Around the beginning of the 20th century British economist, Alfred Marshall,” warned,
Students of social science must fear popular approval; evil is with them when all men speak well of them. If there is any set of opinions by the advocacy of which a newspaper can increase its sales, then the student . . . is bound to dwell on the limitations and defects and errors, if any, in that set of opinions; and never to advocate them unconditionally even in an ad hoc discussion. It is almost impossible for a student to be a true patriot and have the reputation of being one at the same time.
Unfortunately, a whole host of economists who crave popular approval and political influence have been propounding a whole series of quack medicines to “heal” the economy, with the promise of curing the recession through interventionist and monetary “elixirs.”
There is a vast number of political absurdities being perpetrated on the American people, right now. In a new piece of mine on, “Quick Fixes and Economic Fallacies,” I focus on the dangers from “government-business partnerships” and “fair trade vs. free trade,” and the misguided idea of “lower interest rates and easy money for economic recovery.”
Our task is to drive out the economic charlatans from the temple of economic policy, and do everything in our power to bring about a rebirth in the ideas of laissez-faire capitalism and the non-coercive society.
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Let’s Destroy Economic Quackery!
The major weapon we have at our disposal that both exposes the economic charlatans and sends them scurrying is the subjectivist methodology. To the ego-driven interventionist the subjectivist methodology makes the ground shake like an earthquake, and it rocks their world.
What finishes off the demise of the economic charlatans is the secondary weapon, which is the trust in God. The ego-driven interpreters are dumbfounded and confounded and dizzy and confused and leave with nary a whimper.
Reinstituted classical liberalism is then set for the blossuming of civilization.
Let’s Destroy Economic Quackery
The major weapon we have at our disposal that both exposes the economic charlatans and sends them scurrying is the subjectivist methodology. To the ego-driven interventionist the subjectivist methodology makes the ground shake like an earthquake, and it rocks their world.
What finishes off the demise of the economic charlatans is the secondary weapon, which is the trust in God. The ego-driven interpreters are dumbfounded and confounded and dizzy and confused and leave with nary a whimper.
Reinstituted classical liberalism is then set for the blossuming of civilization.
Are you people crazy? The free market failed in 2008. Unemployment is at an all time high, thanks to the free market. The unregulated free market caused the housing bubble. The free market eventually leads to 100% unemployment.
As a non-economist I read the post of one Paul Krugman and thought, “I sure hope this is a joke intended to prove the obvious”. You see, if I (a non-economist) can laugh at the clearly inaccurate comments of a Nobel Prize winner, then surely cows will fly, the moon will glow blue tonight and somewhere way south of here it is freezing over.
For if by “free market” you are referring to the widely regulated US Market, and by “failed in 2008″ you mean – experienced a necessary and predicted correction – then I may see your point.
Further, if by “the unregulated free market caused the housing bubble” you are actually referring to the Senate Finance Committee, the Government owned and directed Freddie and Fannie Mac’s, the Federal Reserve System, the alliance of Big Banking and Congress, and the countless reams of banking and lending regulations – I may lean in your direction.
But when you said “the free market eventually leads to 100% unemployment” you really had me hooked. Because what I think you were trying to say was that a truly free market leads to greater and greater efficiencies, the result of which would/could lead to fewer hours worked to produce a given output or product. I think (now I’m a newbie here so forgive me) that this would lead to 100% unemployment due to an efficient level of wealth creation as a result of a truly optimized efficiency level of each and every worker!
Wow! Krugman…..I get it….I actually get it!
As an everyday Joe, and aspiring Austrian, I hope I didn’t embarrass myself too much.
An increase in efficiency is bad because it increases unemployment. Digging ditches and filling them back in might not sound like much, but it’s a job. It’s honest work and puts money in ditch diggers’ households, and this boosts consumer spending. The government should step in and cause enough malinvestment to prevent any increases in efficiency.
Actually, it’s very easy to think of efficiency as a single thing when the term covers a range. For instance, if you have two factors as inputs, labour and capital, efficient use of capital isn’t identically the same as efficient use of labour. There is a trade off involved, according to what the optimal balance between labour and capital is. Someone who tries to get the greatest efficiency out of either alone is likely not to get the best overall result. Luckily but not coincidentally the two measures aren’t very greatly different so the cost isn’t that bad – but it still makes a difference. (On top of that, some of the costs aren’t true costs as there are external costs of unemployment – and that could well make a serious difference.)
Efficient use of capital is the idea behind financial markets. By bailing out failed financial companies, the government can cause misallocations of capital. And that’s good because it reduces unemployment for people working in those failed companies.
Efficient use of labor is the idea behind labor unions. By bailing out failed labor unions, the government can cause misallocations of labor. And that’s good because it reduces unemployment for people working with those failed labor unions.
The government can cause misallocations of capital in other ways. Corporate welfare can level the playing field between inefficient companies and efficient ones. Wars can level the playing field between counterproductive companies and productive ones. Capital gains taxes make it more worthwhile to stick with low returning stocks than to sell those and buy high returning stocks. Property taxes and eminent domain can be used to steal land and give it to hotel developers.
The government can cause misallocations of labor in other ways. The minimum wage can prevent workers of marginal productivity from competing with those of greater productivity. Unemployment insurance can make it more worthwhile to be unemployed. Socialist insecurity taxes can make it more worthwhile to work under the table. Personal income taxes can make it more worthwile to work for barter.
Paul Krugman wrote “Efficient use of capital is the idea behind financial markets”.
No. This is another blurring of two different kinds of efficiency. Efficient capital markets (stipulating that they are indeed efficient) are about allocating capital efficiently, i.e. the process of moving it from suppliers (ultimately, savers) to its users (those who make physical investments with it), not about using capital efficiently, i.e. getting the most output from a given application of capital. While the two are related, they are not the same.
@PaulKlugman:
We should strive to imprison all people, so that we can make sure that they dig and fill ditches all day. Signboards with appropriate slogans about the economic freedom engendered by such work will no doubt help make them feel it is all worthwhile.
I am not a quack ! OKAY. But the trouble is that our eonomy is Industrial and Not capitalitic. But it is made to obey capitalistic rules creating trillions in unused credit which should be given to individual people to spend in buying and consumption. Consumer dollars are the fuel of the economic system, not investment dollars given to banks, instiutions and corporartons.Ths will not stimulate the economy, only consumer dollars to people will.
Bill Sisco, great post, good humor and good economics go hand in hand.
Charles H. Seitz, I don’t want to offend you but absolutely everything you said has been proven wrong by the economists featured on this site. When I say proven I really mean it. I would recommend you try the reading list here.
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