Friday, July 22, 2011

Krugman and Austrians: the depression will get worse

While Austrians and Keynesians don’t agree on a lot of things, there is one thing upon which they both seem to agree: the U.S. economy is sinking into the morass of depression. At that point, however, the agreement ends, as the two schools have very different explanations as to why this is happening.

The Keynesians, through their Paul Krugman and the New York Times megaphone, have been claiming that the original Barack Obama “stimulus” was too little, and the current emphasis upon budget cutting at all levels of government is exactly the wrong strategy. Austrians, not surprisingly, believe that this explanation is nonsense, and dangerous nonsense.

In a recent column, Krugman lays out his thesis, and it is useful, for it truly exposes the Keynesian mind at work, and a Keynesian mind that allows for no other explanations as to what is happening. The problem is – and always will be – a lack of “aggregate demand,” and the only solution is for governments to spend as though they hit the jackpot.

He writes:
The great housing bubble of the last decade, which was both an American and a European phenomenon, was accompanied by a huge rise in household debt. When the bubble burst, home construction plunged, and so did consumer spending as debt-burdened families cut back.

Everything might still have been O.K. if other major economic players had stepped up their spending, filling the gap left by the housing plunge and the consumer pullback. But nobody did. In particular, cash-rich corporations see no reason to invest that cash in the face of weak consumer demand.

Nor did governments do much to help. Some governments — those of weaker nations in Europe, and state and local governments here — were actually forced to slash spending in the face of falling revenues. And the modest efforts of stronger governments — including, yes, the Obama stimulus plan — were, at best, barely enough to offset this forced austerity.

So we have depressed economies. What are policy makers proposing to do about it? Less than nothing.
If anything described the Keynesian mindset, it is this: Spend, spend, spend. It is a simple thesis, one that certainly appeals to politicians, and even to much of the general public, and has dominated professional economic thinking in the USA since World War II. As Krugman has stated above, households cannot spend what they don’t have, and businesses are not going to invest (read that, spend through capital investment – which always is defined by Keynesians as being valuable because of spending, not by aspects of capital productivity) because they don’t see future demand.

So, we are stuck in what Krugman and Keynesians call a “liquidity trap,” which Krugman seems to believe ends all other discussion. (The notion is that the Law of Opportunity Cost is suspended during a “liquidity trap” because interest rates are low, resources are “idle,” and government can borrow at near-zero percent and spend without consuming any resources. As Krugman said in his book, The Return of Depression Economics, government spending in this situation can create a “free lunch.” He actually used that term.)

While most mainstream economists are not willing to engage the Keynesians on the idea of the “liquidity trap,” Murray Rothbard did not back away. In his book, America’s Great Depression, he takes on the whole notion of the “liquidity trap” head on, writing:
The ultimate weapon in the Keynesian arsenal of explanations of depressions is the "liquidity trap." This is not precisely a critique of the Mises theory, but it is the last line of Keynesian defense of their own inflationary "cures" for depression. Keynesians claim that "liquidity preference" (demand for money) may be so persistently high that the rate of interest could not fall low enough to stimulate investment sufficiently to raise the economy out of the depression.
Rothbard points out a serious problem with that analysis, noting that Keynes never got the theory of interest correct, claiming interest is based upon “’liquidity preference’ instead of time preference,” which then leads to more incorrect conclusions about the state of the economy. Other Austrians have criticized the theory, as well, including William Hutt and Henry Hazlitt.

Both Hutt and Hazlitt took on the whole idea of “idle resources,” which is behind the notion that opportunity cost can be suspended during a depression. The idea of “idle resources” is based upon a notion that factors of production are unemployed because of a lack of spending, and that a burst of government borrowing (at near-zero, which means almost no opportunity cost) will spread to these unemployed assets and put them back to work.

As I noted before, the Keynesian theory is disarmingly simple; resources are unemployed, so government “stimulates” the economy through more spending, the resources are put to work, and somehow, the economy magically sustains itself. On the flip side, Keynesians hold that if new spending does not occur, then deflation will result, making more resources unemployed until ultimately the economy is in a perverse equilibrium in which huge numbers of people are out of work with no prospects for economic improvement.

Krugman is adamant about this point and is so convinced of his rightness that anyone who might disagree does so only because that person wants to see people suffer or because that person is so beholden to the “discredited” Austrian theories that he or she is incapable of adding anything to the public debate. (In fact, Krugman believes there is no debate at all. His position is right, is proven empirically, and cannot be refuted – even when it is refuted.)

Thus, even though we have seen an explosion of government spending the past few years, according to Krugman, we really are on an “austerity” plan. Why? It is because if the government actually had increased spending on a massive scale, then we would be out of this depression. In other words, since there is only one way out of this morass, and since we are not out of that morass, there hasn’t been enough government spending.

What about the Robert Higgs thesis of “regime uncertainty”? Krugman dismisses that one, too, derisively calling it the “confidence fairy.” Businesses, he argues, are hoarding cash because they see a lack of consumer demand. If governments spend and spend and spend, then businesses will invest, period.

(As for the anti-business rhetoric pouring out from the White House, the surge in regulation, and the demonizing of the oil and coal industries – which are essential players if this economy is going to recover – all of that, according to Krugman, either is non-existent or just white noise, and it certainly has no relevance to our current situation. Why? Because Krugman says so.)

The ultimate answer, according to Krugman and the Keynesians, is to find yet another boom, another possible asset bubble that can work its “magic” at least for a while before it, too, collapses. (Perversely, in a post endorsed by Krugman, Karl Smith hopes that it will be another housing boom.

In reading Krugman and the Keynesians, I always am struck by their notion that assets, economically speaking, really are homogeneous. It doesn’t matter where new spending is directed, just as long as there is spending. Spend, and everything else falls into place.

Second, the Krugman/Keynesian viewpoint is based on an extremely mechanistic interpretation of human action. People within a market setting do not purchase goods they believe will meet their individual needs; no, they spend, as though the spending itself is the ultimate end of an economy.

This is a view that separates production and consumption, making them independent of one another with no true purposeful human action to be found anywhere. There is no meaningful connection between desires of consumers and the valuation of factors of production or the direction that factors go in the various lines of production. It all is something that simply can be described as Y = C + I + G with no need to think further than that tautology.

As I said at the beginning, both Austrians and Keynesians believe we are headed for a steeper economic downturn, perhaps into the abyss of a major depression. However, Krugman and the Keynesians believe that the only salvation is for massive spending and intervention by government. Austrians believe that it is the massive spending and intervention by government that makes things worse, and while Krugman and Company never will admit otherwise, it ultimately is the Austrian paradigm that explains these matters, and explains them with accuracy.

200 comments:

Lord Keynes said...

"Rothbard points out a serious problem with that analysis, noting that Keynes never got the theory of interest correct, claiming interest is based upon “’liquidity preference’ instead of time preference,” which then leads to more incorrect conclusions about the state of the economy."

And Rothbard is wrong.

Even an Austrian like Robert Murphy is capable of seeing how only a monetary theory of the interest rate is tenable, and how the pure time preference theory of Mises and Rothbard is false:

http://consultingbyrpm.com/blog/2011/07/is-keynes-from-heaven-or-hell.html

Murphy, Robert P. 2003. Unanticipated Intertemporal Change in Theories of Interest, PhD dissert., Department of Economics, New York University.

Lord Keynes said...

"Second, the Krugman/Keynesian viewpoint is based on an extremely mechanistic interpretation of human action. People within a market setting do not purchase goods they believe will meet their individual needs;"

False. Government spending puts income into people's hands: they will then spend it on whatever commodities satisfy their subjective utility preferences.

This is a view that separates production and consumption,

It doesn't separate it all: effective demand drives production and employment. What you have is a deeply intertwined cause and effect relationship, dependent on one another.

You have already admitted on a previous post that desire for commodities to satisfy subjective utilities is a demand for goods, and producers satisfy those demands, by looking for profit opportunities.

Does this "separate production and consumption" in a way that invalidates Austrian economics?

with no true purposeful human action to be found anywhere.

A non sequitur.
I repeat: Government spending puts income into people's hands: they will then spend it on whatever commodities satisfy their subjective utility preferences.

Their purposeful "action" in doing so is obvious and is no contradiction to Keynesian economics at all.

Dennis said...

Capital cannot be conjured into existence by means of government "spending". It can be destroyed, however, by misdirecting resources into politically motivated ventures such as money-losing community clubs, museums, wind farms, etc. for which there is no sustainable consumer demand. As long as the state insists on destroying capital in this manner, business investment will stagnate as few will want to see the fruits of their hard work obliterated by politicians and lobby groups.

Anonymous said...

Didn't Krugman call for the Fed to create a bubble to replace the Nasdaq bubble? He got his wish. Why is he complaining now?

zackA89 said...

If government spending puts money in people’s hands, why even have them work at all? Why doesn’t the government just mail people with a high propensity to consumer (not those evil rich!) checks to just “spend” for the sake of “spending” so that “spending” can become someone else’s income?

Second of all, where does the government get this money to put “income” into people’s hands? Isn’t real income derived by someone’s prior production, with regards to a person producing a good or providing a service that satisfies consumer preferences? For me, that’s where people’s income comes from and their ability to bid on other commodities. Demand comes from ones prior production. People spend and thus can demand goods because the economy is growing but economic growth in and of itself does not come from mere consumption, it comes from wealth creation i.e production.

Government has no way to direct its spending towards profitable lines of production because it is not subject to market forces like the profit and loss mechanism or the price system. It has no ability to channel its spending into sectors that are consistent with consumer demand because it has no way to determine what or where consumer demand really is. Thus, government spending just diverts funding away from wealth generating activities in the private sector in government projects that usually come in over budget and are wasteful and unnecessary.

Government spending does not "stimulate" or even help "grow" the economy in any meaningful or sustainable way. Keep in mind Government has nothing to "spend" too, it has to raise taxes or print money to finance its expenditures, and there are real consequences to doing that, even during a recession.

Government spending to put “income” in people’s is nonsense because it does not take into account where and how government is spending (and that does matter by the way), and just assumes spending is “good” because it “puts income in people’s hands” as if that is the matters. Again, it matters how resources are employed, not just that they are employed for the sake of employing them.

Lord Keynes said...

"Government has no way to direct its spending towards profitable lines of production because it is not subject to market forces like the profit and loss mechanism or the price system."

(1) Tell me, how does a tax cut cause a government to try and "direct its spending towards profitable lines of production"? The money now available to those who benefit form the tax cut can be spent in any way they like - and tax cuts have always been a major way of stimulating demand in modern Keynesian economics.

(2) Public works and infrastructure are not there to run on a pure profit and loss basis: you build a new road needed between two cities, it's a public good that can benefit private sector business by facilitating transportation.

Lord Keynes said...

"If government spending puts money in people’s hands, why even have them work at all? "

Because you can provide public goods and services by employing people; better private infrastructure and social spending benefits private sector commerce and business.

A simple example: government funded immunisation programs:

“Under the 1955 Polio Vaccine Act, Congress provided the funding to make sure every child in the country received the vaccine. Congress also required the federal government's chief health officer, the Surgeon General, to set standards for the testing and distribution of the vaccine to millions of children without regard to their families’ ability to pay .... Since the 1950s when the federal government began distributing vaccines, the incidence of most childhood diseases has fallen by 95 percent or more. The number of polio cases dropped from 15,000 a year in the 1950s to zero today, while German measles has virtually disappeared from the Western hemisphere.”

Paul Charles Light, Government's greatest achievements, p. 82.

Instead of large numbers of invalid adults today, taking up real resources by being disabled and requiring care, this government program allowed the disease to be eradicted, and has provided more fit workers for private business to employ.

zackA89 said...

Reducing taxes is not spending because it is letting people keep more of what they earn does not constitute a government expenditure. The money is theirs to begin with, and by lowering taxes, people can now keep more of their income and spend it the way they see fit as the government takes less from people. By taking less taxes form people, the government is not spending or cutting anyone a check because the income is property of the individual.

For me, tax rate reductions are not good because they stimulate “demand”, but rather, they prevent the government from spending it on wasteful and unproductive ventures among other forms of mischief. Less government spending and more private spending is more desirable because it allows more resources to be channeled into lines of production that produce real wealth and are consistent with consumer demand.

Public works and infrastructure may be needed in some areas, one could argue, but they are not “simulative” to the economy because there is still an opportunity cost to them as they still divert funding away from wealth producing activities in the private sector. The jobs are financed by tax dollars and will cease to exist when the funding runs out. So they are unsustainable. Plus, these projects come in over budget almost always and are often very wasteful, and take a long time to complete thus destroying more resources in the process that could have been put to use more productively in the private sector.

Private sector generated economic growth permits the public sector to engage in these public works projects but these projects in and of themselves do no create any economic growth.

zackA89 said...

The private sector is fully capable of curing diseases, building infrastructure, and directing spending to benefit the “social good”. It definitely has before and certainly can without government.

Government spending is not needed to cure diseases, nor is it required to invest in infrastructure or social spending. The market place can use the price signals to direct resources to areas where they are most needed. Those areas can and have been social purposes, whether it be roads, education, healthcare, etc..

Lord Keynes said...

"Reducing taxes is not spending because it is letting people keep more of what they earn does not constitute a government expenditure

Of course, cutting taxes does "not constitute a government expenditure" - did I even say it was?? It is - and always have been - a very succesful way of stimulating private demand.

Reducing taxes allows people to spend more, increasing demand.

"Plus, these projects come in over budget almost always and are often very wasteful, and take a long time to complete thus destroying more resources in the process that could have been put to use more productively in the private sector."

An assertion without any evidence to back it up. There are currently millions of unemployed, idle resources, and low capacity utilization in the US.

If resources are now being put to use more productive uses in the private sector, there would be NO unemployment, idle resources, and low capacity utilization. Period.

The same idiotic assumption of full employment.

Lord Keynes said...

"The private sector is fully capable of curing diseases, building infrastructure, and directing spending to benefit the “social good”. It definitely has before and certainly can without government. "

Pure rubbish.
You're telling me private sector business would have paid for every child in the US to receive the Polio vaccine?? If so, why didn't they jump in before government and do it??

Bob Roddis said...

1. The more complicated and uncertain that reality actually is, the more essential is it for people to be free of the statists so that they may employ the pricing process to discover that reality. Thus, Bob Murphy’s more complex notions regarding interest do not help the Keynesians in the least.

2. The statists see "government" and "the economy" as simple machines with levers and with themselves at the controls. Everything the statists say and do starts with that fallacy and nothing we say will convince them otherwise. In fact, they are too dense to even see what we mean. Prof. Anderson mentions this aspect of the Keynesians all of the time and you never see that dim light in the mind of a Keynesian go on regarding this essential point.

3. These Keynesian concepts of "generic" spending and "generic" demand (which we should use in lieu of "aggregate" demand) do not reflect reality and are infantile. They are basically useless for the even a basic analysis of the problem.

4. It is pointless to debate minutiae with people who see an infantile world based upon a vision of mechanical generic demand and mechanical generic spending. The differences between the Austrians and statists are in the basics (the nature of reality, the nature of man, the nature of morality) and not in the minutiae.

zackA89 said...

Bob I totally agree with you. I just thought maybe I could get through to LK. Im trying.

Again, demand is not what drives an economy. People spend because the economy is growing but the spending in and of itself is now what grows and economy. The economy grows when people refrain from spending in the present and allow the savings to be channeled into capital investments that produce real wealth.

This wealth creation process enables individuals to spend. Basically for me, taxes should be reduced because the money is better left in the private sector not because they stimulate “demand.”

Plenty of evidence to back it up that government projects come in over budget and are wasteful. The stimulus bill is one of them. Just look around examples are not hard to come by. Amtrak and the post office lose money quite frequently and go to congress to ask for more funding. Even in states like Massachusetts, a state that I live near, the big dig came in way over budget and wasted resources in the process.

Government has no incentive to make projects they make actually profitable because they are not subject to market forces. Thus, over budget and wasteful government projects destroy resources, despite the fact that they “employ” resources.
Resources will be put into more productive uses once the government and the fed stop stimulating and meddling with the economy.

The price system is being undermined by government and the fed thus economic calculation is being impaired. This makes it difficult for entrenepuers to guide resources to their most profitable ends especially in the face of increased regime uncertainly with future tax, health care, and regulatory burdens being imposed on the business community.

With regard to idle resources, there is no way government spending can reliably even target these resources, nor is it even desirable in every case to put them back into employment simply for the sake of employing them.

Many of these idle resources are idle for a reason. They represent malinvestment and instead of being “stimulated” back into employment, entrepreneurs need to reallocate them toward more profitable uses.

Plus, these idle resources are the property of other individuals in the private sector who are better suited to make use of these resources however they see fit. Government is not doing them a favor by stimulating them; in fact, it is doing harm to them by distorting the pricing system and undermining their ability to engage in effective economic calculation. Government spending to target idle resources or fill excess capacity is not economically desirable or even possible in many cases.

Bob Roddis said...

A visualization of US debt:

http://www.wtfnoway.com/

You see, it's necessary to give "the economy" traction. It makes sense. It really does. Trust me.

Bob Roddis said...

Wait, I forgot. The debt is necessary to provide the private sector with "savings".

zackA89 said...

Ya, you would think after all this spending (gov't spending close to 25% of GDP) and record amounts of U.S debt and deficits, and record amounts of monetary and fiscal stimulus overall,it would be "enough" to "stimulate demand" and create "traction."

I guess all the spending and stimulus just wasnt "enough."

Maybe gov't spending and stimulus was the wrong policy to begin with? They never entertain that idea, instead its always "it wasn't big enough,it was sustained enough, it was "targeted" enough, bla bla bla bla....


The reasoning behind this line of thinking is just outright laughable.

zackA89 said...

Ya Bob, i guess we just dont understand "monetary operations."

I guess we need Mosler to petition the government not to take away our savings. Thank god he gets it.

http://mikenormaneconomics.blogspot.com/2011/07/warren-mosler-so-please-dont-take-away.html

Mike M said...

LK said: ‘Government spending puts income into people's hands:”

At whose expense?

LK said: "effective demand drives production”

Really? Tell me LK what was the effective demand for the first MP3 player (Ipod if you wish) before it was produced? It didn’t exist so how I could demand it. Private industry through intellectual and retained capital created it first (supply), marketed it, found appeal by the masses which demanded it and the result was a successful product.

That is an example of an individual product. In the aggregate however human demand is insatiable. I am posting this from my office. I would rather be posting it from my beachfront estate in the islands which I arrived by private jet, chauffeured to the estate and then being serviced umbrella drinks by bikini clad staff. To make the assertion we have a “demand” problem is moronic. We have an income problem for all the reasons others have cited here.

LK you are the maser of citations but no critical thinking. You have lots of knowledge, but no understanding

Bob Roddis said...

The Keynesians don’t understand what the problem is. The problem is genocide, theft, raping and pillaging. The non-aggression principle solves those problems.

People have never had a problem digging up resources and making stuff. Think of the pyramids or the Sistine Chapel. Unemployment and “idle resources” are problems only as the result of statist policies. The statists are the cause of these problems to the extent they exist. Even worse, statist policies require a relaxation of the protections from violence that are provided by the non-aggression principle. So, along with the poverty induced by statist policies we get a return to barbarism.

Thanks for everything you statists.

Dennis said...

Government spending can only be one of two things: either a transfer of capital from one actor in the current economy to another, or a transfer of capital from a future actor to one in the present. The latter is the preferred method these days; it's called deficit spending. The upside is that you don't have to ask permission of future taxpayers to tax them; the downside is when future taxpayers don't exist in sufficient numbers to pay the bills. That's what's happening in Southern Europe and now the United States as a result of politicians promising things thirty years ago that can no longer be delivered upon.

Bob Roddis said...

Dennis is right. Similarly, all that funny money dilution by the central bank can accomplish is a transfer of purchasing power to those getting the new money first from those holding the old money without the victims knowing what hit them.

These simple facts of theft are hidden beneath layers of complex Keynesian jargon, doubletalk and general BS.

Thankfully, average people don't buy it. The problem is, they don't seem to comprehend that the "elites" actually believe that money dilution and endless debt should be employed PURPOSEFULLY to solve economic problems that do not exist. They need to understand that the cause of their misery is, in fact, this simple: IT'S ALL THE KEYNESIANS' FAULT.

jason h said...

If resources are now being put to use more productive uses in the private sector, there would be NO unemployment, idle resources, and low capacity utilization. Period.

Except the unemployment and "idle" resources are NOT due to private sector hoarding, but malinvestment due to money dilution.

In other words-resources are "idle" for good reason, the market has realized they are no longer profitable. Uncle Sam can't stimulate them into profitabily, in fact, they won't be profitable until the gov't gets out of the way.

JoeB said...

Lord Keynes said...

>Pure rubbish.< (can't argue with that)

Then he said...

>You're telling me private sector business would have paid for every child in the US to receive the Polio vaccine?? If so, why didn't they jump in before government and do it??<

Everyone is welcome to their own opinions, but not to their own facts. Please spell out the historical step by step process for the development of both vaccines (live and dead) and their respective distributions. If you can't, then you're merely espousing mythology or ideologically biased historical revisionism.

When the state makes claim to a legal monopoly action (via codification into law) it crowds out private action. For why should private individuals and/or organizations pursue an objective when they know the state will move in to manage and control the action through force of law? The attempt to do so would be illogical and counterproductive. For if the state had such legal authority it would mostly like have the legal authority to sanction/punish said individuals or groups to their dismay.

Also, no matter how well you paint the history for creation and distribution of the polio vaccine, you are cherry picking events. How do you answer for the failure of the same through collective political action? Do we really need to list it's failures? Or how about when responding to disasters that came through the actions of the state? Or will you espouse yet another myth that the state has never failed in collective action?

Lastly, unobtainable perfection by a private individual or organization does not then discredit said individual and/or organization or make either the inferior actor vs. the state. Libertarians and Austrians have never said their philosophy/ideology will achieve perfection (we are not utopians), only that good will be maximized while the bad would be minimized.

Apparently you haven't read as much about us as you mistakenly believe?

David B said...

JoeB,

You probably know this already, which is why you are goading Lord "Auto-Troll" Keynes, but the development of the polio vaccine was made possible by private sector donations.

That's what makes Keynes such a clown, no different from his namesake. He rushes to judgment before he even knows the complete story.

We may ask: why didn't everyone get a polio vaccination immediately after the vaccine became useful? Well, how much time did they have before the government rushed in take over the polio vaccination process? (Answer: about a year depending on when you count the vaccine as thoroughly tested and trusted.)Perhaps these people lived in the real world where they actually had to allocate scarce resources and make choices and trade offs based on this new information.

Or perhaps they just hated their children and only motherly government saved us all from the scourge of polio.

LK is stepped into a big pile of sh*t in this post and he doesn't have the shoes for it.

But that won't stop our Auto-Trolling friend, just as it didn't stop him when he admitted that Bob Roddis is correct: funny money dilution (as Bob calls it) was the source of the banks excessive lending. Or when he admitted that smaller government produced more effective regulations. Or when he admitted that government interventions exacerbated the boom.

LK is an auto-troll. He doesn't learn from his mistakes. He simply repeats the playbook over and over again, as if that will somehow magically put a stop to the growing Austrian School movement. It's cute, but also kinda pathetic to watch the freight train barrel over him.

Anonymous said...

Anderson, why do you put unnecessary quotes around everything?

Bob Roddis said...

Lord Keynes is misrepresenting the “multiple” vs. single natural rate debate on his blog:

http://socialdemocracy21stcentury.blogspot.com/2011/07/bibliography-on-sraffa-hayek-debate.html

When a commenter notes “so what?”, LK answers with the standard nonsense rejecting the stuff for stuff nature of human exchange plus a clear falsehood about Bob Murphy:

(1) We don't live in a barter economy, and to do so would mean dismantling modern capitalism

(2) we live in a money-using economy; there is no such thing as a unique natural rate in a growing, real world economy: therefore the whole basis of Hayek's ABCT collapses: these cycles can't be caused by the real-world bank rank falling below some unique natural rate.

This is admitted by Murphy.


All Murphy claimed was that there were multiple DYNAMIC rates out there in the real world and shows how Hayek coulda/shoulda buried Sraffa with a follow-up that Murphy provides. Murphy specifically states on page 10 of his paper that “Sraffa clearly missed the entire essence of the ABCT…”

http://consultingbyrpm.com/uploads/Multiple%20Interest%20Rates%20and%20ABCT.pdf

Murphy’s doctoral dissertation is here:

https://files.nyu.edu/rpm213/public/files/Dissertation.pdf

Lucky for you guys I’m not at home and this computer I'm on won’t let me copy and paste from a pdf file.

JG said...

"For me, tax rate reductions are not good because they stimulate “demand”, but rather, they prevent the government from spending it on wasteful and unproductive ventures among other forms of mischief."

And that statement, in a nutshell, explains the appeal of Austrian economic theory to so many politically conservative people. Grover Norquist types looking for an academic model that validates their political opinions love Austrian economic ideas more because they're politically expedient. Whether or not ABCT is economically sound or has ever been demonstrated to hold true in the real world is of lesser concern, the real appeal of ABCT is that reinforces a political ideology.

The endless criticism of Keynes reminds me of the endless criticism of Darwin by creationists who care less about the science of evolution than they do about political and theological implications of what it stands for.

Lord Keynes said...

"All Murphy claimed was that there were multiple DYNAMIC rates out there in the real world and shows how Hayek coulda/shoulda buried Sraffa with a follow-up that Murphy provides."

Total garbage, and Murphy can speak for himself:

"“In his brief remarks, Hayek certainly did not fully reconcile his analysis of the trade cycle with the possibility of multiple own-rates of interest. Moreover, Hayek never did so later in his career. His Pure Theory of Capital (1975 [1941]) explicitly avoided monetary complications, and he never returned to the matter. Unfortunately, Hayek’s successors have made no progress on this issue, and in fact, have muddled the discussion. As I will show in the case of Ludwig Lachmann—the most prolific Austrian writer on the Sraffa-Hayek dispute over own-rates of interest—modern Austrians not only have failed to resolve the problem raised by Sraffa, but in fact no longer even recognize it.

Austrian expositions of their trade cycle theory never incorporated the points raised during the Sraffa-Hayek debate. Despite several editions, Mises’ magnum opus (1998 [1949]) continued to talk of “the” originary rate of interest, corresponding to the uniform premium placed on present versus future goods. The other definitive Austrian treatise, Murray Rothbard’s (2004 [1962]) Man, Economy, and State, also treats the possibility of different commodity rates of interest as a disequilibrium phenomenon that would be eliminated through entrepreneurship. To my knowledge, the only Austrian to specifically elaborate on Hayekian cycle theory vis-Ă -vis Sraffa’s challenge is Ludwig Lachmann.”

(Murphy, “Multiple Interest Rates and Austrian Business Cycle Theory,” pp. 11–12).

Lord Keynes said...

Furthermore:

"“Lachmann’s demonstration—that once we pick a numĂ©raire, entrepreneurship will tend to ensure that the rate of return must be equal no matter the commodity in which we invest—does not establish what Lachmann thinks it does. The rate of return (in intertemporal equilibrium) on all commodities must indeed be equal once we define a numĂ©raire, but there is no reason to suppose that those rates will be equal regardless of the numĂ©raire. As such, there is still no way to examine a barter economy, even one in intertemporal equilibrium, and point to “the” real rate of interest.”
(Murphy, “Multiple Interest Rates and Austrian Business Cycle Theory,” pp. 14).

Lord Keynes said...

“In summary, Austrians should familiarize themselves with the construct of a dynamic equilibrium, in which spot prices and other data can evolve over time, but where entrepreneurs fully anticipate such changes and squeeze out all pure profit opportunities. In this setting, there is no such thing as an objective real or natural rate of interest, so the Austrians cannot cling to their prescription that the banks ought to set the market rate to “the” natural rate. However, as our last scenario above hoped to convey, it still is true that an intertemporal, dynamic equilibrium can be disturbed if commercial banks inject new money into the credit markets. If a Misesian boom-bust cycle ensues, the reason is not that the banks charged a money right below “the” natural rate, because there is no such thing. Yet the basic Misesian analysis still holds true, that the bankers have suddenly augmented the purchasing power of one segment of the population, which not only redistributes real wealth but also leads to distorted money prices and more mistakes than otherwise would have occurred.”
(Robert P. Murphy, “Multiple Interest Rates and Austrian Business Cycle Theory,” p. 23).

The only way "a Misesian boom-bust cycle" can happen now that the natural rate has collapsed is if real resources are not available for the capital goods investment.

But the whole theory still falls when

(1) new fiduciary media or fiat money can simply use idle resources, such as unemployed labour, unused stocks of raw materials, idle capital goods and other factor inputs;

(2) fiduciary media or fiat money can simply be used to import the relevant factor inputs through international trade, and these factor inputs are not scarce

ABCT is still deeply flawed - and your laughable attempt to make distort Murphy's words is a sign of desperation.

Anonymous said...

JG said...

>The endless criticism of Keynes reminds me of the endless criticism of Darwin by creationists who care less about the science of evolution than they do about political and theological implications of what it stands for.<

As if the adoration of Keynes by the collectivist left isn't ideologically motivated as well? Or is it just a coincidence that his economic paradigm validates centralized and concentrated political power which as we all know is the chief objective of the collectivist left.

Keynes admits as much himself in the preface of the German edition of his book "General Theory..."

“The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire."

Hence we see the allure of his theories for those groups of would be authoritarians, be they of the left or right.

"I am now a Keynesian in economics" - Richard Nixon

In addition, I would submit that their embrace of Keynes is not only ideological confirmation bias, but there exist a strong element of religious fever as well. Keynesianism has all the aspects of a faith based cult.

As for conservatives I'll let you divine their motives for following aspects of the Austrian School; but as a libertarian I submit the appeal of Austrian economics is that it explains the actuality of economic action in the real world.

Anonymous said...

"Krugman and Company never will admit otherwise, it ultimately is the Austrian paradigm that explains these matters, and explains them with accuracy."

And you will never admit that the Austiran paradigm is wrong. So what's the difference between you two. As Krugman wrote in another of his posts, which you conveniently omit,

"I keep seeing comments along the lines of “Keynesianism doesn’t work, because liberals keep running deficits even when times are good, and never pay debt down.”

Guys, how about looking at recent history (pdf)?

Between 1993 and 2001, federal debt held by the public fell from 49.2 percent of GDP to 32.5 percent of GDP. What stopped the paydown of debt wasn’t liberal big spending; it was demands from conservatives that the surplus be used to cut taxes. George Bush said that a surplus means that the government is collecting too much money; Alan Greenspan warned that we were paying off our debt too fast.

Oh, and I was very much against those tax cuts, arguing that we should pay down the debt to prepare for future needs. As a reward, I now get accused of inconsistency, for saying that deficits were bad under Bush but good now.

Anyway, get your history straight before making claims about who’s fiscally responsible."

You're a hack and you know it. And that's why you work at Frostburg (where all the lousy students from my high school went) and he works at Princeton. Why not change the name of your blog and see how much traffic you get?

David B said...

@ Anon 10:14AM,

You're a hack and you know it. And that's why you work at Frostburg (where all the lousy students from my high school went) and he works at Princeton. Why not change the name of your blog and see how much traffic you get?

Does baby need a bottle?

What specific Austrian School criticism can you muster?

I find it amusing that you compare us to the anti-Darwinists. The anti-Darwinists never studied Darwin's work. But every single one of us has studied Keynesianism. Have you ever studied Austrian School work? Who is closer to the anti-Darwinists, us or you?

Mike M said...

Anonymous, everything in your post screams "moron.". Your 1993-2001 comments fail to recognize the phony credit induced aspect of GDP during that period.

You said: "Anyway, get your history straight before making claims about who’s fiscally responsible."

Your intellectual dishonesty prevents you from recognizing that NEITHER conventional political party acts responsibly.

You criticize the professor based on where he works? How incredibility shallow of you. Go ahead and worship at the alter of the Ivey League and see how far that gets you. These idiots have been running things and influencing decisions of this country far too long. Look where it has gotten us.

I wish I would have had someone like Mr Anderson teaching economics in my undergrad courses. It would have saved me years of time. Instead I had to unlearn everything I was taught and relearn it properly. Since then my business and investment decisions have been better and more profitable.

The only "hacks" here are people like yourself who don't possess basic critical thinking skills. But go ahead and worship the high priests of economics and finance with pedigrees from the "right" institutions. Follow their advice and teachings and you will end up broke and a dependent of the State.

JG said...

"As if the adoration of Keynes by the collectivist left isn't ideologically motivated as well?"

Not really. If you can point to a track record of success (like the growth and prosperity that an generation of postwar Americans enjoyed under Keynesian policies) then you can attract supporters by getting results.

The ABCT, on the other hand, has no such track record to attract supporters so its only way of attracting admirers is through appeals to ideology.

Mike M said...

JG your statement demonstrates you have no understanding of the reasons behind the economic performance of postwar America. Congratulations

zackA89 said...

The idea of that passage JG was to show why although Keynesians and Austrians agree that taxes should be lower, they disagree on how they should be reduced and why they should be reduced. For Keynesians, lowering taxes for individuals with a high propensity to consume is a way of stimulating demand through a form of fiscal stimulus.

For Austrians, we would like to see taxes lowered in general or even abolished on income, capital gains, dividends, or corporations for both economic and moral reasons. I can’t speak for all Austrians on this, but the idea is that taxation is a form of theft and the income and revenue generated by an individual or firm is their property which government has no right to confiscate.

Basically, in the Rothbardian framework, taxation violates the non aggression principle. Taxes also enable the government to go around the world pillaging and murdering innocent people.
In terms of economic reasons to want lower taxes, the idea is that lower taxes can encourage savings, investment, and production, and help create wealth in the private sector.

Low taxes are also desirable because they prevent the government from spending large amounts of money on wasteful projects that almost always come in over budget that in the end, consume resources, destroy capital, and make the private sector worse off.

Also, taxes help finance government expenditures and stimulus packages that distort the price system and the capital, investment, and production structure of the economy, which ultimately impairs economic calculation. This delays genuine economic recoveries and impairs the ability of the economy to reconfigure along sustainable lines of production.
There are plenty of moral and economic reasons to want lower or even no taxes.

Oh and JG, We are living in a Keynesian induced nightmare at the moment not to mention the stagflation of the 70s, the tech bubble, the housing bubble, and that thing called the great depression were all caused and prolonged by Keynesian and interventionist policies. That’s a lousy track record if you ask me.

These statists strike out and miss every time.

Bob Roddis said...

Yet the basic Misesian analysis still holds true, that the bankers have suddenly augmented the purchasing power of one segment of the population, which not only redistributes real wealth but also leads to distorted money prices and more mistakes than otherwise would have occurred.”

(Robert P. Murphy, “Multiple Interest Rates and Austrian Business Cycle Theory,” p. 23).

My goodness. This sounds like me. Money dilution causing theft of purchasing power and the distortion of price signals OTHER THAN THE INTEREST RATE leading to catastrophe.

Mises and Hayek wrote a long time ago before the complete abolition of the gold standard and before the insane levels of fiat money dilution. They were 95% right but reality turned out to be more complex.

Again, this provides nothing to help the Keynesians and only reemphasizes the importance of the pricing process so that individuals might discover true the nature of a complex reality that is outside the scope of the overseers to comprehend.

As you can tell, LK still doesn't comprehend economic calculation.

and

“Sraffa clearly missed the entire essence of the ABCT…”

David B said...

Just to see how bad things have become for our resident Auto-Troll, Lord Keynes, take a moment o consider his current argument regarding Bob Murphy's dissertation.

LK is so wedded to the doctrine of Appeal to Authority that his latest stunt is to Appeal to Bob Murphy, an adjunct sholar of the Mises Institute, as the Authority!

I find this to be highly amusing, don't you?

Bob Roddis said...

David B:

You are so right. LK is amazing.

Murphy clearly states that he is improving on the ABCT. Whether he is right or wrong (I think he's mostly right) DOES NOT HELP LK one iota.

LK spends his entire life finding small errors in Austrian writings and disputes between Austrian writers without ever understanding the essence of the theory.

That says to me that there is no way to challenge the basic concepts because no one ever does it and they treat them like Kryptonite.

Lord Keynes said...

"LK is so wedded to the doctrine of Appeal to Authority that his latest stunt is to Appeal to Bob Murphy, an adjunct sholar of the Mises Institute, as the Authority!"

There is no "appeal to authority", idiot.

Bob Roddis grossly misrepresents what Murphy says: those quotes show he is wrong.

They are not quoted to make you to believe that there is no unique natural rate in a growing economy merely because Murphy says so, but to accurately show what Murphy has argued.

"This sounds like me. Money dilution causing theft of purchasing power and the distortion of price signals OTHER THAN THE INTEREST RATE leading to catastrophe."

Murphy doesn't say fiduciary media or fiat money must lead to "catastrophe" at all. You put words in his mouth.

And his belief that Mises's boom-bust cycle still occurs doesn't explain what happens when:

(1) new fiduciary media or fiat money can simply use idle resources, such as unemployed labour, unused stocks of raw materials, idle capital goods and other factor inputs;

(2) fiduciary media or fiat money can simply be used to import the relevant factor inputs through international trade, and these factor inputs are not scarce

Again: your laughable attempt to distort Murphy's words is a sign of desperation.

Lord Keynes said...

"LK spends his entire life finding small errors in Austrian writings and disputes between Austrian writers without ever understanding the essence of the theory."

LOL.. You're an idiot if you think the non-existence of a unique natural rate in a growing economy is a "small error in Austrian writings".

It is a major flaw, and is related to the inability of Austrians to defend a credible real theory of interest rates.

When Robert Murphy in his PhD says that only a monetary theory of the interest rate is tenable, he is agreeing with Keynes and rejecting the pure time preference theory of Mises and Rothbard. That is a very significant rejection.

His words:

"I think Keynes is brilliant in Chapter 13 of the General Theory"

http://consultingbyrpm.com/blog/2011/07/is-keynes-from-heaven-or-hell.html

Don't beleive it because he says so: read his argument, learn from it, you broken record player.

Dennis said...

"(1) new fiduciary media or fiat money can simply use idle resources, such as unemployed labour, unused stocks of raw materials, idle capital goods and other factor inputs;

(2) fiduciary media or fiat money can simply be used to import the relevant factor inputs through international trade, and these factor inputs are not scarce"

How absurd. The Keynesian solution to a depression is simply to conjure capital out of thin air and then use it to bid resources out of unemployment. Domestic workers might fall for this stunt briefly; foreigners wouldn't buy it for a second. They won't be compelled to trade the fruits of their hard work for some worthless paper chits.

People will work only if what they receive for their work has equal or greater value that their labor time. If, by the time the recipients get around to spending this fiat money, inflation has decimated its purchasing power, what was the point of working to earn it in the first place? So that you can please some Keynesian confidence man?

Inflation is not a means to prosperity. It does not grow an economy. It does nothing to increase the division of labor; in fact, it destroys it. The "stimulative" effects of inflation only last as long as someone believes in the monetary hocus-pocus. When they stop believing it, they find that they have effectively been working for nothing.

zackA89 said...

Hunter Lewis had a great piece yesterday that was posted on Mises.org with regards to W.H Hutt’s book the Theory of Idle resources and how it blows up the whole Keynesian world view about stimulating idle resources with Stimulus.

LK should take note of it.

http://mises.org/daily/5477/Hutts-Crushing-Blow-to-Keynes

Idle resources are idle for a reason. They do not need to be “stimulated” back into employment for the sake of employment. Many of them represent malinvestments that came about because of artificially low interest rates. The capital and labor tied up in these idle resources needs to be re allocated towards more profitable sectors of the economy by entrepreneurs. Of course, more money dilution and government spending impair the ability of entrepreneurs to put these idle resources back into use elsewhere in the economy that is more productive.

Idle resources are also the property of someone else. Government has no business “stimulating” them, nor is stimulating them doing them a favor. Those individuals are much better suited to decide what to do with these “idle resources”, in terms of perhaps liquidating projects or reallocating their resources into other lines of production that are more in tune with consume preferences. The market can work these things out.

There is no way government spending or stimulus can even accurately or efficiently target idle resources. Nor is it even economically desirable or productive for that matter to “stimulate” them back into use simply for the sake of using them, as if using them is better than not.

One of Hutt’s main points is that quality, not quantity matters. We care about how resources are employed, not just that they are employed. There are always idle resources, recession or no recession, but that does not mean that government can, should or even needs to “stimulate” them back into use. Quite frankly, any attempt to do so actually does the economy some harm.

Lord Keynes said...

"foreigners wouldn't buy it for a second. They won't be compelled to trade the fruits of their hard work for some worthless paper chits."

Really?? Foreigners won't trade with countries using fiat money and Keynesianism?

Australia, the US, the UK, South Korea, Germany, France and many other nations all used Keynesian stimulus from 2008-2010 and have fiat money and fractional reserve banking. Explain why all nations continue to trade with them?

Let's move on this stupidity...

Lord Keynes said...

"Idle resources are also the property of someone else.

Correct. And capitalists are very happy to freely sell their idle stocks of unbought commodities or to increase capacity utilization by freely taking government money or the money of people paid by govenrment. That's capitalism, buddy. In the real world, capitalists want profit: they are not Austrian fools, flogging the dead horse of ABCT.

Government has no business “stimulating” them, nor is stimulating them doing them a favor."

Err.. goverment doesn't "stimulate" idle resources, genius: it stimluates demand and through that production and employment.

"Those individuals are much better suited to decide what to do with these “idle resources”

Give me one example of a private sector firm refusing to take the government's money. One example, please.

zackA89 said...

LK I’m glad you concede that idle resources are the property of someone else. Because of this, the government has no business trying to stimulate them back into use, or interfering with the market process and the price system, thereby curtailing their ability to make the best use of these resources in light of the available information.

It can attempt to stimulate idle resources like labor, and create government “jobs.” That is certainly counterproductive because jobs are a means to an end not an end themselves and it really matters how labor is employed, not just that it is employed for employments sake. Quality, not quantity matters.

You have it backwards. Production generates demand, and labor is a factor of production. People demanding stuff does not magically make goods and services pop up on the shelves, not does it magically employ people in various stages of production. The production comes first. People spend because the economy is growing but the spending in and of itself does not generate economic growth. You can’t “demand” your way into prosperity or out of a recession.

I’m not sure what your last statement has to do with the fact that individuals who own these idle resources, whatever they may be, are better suited to make economic decisions with them than government. Government shouldn’t be giving money to private sector firms. That’s crony capitalism. Firms should be free to compete on the market place without any government money.

Mike M said...

LK said "Err.. goverment doesn't "stimulate" idle resources, genius: it stimluates demand and through that production and employment"

That's a distinction without a difference

LK said "Give me one example of a private sector firm refusing to take the government's money. One example, please"

That wasn't his point! His point was it's their property. Not the governments to take and/or tinker with like a high school science experiment.

LK said "Really?? Foreigners won't trade with countries using fiat money and Keynesianism?"

Again you missed the point. Sure they will trade, but will demand more pieces of paper. Or in the extreme case call the question like France did causing Nixon to close the international gold window permanently

LK you're like a color commentator in the booth at a AA minor baseball league. You can't play the game so you comment on it with lots of superficial comments and player statistics yet you don't understand the game.

Let's move on from this stupidity

Lord Keynes said...

"Production generates demand, and labor is a factor of production."

That is as foolish and stupid as the labour theory of value.

If I labour for 10 hours a day for 10 weeks, it doesn't mean jack s**t if no one wants to buy - if no one demands - the commodities I produce.

You might as well join the Marxists in their fantasies.

"Government shouldn’t be giving money to private sector firms."

Oh, so now you're telling millions of private sector capitalists whose money they can and can't take??

All your Austrian pretentious rot about individual liberty and freedom goes out the window when you think you know better than business people?

A large number of business people want to freely accept government money, who the hell are you to tell them what to do?

Lord Keynes said...

"His point was it's their property. Not the governments to take and/or tinker with like a high school science experiment."

The government's not taking/forcibly extracting their property, idiot: they are FREELY choosing to sell their commodities to government or to people paid by government.

zackA89 said...

The taxes necessary to finance government stimulus projects that manipulate and distort the ability for private sector individuals to make the best use of their idle resources is done through coercion. That is the point.

The idea is that the production of goods and services, i.e wealth creation, is what facilitates the ability for one to demand. Without prior production and wealth creation, there is no “demand.” And no, things are not backwards, demand does not magically stimulate production into existence, production facilitates one’s ability to “demand” not the other way around.

With regards to wealth creation, it is implied that the goods and services one is producing are consistent with real consumer preferences. If they were not, there would have no means to “demand” anything.

No Marxism or labor theory of value here. Not even close.

I only want capitalists to receive revenue voluntarily in the market place. Government has no businesses giving firms public tax dollars that were diverted out of the private sector and away from other profitable uses. Firms can sink or swim in the free marke on their own without government.

Of course they want government money. People and firms want to feed off the public troff as much as they can. Who knew? Everyone wants to get favors from government that benefits them at the expense of their competition. That’s called crony capitalism and It distorts the free market and is overall bad for the economy.

Anonymous said...

Nice work LK - your on a roll. Zack is still just regurgitating the same crap he gets from his Mises cult.

I particularly like this - "Individuals who own these idle resources, whatever they may be, are better suited to make economic decisions with them than government. Government shouldn’t be giving money to private sector firms."

In capitalism, private firms can make the decision to take government money or not. They are the individuals making the best decisions for their firms given the circumstances.

zackA89 said...

Here he goes again. This anon guy is back just attacking me without substance who usually just regurgitates the same old tired and debunked Keynesian and statist fallacies he probably gets from moveon.org, Paul Krugman or someother statist organization. Might as well just go read the Onion.

My point is that there should not be any government money going to into private firms. They usually just give money to firms owned by political allies. Firms should be able to complete freely in the marketplace absent government money. All government money does is give some firms an advantage over others and at the expense of others. This causes misallocations and distortions in the marketplace and is overall economically harmful and undesirable. Let firms compete on their own merits.


btw, this is a fantastic read for anyone interested. It blows up the keynesian worldview.


http://mises.org/books/failureofneweconomics.pdf

Bob Roddis said...

Give me one example of a private sector firm refusing to take the government's money.

I'm not sure there are but a few examples of anyone refusing to take the government's money. The "progressives" have been very successful in destroying social morality. That's the purpose behind a strict non-aggression principle - to prohibit such activities because they are WRONG. Just because the government stole it doesn't mean it's not theft.

Thanks for proving our point that Keynesianism and the "progressive" movement are based not only upon theft, but upon obliterating the concept of theft in the minds of average people.

Which leads, of course, to military Keynesianism where we murder innocent foreigners in order to "stimulate" the "economy" and the concept of "murder" is destroyed.

Keynesianism: Murder and theft sold to the masses as "scientific" economic "management".

Mike M said...

LK I will type slowly so you can understand

When government interferes in the market place they are tinkering in free market decisions about their property

LK you are a cartoon character. Quick look up a citation for us and tell us "rubbish"

Anonymous said...

Its spelled trough Zack...

Dennis said...

"The government's not taking/forcibly extracting their property, idiot: they are FREELY choosing to sell their commodities to government or to people paid by government."

Where does the government get the money to pay for these idle commodities? By forcibly taking it from other productive individuals. Keynesian economics is all about transferring capital from people who are not politically favored and/or connected to those that are. That's what it's all about.

Bob Roddis said...

Keynesian economics is all about transferring capital from people who are not politically favored and/or connected to those that are. That's what it's all about.

It is always unfathomable to me how a statist will always desperately pretend that his programs do not depend upon SWAT teams forcibly extracting other peoples' wealth. If the victims gave up their wealth voluntarily, we would call it libertarianism. The overseer (LK) simply has more knowledge and more benevolence than the economic actors themselves. Right?

Further, the purpose of money dilution is to accomplish the theft without the victims knowing what hit them. Embezzlement of wealth on a grand scale, tricking the masses.

Bob Roddis said...

Watch this seriously informative youtube on LK's blog by Steve Keen. He gets things right about 75% of the time right until he gets to the Minsky part and the attack on barter. The low private debt at the end of WWII is very interesting. And what evil institution encourages unecessary private debt and makes it seem like the right thing to take on? Hmmmm?

http://socialdemocracy21stcentury.blogspot.com/2011/07/steve-keen-on-finance-theory.html

Anonymous said...

"The overseer (LK) simply has more knowledge and more benevolence than the economic actors themselves. Right?"

Well...Yes, sometimes they do! Your faith in the pricing process is nothing short of religious. In reality, grownups sometimes need to step in.

Oh, and there is this little thing called constitutional democracy where we decide as a society that we would rather live in a polity first, and a marketplace second.

Bob Roddis said...

we would rather live in a polity first, and a marketplace second.

I think we understand that quite well. It leads to war, slaughter, theft, pillage, rape and poverty. As LK endlessly points out, no one ever turns down pillaged goods as long as it's a government SWAT team that is the thief.

Anonymous said...

And that is what Austrians fail to admit - the natural extension of their argument is a denial of politics all together. Now if that isn't utopian I don't what is!

In the real world, we deal with power, values, identity and ultimately pragmatism.

zackA89 said...

Ah, I remember my old professors trying to make this “democratic elections” argument type nonsense before. I laugh every time. Everyone eats, but not every votes, which means the ballot box can’t and certainly does not mimic the market place. Sorry. The real voting takes place in the free market as individuals reward the most efficient and productive suppliers of goods and services they value most. Government does not obtain its revenue voluntary, it does it through force, so it has no ability to determine whether or not it is truly satisfying anyones preferences.

First of all the marketplace existed well before any state or “polity” ever did. And democratic voting blocs do not somehow justify what the government does in the marketplace or overseas just because the people who voted to authorize it were “elected by the people.” Democratic elections are not a substitute for the price system, or the profit loss mechanism, and do not absolve the government from being inefficient and wasteful with scare resources not to mention being on the hook for mass murder overseas. Democratic elections also do not magically absolve politicians and planners from being subject to the knowledge problem. They still are regardless.

Austrians point out how politics can lead to perpetual economic plight and endless war. We don’t like those things. I guess.

Bob Roddis said...

The non-aggression principle is quite pragmatic. No wars and no crime. Peaceful people allowed to be prosperous.

Vs. war, slaughter, theft, pillage, rape and poverty which result from the complete lack of human values as exemplified by Keynesianism which has polluted even the basic concepts of theft and murder.

Anonymous said...

"First of all the marketplace existed well before any state or “polity” ever did" - Now THAT is an assertion not backed by fact. Show me one economic system that was not first a social system. Where do you think preferences come from?

Politics (or sociology more broadly) underpins any economic system. Before democracy you had actual tyrants intervening in the marketplace, physically coercing and confiscating the fruits of your labor for their own personal end. Is democracy perfect? No, but Austrians equate all political systems as the same as long as they are not essentially anarchist.

And again, why is it so difficult for you to understand that no one is seeking a substitute for the pricing system, but another set of principles to allocate resources that might parallel the pricing system, supplement it, or perhaps even at times subsume it?

Zack, you and Roddis and Anderson are 100% straw man argument. Persistently.

"The real voting takes place in the free market" Sounded like a true elitist who probably grew up with a silver spoon. No Zack, the ballot box has been one of the most important innovations in human history and has led to profound transformations of human society and freedom for countless.

Anonymous said...

Actually Bob, I think about that and is another utopian aspect of Austrianism - that if only we let people be there would be no evil in the world and people would automatically respect basic principles of human dignity and economic freedom.

zackA89 said...

No the marketplace existed well before politics or “sociology.” Cavemen and early humans exchanged goods and services and engaged in transaction for mutual benefit. The free market precedes the state. Using tools and capital to increase the productivity of labor and create wealth and thus raise standards of living happened well before any political or sociologically system was ever invented.

If you want to maximize utility and improve as many lives as you can, you wouldn’t use democratic elections to justify government spending, but rather leave it up to the marketplace to determine. Individuals in the market place have the types of incentives to satisfy each other’s wants and needs in ways that government simply cannot. Government is force, the free market is voluntary. That’s all you need to know.

The real ballot box takes place in the marketplace. The electoral ballot box has enabled war, genocide, and mass murder all over the world not to mention huge ever growing governments that continues to wreak havoc all over the economy by inflicting regulations, stimulus, and controls upon the marketplace. They destroy resources and capital through spending and cause booms and busts by meddling with interest rates. Ballot boxes enable the government to get away with murder and inflicting economic harm upon society that wouldn’t normally occur in a free society that respects the non aggression principle.

The statists loose again.

Anonymous said...

You idiot you just shifted the terms of the debate - "No the marketplace existed well before politics or “sociology.” Cavemen and early humans exchanged goods and services and engaged in transaction for mutual benefit. The free market precedes the STATE (EMPHASIS ADDED)."

Even cavemen had social norms that determined the proper behavior in that marketplace - probably the strongest guy takes it all! Where do you think preferences come from - out of thin air?

"The electoral ballot box has enabled war, genocide, and mass murder all over the world not to mention huge ever growing governments that continues to wreak havoc all over the economy by inflicting regulations, stimulus, and controls upon the marketplace." Never said democracy was perfect, but would rather we went back to feudalism? And run that line by an black person in this country and get yourself into a Rand Paul mouthful.

zackA89 said...

No I didn’t. The marketplace precedes the state and any central direction from some higher authority.

Cavemen had no state, society, or electoral ballot box to determine how to behave and how not to. They figured it out among themselves, just like a lot of other ancient cultures, and increased their standards of living without any government or democratic state. Look at how many democratic states have gone into the dustbin of history one way or another. Not a very good track record. They usually get to big and overexpand one way or another either domestically or internationally.

Let’s just live by the non aggression principle. I would rather have people respect each other’s property rights and structure a society around the non aggression principle making the initiation of force upon others for no other reason than some subjective moral conviction strictly illegal and forbidden.

You can’t impose your own subjective values judgments on others through force, whether done by a state with the monopoly on force or in the marketplace. When things are done voluntarily, peace and prosperity tend to ensue. I want voluntary peaceful cooperation without force being injected into the equation.

Mike M said...

Anonymous, your ignorance and condescending arrogance is staggering. You have no clue as to the differences between a democracy, a constitutional democracy and a constitutional republic. Your comment at 7:14 reveals your true philosophy. Just who the hell are you or your elected stooges to send I "grown ups"

Anonymous said...

Arrogance? Zack is just making stuff up now. He likes to accuse people of making assertions without facts, but he commits this frequently.

You are shifting the argument Zack from a polity to a modern state. Duh, cavemen did not have states, but anthropologists and historians have clear evidence of social norms, hierarchies, and politics. Man is a social creature - born into a society and cannot define himself outside of that socialization. Again, where do you think preferences come from? Out of thin air? This is a problem with Austrianism and most Rat-Choice approaches - they exogeonize preferences.

As for Mike M - let the kids run wild huh?

Anonymous said...

"Cavemen had no state, society, or electoral ballot box to determine how to behave and how not to" You got two of those points right - cavemen had no state and electoral ballot box (that did not come around until around 1648), but they did in fact have a society. Watch the latest Wener Herzog documentary "Cave of Forgotten Dreams" or really just pick up any book about prehistory.

Oh, but that would involve reading something that is not from the Mises institute.

zackA89 said...

Now all you have done is shift the argument again. Now I have really no clue what you are arguing nor does it make any sense really. You have absolutely no coherent thought process whatsoever.
Social norms and hierarchies can and have existed without a state, government, or electoral ballot box.

Man is a social creature, which is all the more reason to encourage peaceful voluntary transactions by to banning the initiation of force upon others by the state under the guide of “democracy” or by others. The non aggression principle solves that problem by preventing people from imposing their own preferences on others through force.

Kids won’t run wild when they know they will be punished if they violate the property rights of others. This will keep them in check. The NAP solves this. You want to let the government overseer’s run wild? Are they angels? Who will oversee the overseer’s?

The existence of societies has no bearing on this conversation or on anything related to Austrian theory. The marketplace and early forms capitalism laid the foundation for society, social hierarchies, and politics. It always starts with the free market.

Anonymous said...

Just because it sounds elitist to you does not mean its wrong. The fact is that millions of consumers can act rationally and lead to disastrous outcomes. AND, in a constitutional republic, societies can choose to have resources allocated in what would not necessarily be the most efficient, or profit-maximizing manner. Its called a society.

@ Zack

"Social norms and hierarchies can and have existed without a state, government, or electoral ballot box."

You really have no clue do you? The state is not the issue, but the reality of 1) an authority and b) a society deciding how to allocate goods that is not entirely defined by each acting according to his subjective preferences. And even those subjective preferences in the market place are socially defined (i.e. not come about freely).

The idea that cavemen somehow lived in a utopian "free market" and not in a hierarchical society where the strongest made the rules is so utterly absurd it just reconfirmed that you are in an economic cult and probably a trust-fund libertarian.

Your out of your league Zack. Especially when you now conflate "marketplace" with "free market." I honestly think that you buy this crap because it makes you feel superior to people since you belong to an economic cult.

zackA89 said...

I really can’t even decipher through your arguments because they really don’t make any sense whatsoever and I have absolutely no clue what you are really arguing but I will try to make some sense of it.

Consumers don’t cause recessions or disasters outcomes. They are caused, exacerbated, and prolonged by government intervention and distortions in the free market. If any problems do in fact arise in the free market, said problems can be solved easily by voluntary market actors without the government injecting force into the equation. It can and has happened.

“Societies” can choose to rape and murder people if they want to. Heck, you could even democratically elect representatives to carry out such heinous acts. However, just because these policies are the product of democracy does not make a policy morally or economically desirable.

Government has no way to determine what is desirable and what is not because the information necessary to do so cant be held by non market actors. The ballot box does not give them an indication either and again, it is no substitute or supplement to the price system.

Government or politicians just impose their own subjective preferences on society through the use of force and justify it with “hey we were elected so it’s ok!, its consistent with what people want!” Real democracy takes place in the voluntary marketplace.

Authorities tend to have the monopoly over force and can use it to coerce people into doing things they otherwise wouldn’t do. Free markets, with market participants voluntarily exchanging goods for mutual benefit, happened and existed well before such coercive authorities ever existed.

Government has no ability to make any economic sense of how It allocates goods. It usually just pays off political cronies and allies or uses it to buy votes in their district or create voting blocks that are dependent on govenment sending to help get them re elected.

The cavemen lived in a society where no one had the monopoly over force. Others throughout history have lived this way and prospered. I use the world marketplace and the free market interchangeably at times but it has no real bearing on my argument.

I am not a “trust fund” libertarian either. You make no sense you pathetic little statist. Your arguments are empty, meaningless, and completely nonsensical. When I read your comments I feel like im reading the Onion. Go home.

zackA89 said...

words* not world




These statists have nothing. They remind me when I was in my undergrad days arguing with economic illiterates and trying to talk some sense into them. They are blinded by their love affair with the state and their religous belief that benovlent wise overlords can solve all our problems and are somehow smarter than the steve jobs of the world.

Left wing religous statist progressive keynesian dogma makes me sick

Anonymous said...

You've got nothing Zack but regurgitated diatribe! Ha ha ha ha! Grow up. And tell me your not a trust fund libertarian?

Show me that cavemen lived in a free market.

Anonymous said...

"They are blinded by their love affair with the state and their religous belief that benovlent wise overlords can solve all our problems and are somehow smarter than the steve jobs of the world. " A talking point if I've ever seen one. And a complete straw man argument.

zackA89 said...

That’s just an empty attack. The idea behind the cavemen references was to show, that before a state, or even a coercive entity existed, humans freely exchanged and traded with one another for mutual benefit. Their lives were improved without wise benevolent government planners in the mix. The free market and early forms of capitalism preceded the state, and through the free market, society eventually evolved.

Cave men used tools to improve their productivity of labor in order to improve their well being. They freely traded goods with one another for mutual benefit. No state or coercive authority was involved.

JG said...

"Low taxes are also desirable because they prevent the government from spending large amounts of money on wasteful projects that almost always come in over budget that in the end, consume resources, destroy capital, and make the private sector worse off."

Zack, where are you getting this nonsense from? Let's compare the government's actual track record on spending to the Grover Norquist fantasy that you seem to be painting for us. Here is a list of examples of "wasteful" government projects funded through tax dollars that left the private sector "worse off":

1) The interstate highway system that faciliated trade across the continent. A highway system that greatly benefited the private sector by improving the logistics of commerce.

2) The National Science Foundation (NSF) and the Advanced Research Projects Agency (ARPA). Both are government agencies that provided the research and funding that created the internet.

3) The various port authorities and transporation authorities that funded the bridges, roads, tunnels and airports that provide the skeletal framework of our transportation and commercial infrastructure.

4) The entire legal system of federal and state courts that enforce the laws and private contracts that allow trade and commerce to thrive in this country.

5) Public schools and universities that provide the education for most of the future workers that will serve the private sector when finish school.

This is the actual track record of "wasteful" government spending you rail against. The vast majority of the money government spends is not wasted but goes to pay for the things and services that we actually need or that are investments in our future. This idea that everything government spends money on is wasteful is a myth.

zackA89 said...

1.There is no reason to believe that trade could not have been facilitated in the absence of such government projects. The free market can and has provided transportation in order to facilitate commerce.

2.The internet is what it is today because the free market and capitalism. The free market is what has vastly improved the internet in terms of how efficiently it functions and how accessible it is to millions of people. There is no reason to believe that the funding necessary to create the internet could not have happened in the absence of government research funding.

3.The infrastructure framework could very well have been funded in the free market and was before the government ever got involved with it.

4.You can have private law. Government is not needed in protecting private property rights, according to most Rothbardians.

5.Public schools that have been producing low test scores and poor results despite the massive amounts of government spending. Like health care, education is a disastor precisley because of governmet invovlement. Private education does exist, and can educate our kids much more effictievly and efficiently than government does.

Just because government gets lucky and throws money at a winning idea does not mean we owe it to the government. You also have to count all the projects that government has funded that have been outright wasteful and have destroyed resources and capital in the process. It’s like bragging about the shots you made during a basketball game while ignoring the fact that you missed 10 times as many. You have to count all the failures of government not just the alleged successes.

Anyway, we owe it to the free market because the tax revenue necessary to finance those government projects and research was taken out of the wealth producing private sector to begin with. Without a free market and wealth creation, there would be nothing for the state to confiscate in order to finance things it deems worthy. We owe it all to the free market and capitalism, not government

Think Amtrak, the post office, the stimulus bill, medicare, Medicaid, social security, and just about every other government project that come in over budget, looses money, and are out right wasteful. Government has absolutely no ability to determine whether its expenditures are consistent with consumer demand, productive, or even efficient for that matter because it is not subject to market forces like profit and loss and the price system. Its like blind man throwing darts against a dart board. It cant make any economic sense of what it does because it has absolutely no incentive to do so.

There is no way to determine if what government spends other people’s money on is profitable, productive, or even consistent with consumer demand. Opportunity cost exists with any government expenditure. The free market can and has done a better job “investing in our future”

Anyway if you get your revenue through force, you cant actually invest at all. Thats basic econ 101.

JG is the biggest economic illiterate I have ever seen on this blog and that is saying something. Unbelievable. An unapologetic statist with an absolute love affair with government and wise benovlent central planners that are somehow more intelligent than market actors.

These statists make me sick. They have nothing. They swing and they miss like always.

zackA89 said...

I have had enough with these statists and their silly nonsensical arguments that have been blown up and debunked by Austrians for decades.

Rothbard’s got it from here:

“The same is true, to a lesser extent, wherever the price is under the free-market price. On the free market, consumers can dictate the pricing and thereby assure the best allocation of productive resources to supply their wants. In a government enterprise, this cannot be done. Let us take again the case of the free service. Since there is no pricing, and therefore no exclusion of submarginal uses, there is no way that government, even if it wanted to, could allocate its services to the most important uses and to the most eager buyers. All buyers, all uses, are artificially kept on the same plane. As a result, the most important uses will be slighted, and the government is faced with insuperable allocation problems, which it cannot solve even to its own satisfaction. Thus, the government will be confronted with the problem: Should we build a road in place A or place B? There is no rational way by which it can make this decision. It cannot aid the private consumers of the road in the best way. It can decide only according to the whim of the ruling government official, i.e., only if the government official, not the public, does the "consuming." If the government wishes to do what is best for the public, it is faced with an impossible task.”

“It is the fact that government can obtain virtually unlimited resources by means of its coercive tax power. Private businesses must obtain their funds from investors. It is this allocation of funds by investors on the basis of time preference and foresight that rations funds and resources to the most profitable and therefore the most serviceable uses. Private firms can get funds only from consumers and investors; they can get funds, in other words, only from people who value and buy their services and from investors who are willing to risk investment of their saved funds in anticipation of profit. In short, payment and service are, once again, indissolubly linked on the market. Government, on the other hand, can get as much money as it likes. The free market provides a "mechanism" for allocating funds for future and present consumption, for directing resources to their most value-productive uses for all the people. It thereby provides a means for businessmen to allocate resources and to price services to insure such optimum use. Government, however, has no checkrein on itself, i.e., no requirement for meeting a profit-and-loss test of valued service to consumers, to enable it to obtain funds. Private enterprise can get funds only from satisfied, valuing customers and from investors guided by profits and losses. Government can get funds literally at its own whim.”

Lord Keynes said...

"Without prior production and wealth creation, there is no “demand.”

= idiocy.

What you mean to say is that if all production stopped there would be no commodities. There would still be demand, but it would be unmet.

And no, things are not backwards, demand does not magically stimulate production into existence,

No says that "demand" does ANYTHING magically, idiot.

If demand did not stimulate production, then capitalists would not increase production of commodities in markets where there is excess demand for them, to seek profits.

production facilitates one’s ability to “demand” not the other way around"

Production allows consumption of commodities. Demand can be met or unmet, and demand drives production.

Lord Keynes said...

"On the free market, consumers can dictate the pricing and thereby assure the best allocation of productive resources to supply their wants. "

Rothbard is dreaming his libertarian fantasies, as usual: in the real world, even if you had completely free markets, cartels, oligopolies and monopolies could easily develop in many product markets: the prices of commodities would be set by price makers/administrators, not by the dynamics of supply and demand curves.

Why? Because business prefers stable prices to the instability of fluctuating ones and disastrous price wars.

Try spending 10 minutes in a modern marketing department studying the empirical reality of how prices are set.

Anonymous said...

"The idea behind the cavemen references was to show, that before a state, or even a coercive entity existed, humans freely exchanged and traded with one another for mutual benefit." BUT YOUR WRONG!! You live in a fantasy world, where facts and realities about the world take second fiddle to your ideological understanding of the world.

That has got to be one of the stupidest things I have ever read - that cavemen had a system of free trade!

Anonymous said...

Sorry, that is you're.

Anonymous said...

"The cavemen lived in a society where no one had the monopoly over force."

HA HA HA HA HA HA HA. Your grasping at straws here Zack. If it weren't for your ego, you might see the plain truth in front of your nose.

Anonymous said...

"I am not a “trust fund” libertarian either." Prove it - you have all the trappings of spoiled rich kid who thinks he knows it all, but really knows jack sh%%.

At least be a real American libertarian - get your gun and go live off the land. I do.

Lord Keynes said...

"On the free market, consumers can dictate the pricing and thereby assure the best allocation of productive resources to supply their wants."

Rothbard shoots himself in the foot, like the old fool he is.

This is contradicted by Rothbard's attitude to monopoly price on the free market:
“So far we have established that there is nothing “wrong” with monopoly price, either when instituted by one firm or by cartel; that, in fact, whatever price the free market (unhampered by violence or the threat of violence) establishes will be the “best” price.” (Rothbard 2009: 661).

But, if on the unhampered market, cartels, oligopolies and monopolies could easily develop in many product markets, and the prices of commodities were then set by price setters/price administrators, and not by the dynamics of supply and demand curves, then it is obvious that consumers are not dictating pricing. According to Rothbard’s argument here, free markets would not assure the best allocation of productive resources, with cartel and monopoly prices being present.

Bob Roddis said...

Those who live by historical anecdotes must die by historical anecdotes. The progressive era was one big power grab by big business per Gabriel Kolko.

http://tinyurl.com/3z9v2ga

The normal free market trend is away from monopoly and towards competition. That is why big business wants the government to eliminate competition. That is why the big bankers instituted The Fed as bailer-outer of last resort. That is why big business and big banks want The Fed to create funny money to fund wars. Without central banking, there would have been no WWI. No WWI, no Hitler. The purpose of central banks is to hide wealth transfers from the victims. It’s all the inflationists fault, like everything else.

The only monopoly trend in the market is caused by IP which is nothing other than a government monopoly itself. Without IP and other forms of government help, monopoly is not the normal trend of the market.

Bob Roddis said...

Apparently, LK and the MMTers are disciples of Hyman Minsky and his “Financial Instability Hypothesis”. The slipshod, phony and superficial analysis is much like that of Steve Keen mentioned earlier. No mention is made of the central bank creating funny money out of thin air and there is no mention of or concern for acting humans, limited knowledge or the inherent distortions in economic calculation that funny money must inflict. The problems in the Minsky world are merely caused by “capitalism” and “debt”.

In particular, over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy with a sizeable body of speculative financial units is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to try to make position by selling out position. This is likely to lead to a collapse of asset values.

The financial instability hypothesis is a model of a capitalist economy which does not rely upon exogenous shocks to generate business cycles of varying severity. The hypothesis holds that business cycles of history are compounded out of (i) the internal dynamics of capitalist economies, and (ii) the system of interventions and regulations that are designed to keep the economy operating within reasonable bounds.


http://www.levyinstitute.org/pubs/wp74.pdf

(Prepared for Handbook of Radical Political Economy, edited by Philip Arestis and Malcolm Sawyer, Edward Elgar: Aldershot, 1993.)

Rubbish, eh?

ekeyra said...

"Nice work LK - your on a roll. Zack is still just regurgitating the same crap he gets from his Mises cult.

I particularly like this - "Individuals who own these idle resources, whatever they may be, are better suited to make economic decisions with them than government. Government shouldn’t be giving money to private sector firms."

In capitalism, private firms can make the decision to take government money or not. They are the individuals making the best decisions for their firms given the circumstances. "

Wow why did we try to educate someone who couldnt immediately see the problem with that policy?

Only you can prevent troll feedings.

David B said...

Lord "Auto-Troll" Keynes,

Rothbard states: "On the free market, consumers can dictate the pricing and thereby assure the best allocation of productive resources to supply their wants."

Rohtbard's second statement: “So far we have established that there is nothing “wrong” with monopoly price, either when instituted by one firm or by cartel; that, in fact, whatever price the free market (unhampered by violence or the threat of violence) establishes will be the “best” price.” (Rothbard 2009: 661).

LK said: But, if on the unhampered market, cartels, oligopolies and monopolies could easily develop in many product markets,

Wrong. Try again, LK. Rothbard says NOTHING about how easy or difficult it will be to establish cartels and monopolies in the free market in either of the first two statements.

(Hint: if you are the first inventor of a product it is easy to start a monopoly, in fact you have to be a monopoly. Maintaining that monopoly or cartel without help from the state is a whole nother issue.)

If you makes such an egregious error in your first sentence (I should say, in your first sentence after your standard insult), there is no reason to proceed. Your conclusions are built on a faulty foundation.

So try again.

And why are your logical fallacies so easy to spot? One would think you would be somewhat good at this by now.

zackA89 said...

Anon you are a complete and utter buffoon with the intelligence level of a 5 year old. If that. The caveman reference, like I said, was to simply show that early man had engaged in basic forms of capitalism and increased their well being before any such government or higher authority ever existed. That is not even the slightest bit controversial.

Rothbard is no fool. That quote is taken completley out of context as usual. Bob is right. Only government creates and protects cartels, oligopolies, and monopolies by giving some firms special privileges or by limiting entry and restricting competition.

No idiocy. Say’s law holds. There is always demand, but one can only demand if one produces a good or supplies a service that others value. Demand comes from prior production, and demand does not stimulate more production into existence, more production facilitates the ability for individuals to “demand” other goods and services they value.

No one can demand anything without first producing something or providing a service of value. Ones demand hinges on one’s ability to supply something others value. Says law holds.

Prior production allows indivudlas to demand commodities. Demand does not drive production. Without production, there would be no means for anyone to bid on other commodities; there would be no method of payment. The real funding required to exercise your ability to demand other commodities come from prior production or a good or service others value.

People demanding more stuff does not make production happen. Production is what allows people to demand things in the first place. People derive their purchasing power, thus their ability to “demand” other things from prior production.

zackA89 said...

Strait from the source. I like this passage alot.


http://www.econlib.org/library/Say/sayT15.html#Bk.I,Ch.XV


"Thus, to say that sales are dull, owing to the scarcity of money, is to mistake the means for the cause; an error that proceeds from the circumstance, that almost all produce is in the first instance exchanged for money, before it is ultimately converted into other produce: and the commodity, which recurs so repeatedly in use, appears to vulgar apprehensions the most important of commodities, and the end and object of all transactions, whereas it is only the medium. Sales cannot be said to be dull because money is scarce, but because other products are so. There is always money enough to conduct the circulation and mutual interchange of other values, when those values really exist. Should the increase of traffic require more money to facilitate it, the want is easily supplied, and is a strong indication of prosperity—a proof that a great abundance of values has been created, which it is wished to exchange for other values. In such cases, merchants know well enough how to find substitutes for the product serving as the medium of exchange or money:*35 and money itself soon pours in, for this reason, that all produce naturally gravitates to that place where it is most in demand. It is a good sign when the business is too great for the money; just in the same way as it is a good sign when the goods are too plentiful for the warehouses."

JG said...

Zack,

I just gave you 5 examples that directly contradicted your silly little pet theories about government wastefulness and your best reponse was that the government "got lucky" with those. How convenient to be able to dismiss every contradiction to your ideology as a fluke.

Like all zealots, you reduce all complex systems to simple, manageable, easily digested theories. Government = waste, taxes = theft, Murray Rothbard = someone you'd drop to your knees and fellate if he were alive today. Why? Because having an ideology relieves you of the burden of thinking for yourself. Having a litmus test that tells you what to believe is so much easier than coming to your own conclusions through careful analysis.

By the way, quoting others instead of addressing a challenge yourself is how morons debate. Please stop answering criticism by quoting Rothbard. If you can't field a challenge yourself then you're just a mindless parrot repeating what you hear.

zackA89 said...

JG Your leftist ideology and love affair with government blinds you completely from understand any basic economics and why even if it appears as if government made a “good” decision, there is absolutely no rational way to determine if the government’s spending was the best use of resources.

You did not respond to the fact that you can’t invest if you obtain your revenue through coercion because you have been defeated and are an intellectually bankrupt statist regurgitating silly statists notions that been blown up and debunked for decades. You probably worship krugman and other Keynesians. Government spending=good!, free market=”evil, and unfair”

No. The quote blows up your worldview completely. You have no response to it at all. None whatsoever. You lack the intellectual ability and courage to conjure up a response. You can’t invest if you obtain your revenue through force, and even if on the surface it appears as if the government was not wasteful there is no way to determine if the government project was the most productive and efficient use of resources. You have no answer for all the government failures, and how those constitute real wastes of resources and capital that could have been put to use productively in the private sector. You have no response for government opportunity cost in the sense it must receive its funding by diverting it away from profitable private sector projects.

You have absolutely nothing nor have you presented even a remotely coherent argument whatsoever besides praising how wonderful government is without realizing all the waste, fraud, and damage that it does not to mention ignore the fact that the market can and has done all of those things you said and the fact that without market forces government cant make any economic sense of what it does.

Opportunity cost is the most basic economic concept, one which you have no understanding off.

JG swings and he misses. As always. Batting .000. Reading him, like other statists, is just like reading the Onion. For entertainment purposes only.

Mike M said...

JG your last post reveals your immaturity. Isn't there a Seasame Street blog that is more up your ally?

Anonymous said...

Trust fund libertarian....

" The caveman reference, like I said, was to simply show that early man had engaged in basic forms of capitalism and increased their well being before any such government or higher authority ever existed."

EXCEPT - you made it up! Even prehistoric cultures lived in hierarchical societies (I.E. HIGHER AUTHORITY). The myth of the free trading, socially unbound individual, is a conceit made by Austrians. While today it might be the modern state, that does not mean that human beings ever lived as unbounded you claim - it is a utopian vision and a deeply false assumption about a state of nature.

Once you recognize this, you begin to see government intervention and the role of regime-type very differently. You just don't get it.

Back to country club Zack.

Anonymous said...

" You can’t invest if you obtain your revenue through force, and even if on the surface it appears as if the government was not wasteful there is no way to determine if the government project was the most productive and efficient use of resources."

Again, government is not necessarily interested in providing the most productive and efficient use of a resource.

Anonymous said...

"the market can and has done all of those things you said"

Ah yes, another typical Austrian fallacy. The reality is that most of the goods we are talking about have not been produced by private enterprise (nor should they). Austrians then argue that it COULD have been, but we just can't imagine it. How convenient.

Private enterprise could have built the interstate highway. It could have invested in R&D that underlies private enterprise.

David B said...

Anon,

If you're going to become an Auto-Troll like LK, at least enter a screen name so I can have your previous words as references. That way I can I display your inconsistencies, as I have done for Lord Keynes.

Private enterprise could have built the interstate highway.

Of course they could have. To begin with, James Hill built the only trans continental railway system that did not go bankrupt (his received no subsidy, while all others did and eventually went bankrupt.)

But just for sport let's look at it another way. If the government were to restrict or altogether eliminate the private production of toilets, should I thank my benevolent overlords every time I take a duamp? Should I mock those who fantasize about the results of private competition in toilet production?

And to look at it yet another way, can you provide me with specific limits of the market. What operations are they completely incapable of handling? Obviously, the most important elements of food, shelter, security, and clothing are well within their reach. Markets also provide the most sophisticated goods, like the computer that you are using to debate us. Which goods are beyond the capability of the market, and why?

It could have invested in R&D that underlies private enterprise.

LOL, have you ever heard of something called venture capital?

Besides that, every ounce of capital that underlies private industry was produced through the voluntary exchange of private property. When the government has any hand at all in the endeavor, it must first appropriate for itself resources produced in the private market. Therefore, the starting point for all private investment is the market.

Bob Roddis said...

Didn't the Interstate System cause racist suburban sprawl, the destruction of trees and rivers and global warming?

A private freeway system would not have been able to dig deep freeway ditches through black neighborhoods in Detroit. Since statists have no morals, it became OK to dig up black neighborhoods so whites could quickly drive to the segregated suburbs.

zackA89 said...

The revenue necessary to finance any government expenditure or R&D comes out of the private sector to begin with. We owe any alleged “successes” of government (if there are any) to capitalism anyway. If the government ends up throwing money at a winning idea that does not mean we owe it to government or that government should continue to try to pick winners and losers in the marketplace. It has no incentive or business doing so. Every government project has an opportunity costs and your ignoring all the failed government projects that have consumed and destroyed resources in the process.

All you can do is name call and make things up that are not true. All it is an indictment on your own (or lack thereof) of intelligence.

Anon now you’re making things up. The existence of “Hierarchical societies” does not mean that there was some coercive entity that existed that had the monopoly power over force. There was no state, no monopoly over force, yet commerce and the early forms of capitalism existed. Capitalism, free voluntary trade among individuals for mutual benefit and rising standards of living CAN and HAVE happened before the state ever existed or a central higher authority with the monopoly on force. Hierarchy has no bearing on this conversation whatsoever. The idea is that capitalism can create prosperity and improve lives without central direction or planning from anyone. That is the main point. It can happen voluntarily out of the free market with individuals cooperating with each other for mutual benefit.

The idea that hierarchy, a state, or a central authority is a pre requisite for prosperity is a complete myth not backed up by facts or theory whatsoever. The idea that government is necessary to create prosperity it’s a deeply flawed utopian vision possessed by statists who have no clue about basic economics. There love affair with the state blinds them from understand reality.

zackA89 said...

Government intervention is the cause of our problems and general misery. The information necessary for the government to even “solve” a problem cannot be possessed by a bunch of bureaucrats. The information is constantly changing and cannot be entirely known at any given point in time which makes it almost impossible for the government to “solve” any “problem” that in all likelyhood they create to begin with. The market can self correct if you let it.

Right. Government is interested in expanding and maintain its power and control over the masses. Government officials are interested in getting re elected so they will spend other people’s money on wasteful projects in their district that come in over budget and represent the destruction of real resources. Resources are scare, they need to be put to use productively and efficiently, and if government attempts to do this they end up destroying resources which represents a net loss to society and the economy as a whole.



Anon all you can do is name call and make things up that are not true. All it is an indictment on your own (or lack thereof) intelligence.


These statists are pathetic. So are their arguments (or lack thereof)

David B said...

ZackA89,

Some of them really crack me up though. I especially enjoyed the "trust fund" libertarian comment.

You can always tell the ones that have never actually read anything a libertarian has ever written. They use the far left agitprop terms as insults, completely oblivious to the fact that those insults have no application here.

Well, let em have at it. If all they have are insults, I say fire away!

We get insults and logical fallacies. These aren't serious critiques, and they aren't going to understand our position anwyay, so we might as well just have fun with them.

The Left:

pro-war
pro-state
anti-market

The Right:

pro-war
pro-state
anti-market

Neither will ever align with the anti-war, anti-state, pro-market libertarian movement.

The only people we can influnce are the silent majority. Those people that do not waste their lives arguing the minutiae of pointless political bickerings are usually highly receptive of an economic and political philosophy that makes sense and gives them an opportunity to broaden their liberty and power at the expense of the state.

zackA89 said...

David B,

Yes, the stuff they write is sounds like something you would read on the Onion. Its either just empty attacks or just nonesense all together.

Have you seen this yet? I recommend other Ron Paulians and Rothbardians including Roddis to take a look:

http://www.facebook.com/bluerepublican?sk=wall#!/bluerepublican?sk=info

Could this help tip Ron Paul over the edge? There may be hope.

David B said...

Zack,

Thanks for passing along the link. Interesting. As Rothbard advocated, use any means that don't violate the NAP to advance the ideas.

David

Lord Keynes said...

"To begin with, James Hill built the only trans continental railway system that did not go bankrupt "

Yeah, except you leave out some inconvenient facts like most Austrian ideologues and hacks:

(1) Hill acquired a preexistng railway called the "Saint Paul and Pacific Railroad" as the starting basis for his "Great Northern Railway". The "Saint Paul and Pacific Railroad" existed because of massive government support:

"In 1857, the territorial legislature of the state of Minnesota issued a charter to the Minnesota and Pacific Railroad to build a standard gauge railway from Stillwater in the east to St. Paul in the west .... The railroad received a grant of 2,460,000 acres (1,000,000 ha) of land from the territorial legislature. This was the seventh largest land grant of the 75 given to railroads nationwide between 1850 and 1871.

Construction began in the autumn of 1857, and in 1856 the state backed a $5 million bond issue to support the new rail system.
....

But James J. Hill, who ran steamboats on the Red River, knew that the SP&P owned very valuable land grants and saw the potential of the railroad. Hill convinced John S. Kennedy (a New York City banker who had represented the Dutch bondholders), Norman Kittson (Hill's friend and a wealthy fur trader), Donald Smith (a Montreal banker and executive with the Hudson's Bay Company), and George Stephen (Smith's cousin and a wealthy railroad executive) to invest $5.5 million in purchasing the railroad.


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

(2) Hill benefited from government negotiations with Indians to obtain the right to build his railway on their land:

"The Great Northern's Mad Dash for Great Falls The Great Northern had to stop construction in 1886 to wait for the government's negotiations for Indian lands. The 1887 agreement over the Sweetgrass Hills gave the Great Northern Railway a 75-foot right-of-way over the Rocky mountains and through Western Montana-plus permission to use all the stone and lumber it needed for construction.

Montana: Stories of the Land, p. 175.

No government intervention, my friggin' eye.

And not to mention the other lands the railway was built on originally taken by state force and violence from the people who lived there before Europeans.

Awesome example.

JG said...

Roddis,

I like how you try to reduce the largest infrastucture program in the nation's history (the eisenhower interstate system) to nothing more than the demolition of black neighborhoods to make room for freeways.

A massive infrastructure overall that enhanced domestic commerce and contributed to the growth of trade and prosperity is really nothing more than a racist plot to keep the black man down. Thank you for this insightful and relevant perspective....you friggin' dullard.

JG said...

Zack,

Anyone with an ounce of education or familiarity with U.S. history knows that almost every major industrial or scientific achievement of the past 100 years has been the result of collaberation between the private sector and the public sector. Since you clearly have no idea what I'm talking about let me give you some examples:

1) The nuclear energy industry would not exist today without federal research that contributed to the development of atomic power.

2) The modern telecoms industry relies on satellite technology, which is the product of decades of federally funded research and funding from the pentagon.

3) The early networks developed by ARPA and funded by the NSF became the foundation for what would become the internet.

These are just a handful of the countless industrial and scientific advances that the private sector wasn't willing to fund or assume the risk for creating on its own. These were collaberations with the public sector, the same public sector that you and every other Libertarian talking bobble-head loves to piss on and condemn as "the source of all our misery".

The fact that you don't know any of this (or won't acknowledge it) exposes you as either horribly ignorant or horribly dishonest. Which on is it, Zack?

JG said...

Zack,

Anyone with an ounce of education or familiarity with U.S. history knows that almost every major industrial or scientific achievement of the past 100 years has been the result of collaberation between the private sector and the public sector. Since you clearly have no idea what I'm talking about let me give you some examples:

1) The nuclear energy industry would not exist today without federal research that contributed to the development of atomic power.

2) The modern telecoms industry relies on satellite technology, which is the product of decades of federally funded research and funding from the pentagon.

3) The early networks developed by ARPA and funded by the NSF became the foundation for what would become the internet.

These are just a handful of the countless industrial and scientific advances that the private sector wasn't willing to fund or assume the risk for creating on its own. These were collaberations with the public sector, the same public sector that you and every other Libertarian talking bobble-head loves to piss on and condemn as "the source of all our misery".

The fact that you don't know any of this (or won't acknowledge it) exposes you as either horribly ignorant or horribly dishonest. Which on is it, Zack?

David B said...

JG,

Are you familiar with the logical fallacy Post Hoc Ergo Propter Hoc? Your method of argumentation is inherently flawed.

Lord Keynes,

So, let me get this straight. The Republican-led post-Civil War federal government killed millions of Indians and stole their land to open up the west for the party's cronies. (Do you imply that this is Hill's fault?)

Then, the federal government subsidizes their cronies, while Hill receives nothing.

But Hill's success is only possible because of the blood thirsty federal government, which rewarded his competitors at his expense?

Ok, tell me another.

Back to the drawing board for you.

Dr.Olden said...

I was drawn to the original article wondering there was some fact or theory in the Austrian school which would actually explain a modern economy in a way that Krugman/Keynes had not.

No, it is the same pre-depression, historically blind microeconomic analysis which is, in fact, invalidated by the liquidity trap which we are in again today.

Thanks for the interesting commentary which makes that clear.

Lord Keynes said...

"Then, the federal government subsidizes their cronies, while Hill receives nothing. "

Idiot: Hill did not receive "nothing" from the federal government. He

(1) took over the "Saint Paul and Pacific Railroad" which had massive had a grant of 2,460,000 acres (1,000,000 ha) of land from the territorial legislature.

(2) he benefited from government negotiations with Indians to obtain the right to build his railway on their land.

Why don't you learn to read you friggin' Austrian hack.

Anonymous said...

@ David B -

Post Hoc Ergo Propter Hoc only works if there is no argument for causality in the sequence. I can show you how government caused nascent industries to receive necessary research and start-up funds.

You are arguing that the modern economy would have evolved very similarly without government intervention. That is a counter-factual, not a logical fallacy. It is also a very difficult counter-factual to sustain.

One question for the Austrians - do you think the post-WWII era has generally been one of poverty and despair for Americans?

zackA89 said...

I love how statists try to claim that government is so wonderful, successful, and get this , even NECSESSARY for technological process and advancement. It is not. Never mind it throws money at winning ideas once and a while that were already on the rise before government directed funding to it. What about all the projects government has thrown money at that failed and destroyed massive amounts of resources and capital in the process? Not to mention government R&D spending makes some fields more appealing and profitable over others which can undermine development in other fields in science and technology.

Maybe the cure for cancer or other groundbreaking technologies could have come into existence if the government had not consumed and destroyed so many resources. The statists never entertain the idea of government failure or opportunity costs because they’re blind admiration and love affair with the state. Despite the fact the free market has made the internet and computers what they are today. Thank god government took its hands off those things!

JG at the end of the day there is no government funding without the revenue coming out of the private sector. It all starts with capitalism. Without it, there would be nothing for the government to extract out for the private sector to fund all these wonderful things anyway. Government just re directs the funding, it ultimately comes out of the private economy.

Did government really create the internet?

Lew Rockwell has your number:

http://www.lewrockwell.com/blog/lewrw/archives/023540.html

So does Rothbard

http://mises.org/rothbard/science.pdf

You’ve been defeated. Again.

Anon, We know the economy can grow, develop, and prosper in the absence of government intervention because it has, and was already doing prior to the government intervening on a large scale. You have nothing. We cut spending after the way by the way.

Anonymous said...

"Maybe the cure for cancer or other groundbreaking technologies could have come into existence if the government had not consumed and destroyed so many resources." And maybe it can't. The fact is that cancer research did evolve with government support. The counter-factual you are claiming is very hard to sustain.

And trust-fund, you still haven't answered - if government is such an evil why aren't we all poor?

Lord Keynes said...

"Maybe the cure for cancer or other groundbreaking technologies could have come into existence if the government had not consumed and destroyed so many resources."

And maybe if government-funded medical research programs wasn't impeded by neoclassical, conservative, and (less significantly) Austrian friggin' B.S., we would have cures for cancer right now - say, if we had a biotech program on the scale of NASA to come up with rationally designed drugs, gene therapies, and targetted treatments for all teh range of cancers.

Two can play the game of historical counterfactuals.

For every goddamn libertarian counterfactual invoking private enterprise, I can give you another counterfactual arging how government spending could have done something just as good or better.

zackA89 said...

Never said government was evil. That comment makes no sense. We are not poor because of how powerful the capitalist system is in improving the lives of man. Thank god the free market the powerful force that it is, so we are not poor in spite of government, not because of government. We owe it to the free market.

Anonymous said...

How does one get a price without money, a government invention??

zackA89 said...

Money is not a creature of the state. It existed pre state and emerged naturally out of the free market. Swing and a miss anon.



Not even close LK. How pathetic of an argument. Seriously. Government has no incentive to direct funding to the most profitable, efficient, or useful ends whatsoever. It has no ability to pick winners in the market places and usually picks losers. The government has absolutely nothing to fund anything. Printing press doesn’t count. Anything it “funds” must come out of the private sector and away from other profitable uses. There is a huge difference between public and private funding. If you can’t make the difference take econ 101 again.

Government funding makes some areas more profitable and appealing than others drawing resources away from other areas of technology or science. That causes damage by undermining other more neglected sectors. Government spending on technologies that have been failures have destroyed resources and capital in the process. In the private sector, these types of things do not happen as often or as severe because unlike government, private sector individuals can go bankrupt and do can’t soak the taxpayers for more funds.

You are falling victim to the broken window fallacy. What is seen and what is unseen. What is seen is all these alleged “wonderful” things that of course would never have happened if it wasn’t for wise benevolent government, but what is unseen is everything that would have happened with the funds had the government not consumed them or destroyed them on wasteful projects. The most basic of all fallacies. Those things could have been live saving technologies or breakthroughs.

The counter factual does not apply to government because of the broken window. Government has nothing, absolutely nothing, it must take whatever it has from somewhere else which represent an opportunity cost.

Again, the funds necessary for these government projects come out of the private sector in taxes. It all starts with the free market. The free market is responsible for permitting any government spending on anything to take place.

LK you are seriously pathetic. I remember freshmen in my econ classes being more coherent than you are.

David B said...

@Anon,


Post Hoc Ergo Propter Hoc only works if there is no argument for causality in the sequence. I can show you how government caused nascent industries to receive necessary research and start-up funds.

And yet, you cannot show how consumers actually preferred the goods that resulted from these investments, since consumer preference is only revealed through action.

And yes, you are using a logically fallacy of causation as you admit right about.....now:

You are arguing that the modern economy would have evolved very similarly without government intervention. That is a counter-factual, not a logical fallacy. It is also a very difficult counter-factual to sustain.

I'm actually not arguing that at all, which is why I am not engaging in a logical fallacy. I, unlike you, admit that man cannot predict in advance the ways in which humans will interact and exchange to develop the resources that make up scarce means.

One question for the Austrians - do you think the post-WWII era has generally been one of poverty and despair for Americans?

No. Not a single Austrian economist makes this claim.

David B said...

@Anon,

How does one get a price without money, a government invention??

What makes you think money is a government invention? Money comes from exchange, and usage precedes law. How did government legislate money if money didn't already exist? Did they start making gold coins themselves? Why? Why gold? How did the people know what gold was worth if there was no exchange in gold?

A. Mithcell Innes was horribly, horribly wrong.

David B said...

@Dr. Olden,

I was drawn to the original article wondering there was some fact or theory in the Austrian school which would actually explain a modern economy in a way that Krugman/Keynes had not.

No, it is the same pre-depression, historically blind microeconomic analysis which is, in fact, invalidated by the liquidity trap which we are in again today.

Thanks for the interesting commentary which makes that clear.


Nice argumentation from insult and Appeal to Authority (liquidity trap reference.)

I hope you are not a medical doctor.

Lord Keynes said...

"Seriously. Government has no incentive to direct funding to the most profitable, efficient, or useful ends whatsoever. "

Devoting resources to curing cancer isn't about the "most profitable or efficient" ends, you burke. It's a moral end - and will be justified by a moral theory.

Since natural rights/law theory - where private property rights are supposed to be absolute - hasn't a leg to stand on, any defender of virtually any other objective ethical theory - say, Kantian ethics, Rawl's human rights objectivism, the non-absolutist ethics of W.D. Ross, act utilitarianism, rule utilitarianism, G. E. Moore’s agathistic consequentialism - can easily defend govenment-funeded medical research to cure disease.

Government has no incentive to direct funding to ... useful ends whatsoever.

Useful by what standard?
By the subjective utility preferences of human beings?
Preventing or curing disease?
You're telling me that large numbers of humans never derived useful benefits from government funded immunisation programs?
That no one ever derived utility from a drug invented in the public sector (and a vast number of drugs are) and then by private business?

David B said...

Lord "Auto-troll" Keynes,

I can agree that a land grant is a form of subsidy, but the larger point was that his position was at an extreme disadvantage. Again, the fact that your beloved government committed racial extermination in order to free up that land needs to be noted.

As I have said, government cannot direct investment unless it confiscates real resources (in this case, Indian land) for itself first.

The other part of this argument was whether or not private roads could actually be built to satisfy market actors. I don't even have to ask to know your position on that. But good news, the American government is currently clearing all kinds of space for subsidized road building in Iraq, Afghanistan, Yemen, Pakistan, and Libya. So this problem is licked.

Lord Keynes said...

"What is seen is all these alleged “wonderful” things that of course would never have happened if it wasn’t for wise benevolent government, but what is unseen is everything that would have happened with the funds had the government not consumed them or destroyed them on wasteful projects. "

Garbage: it is precisely long-term basic sciences research and other R&D that private enterprise does NOT usually fund, or fund well. The private sector norally has no incentive to invest millions of dollars in long-term projects where the results are uncertian or nothing immediate comes out of it.

The counter factual does not apply to government because of the broken window.

The belief there is any broken window fallacy in these circumstances is itself a fallacy.

"Government has nothing, absolutely nothing, it must take whatever it has from somewhere else which represent an opportunity cost."

Yeah: private sector capitalists needing investment capital have nothing, absolutely nothing, and they must take whatever they get in loans for investment from somewhere else which represent an opportunity cost.

But: if that were a serious argument, no private investment would be possible.

You have no friggin' argument, buddy.

I remember freshmen in my econ classes being more coherent than you are.

What classes were these?? Ones given by Austrians ideologues pushing a nonsensical business cycle theory abandoned by everyone else in the 1930s? Neoclassicals who, with their idiotic efficient market hypothesis and rational expections, brought us the financial crisis?

David B said...

LK said:

"Garbage: it is precisely long-term basic sciences research and other R&D that private enterprise does NOT usually fund, or fund well. The private sector norally has no incentive to invest millions of dollars in long-term projects where the results are uncertian or nothing immediate comes out of it."

But the government does have long term incentive? ROFL, to do what? To promote Lysankoism?

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

Here is an example of a government with no political obstacles to power, in complete and total control of all resources, and yet there supposed long term vision resulted in Lysankoism.

Tell me, LK, if government can direct scientific research better than the private sector, why didn't the most powerful governments in the world - the ones with total control over resources and people - produce the best scientific breakthroughs?

David B said...

Lord Auto Troll Keynes,

Neoclassicals who, with their idiotic efficient market hypothesis and rational expections, brought us the financial crisis?

Do I have to remind you that you already admitted that big government with more regulations and foolish legislation and paper money caused the financial crisis?

You admitted that:

1. Smaller government produces more effective regulation.

2. Excessive lending came from money printed up out of nothing.

3. That government interventions exacerbated the crisis.

4. That America had more regulations at the time of the crisis that any point in its history.

5. That the Federal Reserve had complete regulatory control of every instrument the bank created.

Your classroom is right here, where you learn every day that your beliefs are very close to ours.

Lord Keynes said...

"you cannot show how consumers actually preferred the goods that resulted from these investments,"

Since government provides public goods, a simple example: government funded immunisation programs:

“Under the 1955 Polio Vaccine Act, Congress provided the funding to make sure every child in the country received the vaccine. Congress also required the federal government's chief health officer, the Surgeon General, to set standards for the testing and distribution of the vaccine to millions of children without regard to their families’ ability to pay .... Since the 1950s when the federal government began distributing vaccines, the incidence of most childhood diseases has fallen by 95 percent or more. The number of polio cases dropped from 15,000 a year in the 1950s to zero today, while German measles has virtually disappeared from the Western hemisphere.”

Unless you have evidence that people preferred to get polio rather than get immunised, you haven't a let to stand on, idiot.

Lord Keynes said...

"Do I have to remind you that you already admitted that big government with more regulations and foolish legislation and paper money caused the financial crisis? etc. etc.

I aditted no such thing, you burke. I argued that highly dysfunctional financial regulation and bad neoclassical macro policy caused the crisis. Don't friggin' waste my time inventing what I "believe".

"5. That the Federal Reserve had complete regulatory control of every instrument the bank created.

Again: I aditted no such thing, as was pointed out to you on a previous post. And the fact that you're liar now speaks volumes.

Lord Keynes said...

"if government can direct scientific research better than the private sector, why didn't the most powerful governments in the world - the ones with total control over resources and people - produce the best scientific breakthroughs? "

That a totalitarian system with a ruler cult, where free scientific inquiry was crushed produced a lot of rubbish theories is no surprise at all.

You're an idiot by implying that the system advocated by modern Keynesians would be a totalitarian one. What is needed is a democratic government and society that does indeed protect that classical liberal traditional of free speech and inquiry, with independent science and private scientific organisations (even though they may be government funded) that can give advice on scientific questions and what is and is not promising lines or research.

E.g., just because industry funds some research does not necessarily make the research suspect, nor if governemnt funds it either, if the people involved are independent and honest and their research findings can be easily replicated by others.

David B said...

Lord "Auto-Troll" Keynes,

As fun as it is to make you angry (and notice that your constant referral to me by insult deserves no special emotion), you DID admit those things.

You said:
A. Total regulations were higher during the Bush years than the period you called a "Keynesian Golden Age"

and

B. That regulations were actually more effective during this time of smaller government and lower regulation.

Now how are we supposed to put this together in any other way. Please, enlighten....

Lord Keynes said...

"A. Total regulations were higher during the Bush years than the period you called a "Keynesian Golden Age"

And I told you: it is not the number of regulations that is a proper gauge of how effective your system actually is. Yes, you can have a highly effective system, as we did from 1945-1980s/90s - with fewer regulations, because the overall system worked well.

That in way denies the need for proper regulation, or that the neoclassical/monetarist system that emerged from the 1980s had a major role in causing bad lending and blowing asset bubbles.

This was all explained to you on the previous post. Clearly you're an utter hack, and utterly dishonest.

Mike M said...

LK your 2:47 pm post has all the earmarks of a delusional lunatic standing at the edge of the abyss begging someone to push him in. None of your assertions in the post can stand up to reality. None.

Your postings have deteriorated to name calling and 3 second sound bites. I don’t know what it is you think you contribute to this forum. Citations? Quips, in an attempt to be the Jon Stewart of economics?

You are neither funny nor thought provoking. You post as if your entire intellectual self worth was riding on it. You are obviously educated and not unintelligent, yet above average IQs and degrees provide little when they rest on a faulty foundation. You make no allowance that you could in fact be WRONG. I used to be where you are years ago. I discovered my premise was wrong and evolved. That is what emotionally and intellectually mature people do. They keep learning and evolve.

Seriously dude, seek help. Life’s too short.

David B said...

Lord Auto-Troll,

Wow, ok. Let me get this straight, because as you say more your insights become more fantastic:

You are saying that during the post KGA (I'm going to abbreviate your silly name for that period), the number of regulations put forth by the government was actually a cover for no regulation at all? That's an amazing conspiracy theory.

zackA89 said...

Lk is a complete economic illiterate and has no basic understand of how markets work.

Government can’t go bankrupt and is spending other people’s money. Private sector individuals can go bankrupt if their projects fail and can’t soak the taxpayers for more funding. Thats the difference. Anything government spends comes out of the private sector but private sector individuals obtain their revenue voluntarily from others or through their own hard work. If they borrow money,they have to pay it back in real terms as government can get more funding by printing money or taxing the masses. Private sector individuals can’t tax others or print money to finance their projects. Government can and that’s the problem. Why you dont get that is beyond me.

No one spends other people’s money as effectively as they spend their own. The incentives just are not there. Throwing money at projects is not somehow proof that government can or even should fund research and projects. The taxes to fund them come out of the private sector anyway. It always starts with the free market. Always.

Private sector individuals obtain their capital and revenue voluntarily and because of this have a much better incentive to put it to use productively in a way that satisfies consumer demand (and there is a demand for cancer research btw, don’t need government for that) because If they don’t they go bankrupt.

If government fails, it doesn’t go bankrupt it just raises more taxes therefore diverting more resources out of the private sector away from other profitable lines of production. Bankruptcy serves a vital function in the marketplace.

There is no government without tax revenue. Government has nothing, and can’t exist without a wealth creating private sector but a wealth creating private sector can sure as hell exist without government or government spending on research. Again, it starts with the free market not with government.

The broken window still applies to any form of government spending. The stuff must come from somewhere. In the free market, no one steals money or capital to fund things. You just don’t get it LK. How you obtain your revenue matters in terms of allocating scare resources. Doing it through force just consumes resources that could have otherwise been put to use productivley by indiviuals how have the incentives to do so (people do in fact have incentives to fund research by the way)

I have never seen anyone bend over so far backwards to defend government spending, which must ultimately be financed by extracting revenue out of the private sector to begin with.

zackA89 said...

On a side note, any of our “progressive” critics interested in becoming blue republicans this year and voting in your states republican primary for Ron Paul? Talk about throwing a monkey wrench in the GOP primary. Hey, at least he’s interested in protecting your civil liberties and Is no war monger like the rest of the gang. Not to mention the track record to back it up.

Bob Roddis said...

Slightly off topic, but keep this handy for the next attack from the MMTers. It’s MMT guru #2 L. Randall Wray explaining the crash. He doesn’t like GDP as a measurement either. Further, he doesn’t mention the beloved “sector balances” once and his “Minsky” analysis is the same lame superficial nonsense. It’s as if the Austrian insights were Kryptonite, either he can’t go near them or they do not exist. No familiarity with economic calculation or Cantillon Effects. Simply bizarre. It certainly isn’t a refutation of the Austrian School because he and the rest of them act like it does not exist:

A lot of GDP is imputed, and we know that GDP does not measure welfare, so for decades people have tried to construct different kinds of indices as GDP doesn’t really tell you whether living standards are rising, or whether you actually have economic growth. So it is not a good measure in any case.

http://www.mecpoc.org/2011/07/interview-with-randy-wray-regarding-the-next-crisis/

Lord Keynes said...

"The broken window still applies to any form of government spending. The stuff must come from somewhere."

Your ridiculous broken window fallacy still applies to any form of private investment. The stuff must come from somewhere. Private capitalist A who gets credit is depriving capitalist B of that credit when capitalist B may have made better use of the resources obtained from the loan.

"In the free market, no one steals money or capital to fund things."

Yeah, accept progressive taxes for public goods isn't theft - it's mostly only the brain dead supporters of natural rights ethics who believe this.

As noted above, under a very wide range of objective ethical theories - e.g., Kantian ethics, Rawl's human rights objectivism, the non-absolutist ethics of W.D. Ross, act utilitarianism, rule utilitarianism, G. E. Moore’s agathistic consequentialism - progressive taxes can be morally justified.

And as it happens the vast majorty of people don't think taxes are immoral:

“The IRS Oversight Board conducted an independent poll in 2005 that found 96 percent of the respondents agreed ‘it is every American’s civic duty to pay their fair share of taxes.’

The Pew Research Center in a similar study in 2006 found 79 percent of the respondents said that cheating Uncle Sam was ‘morally objectionable.’

Certainly, Americans pay they taxes because they have to: ever since 1945, taxes have been automatically withdrawn from pay-checks. But people also comply because they think it is fair. Polls show that most Americans think only ‘a few’ people cheat on their taxes. Paying taxes, just like leaving a tip, is a social norm”
(Maxwell, S. 2000. The Price is Wrong: Understanding What Makes a Price Seem Fair and the True Cost of Unfair Pricing, John Wiley & Sons, Hoboken, N.J. p. 146).

If you are in a minority who believe taxes are immoral, then what are you even doing living in a country you find so morally objectionable?
Since:

(1) Taxation is coercive and immoral;

(2) Public goods (roads, bridges, highways, public libraries etc) are immoral as they are built with stolen money taken by coercion.

(3) Any use of public goods is immoral use of stolen property

(4) A moral libertarian would not use stolen property

(5) The only moral course of action for a morally consistent libertarian is to leave a country with coercive taxes and public goods that are stolen property.

Mike M said...

LK nice Post Hoc Ergo Propter Hoc on items 2-5 following #1. Very amateurish

Progressive taxes are a violation of Equal Protection constitutionally. Just because the USSC fails to address doesn't make it right.

Liberty is the maximum absence of coercion. Taxes are coercion thus should be minimized to pay for only essential services. Then again you LK have a fetish for the State so you are ok with coercion.

Bob Roddis said...

Lord Spiro Agnew Keynes:

America: Love it or leave it!

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

It sounds like the stuff I used to hear from the warmonger Republicans in 1972.

I guess we're all Nixonians now.

Lord Keynes said...

Actually I couldn't care less whether you leave or stay: the question is how do you personally justify staying if you think taxes are theft and public goods (roads, bridges, highways) stolen property?

If you are not just a moral hypocrite, then you'd answer.

Mike M said...

Logical fallacy. Nice try. Now go give a State overlord a big hug to make yourself feel better.

Anonymous said...

Let's see:

"(1) Taxation is coercive and immoral;"

Yes: taxation is extortion by another name.

"(2) Public goods (roads, bridges, highways, public libraries etc) are immoral as they are built with stolen money taken by coercion."

Utter nonsense. Only actions have moral status. It's the stealing of money to finance such goods that's immoral, not the goods themselves.

"(3) Any use of public goods is immoral use of stolen property"

Considering the money used to finance them was stolen from us to begin with, no.

"(4) A moral libertarian would not use stolen property"

No, a moral libertarian would not knowingly retain possession of stolen property, provided the legitimate owner could be identified. But again, the property in question was basically stolen from us, so there's no moral problem with us using it.

"(5) The only moral course of action for a morally consistent libertarian is to leave a country with coercive taxes and public goods that are stolen property."

Even if this weren't complete BS owing to your earlier points being complete BS, where would we go? To another country with coercive taxes and public goods that are stolen property, perhaps?

Lord Keynes said...

"Considering the money used to finance them was stolen from us to begin with, no."

"Us"?
It was stolen from vast numbers of other people who do not give you any permission to use the results of their stolen property. If just a few people object to you using public goods, you're using stolen property without permission.

"To another country with coercive taxes and public goods that are stolen property, perhaps? "

Easy: band together and use your money to buy some country - possibly an island - and set up your libertrian paradise there.

You can then live without moral hypocrisy in a country with no government and completely private property.

Bob Roddis said...

I pay a ton of property taxes. I pay a ton of income taxes. I pay a ton of gas taxes. Under the circumstances, I don't have a problem with "taking back" a bit of what I've "paid in".

I've specifically and purposefully have never been employed as a government prosecutor prosecuting drug users or tax evaders. If I were to do that, I would call that hypocrisy. Or worse.

Mike M said...

Hey LK since the land you live on was no doubt “stolen” from the indigenous people then you should move off it and give it back in some fashion to avoid moral conflict. Oh that’s right, for you, it’s not immoral with the collective does the bad acting through the State.

Lord Keynes said...

"Hey LK since the land you live on was no doubt “stolen” from the indigenous people then you should move off it and give it back in some fashion to avoid moral conflict."

The solution to that has already been done in many countries like Canada, Australia etc: let native peoples receive fair compensation for their stolen land, by redistributive progressive taxation.

Try again, bozo.

Mike M said...

Bob, and since taxes on income are a de facto tax on our labor is this not a form of servitude? Is not my income, both active and passive, a proxy for my labor? Is it not a distinction without a difference but only of degrees and mechanics? The serfs in England retained more of their labor than we do. The masses refuse to see their prison as the horrors of its reality would be too difficult to bear.

Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.
At least with a sales tax my action is voluntary to some degree.

Go ahead Statists defend your confiscatory taxation in the name of democracy, which unchecked by a constitution is mob rule.

Mike M said...

“The solution to that has already been done in many countries like Canada, Australia etc: let native peoples receive fair compensation for their stolen land, by redistributive progressive taxation.”
My post was rhetorical. Yours is idiotic. Fair compensation? Fair accordingly to whom? Compensation to whom? To people who are alleged decedents that did not suffer the infraction. I am responsible for my own actions not those of my ancestors. Your redistributive progressive tax policy thus punishes me for a crime I did not commit nor advocate.
Accordingly to your logic, since I am of Irish decent, I should petition the Royal family for reparations for what they did to my ancestors.
Who is the Bozo?

zackA89 said...

Private entrepreneurs have their own stuff to invest from what they have previously produced and or must borrow it from someone else voluntarily which they have to pay back in real terms. They can’t raise taxes or print money to pay back what they borrowed. If their projects are not profitable, they still have to pay back their creditors in real terms.

Government has nothing to “spend” and can just raise taxes or print money to pay for its projects which constitutes theft. In other words, government gets the funds through coercion and private sector individuals receive it voluntarily or uses funding from the fruits of their own labor. In the private sector, people can go bankrupt but in government they cant.

Government has nothing. But the private sector does. You fool. 8th graders understand the fact that government has nothing and must obtain whatever it has through force and that the free market has stuff either from the fruits of its own labor or lenders lending others volintarily.



If I don’t voluntarily consent to someone taking my property, whether it is a government or an individual, it is theft. And nope, “democracy” or the “election system” does not magically absolve the government from committing theft. Nor does living in a society magically make it not theft.

No one has a right to someone else’s property under any circumstances. It’s mostly brain dead statists who have no respect for individual property rights and feel others have a right to someone else’s property and that initiating force upon other to impose your own subjective value judgments upon others is ok. Just like Hitler did.


LK has nothing. Ever. I have never seen someone bend over so far backwards and bend them selves into intalectual pretzels time and time again defending keynesianism and statism. Unbelievable.

No concept of how government gets its funding vs how private sector gets it, and what that DOES matter. No respect for property rights either. The mark of a true statist.

Lord Keynes said...

"Your redistributive progressive tax policy thus punishes me for a crime I did not commit nor advocate."

You benefit from the crime, since you live on stolen land.

Unless your seriously saying it is alright for the Austrian ideologue to use or purchase obviously stolen property, then your argument fails.

Anonymous said...

Great we have "trust fund Zack" still dolling out his profound wisdom derived from taking a class on econ in undergrad and readings from the Mises Institute and now Mike M uses terms "Post Hoc Ergo Propter Hoc" when he clearly has no idea what it means.

LK was not committing any such fallacy. He presented you with a sit of principles, not sequences, and asked you how you morally justify driving on public roads, which in your mind should be akin to using stolen property.

Then you threw back - how do you justify living on land stolen by Indians, which is sort of like the Pee-Wee Herman form of argumentation (I know you are but what am I). But, LK is not the one with the moral problem. He does not live by an ideology that would preclude a solution to such problems - you do.

I know its hard to admit your and idiot - ego is a real bit$$.

And the liberatarian utopia is not so far away as a deserted island. I live in Alaska, and no plenty of people who live off the grid. Get your gun and come on up.

Lord Keynes said...

"Private entrepreneurs have their own stuff to invest from what they have previously produced and or must borrow it from someone else voluntarily which they have to pay back in real terms."

(1) Bond holders have freely chosen to lend to government to match its deficits. Who the hell are you to tell them what to do with their money?

(2) I have aleady exposed the idiocy of your "tax is theft!" argument above.

(3) Private entrepreneurs do not pay back their loans in "real terms", fool: they pay in money.

"8th graders understand the fact that government has nothing and must obtain whatever it has through force and that the free market has stuff either from the fruits of its own labor or lenders lending others voluntarily."

Ah, no, buddy: most Americans think paying taxes is a civic duty:

"“The IRS Oversight Board conducted an independent poll in 2005 that found 96 percent of the respondents agreed ‘it is every American’s civic duty to pay their fair share of taxes.’

The Pew Research Center in a similar study in 2006 found 79 percent of the respondents said that cheating Uncle Sam was ‘morally objectionable.’

Certainly, Americans pay they taxes because they have to: ever since 1945, taxes have been automatically withdrawn from pay-checks. But people also comply because they think it is fair. Polls show that most Americans think only ‘a few’ people cheat on their taxes. Paying taxes, just like leaving a tip, is a social norm”
(Maxwell, S. 2000. The Price is Wrong: Understanding What Makes a Price Seem Fair and the True Cost of Unfair Pricing, John Wiley & Sons, Hoboken, N.J. p. 146).

"And nope, “democracy” or the “election system” does not magically absolve the government from committing theft."

You are right that majority vote does not make something moral, but as pointed out above the moral justification can come from any number of objective ethical theories. For anyone who can convincingly defend Kantian ethics, or Rawl's human rights objectivism, the non-absolutist ethics of W.D. Ross, act utilitarianism, rule utilitarianism, or G. E. Moore’s agathistic consequentialism, the moral justification for both state intervention and taxes can be easily given.

The natural rights theory that, say, Rothbardians use is utterly untenable nonsense.

zackA89 said...

Calling me names is just a tacit admission you are absolutely intellectually bankrupt on every level possible and have absolutely nothing relevant to say. Keep making a fool out of yourself.

This is probably the funniest thing I have ever read on this blog, and its one for the history books.

“But, LK is not the one with the moral problem. He does not live by an ideology that would preclude a solution to such problems - you do.”

Simply amazing.

The statist utopia is crumbling in places all over Europe and the U.S is next. Look at what you’ve done, you statists, they have the NERVE to actually, with a strait face, blame the nonexistent “free market” on all the problems you have created? Amazing.

Whenever statists try to pull that one I just ask them “why don’t you pay higher taxes, and deliberately over pay on your taxes” (most want higher taxes, usually on others of course, or are opposed to the evil “bush tax cuts”.)

Or, if you live by utilitarian ethics, why are you not donating you entire or most of your income to starving children over seas in poor countries? because by not doing it you are committing a rights violation by doing nothing and standing by when you have a moral obligation to help others.


Driving on public roads or living in the U.S is no indictment on Libertarian philosophy whatsoever. You statists are laughable.

zackA89 said...

Most of the governments bonds are not held by the public they are held by the Federal Reserve and other central banks so most of its spending is not “voluntary” because most of its bonds are held by the FED.

Lending the government money does not mean you endorse everything it does. So just because people voluntarily buy bonds, does not mean the government spending is in tune with consumer demand or voluntary for that matter. You loose onc again.

Understanding the difference between how government gets its revenue and spends vs. the private sector is importat and does matter. You just dont get it.


No you have not. Not even close. No one has a right to my property period.

Yes they pay in real terms meaning they don’t print money to pay back their creditors like government can. They can’t raise taxes like government can. They do not have an inexhaustible fund like government does. They can go bankrupt unlike government. They suffer the consequences when they fail unlike government.
People can pay taxes voluntarily if they want to. Using force to do it constitutes theft. Most people want others to pay the taxes, usually the “evil rich.” It’s always someone else who has to pay.

Private property rights are the best way to promote peace, cooperation, and prosperity. If people can’t initiate force against others and commit acts of aggression, no matter what your intentions (either done by a state or a government) they are more likely to peacefully and freely transact for mutual benefit. Private property rights are the best way to promote human rights and higher standards of living, not to mention a good way to prevent abuses and rights violations by government upon the masses.

Lord Keynes said...

"Or, if you live by utilitarian ethics, why are you not donating you entire or most of your income to starving children over seas in poor countries?

Easy. Elementary study of utilitarianism would easily tell precisely why we don't devote ALL or MOST of our income to the third world. Why?

(1) It simply would not require ALL or MOST of our income to elminate hunger or preventable disease in the Third World: as has been shown time and again, quite moderate wealth an capital goods transfers would do it.

(2) Because devoting ALL or MOST of our income to Third World would collapse employment and production in the industrialised nations in fact hurting EVERYONE - especially the poor in the Third World because they are reliant on us for many of their commodities, particularly advanced technology and capital goods.

Lord Keynes said...

"Most of the governments bonds are not held by the public they are held by the Federal Reserve and other central banks so most of its spending is not “voluntary” because most of its bonds are held by the FED. "

Total ignorant garbage. In June 2010 from "Ownership of Federal Securities, Treasury Bulletin":

total US gross public debt: $12.7731 trillion
Debt held by the public: $7.5133 trillion (58.82% of gross debt)
Intergovernmental debt + Federal Reserve holdings: $5.2598 trillion (41.178% of gross debt)
Intergovernmental debt: $4.3197 trillion (33.81% of gross debt)
Federal Reserve holdings: $0.940 059 trillion (7.359% of gross debt)

I would be surprised
if Federal Reserve holdings are now (July, 2011) more than about 10% of total debt.

Your statement that most of the US government's bonds are held by the "Fed" is ignorance incarnate.

zackA89 said...

No amount of transfer payments would do it. Only the free market and capitalism can lift these countries out of poverty. Yes you are right capital and wealth is needed, foreign investment can help, but free markets coupled with private property rights and overall economic freedom is the best cure to alleviate poverty.


By not donating “any” of your income to third world countries you are committing a rights violation? I guess you’re standing by idly with the capacity to help but are choosing not, so you’re somehow violating the rights of the poor kids you’re not helping?
I took a class in ethics and most kids in the class said that is ridiculous that by not donating some of my money to third world countries, I am somehow committing a rights violation. Absurd.

zackA89 said...

http://seekingalpha.com/article/251102-fed-holdings-of-u-s-treasuries-surpass-china-s#comments_header


http://clarionadvisory.com/?p=11673


The Fed owns most of it.Foreigners do too. Regardless, just because you lend the government money does not mean you endorse or support what it does with that money nor does it mean that government spending is in tune with consumer preferences. Unlike private sector individuals, government can raise taxes, issue more bonds ( that its central bank can buy) or just print more money to pay its debts back. Private sector individuals cant do that.


Its not that hard or complicated to understand how the government gets its revenue and spends vs how the private sector does it and how and why it matters in the grand scheme of things. Why you're bucking me tooth and nail about it is absolutley ridiculous. Its basic stuff.

Lord Keynes said...

Chomsky:

"While I am speaking, 1000 children will die from easily preventable disease, and almost twice that many women will die or suffer serious disability in pregnancy or childbirth for lack of simple remedies and care. UNICEF estimates that to overcome such tragedies, and to ensure universal access to basic social services, would require a quarter of the annual military expenditures of the "developing countries," about 10% of U.S. military spending. It is against the background of such realities as these that any serious discussion of human freedom should proceed. "

http://www.chomsky.info/articles/199711--.htm

That was in 1997, but I doubt the figures involved have changed that much.

As a utilitarian, I would happily pay whatever my "share" would be, if in fact this was done by governments, international agencies, private charities or other institutions, so all your rants above about the need to devote ALL or MOST of our income to the Third World are pure rubbish.

If say the US government did this by devoting the necessary tax revenues, and the majority of its population objected, in fact it would STILL be the right and moral thing to do, as majority vote (as said above) does not make something moral: moral justification for action comes from a defensible objective ethical theory.

Mike M said...

LK said “You benefit from the crime, since you live on stolen land.”

You are the poster child for the statement that intelligence is about understanding not knowledge.
You are like talking to a book smart child. No critical thinking skills what so ever.

Anonymous, apparently you and LK share the same brain. “After this there for because of this” you sanctimonious jackass. And yes that is exactly what he did. A fallacy in items 2-5 following #1

My comment about Indians was to point out the absurdity of his argument by being absurd. Or are you too obtuse to understand that?

LK you are free to practice your utilitarian ethics for yourself, just leave everyone else alone to make their own decisions about their own lives and property. But you Statists can’t do that can you? No for your vision to be enabled it must be mandated by coercion. You are probably the guy that created “mandatory volunteerism” as a requirement for high school graduation ironically failing to recognize the inherent conflict in the term.

zackA89 said...

Ahmen to that mike. Well said. Let LK practice his ethics and let us practice ours.

Lord Keynes said...

From your link:

"The Fed [Feb, 2011] now holds $1.108 trillion" ... By June the Fed could own $1.6 trillion of Treasury bonds.

http://seekingalpha.com/article/251102-fed-holdings-of-u-s-treasuries-surpass-china-s#comments_header

Basic data:

"As of June 29, 2011, the Total Public Debt Outstanding of the United States of America was $14.46 trillion"

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

For June 2011 the $1.6 trillion held by the Fed gives a figure of 11% of public debt held by the Fed.

Are you capable of doing basic maths?? Clearly not.

zackA89 said...

The top holder is still the Fed (more than China and other central banks) at 11% and it does not detract from anything I said about how the government spends and gets its revenue and how the private sector does and why this does in fact matter in the grand scheme of things. You just keep trying to move the goal posts.


http://blogs.wsj.com/marketbeat/2011/06/09/the-fed-is-the-biggest-holder-of-us-debt/

Anonymous said...

@ trust-fund Zack.

Ah, you have not yet proven that you are not just another trust-fund libertarian with highfalutin ideas about the world, all argued from the comfortable confines of your parent's summer home. So easy to be so ideological about the world when you have the comfort to think that way. Meanwhile in the real world...

A little thin-skinned aren't we Zack? I believe it is you who likes to call people "statist" or wrote the following - "Lk is a complete economic illiterate", "You fool. 8th graders understand the fact that government has nothing ", "LK you are seriously pathetic. I remember freshmen in my econ classes being more coherent than you are", and "Anon you are a complete and utter buffoon with the intelligence level of a 5 year old."

I have to go back to work now at a real job - one where I perform labor and provide services for people in exchange for money. I will willfully pay my sales tax to the city, match FICA payments, pay user-permit fees, pay workman's comp insurance and state unemployment, and continue to operate according to the regulations established by my city, state, and federal government. And I am making a profit and my employees are happy - its called the mixed-economy.

You and "judge" Roddis keep on pontificating about an economy you have so little actual experience with.

Lord Keynes said...

"The top holder is still the Fed"

Rubbish: foreigners own more than the Fed does:

As of January 2011, foreigners owned $4.45 trillion of U.S. debt, or approximately 47% of the debt held by the public of $9.49 trillion and 32% of the total debt of $14.1 trillion.

http://en.wikipedia.org/wiki/United_States_public_debt#Foreign_ownership

January 2011:
Total debt: $14.1 trillion
Foreign ownership: $4.45 trillion (31%)
Fed holding's [Feb, 2011]: $1.108 trillion (7.8%)

Are we to take it that 7% (the Fed's figure for Jan) is larger than 26% in your world???

Today the Fed's figure is 11% - still lower than foreigners.

Anonymous said...

Mike M - you utter moron - claiming a logical fallacy is not the same thing as showing that LK committed a logical fallacy. It is obvious that you don't know what a logical fallacy actually is, and you are just hiding behind the statement to mask this ignorance. And then you have the nerve to accuse LK and myself of lacking critical thinking? If anything, I would admit to everyone who posts here that they are at least critical thinkers - albeit based on flawed premises in my opinion when it comes to Austrians.

Neither you or trust-fund Zack have addressed the problem that LK presented. If you believe that all government action is theft and coercive then how do you justify personally driving on subsidized roads and benefiting from all that government has stolen? LK does not need to live by this moral standard, since he does not view the world in those terms! You simply acted like Pee-Wee Herman and asked him how he lives on land stolen by Indians. Ridiculous.

And if you guys are so adamant about liberatarianism - why not go and practice what you preach? It is not in the realm of impossibility.

Mike your out of your league. At least Zack has some coherent statements that he has thought through. Your just a moron. You don't have "street smarts", and it wouldn't hurt you to crack a book open once in a while.

Mike M said...

What is being missed in the discussion about who hold what silly % of debt is that foreigners are the marginal buyer at this point. Absent their participation at increasing levels, the Fed is the buyer of last resort. There is an estimated $500 billion to be rolled or newly issued in the month of August. The marginal buyer sets the tone.
Forget the garbage line by the establishment the Fed not monetizing. The primary dealers are tendering a significant portion back to the Fed after the required holding time. It s a wash sale.
There is too much debt in the system. There will either be a back door QE3 or a global QE to hide the effects.

Mike Cheel said...

"If you believe that all government action is theft and coercive then how do you justify personally driving on subsidized roads and benefiting from all that government has stolen?"

Walter Block answers this here:

http://www.lewrockwell.com/block/block86.html

zackA89 said...

Keep lobbing attacks against me that have no bearing on reality whatsoever. You just keep making stuff up. I called LK those things because he made statements that suggested he knew very little about basic economics.

Mixed economy eh? I think we would be a lot better off with less government and more economic freedom. Perhaps much of our problems are attributed to the fact we have a “mixed” economy that is becoming more and more mixed in favor of government?
Exactly mike. The Fed owns more treasuries than any one central bank, and is the top individual holder, so lumping all the central governments together and saying “see the Fed is not the top holder” is foolishness. Bottom line, government debt is a problem, especially if foreigners and your own central bank hold the vast majority of it. There isn’t enough real stuff to pay it all back nor are there enough taxes to divert out of the economy to fund it. The MMT’ers feel the printing press is our savior. Boy we are in trouble.

Just because the government uses force to pay for roads that I drive on does not mean I am a hypocrite for driving on them anymore than people who were opposed to the Bush tax cuts benefit from having lower rates (they could pay more in taxes you know, voluntarily, the government does not stop people from doing that).

Are people who want universal health care or more welfare benefits for the poor hypocrites for not giving away more of their income to help the poor? The want to help the poor but are too stingy to do it themselves. So they want others to do it but not them. In other words, they only want to be “generous” with other people’s money? That’s hypocrisy.

Just because the government uses force to extract tax revenue to pay for roads that I drive on does not mean it couldn’t be done in the absence of such government action. It can and has been done before.

JG said...

Zack,

Despite what you've been absorbing from the Mises blog and whatever other extremist websites you frequent, the government actually has had a strong hand in "picking winners" in the sense that industries that it chose to support early on have gone on to dominate the private sector once their value was made evident.

If you were to compare the industries launced with early funding from the pentagon, NASA or the D.O.E. to industries that received seed money from venture capitalists you'd see that the government has a pretty good track record by comparison. The public sector fills the void in long-term, high fixed cost ventures that the private sector avoids due to the risk, and any misses they've made along the way have been eclipsed by the successes.

Just because you've been indoctrinated into believing that the entire public sector resembles the Department of Motor Vehicles doesn't make it so.

zackA89 said...

Mike that is an awsome article by Block that I would recomend LK and Anon take a look at.

zackA89 said...

The amount of losers and over budget projects that have wasted resources outweighs any alleged “winners” government has thrown money at. Even these alleged “winners” come in over budget and waste resources that could have otherwise been put to use more productively in the private sector. There is no evidence to suggest these winners could not have happened in the absence of government funding. The defense contracts are contracts with private companies that just receive government money so as far as I am concerned it’s still the free market that develops these things anyway. The spending that government gives some firms comes at the expense of others who are now worse off. What is seen and what Is unseen, that is the broken window fallacy. Statist never consider the unseen effects of their policies.

The revenue necessary to finance all these wonderful government projects ultimately comes out of the free market anyway. So for me, without the free market, there would be no tax revenue and no government to spend on these “winners.” The free market is what has developed all this technology into what it is today and has made it accessible to millions. Thank god for capitalism. Ill take capitalism over state planning any day.

Mike M said...

JG said: "Despite what you've been absorbing from the Mises blog and whatever other extremist websites you frequent..."

Congratulations, you are following the Left’s talking points perfectly. Use the word extremist whenever possible to color the other side’s argument not with substance but mud. You get a progressive gold star for the day.

David B said...

Neither you or trust-fund Zack have addressed the problem that LK presented. If you believe that all government action is theft and coercive then how do you justify personally driving on subsidized roads and benefiting from all that government has stolen?

This is the EASIEST objection to address. I have actually pointed this one out specifically above, and in numerous other threads.

If the government takes over the production of toilets, outlaws competition, and directs me to use only a government created toilet, should I sh*t in the woods? Should I thank them whenever I take a dump in a government toilet, even though I know that humans can solve the problem of toilet production without a coercive government?

Really... what is so hard to understand?

Mike M said...

David B. Your 4:23 was perfect! Some like to overcomplicate simple issues to impress others. Thanks for helping bring it back to reality.

Anonymous said...

Zack, I made statements about you based on the fact that I am fairly confident you are a trust fund liberatarian, with grand ideas about economics based on your profound undergraduate education and visits to the Mises Institute website, and that you have no experience whatsoever with actual human experience or a working capitalist/mixed market economy.

Arrogance at is most blatant, completely obtuse to the real world that is inevitably involved with decisions about distribution that are not based entirely on profit and efficiency, where politics does determine winners and losers, and where you can make distinctions between a mixed economy and Bolshevism.

And to think I am taking time off from being a proud tax-paying capitalist to deal with your juvenile attempts at deep thought.

Anonymous said...

David-B

That is a non-answer. You can go take that proverbial sh$$ in the woods. No one is putting a gun against your head forcing you drive on our roads or use our public education.

You just sound like another trust-fund libertarian who gets riled up at the prospect of gubmernent taking their "hard-earned dollars" and giving it to Black people, and you don't have the balls to actually live out your ideals. Which is so strange, given how ideological and unambiguous Austrians are about the awful tyranny we are living under. Resist! Fight the machine!

David B said...

Anon,

I got a good laugh at the "trust fund libertarian" line the first time you used it. But now it's just boring.

Is this all you have left? Something tells me that there is no great productive work being missed because of your time spent here in KIW.

No one is putting a gun against your head forcing you drive on our roads or use our public education.

Well I obviously have to pay for those things whether I use them or not, and if I can, I do avoid them. I am about to start a family and our kids will be home schooled. Do you advocate that I be exempt from taxes for public schools due to my choice to home school my childrent? And if privately owned roads were allowed, I would use them as well.

You can go take that proverbial sh$$ in the woods.

I actually have taken a few real sh*ts in the woods. It's actually not that big of a deal, but my better half would find me less attractive. Oh well....

Thanks for the tremendously insightful critiques.

Mike M said...

Anon your 6:52 is pathetic

Dave B is correct you're boring

JG said...

Zack,

"There is no evidence to suggest these winners could not have happened in the absence of government funding."

Of course there is. The absence of key innovations or entire new industries prior to the involvement of the public sector is proof enough. The private sector by itself never had the risk appetite to make the long-term investments needed for research behind nuclear energy, satellite technology, radar or any number of other innovations that grew out of the D.O.D. or D.O.E. or NASA. And please don't just assume that the private sector would have gotten around to these innovations sooner or later if the public sector hadn't done that first, that's like saying that you would have invented the light bulb if only Edison hadn't gotten around to it first.

Mike M said...

You mean like your 3:43 post using talking point buzz words like extremest? You are a fine example.

You may not like the prior content I posted. You may not agree with it. Then again as a statist I wouldn't think so anyway. Like all true statists you resort to name calling and attempts to control.

The market place has spoken. Your central planning views fail time and time again yet you cling to them like a Teddy Bear seeking comfort. May I suggest you learn from that and evolve or continue to a "useful idiot" for the statists. (their phrase not mine)

Anonymous said...

"I can, I do avoid them" - Yeah right!! If you so passionately believe in these ideals and think that government is tyrannical and stealing from people - stop whining and do something about it. Such unambiguous ideology without the action to back it up just resonates as hollow with me.

And if you don't like the trust-fund libertarian moniker, show me otherwise.

Anonymous said...

"Like all true statists you resort to name calling and attempts to control." Mike, your so dumb you don't even know what the word "statist" even means! You probably heard it on talk radio or from some other right-wing idol that you ape.

Nothing is more low in argument than absolving yourself from the argument by claiming that someone is using a talking point! Talking points don't come out of thin air.

Again, go re-read what logical fallacies actually are and read a book once in a while. You might call JG and myself elitist, but no, we are just so much smarter than you that it drives you crazy.

Statist. Ha ha ha!

Anonymous said...

I meant you're so dumb. Forgive my quick fingers.

zackA89 said...

No JG, you can’t just say “the private sector would not have done it, I just know it!, why? cause i just do!” No, there is no evidence to suggest that in the absence of government funding, those things could not have come into fruition. They certainly can, and great technological advancements and breakthroughs have happened without government spending and that should be proof right there that it is possible for the private sector to develop these things. They were developing breakthrough technologies way before government ever got involved in funding anything. No reason why that trend can continue.

You can’t credit the government with any of those things. You have to credit the private sector. The funding necessary for these wonderful government projects you tout came out of the private sector in taxes. Without a private sector, without capitalism, there would be no stuff for government to fund anything. It’s all the free market, always has been always will be.Its what enables government to spend on anything. You are still ingoring all the failures of government spending on research and disregarding the unseen effects of government spending.

Anon your just a fool who keeps making things up about people you don’t know. You make assertions about people who you don’t even know. That’s the true market of intelligence. Making up statements about people who you don’t know in an attempt to smear them and discredit them.

The economy is becoming increasingly mixed in favor of government. That’s the problem. If you can’t see that, well, that’s your problem. There is no other way to distribute goods other than profit because without a profit motive you are flying blind with no sense of where consumer demand is. And, nope, for the millionth time, neither democracy nor an electoral system can give the government the necessary information to allocate resources in a way that makes any economic sense. Profit and efficiency benefit the masses, and resources should be employed in such ways that are profitable and efficient not based on political reasons.


Keep name calling. Keep making stuff up. Thats all you got. JG is just a statist who knows no economics and has a blind love affair with the state.

David B said...

JG said:

The absence of key innovations or entire new industries prior to the involvement of the public sector is proof enough. The private sector by itself never had the risk appetite to make the long-term investments needed for research behind nuclear energy, satellite technology, radar or any number of other innovations that grew out of the D.O.D. or D.O.E. or NASA.

This entire statement is false.

Radar was invented by Heinrich Hertz and developed into a system that become widely available by Christian Huelsmeyer at the turn of the 20th century. The original purpose of radar was collision avoidance in the fog.

There are many different types of satellites, so you will have to be more specific. The kind used as weapons and spy systems were developed by the killers of men. That is correct. However, the fixed and mobile satellite systems were created and developed in the private sector.

The development of nuclear energy (James Chadwick, Frederic, Irene Joliot-Curie, Enrico Fermi) was moving along as normal until WWII and the Manhattan Project, where the killers of men altered the course of that technology forever.

That's probably not something a statist should be banging his chest about.

I mean, heh, I have to admit that there is no market for something used to slaughter every living thing on the planet. Good one. You got us there!

David B said...

Anonymous,

Yeah right!! If you so passionately believe in these ideals and think that government is tyrannical and stealing from people - stop whining and do something about it. Such unambiguous ideology without the action to back it up just resonates as hollow with me.

I withdraw consent. It's a peaceful solution. If you would prefer a violent solution, you will have to look elsewhere.

And if you don't like the trust-fund libertarian moniker,

Yawn. I didn't say I don't like it. I said it gets boring because you use it repititiously.

show me otherwise

For what purpose?

Why didn't you answer my question about home schooling? In case you missed it, here it is again:

Do you advocate that I be tax exempt from taxes for public education if I homeschool my children?

Mike M said...

Anon your 9:05

Thank you for revealing your true self. It was inevitable

Anonymous said...

@David B, Mike M, Trust-Fund Zack and Sam

If it weren't for your enormously sized egos, you might have noticed that none of you responded to the point.

David B - "Do you advocate that I be tax exempt from taxes for public education if I homeschool my children?" No I don't. But do you have to commit the double-evil of having your money stolen from you and then having your children educated by the government that stole it from you? Nice try, again, sidestepping the issue.

The withdrawal of consent - which I am sure that you do not engage in regularly or to any scale - is not commensurate with the degree of absolutism and fervor with which you and fellow Austrians view government and taxation. If life is so slavish I would expect much more active and passive resistance. And, getting closer to the utopian experiment is not a wild dream - you just have to give up a lot of your current life, which apparently is slavish anyway. I have a subsistence permit for instance.

That is why, whether you think the term is boring or not (which is another cop-out to actually engaging the argument), the term trust-fund liberatarian applies. You are not willing to live with the actual consequences of your argument, and that type of argument can only be made by people who already have.

Zack - ditto to you. You have not denied anything I have said, so I will continue to accept it as true. Your arguments are completely armchair, and rest on absolutist principles that only the well-off can really sustain. Your ignorance of history is blatant, and I find it so ironic that your common defense is to restate your assertions and then make up histories, while accusing other people of making stuff up and only making assertions!

Even in your last statement - "The economy is becoming increasingly mixed in favor of government." you are just making an assertion! At least you are recognizing that the economy is indeed mixed, and maybe there is a hint of acceptance of that fact, or that regime-type matters. I notice these little hints of ambiguity and nuance in your writing, but then it is right back to absolutism - government bad! Private sector (or eventually) good!

Mike M - another whimsical comeback of the less intelligent. I have never tried to hide who I am. Your anti-intellectualism is just a shield to protect your ego from the realization that you are woefully inadequate upstairs.

Sam - If you had actually read anything, my arguments are nothing like LK's. He is much better versed than I am in the minutiae of Austrian writing and even economic theory. My background is in economics, but also philosophy, history, and political science. Unlike LK, I don't tend to argue about whether there is a natural rate of interest or not, or whether Mises said this or didn't. I disagree with Austrian's praexology and rejection of scientific positivism and with their complete ignorance of the details and importance of the social and political world.

Mike M said...

Anon. Your insightful omnipotence providing cutting edge psychological analysis via a limited Internet blog is truly a marvel to behold.

It that whimsical enough for you?

Have you considered my response to your posts in that fashion is because that's all your posts warrant? I have no tolerance for statists, collectivists, progressives etc. You wrap your arguments in pseudo-intellectualism to rationalize a system that forces one man to live for the sake of another. Liberty, defined by the maximum absence of coercion, has not been the natural condition historically and thus should be defended at all costs. Appears it is not a value you embrace.

If I respond to your nonsensical posts it's only so silence is not construed as acquiesce.

Beyond that, at best you are amusing. Most often you are just a court intellectual for the statists.

JG said...

David B,

Thank you for proving my point. Radar, nuclear research and satellite technology did exist as obscure, immature, underfunded projects that the private sector did not have the desire or the risk appetite to develop to their full potential.

It took the Manhattan project to push the obscure theories of physicists into applied technology that now powers nuclear reactors around the world.

It took the pentagon's push for spy satellites and rocket research to enable the satellites that now form the backbone of the telecoms industry.

Radar was a gimic that was virtually ignored by its intended industry until the military applied it to aviation, which resulted is now a central technology to modern commerical aviation.

If the public sector has been partner and supporter to countless breakthroughs that the private sector alone never displayed the appetite to pursue.

But of course, that flies in the face of the libertarian fantasy that you and Zack are so deeply immersed in, so you ignore all this.

Davdi B said...

JG,

I can't take you seriously.

Radar was a gimic that was virtually ignored by its intended industry until the military applied it to aviation

No, again. False statement. Radar was widely in use before the wars.

Calling it a "gimmick" does not strengthen your case. Go back to the drawing board. I'll wait.

zackA89 said...
This comment has been removed by the author.
David B said...

JG,

I say this with all due respect: your ideas ain't worth a velvet painting of a donkey and a whale getting it on.

I also think you might be a psychopath. Don't get mad, please, but it's true. You're just a little off your rocker.

I have a feeling you might have learned to read by the whole word method, rather than the phonic method. I suspect this because you seem to guess at the meaning of words, rather than understanding their meaning.

You take pride in the lust for blood that has ended up with millions upon millions dead, as long as it might have pushed along one technology or another.

Not only is your premise totally flawed and conjectural, but it ignores the moral reality of war as well as the consequences of human slaughter.

You are also a pathological liar. I didn't "make your point." You had no point.

Bob Roddis said...

Seeing that it was the statists who brought us central banking which brought us the slaughterfest of WWI and its nasty "progressive" economic war controls that launched a massive inflation which made the correction of 1920-21 necessary followed by Britain going back on a gold exchange standard at the wrong exchange rate leading to the depression which lead to statist slaughterfest II, it's pathetic for statists to lecture us on what the voluntary sector could or could not invent during the long years of their slaughterfests and poverty-inducing interventions.

Bob Roddis said...

If various statist projects have 70%-80% popular support as Lord "Spiro Agnew" Keynes asserts, then under a Rothbardian system of voluntary association and non-aggression, those 70%-80% could voluntarily join together in consumer unions or nature conservatories or whatever and invest in those very same inventions that allegedly could not have been invented without the SWAT teams, right?