they fail to cease and desist violating their rights.
Of course, this isn't a hypothetical, but common in ancient history. So, the people downstream unite under a military leader. The people upstream either also unite or be conquered. A war ensues. Eventually, either the two governments reach accommodation, or one side conquers all.
@ Major Freedom - congratulations! You have just traced the evolution of modern nation states.
I will join Zachriel in the "our" to imply people who do not view democratic states as police states, do not equate government intervention in certain markets as collective planning, do not view markets (or governments) as omnipotent and omniscient, and believe that politics is inevitably intertwined with economics so denying the former is futile.
In other words, a critical thinker with no overarching preconceived ideological premise that precludes them from incorporating new data, updating their prior beliefs, and grasping nuance.
So Keynesian theory cannot be falsified then? So why do Keynesians pretend it's at all scientific?
Unknown: So Keynesian theory cannot be falsified then?
You seem to be confusing not having been falsified with not being falsifiable.
Zachriel:
"Major_Freedom: Yes, you are a socialist, it is not a misrepresentation."
"socialism, any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods."
Hey cool, that describes you.
"Major_Freedom: You are against the free market,"
"Nope. Free markets are essential to prosperity and innovation, as well as the development in poorer countries."
You define "free markets" as managed markets, i.e. with central economic planning.
You're using the terminology, but you aren't accepting the meanings of the terms.
"Major_Freedom: ... and want it to be centrally planned."
"Markets can't be planned. However, governments have a responsibility to provide a common set of ground rules for fair trade, to protect common resources, and to temper the worse excesses of the markets."
In other words, centrally planned.
"Major_Freedom: The owners downstream have the right to charge the violators, and use force to stop them if they fail to cease and desist violating their rights."
"Of course, this isn't a hypothetical, but common in ancient history. So, the people downstream unite under a military leader. The people upstream either also unite or be conquered. A war ensues. Eventually, either the two governments reach accommodation, or one side conquers all."
Uniting under a military leader is not the same thing as uniting under a state.
"You seem to be confusing not having been falsified with not being falsifiable."
Keynesianism is not a falsifiable doctrine.
morse79:
"@ Major Freedom - congratulations! You have just traced the evolution of modern nation states.
"I will join Zachriel in the "our" to imply people who do not view democratic states as police states, do not equate government intervention in certain markets as collective planning, do not view markets (or governments) as omnipotent and omniscient, and believe that politics is inevitably intertwined with economics so denying the former is futile."
I will not join you who believes majority initiating force backed rule over the minority is moral, who believes that government intervention into the economy is somehow anything other than central planning, who believes that government is omniscient and omnipotent but also chastises the market for not being omniscient and omnipotent, and who believes that politics is the same thing as statism.
"In other words, a critical thinker with no overarching preconceived ideological premise that precludes them from incorporating new data, updating their prior beliefs, and grasping nuance."
You have an overarching preconceived ideological premise that precludes you from accepting the validity of zero states, updating your beliefs based on logic and evidence, and grasping nuance. In other words, you're not only ignorant, but a hypocrite.
Major_Freedom: Hey cool, that describes you.
Um, no.
Major_Freedom: You define "free markets" as managed markets, i.e. with central economic planning.
Even the most primitive markets had some planning, such as a place set aside for trade.
Major_Freedom: In other words, centrally planned.
The king setting aside a space for a market doesn't mean it's not a free market.
Major_Freedom: You have an overarching preconceived ideological premise that precludes you from accepting the validity of zero states, updating your beliefs based on logic and evidence, and grasping nuance. In other words, you're not only ignorant, but a hypocrite.
You appear to live in a world of only black and white, but no color.
Zachriel:
"Major_Freedom: Hey cool, that describes you."
"Um, no."
Uh, yes.
"Major_Freedom: You define "free markets" as managed markets, i.e. with central economic planning."
"Even the most primitive markets had some planning, such as a place set aside for trade."
You see? You define "free" markets as managed markets, i.e. central economic planning.
Your response was to avoid admitting it, and instead say "but this is how markets have always been like", as if status quo fallacy is a legitimate form of argumentation.
"Major_Freedom: In other words, centrally planned."
"The king setting aside a space for a market doesn't mean it's not a free market."
Actually it does, since the King is not the private property owner, and so violating the property rights of others is antithetical to free markets.
And Kings didn't "set aside" a space for a free market. they conquered territories, meaning they obliterated any chance of a free market by presuming themselves King over other people's property against their consent.
You simply have no clue what a free market means.
"Major_Freedom: You have an overarching preconceived ideological premise that precludes you from accepting the validity of zero states, updating your beliefs based on logic and evidence, and grasping nuance. In other words, you're not only ignorant, but a hypocrite."
"You appear to live in a world of only black and white, but no color."
Ah yes, the old cliche that leads to contradiction.
By saying the world is color, you are making a black and white argument. The world and man's position in it does call for a black and white epistemology. All propositions are either true or false. Reality is everything that exists, and is not what does not exist. Reality IS "black and white".
Those who deny this, are just denying logic and science, and calling for a black and white world of pure subjectivism and nothing else.
Major_Freedom: Uh, yes.
Strawman.
Zachriel: The king setting aside a space for a market doesn't mean it's not a free market.
Major_Freedom: Actually it does, since the King is not the private property owner, and so violating the property rights of others is antithetical to free markets.
Black-and-white thinking. By any reasonable meaning of the term, it's still a free market when someone goes to the agora to buy radishes.
"By any reasonable meaning of the term, it's still a free market when someone goes to the agora to buy radishes."
Except when the King places the market 10 miles away from where would have been (or maybe a second market would have been placed there but the King made it illegal) in a truely free system, increasing the travel time and costs of some of the merchents and buyers.
Sam: Except when the King places the market 10 miles away from where would have been (or maybe a second market would have been placed there but the King made it illegal) in a truely free system, increasing the travel time and costs of some of the merchents and buyers.
That's the whole point. It depends on the particulars. Generally, ancient city-state governments would set up a large plaza in the town so that there would be room for merchants, and so that the streets would be clear for traffic, including traffic required by the market. They would go so far as to lay out the streets in orderly patterns, wide enough for wagons, and often converging on the market.
Compare this to the anarchic pattern of the early Middle Ages, where streets, houses and markets were highly congested, trade severely limited, roads between towns dangerous to travel, and everyone responsible for their own security.
Zachriel:
"Major_Freedom: Uh, yes."
"Strawman."
No, it's your actual position. I suggest you stop lying to yourself and to others.
"Major_Freedom: Actually it does, since the King is not the private property owner, and so violating the property rights of others is antithetical to free markets."
"Black-and-white thinking. By any reasonable meaning of the term, it's still a free market when someone goes to the agora to buy radishes."
LOL, "Black and white thinking", as if merely stating this means I am wrong, totally unaware of the fact that you just contradicted yourself by utilizing black and white thinking when you said I am wrong.
No, it's not a free market "by any reasonable meaning of the term." You are not being reasonable. The free market is about voluntary exchanges and respect for property rights. Kings using their might to confiscate land and set it aside for his own enjoyment of observing a "free" market, is NOT a free market in action. You're ignoring the violation of the free market that the King's violence has brought about.
"Sam: Except when the King places the market 10 miles away from where would have been (or maybe a second market would have been placed there but the King made it illegal) in a truely free system, increasing the travel time and costs of some of the merchents and buyers."
"That's the whole point. It depends on the particulars."
That sounds very "black and white." You're saying it's true that it depends on the particulars, and it's false that it does not depend on the particulars. That is black and white thinking.
"Generally, ancient city-state governments would set up a large plaza in the town so that there would be room for merchants, and so that the streets would be clear for traffic, including traffic required by the market."
That wasn't the government's property. It was the property of others. Since the government backed their "plans" with violent threats, it's not a free market by definition.
"They would go so far as to lay out the streets in orderly patterns, wide enough for wagons, and often converging on the market."
You are definitely a socialist.
"Compare this to the anarchic pattern of the early Middle Ages, where streets, houses and markets were highly congested, trade severely limited, roads between towns dangerous to travel, and everyone responsible for their own security."
Yup, socialist. You are a lying socialist to boot. You praise centrally "planned" economies, and you attack individually planned free markets.
And you can't compare two different locations in two different time periods and consider yourself to have acquired knowledge about the validity of anarchism and private property rights. The justification for property rights, or violations of property rights, is not empirically derived.
Major_Freedom: No, it's your actual position.
When you learn to stop misrepresenting people, maybe you will learn to make a valid argument.
Zachriel: They would go so far as to lay out the streets in orderly patterns, wide enough for wagons, and often converging on the market.
Major_Freedom: You are definitely a socialist.
Accurately describing what ancient city-states did does not make one a socialist.
Major_Freedom: You're saying it's true that it depends on the particulars, and it's false that it does not depend on the particulars.
Add dichotomies to things you do not understand.
Zachriel:
"When you learn to stop misrepresenting people, maybe you will learn to make a valid argument."
I have already learned that long ago, which is why I am not wrong to represent you as a socialist, because you are one. It's not a misrepresentation.
"Major_Freedom: You are definitely a socialist."
"Accurately describing what ancient city-states did does not make one a socialist."
I didn't say that is what makes you socialist.
"Major_Freedom: You're saying it's true that it depends on the particulars, and it's false that it does not depend on the particulars."
"Add dichotomies to things you do not understand."
Add being unable to not contradict your own professed position to the list of things you do not understand.
You believe it's true that it depends on the particulars, which of course logically implies you believe it's false that it does not depend on the particulars. You can't deny this and still maintain your statement that it depends on the particulars.
I understand dichotomies just fine, thank you. You don't. You don't even understand the law of non-contradiction and the law of identity for crying out loud. Your brain is warped almost beyond repair.
Major_Freedom: I have already learned that long ago, which is why I am not wrong to represent you as a socialist, because you are one. It's not a misrepresentation.
Sorry, we don't believe the government should own the means of production.
Zachriel:
"Sorry, we don't believe the government should own the means of production."
Sorry, but I don't believe you. You want managed, centrally planned "free" markets. You don't want individual property owners to have final authority over their own means of production. You want the state to have final authority. You just hope and expect and pray that they won't have to actually physically exercise this authority, as long as the "free" people play by the state's rules. If they break the state's rules, then the state has the authority to forcefully take physical possession of the means of production away from the "social misfits" and "outcasts" and "offenders".
Your ideal is this, which is socialism dressed up as free markets.
Now, just because this is your ideal, it doesn't mean that you are even able to fully integrate that ideal into every thing you say. So sometimes this tyrannical worldview of yours only comes out in small talking points and sound bites, like "move away to an island." Politely asking that people move away is just the seed for much larger mental problems you have, which when pressed and continually prodded, will invariably result in you calling for "outcasts" who disagree with "the centralized plan" to be forced out of society, which of course is what is required in order for...the state to take physical possession of that person's means of production.
It's very funny to see you actually try to make a case that you're being "misrepresented", as if you can point to you not explicitly directly and obviously saying something, to exclude that from the list of things you hold as a moral, perhaps not political, ideal.
Major_Freedom: You want managed, centrally planned "free" markets.
Nope. Central planning undermines the efficacy of markets.
Major_Freedom: You don't want individual property owners to have final authority over their own means of production.
You consider any accommodation through the auspices of government to be tyranny, even something as simple as having you stop at a red light. It's a good illustration of your black-and-white thinking.
Zachriel:
"Nope. Central planning undermines the efficacy of markets."
Notice how you subconsciously dropped the "free" in "free markets."
"You consider any accommodation through the auspices of government to be tyranny, even something as simple as having you stop at a red light."
Where did I say that? I would not consider someone in government to be acting tyrannical if they prevented me from violating someone else's liberty, of their person or property. It's the system of government itself that is tyrannical.
If a rapist helped an old lady cross the street, then by wanting the rapist to stop raping, I am not also saying that everything the rapist does should be stopped by law, like helping old ladies cross the street.
"It's a good illustration of your black-and-white thinking."
No, it's a good illustration at your inability to correctly utilize logic, i.e. black and white thinking.
Zachriel: You consider any accommodation through the auspices of government to be tyranny, even something as simple as having you stop at a red light.
Major_Freedom: Where did I say that?
So just to clarify, you consider it a valid use of government power to force people to stop at red lights?
Zachriel:
"So just to clarify, you consider it a valid use of government power to force people to stop at red lights?"
I would find it a valid use of force to stop people from destroying the person or property of another, and so regardless of who the enforcer is, rapist, murderer, or the state, it would be a valid use of force.
But, this does not mean that I have to advocate for rape, murder, or the state.
Major_Freedom: I would find it a valid use of force to stop people from destroying the person or property of another, and so regardless of who the enforcer is, rapist, murderer, or the state, it would be a valid use of force.
You're working very hard not to give a clear answer. There is a busy intersection. The government puts up a traffic light and passes a law requiring people to stop when the light is red. Is this a valid use of government?
Zachriel:
"You're working very hard not to give a clear answer."
Hahaha, you're working even harder to find something you think is there, but really isn't.
"There is a busy intersection. The government puts up a traffic light and passes a law requiring people to stop when the light is red. Is this a valid use of government?"
I don't view the government in terms of the valid use of government and invalid use of government. I view the government in terms of whether the government itself is valid or not.
By asking me if this is a valid use of government, you are clearly wanting me to accept that government itself is valid. But I do not hold that position, so your question is rhetorical and misleading.
It would be like asking me "Is that a valid use of rapists?"
No, I didn't just equate government with rapists. No, I didn't just say stopping at red lights is like rape. No, I didn't just compare stopping your car to being raped.
I am saying your question is LIKE that, because just like I find rape morally repugnant, I also find government morally repugnant, and so asking me whether or not it is a valid use of a morally repugnant person, as if I am just supposed to ignore the fact that they are morally repugnant, is not a question that can have an honest answer.
Major_Freedom: By asking me if this is a valid use of government, you are clearly wanting me to accept that government itself is valid.
So to be clear, you are against the people in a town voting on putting up a street light, then enforcing a law against anyone who doesn't stop on a red light, that you find the idea "morally repugnant".
Just wanted to make sure that was clear to our readers.
Zachriel:
"So to be clear, you are against the people in a town voting on putting up a street light, then enforcing a law against anyone who doesn't stop on a red light, that you find the idea "morally repugnant"."
No, that is not my position. You are so sloppy in your words that you are failing to keep track of what is being said.
When you say "people in a town" who EXACTLY are you referring to, and when you say "street light", who's PROPERTY are you exactly referring to?
Without giving a precise explanation of who exactly owns what, you will forever fail in understanding private property anarchy, and the arguments I am making.
I will ask you who exactly owns the street, and the street light? Is it the entire town's population? Each individual in the town agreed and consented via contract to finance the project according to a pre-determined price, pre-determined usage rights, pre-determined opting out clauses, and pre-determined enforcement of the traffic rules, for both themselves and visitors?
If so, then that street, and that light, are PRIVATE PROPERTY. Anyone who visits the town, must agree to the private property owner's (townspeople's) terms.
Now, does this mean that if the street and traffic light are financed by theft, and are not legitimate private property, but the illegitimate property of the mayor, that I advocate running the red light? No, not in the slightest. In this case, because the owner is illegitimate, I won't abstain from running the red light out of respecting their demands, I will abstain from running the red light out of respecting the safety of other drivers, myself, and, if there are kids in my car, their safety too (both physically and educationally).
I do not abstain from breaking "good" government laws on the basis that I respect their demands or respect their threats or respect the government as an institution. I do so because I respect libertarian laws that just so happen to coincide with good government laws.
For those government laws that they consider to be evil, but I know to be good according to libertarian laws, I will happily, without any guilt or remorse, and with pride, break those evil government laws. I will break them as long as I can get away with it, as long as I can do so without the government finding out.
When it comes to red lights, I do not run red lights out of my own safety and the safety of other drivers, and my own passengers, who trusted me, basically with their lives. I do not abstain from running red lights because the government demanded that people don't. The government to me has absolutely zero moral or authoritative standing. They are nothing but a mafia family writ large. They are a nuisance. They are a criminal syndicate who I adapt my actions around their existence to keep myself as free and yet as safe as possible.
I do not find the law of not running red lights ITSELF morally repugnant. I find the enforcers morally repugnant because not only do they enforce "good" laws like not running red lights, but by their very existence, they enforce extremely evil laws that are a part of the government existing at all, namely, territorial monopoly of taxation, and threatening anyone else who offers FINAL legal protection and security.
Major_Freedom: When you say "people in a town" who EXACTLY are you referring to, and when you say "street light", who's PROPERTY are you exactly referring to?
There have been accidents at the main, publicly-maintained intersection in the town. A vote is held to put up a signal light and pass an ordinance. The vote passes with only one dissenter, the town crank who calls himself Colonel Something-or-other and dresses in an antique military-type uniform (but who hasn't ever been in the military).
The town mechanic puts up the signal light, but Colonel Something-or-other insists on running the traffic light saying he isn't bound by the ordinance as he voted against it. He ends up running into the automobile of one Ms. Millie Pennipence, seriously injuring her legs. Her nephew wants to break Colonel Something-or-other's legs, but the town cop intervenes and arrests him.
At the trial, Colonel Something-or-other insists he isn't bound by the ordinance, as he never agreed to it, and that Ms. Millie Pennipence should pay for the damage to his car as she didn't even slow down. The court sentences him to 90 days suspended and restitution, which they will enforce as necessary.
The judge warns Colonel Something-or-other that if he continues to ignore the traffic light, he will be arrested and imprisoned. Colonel Something-or-other shouts "Democracy is tyranny!", calls everyone he sees troglodytes and rapists, while the bailiff escorts him out of the courthouse.
Major_Freedom: When it comes to red lights, I do not run red lights out of my own safety and the safety of other drivers, and my own passengers, who trusted me, basically with their lives.
Must be the difference in rank. Colonel Something-or-other refuses to obey any government law out of principle.
Major_Freedom: I will break them as long as I can get away with it, as long as I can do so without the government finding out.
In other words, you will cheat on your taxes.
Zachriel:
"A vote is held to put up a signal light and pass an ordinance. The vote passes with only one dissenter, the town crank who calls himself Colonel Something-or-other."
Since when are majority votes justified? When those who want to participate in one agree, correct? Well, what if private property owners don't want to participate in a majority vote?
Your worldview calls for the sacrifice the individual not because he is wrong, but merely because he is outnumbered.
OK, suppose the majority passes a vote that says they will torture or murder an individual. Will you call him "a town crank" because he dissents?
The fact that you felt compelled to insult an individual merely for disagreeing with those who outnumber him, means that your standard for right and wrong is not reality, but the mob.
"Must be the difference in rank. Colonel Something-or-other refuses to obey any government law out of principle."
You lost. A while ago mind you, but these comments are just reinforcing that fact at this point.
"In other words, you will cheat on your taxes."
In other words, I do a lot of things that are peaceful, but illegal in the opinions of thieves and murderers.
Oh, and it's not immoral to cheat a thief.
Major_Freedom: Since when are majority votes justified?
There is a large literature on the subject, but you can start with this:
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed"
http://www.archives.gov/exhibits/charters/declaration.html
Of course, like all syllogisms, it is based on axioms you may not share. For instance, King George III rejected the argument, as eloquent as it was because he rejected the basic argument that sovereignty belonged to the people.
Major_Freedom: OK, suppose the majority passes a vote that says they will torture or murder an individual. Will you call him "a town crank" because he dissents?
As we have explain many times, modern democracies are not simple majoritarian ochlocracies. People have the right to due process and just compensation.
Major_Freedom: Oh, and it's not immoral to cheat a thief.
Right. You keep your citizenship in a country founded on a system you despise. You enjoy the fruits of that society, but will cheat whenever you can get away with it. Teach your children well.
Here is, perhaps, a better example of how to approach the problem of an unjust law.
http://www.africa.upenn.edu/Articles_Gen/Letter_Birmingham.html
"Major_Freedom: Since when are majority votes justified?"
""There is a large literature on the subject, but you can start with this:"
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed"
No majority rule there. The founders hated majority rule.
Terrible example.
Since when were the founders justified in establishing the legitimacy of government for everyone, and not just themselves and those who agreed with them, but the unborn as well?
"Of course, like all syllogisms, it is based on axioms you may not share."
The "To secure these rights, governments are instituted among men" is a non-sequitur.
"For instance, King George III rejected the argument, as eloquent as it was because he rejected the basic argument that sovereignty belonged to the people."
And for instance, peaceful private property owners who did not want to live under government, rejected your and the founder's argument that the individual is not sovereign.
"Major_Freedom: OK, suppose the majority passes a vote that says they will torture or murder an individual. Will you call him "a town crank" because he dissents?"
"As we have explain many times, modern democracies are not simple majoritarian ochlocracies. People have the right to due process and just compensation."
"We"? Who else is there besides you?
Yes, democracy is "majoritarian ochlocracy." The only reason it is not being practised today is because there is, in the political sphere, ANTI-democratic philosophies that are mutually incompatible with democracy.
It's exactly why the US was, up until you freaks came in and wrecked the place, the most free and prosperous economy ever.
If in democracy people have the right to due process and just compensation, then that is not democratic at all. Because if the majority votes AGAINST these rights, then who will ensure that the minority are protected? The majority government? LOL
"Major_Freedom: Oh, and it's not immoral to cheat a thief."
"Right. You keep your citizenship in a country founded on a system you despise."
I haven't told you what my citizenship is you dishonest straw man making creep.
"You enjoy the fruits of that society, but will cheat whenever you can get away with it."
I enjoy the fruits of my labor, and I don't advocate that I benefit at other people's expense.
I didn't take taxpayer money. The government did.
"Teach your children well."
They'll be smarter then you will ever be as an adult.
"Here is, perhaps, a better example of how to approach the problem of an unjust law."
Not interested in more statist clap trap that inherently justifies statism.
Major_Freedom: Terrible example.
As your argument concerns all governments, please read this part again: "Governments are instituted among Men, deriving their just powers from the consent of the governed".
Major_Freedom: Because if the majority votes AGAINST these rights, then who will ensure that the minority are protected?
In the U.S., it's loyalty to the written Constitution and the rule of law. Sorry, but your freedom is tied up with those of others. Your freedoms are safe because others are willing to defend what you despise.
Major_Freedom: I haven't told you what my citizenship is
Would hate to think you kept your citizenship in any country with the tyranny of traffic lights, otherwise you too would be an accomplice to a criminal enterprise.
Major_Freedom: I enjoy the fruits of my labor, and I don't advocate that I benefit at other people's expense.
But you do.
Major_Freedom: Not interested in more statist clap trap that inherently justifies statism.
Letter from a Birmingham Jail is one of the seminal documents of the Civil Rights movement.
Zachriel:
"As your argument concerns all governments, please read this part again: "Governments are instituted among Men, deriving their just powers from the consent of the governed".
I've read this many times before, you make it sound like you're the first person to have discovered it.
Your example is terrible because you defend democracy, and yet the founders were against democracy. You quoting the founders cannot give your position any additional credence (from zero that is).
"In the U.S., it's loyalty to the written Constitution and the rule of law."
By what right did the first government have in violating the individual rights of the minority?
"Sorry, but your freedom is tied up with those of others."
Individual freedom and private property law already presumes that.
You're saying "sorry" as if my conception of individual freedom includes violations of individual freedom, when that is a rank contradiction. Individual freedom means a given individual cannot violate the freedom of any other individuals.
"Your freedoms are safe because others are willing to defend what you despise."
False. Citizens are not free precisely because arrogant a$$holes you worship are violating individual freedom everyday, by stealing their property, and by imposing draconian laws that are not about protecting liberty.
The state doesn't protect or defend individual freedom. They are the biggest violators.
I despise those who despise the individual freedom of others to such a degree that they are willing to initiate violence against them.
My freedoms are NOT safe when there is a gigantic coercive monopoly telling me what to do, threatening me with violence to take 40% of my earnings, and then pretending as if they are protecting me from others.
A protector of property rights cannot be a violator of property rights. It is a contradiction. You believe in a contradiction. You should stop believing in contradictions.
Your superstitious nonsense is simply not going to work on me. I will NEVER accept an initiator of violence to be in any way shape of form a protector of individual liberty.
Why do you despise individual liberty? Is it because people will think and do what you cannot feel like you're controlling through the state? Is it because you hate humanity so much that you want to punish it with a systematic coercive aggressor? Is it because your mind hasn't matured and so you are unable to rid the illusion that government is your mommy and daddy?
Zachriel:
"Would hate to think you kept your citizenship in any country with the tyranny of traffic lights, otherwise you too would be an accomplice to a criminal enterprise."
One cannot be an accomplice for being the victim of aggression.
I didn't say this country is tyrannical because of traffic lights, so nice pedantic straw man.
This country is tyrannical because of the fact that there is a systematic initiator of violence against individual property.
Government traffic lights are but one outcome of this tyranny, so they represent tyranny, the same way sandwiches in a concentration camp are the outcome of that tyrannical organization, and thus represent that tyrannical organization.
Can the prisoners count on you to lick the boots of the guards and say "You're complaining over sandwiches? The sandwiches are based on tyranny are they? Really? You should shut up and be thankful that they let you eat at all. Friggin sandwiches...can you believe the nerve of this guy? He actually believes food, what humans need to live, is "tyrannical." Ah well, no worries, he is going to be working for us anyway, let him complain."
I am not concerned about your opinions, your non-help, or your stupid caricatures of what is in fact a highly respectable, intellectually robust, and very sophisticated political philosophy. You are making a total fool of yourself, and the hilarious thing about that is that you actually believe you are presenting supposed "gotchas", when in reality you are being gotcha'd.
But please, keep posting. I have truth on my side, so you will never say anything that could ever refute me in this area of inquiry. You are doomed to loose. You've barely scratched the surface of anarchist political philosophy based on rationalist epistemology. You are still in the "I don't understand it, so I fear it, and because I fear it, I will consider it a threat, and because I believe it is a threat, I will rationalize it as being wrong. I will spew out illogical fallacies if I have to. It doesn't matter."
Zachriel:
"Major_Freedom: I enjoy the fruits of my labor, and I don't advocate that I benefit at other people's expense."
"But you do."
No, I don't. You are mistaking me for the state. I am not benefiting at other people's expense when I advocate that taxes be made voluntary at the individual level. I wouldn't even be benefiting at other people's expense by avoiding paying taxes. I would be bringing about a reduction in people living at the expense of others, by bringing about a reduction in the extent to which some people (those in the state) benefit at other people's (my) expense.
"Major_Freedom: Not interested in more statist clap trap that inherently justifies statism."
"Letter from a Birmingham Jail is one of the seminal documents of the Civil Rights movement."
Not interested in your brainwashed talking point form of argumentation. I don't care what you were told by others concerning this document.
It is considered a "seminal document" by social democrats. Not individual liberty anarchists. The document just justifies the social democrat's own tyrannical worldview by milking MLK's popularity and legacy and making it their own.
But it does in fact contain statist claptrap.
It states:
"Now is the time to make real the promise of democracy and transform our pending national elegy into a creative psalm of brotherhood."
This is an advocacy that one oppressive social system be replaced by another oppressive social system. Overturn the violent oppression of blacks, which is pro-individual liberty, but replace it with, or at least maintain, oppression of the minority, which is anti-individual liberty.
I cannot support that document in full.
It would be like asking me to support someone fighting to free black slaves, but who also wants to enact enslaving the minority to some lesser degree than blacks were enslaved. It's like out of the frying pan and into the fire.
I cannot support the whole document by focusing on the good parts and ignoring the bad parts. Since it is a call for democracy, it is a call to violate the rights and freedoms of those in the minority.
King: Now is the time to make real the promise of democracy and transform our pending national elegy into a creative psalm of brotherhood.
Major_Freedom: This is an advocacy that one oppressive social system be replaced by another oppressive social system.
You got us again Loki! For a moment there, we thought you were serious. Heh.
Zachriel:
"Major_Freedom: This is an advocacy that one oppressive social system be replaced by another oppressive social system."
"You got us again Loki! For a moment there, we thought you were serious. Heh."
I was serious.
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