The Atlantic posts “the scariest unemployment graph…”
Just as alarming:
Source link: http://archive.mises.org/13357/the-more-the-state-intervenes/
The more the state intervenes….
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I’d like to see the second graph contrasted with the maximum time allowed to collect unemployment benefits. I bet there’ll be a correlation between them. And by correlation meaning we’ll probably not see the numbers in the second graph reach higher than the maximum benefits allowed under the unemployment benefits system. It’s not a crack to say that people magically find work when the benefits run out (they do in many cases though), it’s to show that the numbers are grossly understated since the unemployment rate tends to be ignored if the unemployed isn’t cashing in the unemployment check.
I seem to recall that someone did a study that shows most people do not even start to look for work until one month before the unemployment benefits run out? Extend benefits = Extend Average Time People Remain Unemployed.
Being on unemployment is essentially no different than working for the government at minimum wage, except that you do not pay FICA, and in some states, health care insurance is also paid for.
But just think of all that economic stimulus it provides!
That’s true, but there is still the factor that the numbers fail to consider underemployed or discouraged workers. In effect, if unemployment benefits last for 40 weeks, then the chart will be hard capped at 40 weeks for the average weeks out of work, especially when combined with the fact that most people will milk the entire 40 week period. Most people will record 40 weeks out of work and either find a job or drop off the official reporting radar. The reality is that the chart should see some upward shift, which will be more pronounced in the 2010 end of the graph.
We need more stimulus!!!
*sarcasm*
So can we all just go ahead and agree that all the work of the government over the last 2 years has done nothing? … I mean done nothing productive at reducing those numbers. The policies have done something all right!
Clearly, the government is what saved us from a much worse fate. At least that’s what they tell me.
Actually the State has done something quite the contraire, the State has again provided another example of the failure of the so-called “social contract.”
100% agreed Walt and Murray. “I’d like to see the second graph contrasted with the maximum time allowed to collect unemployment benefits. I bet there’ll be a correlation between them.”
Are there figures for Mean Duration of Unemployment during the First Great Depression? We know (I have posted it several times) that the current U6 unemployment rate is slightly higher than the average unemployment rate for the First Great Depression.
Is there a graph on government spending to compare to these?
I like this graph. This is what I use when baby boomers tell me that “Your generation has it sooooo easy!”
Pelosi: Unemployment Checks Fastest Way to Create Jobs
http://www.foxnews.com/politics/2010/07/01/pelosi-unemployment-checks-best-way-create-jobs/
Unemployment comp is in fact just about the only way an injection of money can stimulate consumer demand.
Money given to the bankers in 2008-09 just went into the vaults, to restore reserves depleted by foolish investment in speculative bubbles. It has done no work.
Money rescinded to the richer portion of the public also does no work in stimulating demand. As a rule such people are already spending all the money they want to. More money, in the form of low tax rates, doesn’t stimulate further spending. As a rule it just becomes more speculative capital, entering the stream that ultimately will become the next financial-sector bubble.
Unemployment comp, on the other hand, buys goods. This demand gives rise to more employees being hired to satisfy it. It also buoys the housing and auto markets, because people don’t lose cars and homes after they lose their income stream. Therefore legions of empty homes and lots full of ownerless cars don’t depress those markets.
It’s in the public’s interest to direct emergency funds to areas where they will directly lead to increased demand. We are, after all, a consumer-based society.
Wow, so you’ve gone from mercantilist fallacies to demand-side fallacies, eh Michael?
I’d be glad to entertain your explanation, with accompanying evidence, demonstrating that consumer demand to buy articles of commerce creates no impulse for manufacturers to meet it by stepping up production.
Also explain how they can meet increased demand without hiring added staff.
If the money used to buy articles of commerce comes from unemployment benefits, then that money was diverted from companies, who could otherwise have used that money directly to hire added staff. So which is more likely to add jobs, money directly spent on that, or money diverted and given to unproductive people to indirectly create demand?
BTW, where is your evidence that your arguments are correct? Don’t demand from others what you yourself are unwilling (or unable) to provide.
Thanks for your worthwhile observation, Russ. Those are all points worth considering.
“If the money used to buy articles of commerce comes from unemployment benefits, then that money was diverted from companies, who could otherwise have used that money directly to hire added staff.”
Government does not invest tax dollars in companies, other than those it subcontracts with, like military industrialists. Therefore unemployment comp does not get snatched from the mouths of poor giant corporations.
Corporations, in fact, get funded by an immense oversupply of funds from investors who have more money than they can spend. Their excess goes into investment, fuelling price inflation in stocks and derivatives as a surplus of money looking to invest itself chases a relatively finite store of investment opportunities. That’s what has fuelled the explosion in derivative offerings in recent years. There’s more hot money out there than there are legitimate investment opportunities. The bright fellows in the bond trading banks have to come up with new issues… all mostly just hedges and gambles on the movements of other investments.
So I don’t think we have to worry about any serious shortage of investment money. Were that to ever come about, it would signal the advent of a period where we no longer had rich people, people with “excess spendable” income.
Also, if companies got the money directly, they could hire all the added staff they wanted to. But they would have little motivation to do so in a down consumer market. In fact in 2007 they did have enough cash to retain staff. But without customers, there was no demand for their products. So they shrank their companies instead, curbing production and laying off help. Companies don’t like building up inventory when no one’s buying the products already on the shelf.
“So which is more likely to add jobs, money directly spent on that, or money diverted and given to unproductive people to indirectly create demand?”
I think you’re confusing money LENT to companies to keep them going (which has to be paid back) with money being “spent” on them, as in buying their products. Keep in mind that the only reason a large, established company needs to borrow more money just to maintain operations is that it either has not been churning out profits or that it has been squandering its reserves on dividends and executive comp. A viable company should keep an adequate reserve to cover operating costs, and to finance expansion in a good market by accumulating enough reserves to pay for such. It really shouldn’t need investment funds in the quantities that companies today seem to require them.
And in fact in a downturn, companies are shrinking their operations. They need much less investment money than in the good times, when their customers have money in their pockets. It’s consumer spending that drives our economy, or should be rather than the mere availability of more cash to be borrowed. If the economy’s merely being maintained by bridge loans from investors, it will ultimately fail.
New startups do need operating cash. And for these there has in fact been a pronounced lack of enthusiasm on the part of those very banks that have received federal bailout money. So it’s not the fault of the government that these little guys are starved for cash. Blame the bankers instead.
You really ought to check out the above assertions for yourself. Anyone who’s managed an ongoing business knows the truth of them.
“BTW, where is your evidence that your arguments are correct? Don’t demand from others what you yourself are unwilling (or unable) to provide.”
A good point. You could start by reading the financial news. The evidence does support my view. Banks are currently awash in funds, and the small companies who desperately need bridge loans are seeing such funds dry up. This aspect of the bailout has failed.
And where is the argument that our tax rates, the lowest in sixty years, have caused the net incomes of the top two quintiles or so drop away to such a pittance that they can no longer afford to speculate with their excess? Well, you can look at investment volumes, for one thing. See how the amount of total new money coming into the investment world is at an all-time high. You fellows do like to point to the dangers of inflation. Why not see where the excess cash is actually going? It’s not going into consumables, because we’re seeing stores close and employees being pink-slipped in the hundreds of thousands. No, that excess money’s all going into investments, which tend over time to rise in value (that is, their prices tend to inflate beyond the background rate of inflation in store purchases). Check it out.
You could falsify my observation by finding that during the period when our taxes were highest, that is, 1945-1960, investment funds were so starved by such taxation that companies couldn’t find the money to expand. Yet that was precisely the period in which the American economy expanded to its current size, the greatest on earth. So I think one can’t make the case that taxes and consequent government expenditures are what’s choking us to death.
You could also track the thing called “consumer confidence”, as the stores and suppliers all do. They know there’s a direct link between the amount of cash a consumer is willing to spend and the amount of profitability a merchandise provider will realize. Are you really contesting such a link? Then find the relevant charts, (a) consumer confidence and (b) total retail profits.
Ask me if you need more documentation.
michael wrote:
“Government does not invest tax dollars in companies, other than those it subcontracts with, like military industrialists. Therefore unemployment comp does not get snatched from the mouths of poor giant corporations.”
OK, first, your conclusion does not follow from your premise. You’ve just committed a non sequitur fallacy. Second, where do you think unemployment compensation comes from, exactly? It comes from employers. Employers have to pay money to the states for pretty much every employee they have. And since many people are employed by giant corporations, they do indeed get socked for enemployment comp.
“There’s more hot money out there than there are legitimate investment opportunities.”
I actually kinda agree with this. That is what happens when the Fed prints way too much money. The “cheap” money is invested in unwise ways because there is more money than real wealth.
“So I don’t think we have to worry about any serious shortage of investment money.”
OK. So what does that have to do with my argument that unemployment comp is a less direct, and thus less wise, way of employing people than letting the employers keep their money and hire people with it?
“Companies don’t like building up inventory when no one’s buying the products already on the shelf.”
True, but again, so what? When companies are ready to start hiring again, it helps if they have the funds necessary to do so, instead of spending those funds on non-productive people through unemployment comp.
“I think you’re confusing money LENT to companies to keep them going (which has to be paid back) with money being “spent” on them, as in buying their products.”
No, I not confusing them because I’m not talking about money lent to companies at all. I’m simply making the common-sense observation that money directly spent by companies to create jobs is more likely to create jobs than is money given by companies, in the form of unemployment comp, to unproductive people to buy those companies’ products. Essentially, the companies are giving out money for people to buy their products, which is effectively the same as the companies buying their own products themselves. It’s like Mommy giving little Suzy $10 so that Suzy can buy Mommy a present. Effectively, Mommy bought the present for herself. She is not better off than before, financially speaking. Suzy probably pocketed the change. And she probably got a gift that she really didn’t want.
“New startups do need operating cash.”
So do on-going businesses. For instance, the machine tool business needs loans continuously to operate. Even a small machine can cost millions. The companies that build these machines do not buy the components and materials for these machines out of savings. They get loans from banks, and then pay them back once they sell the machines.
(Not that this has anything to do with the unemployment comp. argument we are supposedly having.)
“So it’s not the fault of the government that these little guys are starved for cash. Blame the bankers instead.”
A great deal of this problem could be taken care of with the stroke of a pen, if Congress would change the mark-to-market accounting rules that banks must follow. So, like with most other things, don’t blame the businessmen, blame the people who make the screwed-up environment in which business must operate; i.e. the government.
(Not that this has anything to do with the unemployment comp. argument we are supposedly having.)
“You could start by reading the financial news. The evidence does support my view.”
No, it really doesn’t. The problem here isn’t one primarily of facts. The problem is one of a lack of an intellectual framework by which to interpret the facts. Without such a framework, you can have all the facts in the world, and they won’t do you any good at all. The idea of “priming the pump” with government-stimulated spending is also something that could not stand scrutiny in the light of a coherent intellectual framework. Have you ever actually primed a pump? All you need is enough water to moisten a seal so that the pump seals properly and can build a vacuum. An economy likewise shouldn’t need trillions of dollars to “prime” it. Any money that is diverted from one purpose by the government for another purpose is just wealth moved, not wealth created. It’s a shell game. It’s like attempts to build perpetual motion machines. You can’t power a machine indefinitely by redirecting its own heat exhaust. There is always going to be an inefficiency that prevents that from working. It’s the same with the government trying to redirect money to keep an economy going.
Unfortunately, you don’t seem to have any sort of coherent intellectual framework with which to order your thoughts about the economy, and therefore, even though you are intelligent and have a command of facts, you can’t do anything but make non sequitur arguments and talk about things that are irrelevant to the argument at hand. I strongly urge you to get a copy of Gene Callahan’s “Economics for Real People”, available here at this site for free in PDF format.
“Unfortunately, you don’t seem to have any sort of coherent intellectual framework with which to order your thoughts about the economy, and therefore, even though you are intelligent and have a command of facts, you can’t do anything but make non sequitur arguments and talk about things that are irrelevant to the argument at hand.”
Russ: The coherent intellectual framework I employ is just observation and analysis based on data that are freely available. I don’t need or want any ideological lens through which one might distort the findings so they’ll fit the theory better.
One of your fellows, Bala, has explained a concept to me that I believe is key. He says that my comments are all irrelevant because I don’t describe the world as it would be if it were run according to Austrian principles. And as that, according to him, is the purpose of this forum, everything I have to say is therefore off base.
I love it. If I make reference to the actual state of our economy, I’m not being Austrian enough to be listened to. And if I say anything about Austrian theory, it is understood that it doesn’t apply to anything real… because we don’t live in that world.
This stuff amounts to science fiction. It’s the study of an imaginary planet.
Russ: Thanks for your recommendation. People have already recommended half a dozen free books on this site. I’ve downloaded them all and are taking a look through them.
I do have a couple of comments to make about these points you raise:
“The idea of “priming the pump” with government-stimulated spending is also something that could not stand scrutiny in the light of a coherent intellectual framework.”
See below on how it can.
“Have you ever actually primed a pump? All you need is enough water to moisten a seal so that the pump seals properly and can build a vacuum. An economy likewise shouldn’t need trillions of dollars to “prime” it.”
Exactly so. And in fact on these pages I have argued that there are two phases to any successful use of stimulus money. During the first phase, emergency funds are introduced into a sagging economy. And during the second, necessary phase, a like amount of funds are removed from the economy vie taxation. The result is a balanced budget.
It may not appear to you that it is balanced. But it is so over the period of one business cycle, rather than one fiscal year. BTW JM Keynes also conceives of this process in the same manner. He has NEVER just advocated that new money be introduced as desired.
“Any money that is diverted from one purpose by the government for another purpose is just wealth moved, not wealth created.”
This is demonstrably not so. I know it’s not covered in your books here, but here’s how the multiplier works:
First, a good stimulus program doesn’t just give money to investment banks as a cure for their insolvency. As we’ve seen, they’ve done little more with it than reward their principals and sit on the rest, to replace their vanished reserves. That’s a poorly designed program. A proper and effective program finds projects that need to be done, but ones that private industry doesn’t address because they can’t make a profit on. Road, dam and bridge repair, reclamation of damaged or contaminated land such as Superfund sites, or anything else that costs money but needs doing.
Then you employ the unemployed in making the repairs. So one societal good has been created. Naturally if you don’t believe in society and think there’s no such thing as a common good, you’re not following me already.
But if you still are, these people get paid. And they’ve exchanged their labor for pay, not just received it for being unemployed. So they buy goods. And these purchases constitute demand… which drives production. So mothballed factories come back to life and rehire their old workforce, so they can meet that reconstituted demand.
This causes more out-of-work people to become employed, based on the seed money the government started it off with. And so on, as they in turn buy more things than they could have when they were unemployed.
Best of all, each time this new money changes hands, it creates a taxable moment (another aspect the Austrians are careful not to cover). That is, if a typical recipient of this new money pays taxes at a typical 20% rate, and it changes hands five times during the first year of issue, 67 cents is returned to the US Treasury in the form of tax receipts for every dollar cast upon the waters. I urge that you perform this calculation yourself.
In business, any time I could amortise the cost of 2/3 of my investment in only the first year, I considered that to be a great deal! I usually invested in anything that would recapture my entire investment inside three years. So expending federal money this way is actually a money-wise investment.
In closing, a word on these trillions of dollars we’ve run up in recent years. You will recall that during the late 1990s we were actually beginning to pay down our debt, along a sustainable path. Then with the change in administration came a change in orientation. We now embarked on a plan to increase spending while reducing revenues through tax cuts. To me, this was a fiscally unsound practise. Maybe you will disagree.
So the majority of those new trillions added (the debt went from $5.66 trillion and dropping, the day Bush took office, to $10.7 trillion and rapidly rising, the day Obama took office) have been on George Bush’s watch. And the momentum upward created by those years in the red would be impossible to control without drastic measures, like rescinding tax cuts and closing down the optional wars we’ve been fighting. Neither of which Obama has done.
The figure being much bandied about is that the Obama portion of the stimulus program has cost us around one trillion dollars. But of that amount, one-third has been in the form of lost revenues (in a business recession fewer profits are posted, thus less taxes are owed and paid). And much of the remainder has consisted of loans to investment houses– money that likely will be repaid eventually. So the actual amount of stimulus expended since January, 2009 has not been all that large.
Nor has the program been that effectively designed. It hasn’t done much for the economy or for our dilapidated infrastructure. And it hasn’t created many jobs.
michael wrote:
“Russ: The coherent intellectual framework I employ is just observation and analysis based on data that are freely available. I don’t need or want any ideological lens through which one might distort the findings so they’ll fit the theory better.”
I’ll admit that there is a lot of ideology in economics. It’s no coincidence that most Austrians are libertarians of one bent or another, most Friedmanites are so-called “conservatives”, most Keynesians are so-called “liberals”, and most Marxist economists are, well, Marxists.
Having said that, though, there is more to economics than just ideology. The real substance of economics is analysis. What’s more, as opposed to your superficial “common sense” analysis, real economics doesn’t just take into account local first-order effects, such as “Minimum wage means people get paid more”, “Rent control makes housing more affordable”, or “Unemployment benefits help the economies of unemployed people”. It looks at second-, third-, etc.- order effects, and it looks at the effects of policies on the economy as a whole in the long term, not just short-term local effects. These extended, systemic effects are not obvious to one whose only intellectual weapon is common sense. These effects can be quite paradoxical at first blush, and it takes some time and effort to understand them. But it’s not just ideology.
As I said in another post, you can’t test an economic theory without having an economic theory. Imagine if physicists tried to come up with predictions about the world without physical theories! What could they do? They could only come up with ad-hoc bullshit! They need a theory, because without that they are mere collectors of isolated facts that make no predictions. To make predictions, you must have a theory. A theory is the intellectual framework that I am speaking of. You don’t seem to have one. Therefore, you assemble random facts and interpret them randomly and incoherently, sprinkling in facts and arguments that have no pertinence to the discussion at hand, and without rhyme nor reason except that you try to make your predictions match the outcomes that you want and which you emotionally and intuitively believe should be right.
For instance, you believe that not all people who are unemployed are lazy grifters (I agree; I have been unemployed before, it’s not fun, I was not unemployed on purpose, and I jumped on the first job that came my way). You believe that unemployment compensation helps these people (in the short term, and ignoring higher-order effects, I agree with this as well; all other things being equal, it’s obvious that somebody getting $X in unemployment comp is better off than somebody with no income whatsoever, and no prospects of getting income, especially if they have no savings). All this being the case, you want unemployment comp to be a stimulus to the economy, because that is a justification for something that you feel emotionally is a good thing. But your wanting it, or feeling it, or believing it fervently, does not make it so. In fact, in the long term and considering higher-order effects, unemployment comp is not a stimulus to the economy, it is a drain. This is not me being mean-spirited, and this is not ideology. It is simply, effectively speaking, a fact. And we ignore economic facts at our own peril.
michael,
“Thanks for your recommendation. People have already recommended half a dozen free books on this site. I’ve downloaded them all and are taking a look through them.”
You might also try the popular books by David Friedman (Milton’s son), Steven Landsburg, and Thomas Sowell. Hell, even Milton Friedman’s popular books would be better than nothing, although I think there is a fair amount of crap in them (i.e. the negative income tax is a horrible idea).
“And in fact on these pages I have argued that there are two phases to any successful use of stimulus money. During the first phase, emergency funds are introduced into a sagging economy. And during the second, necessary phase, a like amount of funds are removed from the economy vie taxation.”
I am aware of this theory. It has two obvious problems:
1) It’s like flooding the basement to kill the mice, then trying to pump out the water before it damages anything in the basement that you care about. Wouldn’t it be easier to not flood the basement in the first place?
2) If unemployment comp is a stimulus to the economy, because it increases spending, then isn’t increased taxation every bit as much a negative stimulus, because it decreases spending? Sounds like a recipe for creating business cycles to me.
“A proper and effective program finds projects that need to be done, but ones that private industry doesn’t address because they can’t make a profit on. Road, dam and bridge repair, reclamation of damaged or contaminated land such as Superfund sites, or anything else that costs money but needs doing.”
Of course, the problem here is that projects that don’t need to be done are often started up, which do nothing in the long term except divert capital from those projects that do need to be done, and could be done by the private sector. (Also see below on capital misallocation.)
Also, where is your evidence? The Great Depression programs of FDR? These makework programs did absolutely nothing to get rid of the Great Depression. Contrary to myth, Truman did more to get rid of the Depression than FDR ever did, by getting rid of warfare socialism programs (and FDR’s boondoggles) after the war was over.
“So one societal good has been created. Naturally if you don’t believe in society and think there’s no such thing as a common good, you’re not following me already.”
I do believe in “societal goods”, in a sense, but I don’t believe that bridges to nowhere qualify. I also don’t believe that makework on roads to somewhere, like exist currently in Michigan, qualify. The “societal good” would be much better served by building roads that actually last for a while, and don’t need to be “fixed” every year, even though this would not necessarily employ as many people.
“But if you still are, these people get paid. And they’ve exchanged their labor for pay, not just received it for being unemployed.”
So people get paid to make things that probably aren’t necessary in the first place. So what? I see no real difference between this and handouts, and thus no benefit here.
“So they buy goods. And these purchases constitute demand… which drives production. So mothballed factories come back to life and rehire their old workforce, so they can meet that reconstituted demand.”
This same demand can be stimulated by people who get paid to make things that we actually do need, as opposed to unnecessary things that are excuses for giving out handouts. All that would be necessary is get out of the way and let the business cycle correction happen.
“This causes more out-of-work people to become employed, based on the seed money the government started it off with. And so on, as they in turn buy more things than they could have when they were unemployed.”
If you actually believe that the government creates things that society needs better than the free market does, this would be an argument. But I can’t believe this. At any rate, to the extent that the government boondoggles are not really needed, the government might just as well be handing out money to people to do nothing, and diverting it from real practical, private enterprises.
Also, you’re neglecting a crucial problem, which only Austrian theory seems to be concerned with; business cycles happen because of misallocated capital due to an inflated money supply. This misallocation needs to be corrected before any real correction can occur. This correction cannot happen if the money needed to retool plants cannot be had because all the money that would have been used for this purpose has been diverted into makework or handouts.
“Best of all, each time this new money changes hands, it creates a taxable moment (another aspect the Austrians are careful not to cover).”
This is a good thing???? Austrians do cover this, but they correctly consider it a bad thing. Every “taxable moment” simply diverts more money from the free market into unproductive boondoggles and handouts.
“In closing, a word on these trillions of dollars we’ve run up in recent years. You will recall that during the late 1990s we were actually beginning to pay down our debt, along a sustainable path.”
You mean a few after Newt Gingrich and the Contract with America took over Congress during the Clinton administration?
“Then with the change in administration came a change in orientation. We now embarked on a plan to increase spending while reducing revenues through tax cuts. To me, this was a fiscally unsound practise. Maybe you will disagree.”
You’re neglecting two things. One, a little thing called 9/11 happened. Whether you like how Bush dealt with it or not (I don’t), it isn’t something Clinton had to deal with. Two, the Laffer curve has been shown to be real. It was real in the Kennedy years and the Reagan years. Lowering taxes stimulates business; go figure. (Granted, I don’t think that the higher tax revenues generated by a proper understanding of the Laffer curve justify reckless spending, but that’s another matter.)
“So the majority of those new trillions added (the debt went from $5.66 trillion and dropping, the day Bush took office, to $10.7 trillion and rapidly rising, the day Obama took office) have been on George Bush’s watch.”
Yes, Bush was an economic nincompoop, too. Just not quite so much of one as Obama is. Much like Hoover and FDR, the depression started on Hoover’s watch, even though it was not all Hoover’s fault. And much like Hoover, and then FDR, made things worse, so did Bush and Obama.
“And the momentum upward created by those years in the red would be impossible to control without drastic measures, like rescinding tax cuts and closing down the optional wars we’ve been fighting. Neither of which Obama has done.”
Of course lowering spending on the war would help economically. Whether this is counteracted by non-economic considerations is a discussion for another time. (I have mixed feelings on this, myself.) But I still think you’re completely wrongheaded regarding taxation. Lowering taxation is like handing people and corporations free money (except they’re really just allowed to keep their own money). If handing people money through unemployment comp or makework stimulates demand and thus the economy, I can’t see how letting people keep their own money and spend it could fail to do the same. You can’t have it both ways, michael.
“Nor has the program been that effectively designed. It hasn’t done much for the economy or for our dilapidated infrastructure. And it hasn’t created many jobs.”
This reminds me of countless arguments I’ve heard that there is nothing wrong with socialism in theory, it’s just that it’s never been properly implemented in practice. How many failed “experiments” must the human race endure before socialists come to the inevitable conclusion that socialism can’t be properly implemented?
Russ: Thank you for presenting such a detailed and well reasoned rationale for believing in those things you believe in. Not many people posting here have been able to give voice to them in a very convincing manner.
At the core, you believe that there is an underlying Grand Order to things economic, while I do not. Were I to form some great scheme that appeared as though it might explain everything I would test it, to see where the scheme came apart. I think our economic life is a subset of all human behavior; and as such, it comes in an infinite variety. Further, though, I do not believe that we have been put here to serve the great god of a rationale way to manage our money. Instead, I believe that monetary exchanges are something that we have developed for our own convenience, and what we make of ‘the economy’ is whatever gives us the greatest good for the greatest number. This belief is incommensurate with your own.
Under your set of beliefs, for example, there is no solution to the problem of the increasing efficiency of industry– that is, the tendency to be able to make goods in ever greater numbers while using fewer employees. This trend will obviously result in a world where all the goods necessary to run society can be delivered effectively by a number of employees far fewer than the total number of people on earth– making the surplus extraneous to the economy.
How would the Austrians treat this excess population? They would have no legitimate way of earning a living. Should half of them then be employed in the killing off of the other half? That would seem a very 20th century way of dealing with the issue.
So my bias is therefore humanist. I would do whatever it takes to divide up the work in such a way as to allow everyone alive to have a little piece of it.
Friedrich von Hayek has a different view. Here’s a snippet from the Wikipedia article on him:
“Hayek disapproved strongly of the notion of ‘social justice’. He compared the market to a game in which ‘there is no point in calling the outcome just or unjust’ and argued that ‘social justice is an empty phrase with no determinable content’; likewise ‘the results of the individual’s efforts are necessarily unpredictable, and the question as to whether the resulting distribution of incomes is just has no meaning.’ He regarded any attempt by government to redistribute income or capital as an unacceptable intrusion upon individual freedom: ‘the principle of distributive justice, once introduced, would not be fulfilled until the whole of society was organized in accordance with it. This would produce a kind of society which in all essential respects would be the opposite of a free society.”
The following is then grudgingly added:
“However, Hayek was prepared to tolerate ‘some provision for those threatened by the extremes of indigence or starvation, be it only in the interest of those who require protection against acts of desperation on the part of the needy.’”
To me, such a philosophy– with its tiny space allotted for grudging largesse– may be suitable for the social insects, but it is not for mankind. We rise to a higher plane, and seek justice and a degree of equity between individuals. Further, we seek to include everyone in the task of building a functioning society, as a person with no opportunity to become an asset must then become a liability, imposing social costs on those gainfully employed.
Writing off the mass of humanity as superfluous to ‘the economy’ leads directly to world war, as the desperate engage in acts of terrorism to destroy the State, while the State must squander its wealth in destroying the lives of the desperate. The failure to accomodate those left out by finding some way to bring them into the system has led directly to what we have now: the strongest national security state the world has ever known. A state surrounded by poor people, beginning to learn the crafts of effective warfare for lack of a better opportunity.
The economy? That can be whatever we make of it, and can be made to work in any number of ways. Prioritizing the strength of the currency is not, to me, the most sacrosanct value the system exists to perpetuate. Instead, I would prioritize development of a system able to provide a minimum standard of living to all its participants first, then attend to any conceivable path to individual prosperity second. The prosperity of the few, when at the expense of the many, is not supreme in my view. Instead a community of political equals, each with a chance to excel economically, would be optimal. That is, what we would call a mixed economy.
I don’t want to clog up the bandwidth further by rambling on at this time. I would like to come back at some later time to address some of your points in greater detail. These are worthy arguments you present.
After a typically huge but especially desperate display of leftie flailing: “I don’t want to clog up the bandwidth further by rambling on at this time”. I finally get it, Michael’s a comedian. He did show where Hayek, Russ and righties mainly go wrong though: giving lefties an inch in the wrong direction.
Michael:
Have you ever heard of the industrial revolution? Please go away and read some history.
“At the core, you believe that there is an underlying Grand Order to things economic, while I do not. Were I to form some great scheme that appeared as though it might explain everything I would test it, to see where the scheme came apart.”
But what if the “testing” makes things worse for everyone, much like the “noble experiments” in Russia and Eastern Europe have?
“I think our economic life is a subset of all human behavior; and as such, it comes in an infinite variety.”
I don’t believe that human behavior is so infinite in variety as many people are wont to believe. The idea that people come in infinite variety makes for good poetry, but it’s sloppy thinking. All people have certain similar needs, by virtue of us all being members of the same species and living in the same physical reality. We all act in similar ways to try to fill those similar needs, given our similar environments. I think that gives us all a great deal more commonality in our behavior than you are willing to concede. In fact, I think your “un-theory” is merely an excuse for sloppy rationalizations of policies that you “feel” are right.
“Further, though, I do not believe that we have been put here to serve the great god of a rationale way to manage our money. Instead, I believe that monetary exchanges are something that we have developed for our own convenience, and what we make of ‘the economy’ is whatever gives us the greatest good for the greatest number. This belief is incommensurate with your own.”
No, not really. I just don’t think that attempts to “stimulate” the economy by taxing, inflating and spending are policies that will result in the greatest good for the greatest number. (Not to mention the moral arguments against stealing peoples’ money in various ways, which you seem to be completely unconcerned with.)
“Under your set of beliefs, for example, there is no solution to the problem of the increasing efficiency of industry– that is, the tendency to be able to make goods in ever greater numbers while using fewer employees. This trend will obviously result in a world where all the goods necessary to run society can be delivered effectively by a number of employees far fewer than the total number of people on earth– making the surplus extraneous to the economy.”
This shows just how economically illiterate you really are. The increasing efficiency of industry helps people, by further amplifying the efficacy of the workers’ labor. Without it, labor would be able to produce very little, and people would be reduced to the subsistence existence that they have lived for most of history. With capital amplifying the power of their labor, workers are finally able to have a decent living, and even have leisure time and a retirement, which was unheard of for the “common people” before industrialism came along. What this trend will “obviously” result in is more and more leisure for the average man, and a better standard of living, not having masses of people who are unemployed. Your theory is patently absurd, and demonstrates your complete lack of understanding of even the most basic economic principles.
“So my bias is therefore humanist.”
Your bias is the result of uninformed leftist conspiracy theories, post-Marxist pseudo-science masquerading as economics, and class envy, absorbed from other leftist nonsense that you have read elsewhere, percolated and fermented (without being really analyzed or criticized) in your mind, and then regurgitated. If you really understood the likely consequences of the policies that you favor, you would (hopefully) be horrified.
“Hayek disapproved strongly of the notion of ‘social justice’.”
If you’d bother to actually read Hayek, which I have, his biggest objection to the phrase “social justice” is that the word “social” as a modifier is a “weasel word” which is used to turn the meaning of the word “justice” into a word that means something nothing like justice. The meaning of the word “justice” is that people get what they have coming to them. For instance, if people work and earn money, they get to keep that money, instead of having it taken from them by politicians and given to others who will vote for said politicians, even though those others have done nothing to earn it. In other words, “justice” means that people have the right to keep what is theirs. “Social justice”, on the other hand, means that some people have the right to other peoples’ money. It’s an Orwellian twisting of the meaning of a formerly respectable word.
“To me, such a philosophy– with its tiny space allotted for grudging largesse– may be suitable for the social insects, but it is not for mankind. We rise to a higher plane, and seek justice and a degree of equity between individuals. Further, we seek to include everyone in the task of building a functioning society, as a person with no opportunity to become an asset must then become a liability, imposing social costs on those gainfully employed.”
This assumes that a socialist programme can employ people in a constructive way better than a free, capitalist system can. This is a huge assumption, and it has not been supported by history (or sensible economic theory such as that of the Austrian school). Communism attempted to do the very same things, and it failed horribly. Not because of mistakes in implementation, but because of fatal flaws in the basic idea itself. The antagonism between a free market and a collectivist approach is basically the same as that between teaching somebody to fish and giving them fish, except that it is writ large. Socialism may feed the people for a day; capitalism will feed them for the rest of their lives.
Besides, I am far from being opposed to charity. I am simply opposed to forced “charity”, which I prefer to call compassion fascism. And studies have shown that people on the political Right give more to charities than people on the Left do, because the Left expects the government to take care of everything.
“Writing off the mass of humanity as superfluous to ‘the economy’ leads directly to world war, as the desperate engage in acts of terrorism to destroy the State, while the State must squander its wealth in destroying the lives of the desperate. The failure to accomodate those left out by finding some way to bring them into the system has led directly to what we have now: the strongest national security state the world has ever known. A state surrounded by poor people, beginning to learn the crafts of effective warfare for lack of a better opportunity.”
A typical leftist analysis of foreign affairs that sees everything in terms of a flawed theory of economics (even though you suposedly don’t believe that economic analysis is a worthwhile pursuit). Let’s completely ignore the fact that the reason that the common people in the US, Western Europe, Japan, etc., have a standard of living much greater than that of the rest of the world, precisely because we are more free and more capitalistic. Let’s assume that all other people in the world see things through the same purely economic lens as leftists do, completely ignoring the fact that those mostly responsible for terrorism see the world through the completely different lens of Islam. And, of course, let’s assume that the big, bad, mean capitalists want to write of the mass of humanity, when in reality capitalism is the mass of humanity’s last, best hope! Your “analysis” is twisted and absurd.
“The economy? That can be whatever we make of it…”
No, it can’t. That’s why the laws of economics are called the laws of economics! They aren’t just suggestions, they aren’t just good ideas, they’re the law! *grin* If you think we can make of the economy whatever we wish by legislative fiat, then you are no better than the 19th century legislators who voted to make the value of pi equal to 3, because it would make calculations easier! That was absurd, and so is your 7-Up un-theory of non-economics.
“Prioritizing the strength of the currency is not, to me, the most sacrosanct value the system exists to perpetuate.”
Who is hurt the most by dwindling value of savings? The poor, whose idea of investment probably stops with the certificate of deposit at best, or the rich, who are savvy enough to invest their money in instruments that will protect them from price inflation? Even if your Keynesian theory of how to stimulate the economy were correct, which it’s not, it would result in either the poor getting socked by inflation, or increased taxation (to sop up the excess money) socking the poor (since we all know that taxes on the rich get passed down to the poor one way or another).
Also, which is better for the economy as a whole? Using money to hire people and thus make them productive, or using that same money to keep people sitting on their asses, being unproductive and letting their skills atrophy?
I think you’re attributing an incorrect motivation to the laid off work force. Put yourself in their position, Russ. You have a house, one or two cars and a couple of credit cards. Payments are due on all those, so you can keep the mini-economy that is your household going without entering into bankruptcy.
Suddenly the job you’ve invested all your time and energy into vanishes. And in its stead you get compensating payments of about half what you’ve been accustomed to spending. Plus, to pay for those checks you have to spend time on a weekly basis going down to the office to submit paperwork assuring them that you’ve been going out looking for work. It’s demeaning, it’s tedious and it takes away from the time you actually spend looking for work.
So would you, Russ, be willing to do all that just so you wouldn’t have to go back to full time work and full time pay? Or is this a weak case to support, that all American workers are naturally lazy and would rather see their checks be cut in half? I believe you would probably consider those payments a valuable bridge to get you to your next job, hopefully within a finite amount of time.
Michael
Question: do you think the existence of employment benefits increases or decreases the number of unemployed?
FOrget the implications of the answer or what I might be thinking, could you just please answer the question.
A valid question, Kid. In normal times (or good times) there are certainly a lot of people who work for a while, become eligible for UC, and then find a way to get fired (usually for incompetence) so they can skate for a while. Note though, that you can’t just quit your job. That renders you ineligible. And your employer won’t connive in misrepresenting you as having been laid off. Because then he has to pay. So it’s something you can’t do very often. You have to screw up badly enough for the guy to fire you.
And this all changes during a contraction. When jobs disappear, there’s NO one out there voluntarily leaving a good job just to draw unemployment. Everyone with a job is thankful, and hopes he can keep it until the downturn ends.
Those among us who qualify for extended UC really need it. They’ve been laid off for more than six months and still can’t find anything. They’re on the rocks. Note also that most of them accept semi-jobs paying half what they used to earn, or less. Engineers bagging groceries, people working part time in big box stores and the like. Because they prefer a crappy job to inaction and despair.
It’s not all gravy out there on the unemployment line. You should try it yourself some time, to see what the reality feels like.
Russ is about to tear you a new a**hole, Michael, and in a completely clinical, non-personal way. And I’m just saying this to maximize my savoring of the upcoming moment.
A valid question? Well, if so, it’s one that you rambled on about but still did not answer clearly despite my request – you are the biggest bullshitter I’ve ever seen on this site.
Your last two posts are contradictory, like they were written by different people. Or maybe you have a dual-personality disorder – in which case, you are number one and two on the bullshitter list.
“It’s not all gravy out there on the unemployment line. You should try it yourself some time, to see what the reality feels like.”
How do you know I’ve never been unemployed? You don’t. Yet you insist on saying such things – this can only be described as delusional, in that you constantly try to fit the world to you “arguments”.
The Kid:
[howls, howls of derisive laughter]
“Russ is about to tear you a new a**hole, Michael..”
Not that you’ve demonstrated. As usual, you’re very short on specifics– while I’m offering a large array of specifics, so you can have plenty of material on which to hang a coherent argument. It just tells me you’ve really nothing to say.
“A valid question? Well, if so, it’s one that you rambled on about but still did not answer clearly despite my request – you are the biggest bullshitter I’ve ever seen on this site.”
Kid, if any part of my answer is not clear, please let me know which part it is. I’ll be happy to clarify. My answer was, I thought, a complete one. You asked whether employment benefits increased or decreased the number of unemployed. And there’s no answer simpler than the one I gave you.
As has been said, every problem should be framed as simply as possible… but no simpler.
“Your last two posts are contradictory, like they were written by different people.”
Point out the contradiction(s). You might be right. But so far you haven’t shown it.
“How do you know I’ve never been unemployed? You don’t.”
Irrelevant, and a distraction.
“Irrelevant, and a distraction.”
A direct response to YOUR idiotic tactic! You just kill me. “Chutzpah” doesn’t approach the accurate term.
Always ask yourself, egomaniac, “how was it he knew who Obama was when I didn’t?” And then, after Russ soon lays you to waste, ask yourself, “how was it he told me about that before it happened?”
michael wrote: “I think you’re attributing an incorrect motivation to the laid off work force.”
I think you’ve misinterpreted the post of mine to which you’ve replied. I’m not attributing any motivation to the laid off work force. Note that I did not say that people are “sitting on their lazy asses”. Their motivation is not at all relevant to my argument. Even people who want to get back to work, and are involuntarily unemployed, are still essentially being paid to be unproductive when they are given unemployment benefits.
NB I apologize to anyone who thinks my refutation here was not a**hole-ripping and devastating enough. *grin*
“Even people who want to get back to work, and are involuntarily unemployed, are still essentially being paid to be unproductive when they are given unemployment benefits.”
Thanks, Russ. I think I’ve covered that in my response to you above, where I agree that the superior approach is to pay unemployed workers to perform badly needed work that private industry can’t perform at a profit. That is, unless the government pays them to perform it. Back-to-work programs like the CCC and WPA are what got us through the Great Depression. Countless families relied on this income, and the country as a whole benefited from the public works performed.
Needless to say, Obama hasn’t gone that route. Not enough of a socialist.
“I think I’ve covered that in my response to you above, where I agree that the superior approach is to pay unemployed workers to perform badly needed work that private industry can’t perform at a profit.”
I think you’re contradicting yourself, michael. If the work is so badly needed, then why couldn’t a business figure out how to perform it at a profit? Probably only if they can’t compete with government, which can waste massive amounts of money and get away with it. When businesses do that, they go under. But if these businesses didn’t have an unfair competitor to compete with, and if the work were really all that badly needed, I think a private, free market solution would be more feasible.
“Back-to-work programs like the CCC and WPA are what got us through the Great Depression. Countless families relied on this income, and the country as a whole benefited from the public works performed.”
I hate to break it to you, michael, but the makework programs like the CCC and WPA are part of what prolonged the Great Depression. The public as a whole may have benefitted from the public works, but could they not have benefitted more from a much shorter depression? As for countless families relying on the income, sure they did. If you rob Peter and Paul of all they own, and give (some) of that money to Paul and (some) of that money to Peter, then both Peter and Paul will rely on you for their income. This doesn’t mean they wouldn’t have both been better off without your intervention.
“Needless to say, Obama hasn’t gone that route. Not enough of a socialist.”
Somebody more socialist than Obama in the White House? Now that’s a truly frightening thought!
“NB I apologize to anyone”
Haha, you were just getting warmed up. I’m pretty satisfied so far, and I’m sure there will be more enjoyment to come, if you can stand it.
“I think you’re contradicting yourself, michael. If the work is so badly needed, then why couldn’t a business figure out how to perform it at a profit? Probably only if they can’t compete with government, which can waste massive amounts of money and get away with it. When businesses do that, they go under.”
Russ, the government IS a business. Not a particularly well run one, but a business nonetheless. And as it exists to serve the entire public, not just the shareholders, we consider any profit in the system to fit the definition of graft. We put such people in prison, or at least hound them from office when they seek to profit from us.
Our highway grid has been produced at less cost to the public than it would had it been built at a profit. Such a state of things would have given us highways not owned by us all but owned by the few. And the few would wring profits from the many forever, having such a monopoly on our ability to travel or to transport goods that they would soon take a piece of everything that used ‘their’ highway grid. The highways better serve us when they are a public trust, and the public pays directly for their maintenance without ensuring a profit for a parasitic group of overlords.
In fact much of your philosophy seems designed to get us used to the idea that we have a natural set of rulers, the owning class, and that everything that comprises our natural heritage should end up being ‘owned’ by someone, and then rented out to the rest of us. It appears very much to me to be a philosophy of elitism.
Michael wrote:
“Our highway grid has been produced at less cost to the public than it would had it been built at a profit.”
And you make this claim despite the fact that government funds can be endlessly confiscated from the people while private funds are limited to what is voluntarily invested?
Michael also wrote:
“The highways better serve us when they are a public trust, and the public pays directly for their maintenance without ensuring a profit for a parasitic group of overlords.”
By being built by politically connected contractors who see no detrimental effects to overcharging and who also have very little incentive to do a quality job?
Michael also wrote:
“In fact much of your philosophy seems designed to get us used to the idea that we have a natural set of rulers, the owning class, and that everything that comprises our natural heritage should end up being ‘owned’ by someone, and then rented out to the rest of us.”
And your solution to this apparent problem is to create a system of rulers with the power to forcibly confiscate our wealth from us and force us to do things against our will?
“Russ, the government IS a business. Not a particularly well run one, but a business nonetheless.”
No, it’s not. A business exists for the purpose of making a profit. A government should not (although many politicians seem to think so, given their fixation on increasing government revenue). A government should create the framework necessary for business (and all other free interactions between people) to exist, but it should not be a business itself. If you believe that, ironically, you’re closer to the anarcho-capitalist philosophy than you think!
“Our highway grid has been produced at less cost to the public than it would had it been built at a profit. Such a state of things would have given us highways not owned by us all but owned by the few. And the few would wring profits from the many forever, having such a monopoly on our ability to travel or to transport goods that they would soon take a piece of everything that used ‘their’ highway grid. The highways better serve us when they are a public trust, and the public pays directly for their maintenance without ensuring a profit for a parasitic group of overlords.”
Really? How do you know that? How do you know that “the few would wring profits from the many forever”? After all, aren’t human actions completely unpredictable, and thus not subject to logical analysis?
Ignoring for the moment the inconsistency of your position, what about competition? Businesses have to compete with one another, which keeps costs down. Worst case, if a road company got out of control, people would move away. Also, businesses try to earn profits, and so try to keep costs down. A government might do something like doing unnecessary work in order to “stimulate” the economy, which would raise costs (and which you yourself have argued for). It seems that there are some arguments for privately-owned roads as well as for publicly owned ones, eh? So why not try to “test” these competing theories by allowing certain areas to have private roads? Or are you only for “tests” when they test out statist policies?
“In fact much of your philosophy seems designed to get us used to the idea that we have a natural set of rulers, the owning class, and that everything that comprises our natural heritage should end up being ‘owned’ by someone, and then rented out to the rest of us. It appears very much to me to be a philosophy of elitism.”
It’s true, I don’t think that elitism is entirely a bad thing, as long as the “elite” are an elite of true merit. After all, which is worse, having the world run by people who are actually capable of getting things done that can benefit us all, or having it run by a medicracy whose only qualification for holding office is that they were able to sucker a bunch of un-educated, economically ignorant couch potatoes into voting for them?
“Private road associations manage two-thirds of the road network in Sweden. A 2001 government-commissioned evaluation found that the cost of operation and maintenance of private roads was often less than half the cost of publicly managed roads.
However, the same article notes that the government plays an active role in administering these roads.”
http://en.wikipedia.org/wiki/Private_road#cite_ref-1
“Private highways are common in Asia and Europe; in addition, a few have been built in the United States on an experimental basis.”
http://en.wikipedia.org/wiki/Private_highway#Asia
In brief, it is not necessary, at least, that all the ‘roads’ be owned or administrated by the government.
“Really? How do you know that? How do you know that “the few would wring profits from the many forever”? After all, aren’t human actions completely unpredictable, and thus not subject to logical analysis?”
Russ, by your own definition a business only exists to make a profit. So if a business were to run a road it would of necessity and by definition do so at a profit.
Would it freely choose not to do so forever? I think not. Your reasoning is forced.
“Ignoring for the moment the inconsistency of your position, what about competition? Businesses have to compete with one another, which keeps costs down.”
But with a road there is rarely any such thing as competition. If there is one road between points A and B, there’s no reason to build a second one. So the existing road holds a monopoly until it becomes saturated with traffic. And in that case, road B, designed to alleviate congestion, would have few users if it cost the user a toll for each use.
Common sense tells us that if construction costs are comparable, a road built on a nonprofit basis will always cost less than one built on a for-profit basis. Maybe that’s why in the United States there’s nearly no such thing as a privately built and maintained road. People would freely choose not to use them.
“Russ, the government IS a business. Not a particularly well run one, but a business nonetheless”
michael complains that Russ is too literal with his language. This is, to michael’s immense credit, not an accusation that can be levelled at him.
I mean, saying the government is a business is like saying a league competition is a knockout competition. Not only are they not equal, but they are in fact the mirror image of one another in a fundamental aspect of their operation.
Anyone who wants to use the same word for
- an organisation which relies on customer satisfaction and voluntary purchases/usage for its revenue
- and organsation just threatens you with jail if you don’t use them
is, by design, destroying debate.
No one works for money. We all work for the stuff money buys. The fewer people working = the worse off we are. Like it or not, we still live in a barter system. Giving away money just means we have to give away that which we produce for nothing in return. Or in other words, we give away a portion of our product to someone else who effectively turns around and tries to trade it back to us. Why would you sell what you just made for the same item you were forced to give away.
The best way to understand economics is to eliminate the money aspect. We all trade what we make for what someone else makes. It doesn’t take much of a genius to figure out that allowing one person to make nothing while taking from a now smaller pool of final resources makes everyone worse off in the end. That doesn’t produce jobs or prosperity.
“No one works for money. We all work for the stuff money buys.In fact nearly all our most successful income earners have long passed the point where they need more money just so they can buy more stuff. You can get all the stuff you need with only a few million bucks. And with the momentum having long passed from industrial production to financial chicanery as a path to wealth, we now have bond traders pulling down one billion dollars a year. Obviously, they accrue more and more money just as a way of keeping score.
Increasingly, that’s where all our money has gone. Remember back in 2002, when it was calculated that the country had lost $7-8 trillion in accumulated wealth? All of that ‘lost’ money represented bad investments that someone traded to investors in exchange for their cash.
Who was it that ended up with all that cash? It certainly didn’t enter the consumer economy. We’d have noticed. And the same is true with our latest loss of accumulated wealth, approx. $13 trillion by 2008. Someone skiffled all that cash out of investors’ pockets and into their own. It’s not out there buying new Fords and Chevies.
“Who was it that ended up with all that cash? It certainly didn’t enter the consumer economy. We’d have noticed.”Wow. Think for a second, Michael. The money that is lost in bad investments is that which would otherwise have been used in some other way (even if it “sat” in a bank account, the bank would have loaned it to someone, thus it would have still been useful). So, that money was already in the economy! Money can’t be in the economy twice at the same time.
The only money that isn’t “in the economy” is that which somebody buries in Mason jars in the back yard.
Russ, it does make a difference just where the money lands. And I will maintain that when a handful of bond traders manage to scoop up dollars in the billions, that not much of that money actually ends up in the consumer economy, the economy of washing machines, sports cars and electronic gadgetry. The mass of it will stay in the clouds, wheeling and dealing in abstruse concepts like equity derivatives, foreign exchange derivatives, interest rate derivatives, commodity derivatives and credit derivatives. This money virtually never touches ground, where it might create the occasional job. (It also, BTW, is not buried in Mason jars in the back yards of the big boys. New York brokers have balconies rather than back yards.)
To me this managed yield of speculative money, apparently creating more of itself by some arcane magical art, is a parasitic growth on the economy proper. It sucks more money in from the hopeful suckers than it bestows to them in actual, realized profits. Whereas it’s the sales of those nuts and bolts one produces, and the purchase from one’s proceeds of other material goods, that (hopefully) makes the average American a prosperous and contributing member of the middle class.
Please feel free to contest me. I’d like to hear and consider your very best argument. Because all the arguments I put forth are derived from persuasive ones I’ve either heard from someone like you, researched and become convinced of, or ones I’ve worked out on my own.
michael,
Instead of quibbling over details, I’ll assume, for sake of argument, that everything that you’ve said is correct. So, what is the way out of this conundrum? First, let’s ask, why are investors currently investing in the “bubble economy”, rather than the one that actually produces things and employs people? It’s because they fear inflation and want their wealth to be protected from that, so they’re investing in whatever they think is a good investment at the present time. And they do not currently invest in real productive businesses that employ people, because they do not currently view them as good investments. What is the solution? Is it to prevent people from protecting themselves from inflation? No. The solution is to change the business enviroment so that productive businesses are once again good investments. More taxes, more regulations on those businesses, making those businesses shell out money for unproductive people, and “stimulus” that merely moves money around from investments that the market thinks is good to investments that politicians think are good, is not the way to do that. The way to do that is to reduce taxes, reduce regulations, and otherwise reduce the drain on productive businesses so that they can hire people to produce real wealth once again. Then, those people can use their salaries to buy products, not government handouts. And while we’re at it, we could reform banking regulations so that the banks aren’t afraid to loan out money to these businesses, stop printing money that does nothing in the long run but cause price inflation, and get the Federal government out of the housing market. That’s the cure, not more of the same poison that caused the sickness in the first place.
“So, what is the way out of this conundrum? First, let’s ask, why are investors currently investing in the “bubble economy”, rather than the one that actually produces things and employs people? It’s because they fear inflation and want their wealth to be protected from that, so they’re investing in whatever they think is a good investment at the present time. And they do not currently invest in real productive businesses that employ people, because they do not currently view them as good investments.”
Okay, I hear you. So what would be the perfect investment?
A: Gold.
It serves no function, it employs no one, it does no economic work. It just sits there. It’s suitable for sticking under your bed. And, last but very far from least, it makes the guy who sold you the gold very rich on dollars.
It’s the perfect investment.
In reply to Michael, a knowledgeable Austrian who buys gold does so because he understands that gold is historically the commodity of choice for money purposes. He recognizes that all those dollars he sold to the entity which formerly owned the gold will soon been inflated to the point of worthlessness by the very government that created them. Therefore, Michael, the knowledgeable Austrian is simply transferring the “money” (value) he has accumulated from a very weak and unnatural store of value (dollars) into a much more stable and historically-proven store of value (gold).
You contend that he should instead purchase the stock of productive entity, which would itself be a purchase of a store of value. However, in this environment, the astute Austrian does not have any faith in any aspect of our current economic system, for all the reasons outlined by Russ above. But the most significant of these reasons how the refusal to allow for a natural rate of interest has resulted in a severe incoherence of the information exchanged between producers and consumers, and therefore in the gross distortion of the structure of our economy. Producers have long been left to run around like chickens with their heads cut off, but nevertheless as headless chickens with the ability to procure massive loans. So in the end, government policies and money creation beget distortion and inflation, which begets more distortion, and so on and so forth until the astute Austrian recognizes that now is the time to get their wealth into the historically prove store of value that is gold. Then, when our current system collapses in on itself, the astute Austrians will have his hands on the “money” to be invested in what will be our new “emergent” economy.
“In reply to Michael, a knowledgeable Austrian who buys gold does so because he understands that gold is historically the commodity of choice for money purposes. He recognizes that all those dollars he sold to the entity which formerly owned the gold will soon been inflated to the point of worthlessness by the very government that created them.”
Translation: gold is the medium of exchange that was virtually abandoned by all nations under the Bretton Woods Agreement of 1945, and later agreements replacing gold with special drawing rights. Under the current system, continually undergoing revision, the dollar still manages to remain the world’s reserve currency, although it is backed by no gold. Or even any absolute rule book governing its generation, use and retirement, other than the rules adopted by the Federal Reserve.
There’s nothing standing in the way of the dollar’s total collapse… except, of course, the fact that all the world’s nations still like it better than whatever comes next. And use it to denominate their life’s savings.
Gold was tried at length. And was found to not meet the needs of current commerce. It had a way of precipitating crises in countries that thought themselves invulnerable until crisis struck them and their reserves were drained away– a state which central bankers did not enjoy.
We rely on gold to balance our affairs to the same degree that we rely on the horse and oxcart to meet our transportation needs. Various economic schismatics do, however, like to stockpile the stuff. So for them, there still remains a niche market in gold bars and coins. And demand is strong enough that in recent years the price in dollars has gone up and up.
Buy it now, while supplies last!
michael wrote:
“A: Gold.
It serves no function, it employs no one, it does no economic work. It just sits there. It’s suitable for sticking under your bed.”
Exactly, except for one little caveat. Gold does serve a function, and a very useful one at that. Gold preserves purchasing power. That’s why you can stick it under your bed and let it just sit there. Because you know that the purchasing power of the gold will not dwindle over the years due to monetary inflation if you do so, as would happen if you stuck a shoe box full of paper money under your bed.
Do you think it’s socially irresponsible to invest in such a nonproductive good? Well, then why do you favor monetary policy that encourages exactly that socially irresponsible behavior? There’s another example of your logical inconsistency.
That isn’t wealth. That is what we WANTED it to be worth. There’s a major difference between value and the ability to trade it for cash. The “cash value” of all the world’s assets vastly exceed the amount of cash, pretend credit, and other monetary media by a gigantic margin. When we “lost” $8 trillion, all that vanished was the expectation that we would get $8 trillion more when those assets were sold. The asset still exists, the only change was the number of little green pieces of paper needed to trade for it.
The only way we can legitimately lose any value is if the resources is used up or the asset is physically destroyed. Just because I decided I wanted to get $50 for that baseball card I had in my attic yet the best I could get was $25 didn’t mean I “lost” $25 in value. I just had an over-inflated expectation of what it would trade for.
JM, I think I was describing the way the shell game actually works. It’s a way to vacuum up OPM (other people’s money). I did not assert, and in fact was very careful not to, that “wealth” (the word I used) was equivalent to cash. It’s not.
Instead an investment banking whiz comes up with some novel expression of value, usually a derivative based on up-or-down the motion of some real or abstract commodity. And he sells his concept to a person with a sum of money in his pocket.
Said money moves from Pocket A into Pocket B (the derivative investment), and the broker takes his portion.
Pocket B, depending on the direction reality actually takes (let’s say the yen moves slightly over time relative to the Euro), either distributes some of this money into Pocket C or takes a portion FROM Pocket C. And there are times when it rolls up all lemons, an investment worth very little or nothing.
That’s when the investor thought he was getting a yield based on home mortgages he was assured would ratchet up into handsome rates of return. And what he really got was possession of unsalable used houses, vandalized, with mosquitos in the swimming pool, crack smokers in the parlor, and worth nothing on a now-glutted market.
Sure, technically the money he invested is still there. But it’s been spent. And the people who got his money spent that as well. No one got good value in exchange for what they spent that money on… except the broker. He cleaned up big time.
How to describe this? It’s a misallocation of scarce resources. A distortion of the way markets should operate. I would agree with you that someone benefited. The carpenter who built the house that ended up on the scrap heap made some income. But it was toward no productive end. The lender botched his part of the enterprise, the ratings company that gave it an AAA lied brazenly, and the broker acted foolishly or cravenly in touting the product as a sound investment.
michael,
“…our latest loss of accumulated wealth, approx. $13 trillion by 2008. Someone skiffled all that cash out of investors’ pockets and into their own…”
You find him and I’ll help you hold him upside down so we can shake out his pockets! We’ll split the money ’cause I’ll supply the truck.
Cordially,
Don
Hi Don. See my comment just above yours. This money went to a cast of characters, some of whom earned it honorably (the carpenter, the developer, etc). Others were acting as con men and touts. Look for much of the ill-gotten gain in the pockets of RE appraisers, lending officers, the heads of lending firms, Fannie and Freddie (who backed all those bad bets), the bond ratings agencies who were working just down the hall from the bond traders who sold this crap, and the television commentators who convinced the mob that we all had the chance to become permanently prosperous, and that these were all good tickets to the gravy train. All shared in promoting the folly and profited from it.
The losers were not just those impetuous investors who failed to practise their own due diligence. They include all of us who lost work and income when the economy contracted. So then, in sum, many little guys lost big time. And a relative handful of very big guys got somewhat bigger.
Don, good on ya, nasty but not nasty.
And Michael, where have you been all this time?!? We’ve needed your insights so! Putz.
Love,
Extreme Hard Right Member
Hmmm, I guess that late night gig is out of the question now. Oh well, I’m too old to stay up that late anyway.
I am still waiting and hoping for a sufficient answer to my question of exactly why those at the helm of the government thought it in our collective best interest to provide the bailout to those people michael describes as crooks. He even correctly notes that the bailout “money” sits in a ledger with the sole purpose of making it look to the casual observer that those same crooks are solvent. Maybe I wouldn’t be so bothered if it had actually worked and the pain had stopped, but it clearly hasn’t. Since michael seems to be this sites biggest advocate of the government, I was sort of expecting him to be up to the task, but I will be grateful to anyone who can give me a satisfactory answer.
Cordially,
Don
“I am still waiting and hoping for a sufficient answer to my question of exactly why those at the helm of the government thought it in our collective best interest to provide the bailout to those people michael describes as crooks.”
Don, as you will recall, when the Global Meltdown was presented to us as leading to the collapse of the world economy unless we did something to stanch the flow, the national consensus was that we should bail the varmints out, knowing full well that they were culpable in creating the mess. And, that we should re-create those barriers preventing this kind of thing from happening over and over again by initiating legislation something like what we enacted in the wake of the last general collapse, that of October, 1929.
We, the responsible public, assumed that the money would be handed to the imprudent investment bankers with very serious strings attached as to its use. Well, we were very wrong about that. (I do notice in passing that most of the people in either administration who formulated the terms of the bailout were on loan from Goldman Sachs. Not cool.)
And then we also assumed that a financial regulatory package would be passed with real teeth in it to prevent another, similar meltdown. Again, we were wrong. The same cast of players worked over the bill’s language very carefully. We’ll still be living in their world, not them in ours.
The question is: were we better off to have gone that route, or would we have been better off just to watch the whole shooting match crash and burn, then do something new and useful with the pieces?
A majority of Americans, even knowing everything we now know, would have said we had little choice. Had we just stood by while the dollar went down in flames, our collective net worth might now be something like zero, and all the bad banks around the world might have been just a series of collapsed dominos.
Would we then have been ahead of the game, with all our life’s savings wiped out but a clean slate in front of us? You be the judge. Everyone in the country gets one vote, and yours is as good as Pee Wee Herman’s.
“He even correctly notes that the bailout “money” sits in a ledger with the sole purpose of making it look to the casual observer that those same crooks are solvent.”
At least it’s not out there inflating the economy. And in time, most of these loans will be coming back into the Treasury. Hopefully, to help retire our Debt.
“Maybe I wouldn’t be so bothered if it had actually worked and the pain had stopped, but it clearly hasn’t.”
Amen, brother. Nothing trickled down into the economy, other than what bank officers stuffed into their own pockets. It all stalled at the bank level, and no useful work was done.
“Since michael seems to be this sites biggest advocate of the government, I was sort of expecting him to be up to the task, but I will be grateful to anyone who can give me a satisfactory answer.”
Don, the thought that I’m a big advocate of our government as it is presently constituted is a gross error– one that all of you would prefer to make rather than to take me more seriously. Innumerable times now, I’ve taken pains to point out that the government has been undermined to the point that it is nearly incapable of managing our national life. And that it desperately needs improving.
I merely uphold the idea that the best approach is to work with what we’ve got, as opposed to sweeping the slate clean and starting over. Because history tells us what comes in the wake of revolution. And it’s not something I want my grandkids to have to go through. France and Russia were quite enough to serve as cautionary examples!
Just great Don, you’re feeding him the rope beautifully. And his ego is so massive, his blissful unawareness of who he is dealing with so complete, that I have no fear of screwing up your job.
I am *compelled* to read his posts, it’s must-see stuff. “We, the responsible public”, had me in stiches. “one that all of you would prefer to make” a classic case of projection. And then, coming into his closer, one of his famous reversals and combo pattened incredibly crude strawmen.
michael,
“…the government has been undermined to the point that it is nearly incapable of managing our national life.”
I have not seen anything posted at this entire site that I could agree with any more than that statement.
“And that it [the government] desperately needs improving.”
I will share this sentiment too, for as long as we have government.
“I merely uphold the idea that the best approach is to work with what we’ve got, as opposed to sweeping the slate clean and starting over.”
I respect your position, and it is not an unexpected one. What does surprise me a bit however, is your ardent conviction, even after you have witnessed the mode of failure after failure of the government as you have pointed out cogently and frequently, that they will ‘get it right next time’. Your sentence contains a telling clause. It indicates that you may be accepting an assumption as fact without being consciously aware of doing so. You are one who has a high threshold of acceptance. But these things can sneak by any of us. History, especially after having lived some of it, tends to channel our thinking so as to avoid a repeat of disaster so it is understandable you would tend to think that our choice is one of either this or of that and the that option is out of the question. Does working to improve the government include trying to convince others that government is the best thing? Does it include identifying governments failings and suggesting and demanding improvements? While I wish you the best in your efforts, I find little joy in either.
For my part, I prefer to build, with clouds in the mind, ideas for better options for the future. For all our grandchildren.
Cordially,
Don
P.S. I’m still working on it.
Don: As usual, a thoughtful response. But have you ever heard of a civilization that improved after the government collapsed? If not, how can you be so confident that ours will?
To me, every historical example shows that when a government collapses, things get very bad for a very long time– until the strongest among the contending forces manage to establish the next government. In ten thousand years of history we haven’t seen a single example of a collapsed government being replaced by a loose collection of independent free spirits.
But you expect this to happen on the grave of the United States of America. It’s a very curious belief.
Why do you think that United States of America is a necessity in my plans? There are better candidates. And while there is no necessity for any government, like you say it would be preferable not to start from a bone pile. I have no control over that. I believe our government leaders have already covered that position. I’m working with the reality that I have, to perhaps create a better thing.
Cordially,
Don
P.S. Don ‘t misunderstand. I am a loaner, but this absolutely is not a project that depends on any one man, and most decidedly not me. You are always welcome to join the effort in any way you choose. As change from the role you are now playing, that is.
Michael, this is the nth time I’ve seen you suggest that because many of us are predicting the collapse of D.C. (dragging America down with it), that what we *want* is catastrophic collapse. Try this one out, try asking one of us what we want to happen (different libertarians want different situations). Then some of us may well no longer believe that you are a rank propaganda artist.
“Michael, this is the nth time I’ve seen you suggest that because many of us are predicting the collapse of D.C. (dragging America down with it), that what we *want* is catastrophic collapse.”
That’s odd… I’ve been reading some hundreds of comments here about your collective attitude toward the government. And none of them that I can see are in the form of mere prediction. Everyone hopes with all his heart (curiously, no women ever seem to post here) that the government will implode. And that there will henceforth be no control, no force, no coercion. That is, that there will be no such thing as governmental powers. And that there will be no taxes– thus no way to retain any governmental function.
These are all things you all urgently beseech your Austrian gods to visit upon us. Methinks you are being a wee bit disingenuous.
“catastrophic collapse”, dishonest and very amateur propaganda artist.
If you were a preacher and I told your parishioners they shouldn’t go to your church, you’d say I wanted them to burn in hell. You are so weak, I’m going to have to do like Jay and start arguing for you.
I agree. My favorite Austrian axiom is “something must be produced before it can be consumed”. Understand this and all else falls into place.
My favorite is “Man acts.” Because that IS the central praxeological axiom. Everything else is a theorem derived from this axiom and a few “empirical” assumptions about the conditions within which man acts.
Not in front of michael. He denies that it is axiomatic. He denies that it is true or self-evident. That sort of explains all the rest of his “ideas”.
This little ditty from michael is especially revealing…..
” michael July 19, 2010 at 3:32 pm
Donald: Here’s my problem. Economics, if it is to be regarded as a repository of established knowledge, has to conduct itself as a science. That is, it can’t just come up with theories that possess internal consistency and appear to explain things. It has to test those theories, to see whether they can be falsified. And all I’m doing is asking for that kind of testing.”
It’s really not that tough to get over a hangup like that.
michael – stop living in denial, or at the very least stop displaying that denial as an insightful scientific tool.
Seattle, I see my explanation didn’t convince. But man is not in fact the ‘measure of all things’. He’s merely one of the players on life’s stage. Man is merely another of the sentient and motile animals who inhabit the earth, born for no foreordained purpose other than to live and breed. And we act because it’s in our physiological makeup to act. We cannot wilfully stop acting until life is over.
http://en.wikipedia.org/wiki/Motility
We’re like the shark. We think about things in the same way a shark must constantly swim to keep breathing. Our minds continually provide us with rationales as to why we act. And so the products of our idle thoughts serve little praxeological purpose other than whatever we imagine they do.
It’s obvious michael isn’t a human being: He’s obviously a script who scours the internet, and making replies that have nothing to do with the current conversation, but uses words from the conversation to make it look like it’s making a legitimate attempt.
Once he’s become accepted he’ll start spamming advertisements.
michael,
” But man is not in fact the ‘measure of all things’ ”
The operative word in this is “measure”. What is “measure” (I mean as the part of speech that you are using it as)? Who measures? What specific attributes of the agent make it possible for the agent to measure? What does the agent measure? How does the agent measure? Since measurement is essentially quantitative, how is a number associated with a measurement? Since any number used in a measurement consists of 2 parts, a magnitude and a standard, with the specific magnitude of a particular measurement depending in turn on the magnitude that the standard itself represents, how does a “standard” get to become a “standard”?
How did the “foot” become the standard of length?
Down here where i live (in India, specifically South India), there are a lot of people who still buy flowers strung into garlands based on on a measure called a “muzham” (sorry if you can’t pronounce it right. It is a syllable peculiar to my language). A “muzham” represents the length measured from the base of the elbow to the tip of the middle finger with the fore-arm held at roughly right-angles to the upper-arm.
Another measure used is called the “jaan” (the “aa” is used to denote a sound that “a” makes in “artery”) which represents the length from the tip of the thumb to the tip of the little finger when the fingers are stretched to their maximum sideways away from each other in the plane of the hand.
Just trying to show you a couple of examples (across cultures) where men have set a standard of measurement that is related to the the length of a body part. In fact, even words like “big”, “small”, “tiny”, “huge”, “gargantuan”, “puny”….. they are all relative to us. What’s “puny” or “tiny” to you is huge to an ant.
The point simply is that, man is the measure of all things, not metaphysically but epistemologically.
It is also important to note that when you misinterpret simple statements the way you have, you make an ass of yourself.
Bala: We’re familiar with the measurement you describe, just not the word muzham. Most people think of it as a cubit. But it doesn’t add to the discussion. I was speaking of something totally different– not feet, inches of furlongs but rather the thought that man exists at the center of the universe.
You’ve had to contort the discussion into something it never was, just to be able to say “It is also important to note that when you misinterpret simple statements the way you have, you make an ass of yourself.”
” You’ve had to contort the discussion into something it never was, just to be able to say ”
No birdbrain. You misused the statement “Man is the measure of all things”. You interpreted (and still continue to interpret) it as “man is the metaphysical centre of the universe”. That interpretation indicates the fact that you are indeed a birdbrain. It actually means that “man is the epistemological centre of HIS universe”.
Your attempt to use your interpretation of this statement to show that man is not the only significant creature in the universe is, therefore, an utter failure.
Bala, you speak with such assurance that I really hate to correct you. But the notion that “man is the measure of all things” originated with Protagoras.
“In his dialogue Protagoras, Plato credits him with having invented the role of the professional sophist or teacher of virtue. He is also believed to have created a major controversy during ancient times through his statement that man is the measure of all things. This idea was very revolutionary for the time and contrasting to other philosophical doctrines that claimed the universe was based on something objective, outside the human influence.” (from the Wikipedia article)
You and I may differ on this, but I’m of the assumption that the universe has an objective reality, and thus a scientific basis. The opposing view, from what I’ve seen from its proponents, is that it’s all a matter of opinion, and one can spin it any way one wants. What did Protagoras actually think? We don’t really know, we don’t possess that many of his writings.
To me, the epistemological focus of all our knowledge should be on discovering the natural laws of the world and of mathematics– two somewhat separate realms within the whole. And then realize that within that universe man is just an animal, bent on his own temporary survival and propagation in a world in which he is certain to die.
If you’re a solipsist, and all this originates inside your magnificent head, what am I doing here?
“If…all this originates inside your magnificent head, what am I doing here?”
You’re Satan?
” You and I may differ on this, but I’m of the assumption that the universe has an objective reality, and thus a scientific basis. ”
I don’t know about the “scientific basis”, but I do not disagree on the “objective reality” part. There exists something out there that is independent of our consciousness and its attempts to understand that something.
However, where we disagree is on epistemology. Epistemology is the science of “how we know what we know”. Your statement
” To me, the epistemological focus of all our knowledge should be on discovering the natural laws of the world and of mathematics– two somewhat separate realms within the whole. ”
betrays your complete lack of understanding of what epistemology is. You are trying to dictate what epistemology should be, i.e., your whim. However, it is what it is – the science of how we know what we know. Man’s epistemology is defined by man’s nature, not by michael’s whim.
Further, what is mathematics? I define it as the science of measurement. It is the indispensable tool of our rational mind. Mathematics is created in our minds and exists only in our minds. Our mind evolves it as a means of knowing reality and forming concepts of reality. If this escapes you, I have little else to discuss with you.
Finally, there are no such things as “natural laws” that exist. Laws, by definition, are an expression our understanding of causality. Causality derives from the nature of the entities that constitute the universe. They too, like Mathematics, exist only in our minds. We develop “laws” including the laws of nature by observing existents in the natural world and their behaviour. The “laws” are just our attempt at establishing and quantifying relationships of causality.
So, your statement
” two somewhat separate realms within the whole. ”
comes across as complete gibberish. It fails to understand that both the “separate realms” exist only in our minds.
It is interesting to use this information to determine an objective (albeit crude) estimate of the effective unemployment rate. This can be done using the following ratio:
U=Δt/( ΔT+ Δt)
Here ΔT is the mean employment time and Δt is the mean unemployment time. ΔT can be estimated from the monthly average turnover rate, which between 2000 and 2008 was 3.3%. This implies that the average term of employment at a given employer was just over 131 weeks. Since the beginning of the “great recession” there has been an average equality between those quitting and those discharged/laid off. Assuming that 75% of those that quit find new work immediately, the effective average employment time becomes about 230 weeks or 4.4 years.
By this measure the jump in Δt over the last reporting period from about 32 to 35 weeks (and assuming ΔT has not changed significantly) implies a spike in the unemployment rate from 12.2% to 13.2%.
“Assuming that 75% of those that quit find new work immediately..”
That’s quite an assumption. Do you have sources for it?
The common use of “to quit” refers to a separation action initiated by the employee with respect to his employer. In all cases this implies that by quitting the employee will achieve a new state that he prefers over his present employment. The alternatives include retirement, temporary leisure, re-training, or a different mode of employment. (I include starting one’s own business as a new mode of employment.) Given the low rate of savings within the United States, the majority of prospective American quitters will not quit until they have a new line of employment set up. Hence anyone would be hard-pressed to argue that less than 50% of quitters quit without some firm (and immediate) new employment lined up.
My choice of 75% is hardly “quite an assumption,” as the derived unemployment rates are rather insensitive to the selected value. If I choose the 50% lower bound value discussed above, the recent spike in the inferred unemployment rate translates to a jump from 14% to 15.1%.
Do you find that result more to your liking?
“Do you find that result more to your liking?”
Thanks for the clarification, I do. We need to separate the actions of people who voluntarily leave their employment (and who do not qualify for unemployment benefits) and those who are laid off and who do qualify. The two categories are apples and oranges.
So then, the people who leave one job in order to take another do not materially affect the unemployment figures. Nor do they accept any public funds. They are extraneous to our conversation.
Yet there are numbers in which they appear. We have a background rate of jobs lost each month and jobs gained each month, which in many cases would include its share of job-hoppers. But when jobs lost start consistently outpacing job gains, we can see that as evidence of people being terminated involuntarily. And not finding other work. Which has been the case over the past two years.
We also have an even more pertinent category: the long-term unemployed. This number does not represent bums, people who don;t work. It’s people who were working but now are not. Take a look at this chart:
http://www.cbo.gov/ftpdocs/87xx/doc8770/10-31-LongtermUnemployment.pdf
Turnaround for 53% of them is under five weeks. These would for the most part be the voluntary job hoppers you speak of. An additional 39% are out of work from 5 to 39 weeks. These are the workers for whom standard unemployment benefits were designed. And 8% are hard core unemployed, still seeking work beyond 39 weeks. This is a category we only see when there’s a significant economic downturn, and widespread unemployment.
In normal times, most people looking for work can find it within a reasonable amount of time, unless they’re structurally unemployed, by the decay of the industry they were employed in. And those people need to go back to school before they can again become employable. Which takes both time and money. So helping these people return to a productive state is a worthwhile endeavor. Otherwise they become a burden to society.
We now have both that population and the population whose temporary status as surplus work force has extended to something beyond the 24 months and counting of this current downturn. That’s a lot of people.
the more you use government statistics the more stupid you look
What are we to make of your arguments, that make use of no evidence at all?
Hockey Stick Graph?
If we assume the slow and progressive growth of government (averaged out among the spurts and shrinks), the positive slope of unemployment duration has a pretty clear correlation. The more the government grows, the less productive that we become.
This most recent and monstrous growth is terrifying. Moreso, it is sickening.
The answer is obvious: Unemployment is caused by Global Warming!
Strange how unemployment starts to decline just as benefits begin to expire. When you pay people to be unemployed, you get a lot of takers for that job. Just a correlation? I don’t think so.
Yes, correlation. Coincidence? I think not.
Kid Salami = I am still laughing. Rock on.
I’d like to see this graph correlated with net capital investment.
It gets better. In addition to these graphs, other interesting news is out regarding taxes.
“The lowest bracket for the personal income tax, for instance, moves . . . to 15% from 10%. The next lowest bracket — 25% — will rise to 28%, and the old 28% bracket will be 31%. At the higher end, the 33% bracket is pushed to 36% and the 35% bracket becomes 39.6%. . .
The marriage penalty also makes a comeback, and the capital gains tax will jump. . . to 20% from 15%. The tax on dividends will go all the way from 15% to 39.6%. . .
Both the cap-gains and dividend taxes will go up further in 2013 as the health care reform adds a 3.8%. . .
Other tax hikes include: halving the child tax credit to $500 from $1,000 and fixing the standard deduction for couples at the same level as it is for single filers.”
Go to the link and read the rest.
http://www.economicpolicyjournal.com/2010/07/coming-tax-tsunami.html
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Welcome return visit
I think I need to brush up on my Chinese.
“Come see my scam pharmaceutical sites.”
I don’t read it either, but that’s pretty much what it says.
I’m surprised the armchair economists/philosophers at the mises institute have failed to show michael the light via some axiomatic logical superstructure that only they understand. Perhaps they will one day understand that their arguments are, in fact, shallow. And maybe the reason they are not accepted by mainstream economics is not because mainstream (new)(post)Keynesian economics is stupid and ignorant of the genius for which only they understand. But rather, proper economics seeks to understand the world we live in, not, like many hear believes, to discovery a superstructure of truth that must be deciphered and followed. I pity the men who devote themselves to such an endeavour because these men are not looking for good economics, they are looking for meaning and purpose in their lives via mans darkest and most dismal of sciences.
You are a fascinating character, Ian. More please. I really do agree with you in a way, the path to liberty can not be through economics.
Ian: “Main stream economists” are funded (prostituted) by “(new)(post)Keynesian” politicians.
May I suggest sipping the Keynesian kool-aid and not pounding it?
mpolzkill: If not through economics where is the path to liberty?
“If not through economics where is the path to liberty?”
I’ll be so bold as to answer this for Mr. Polzkill. The path to liberty is through a philosophy that provides values consistent with the well-being of human beings. Economics merely tells us that policy X will lead to outcome X and policy Y will lead to outcome Y. It does not tell us whether we should prefer outcome X or Y. Only a value system can do that.
Yes, thanks Russ. That’s the main reason (and described better than I could do). The minor one is that economics seems to positively attract about a hundred righties for every leftie, haha.
In order for economists to test a theory, they must first have a theory to test. In other words, science depends on a “superstructure of truth”; a theory. Without it, they are just rationalizing their prejudices and preconceptions (like michael).
Russ: Every comment I’ve made here begins with a theory proposed by the Austrians, addresses it in light of available evidence, and demonstrates its falsity. All I’m doing is applying the usual methods of analysis.
” addresses it in light of available evidence ”
Like I’ve told you before, to prove a theory false, you take on board all its assumptions, collect data that was generated with full compliance with these assumptions and analyse them to show that the results predicted by the theory do not follow. If even one of the assumptions is not valid, you are not refuting the theory you are claiming to.
In this case, the theory explains how a free-market economy works. All your data are from an interventionist economy. So, how can your “anal”ysis, based on data that does not come from a free market, claim to refute a theory that makes predictions in a free market?
Or are you saying that since we do not have a free-market, what’s the point of a theory that makes predictions in a free-market?
OK then!!! Ever tried peering into the mind of a bureaucrat or a politician and tried to figure out what’s happening inside? The day you can do that, you will have the theory that works. But then, you should be able to penetrate the mind of every bureaucrat or politician around, not just 1 or a few.
” and demonstrates its falsity. ”
As I have shown, the only thing false is your claim.
What I’m saying, Bala is that theory may well be consistent. It just doesn’t apply to real-world issues. And it purposefully leaves vital factors out of its neat, simple equations. It completely omits, for example, the role markets play in determining production.
Following Austrian Theory rigorously, you’d be well pleased to live in a world with no collective bargaining, no benefits for workers such as retirement plans or insurance policies, whether paid by the State or by their employees. You’d level the playing field by imposing minimal and flat taxes, so the billionaire paid no more on the dollar than the pauper. All social insurance would be eliminated. And the free, untrammeled operations of business would shoot sky high. Right?
Wrong. You’d have no customers for your wares, for the simple reason that there would hardly be anyone who could afford to buy them. So you’d drown in a sea of spare capacity. Everyone else’s loss would be directly responsible for your own loss.
We all hold one another up in this life. When millions of us start drowning, that’s just the first act. Your own buoyancy is imperiled by a lack of the number of customers required to keep you afloat.
” It just doesn’t apply to real-world issues. ”
Utter nonsense. It explains the effect of intervention as well as it explains the functioning of the free market. That you have not read it does not mean that it does not explain them.
” And it purposefully leaves vital factors out of its neat, simple equations. It completely omits, for example, the role markets play in determining production. ”
What???????????? Are you actually saying this? I am surprised no one else has pounced on this statement till date. What a jackass.
Please explain what factors Austrian Theory has omitted and what are the deficiencies in explaining the role markets play in determining production. Puhleeese!!!
” Following Austrian Theory rigorously, you’d be well pleased to live in a world with no collective bargaining, ……… Your own buoyancy is imperiled by a lack of the number of customers required to keep you afloat. ”
Bald, unsupported assertions that do not have even fig-leaf cover to protect them. Your stupidity is reaching its ultimate destination – insanity.
What Austrian Theory omits is the fact that market demand is the engine that drives the economy. Without demand there is no need to produce anything– for the simple reason that if you can’t sell your wares you operate at a loss.
Taco: This is the explanation that undermines your theory, A to Z. Economic growth, wealth and all the rest begin with a customer willing to exchange money for your wares. Absent the customer, there is no economy.
Therefore any economic plan must begin with finding a way to put money into the customer’s pocket. Normally we employ him to do work for us, and we pay him well enough to buy the wares he produces. Keep short-changing our employee and before long we can no longer sell our produce to him.
http://mises.org/Books/humanaction.pdf p.240
Not much difference.
” What Austrian Theory omits is the fact that market demand is the engine that drives the economy. ”
What you are omitting is the fundamental fact that before there can be a “demand’ for something, that something needs to be “produced”. Prior to production, there can only be a “need”. Even that need may not be perceived by those in need.
Just to take a simple example, before Carrier developed the air-conditioner, no one even knew that there would be demand for a device that kept a room at controlled temperature. There was no demand for room temperature control devices like air-conditioners. Of course people had a need and probably used other simple devices like fans. What you are missing out is that the apparent “demand” for fans was only a symptom of an underlying “need” for cooling which Carrier (smartly) figured out would translate into a demand for air-conditioners. That set him on the task of “producing” air-conditioners. Once he did, demand for them kicked in.
The same may be said of PCs. The CEO (or whatever top brass) of IBM once famously said “There will be a worldwide demand for 5 personal computers”. That did not stop those who produced PC’s from producing them and trading them.
In effect, demand follows production which in turn follows need identification.
It is only AFTER something is produced that it can be traded. It is only if it can be produced and traded can there be a demand for it.
That is why the primary issue in economics is “production”, i.e., supply and trade and not “demand”.
” Without demand there is no need to produce anything– for the simple reason that if you can’t sell your wares you operate at a loss. ”
Without production, demanding is nothing more than making arbitrary whims, just like a lunatic (which you seem to be).
michael,
You seem to be more of an a***hole than a birdbrain. Across 5 posts, I asked a number of questions. The first 4 posts contained questions that questioned the validity of your position and claims. You ignore all that and go on to the last that just requires you to lay out “action points”. It is a different matter that you have said enough for me to get into one more exercise of tearing you to pieces if I choose to.
However, the fact that you have not bothered to address all the fundamental criticisms of your position only reveals that you are not here to learn but to troll. I will still get back shortly with the promised “tearing to pieces”.
“What you are omitting is the fundamental fact that before there can be a “demand’ for something, that something needs to be “produced”. Prior to production, there can only be a “need”. Even that need may not be perceived by those in need.”
“Just to take a simple example, before Carrier developed the air-conditioner, no one even knew that there would be demand for a device that kept a room at controlled temperature. There was no demand for room temperature control devices like air-conditioners.”
Bala, I think you don’t mean “produced”. You mean “invented”. Before something like refrigeration was invented, it would have been impossible to demand it.
But look what happens when a market becomes saturated. Everyone who both wants an AC unit and can afford to buy an AC unit already has one. So at this point, it serves no purpose for the factory to continue making more units and putting them on the shelf.
They then retire plant and lay off employees. This is what I refer to as having reserve capacity. And my question to you is, how do you return that spare capacity to service, so the economy again runs at full speed?
You need more customers. No other way to put it. Our economy is stalled for a handful of reasons, but the main one preventing a recovery is a lack of spendable income in the pockets of potential consumers. THAT will make Carrier get back into production, hiring back the mechanics it fired at the start of the recession.
And the taxes they pay on their restored income are what will pay off the debts incurred by a government in kick-starting the process.
” Bala, I think you don’t mean “produced”. You mean “invented”. ”
No I don’t. I meant produced. Why do you have to twist it because it is inconvenient?
That apart, nothing in this nonsensical post of yours refutes the point that production precedes demand. So, you are yet to respond to my basic point, which is that the base of your “economic’ theory is a load of balderdash.
” And my question to you is, how do you return that spare capacity to service, so the economy again runs at full speed? ”
Hey birdbrain!!! Why on earth is this even a relevant question, that too for me to answer? To even ask this question, you have to presuppose that I can and should act to address it. So, you have assumed your “government action good” notion to prove that government action is good. That’s as circular and nonsensical as it can get.
The correct people to raise and address this question are the producers who have invested in production capacity. It is they who, as the owners of the production system, who need to decide what is to be done. Not idle arm-chair economists. Looks like this is too difficult for you to digest.
If the producers are the one to take the decision, why is the question only about ” returning that spare capacity to service”? Why not talk of redeploying the production system to something else more beneficial to the producer? Why not just let it go to seed of the choice of redeploying is plain impossible or economically infeasible? Why is it necessary that the original level of demand needs to be created again?
In effect, I am asking “What constitutes returning the spare capacity to service? In service of whom?”.
” , so the economy again runs at full speed? ”
What is “full speed’? How did you determine it? If you mean “as fast as it was in the past”, why is that justified? How does it account for the possibility that the economy at full-speed in the past was the result of a mass of erroneous decisions? What makes you so sure writing off the losses and restarting with a clean slate is worse than returning to the same “full-speed” economy?
It is indeed difficult to package as much stupidity into a post as you do, but then birdbrain that you are, you do indeed possess those special powers.
” Our economy is stalled for a handful of reasons, but the main one preventing a recovery is a lack of spendable income in the pockets of potential consumers. ”
This line is so stupid I really don’t know where to begin. But let me give it a shot.
What are the “handful of reasons”? If you understand ABCT, you will realise that the stalling of the economy is just the effect of the prior unsustainable boom characterised by massive and widespread malinvestment created by the excessive pumping of credit to the production system backed by inflation in the supply of fiduciary media.
Do you realise that ABCT essentially makes it clear that absent an institutionalised mechanism of credit expansion and monetary inflation to create bubbles of malinvestment, you will not have a business cycle in a Capitalist framework?
Are you saying that ABCT does not make sense? If so, could you please refute it?
So there go your precious “handful of reasons”. Now that that’s done, how did you come to the conclusion that what’s preventing a recovery is the lack of spendable income in the pockets of potential customers? How did you conclude that it is not because massive investments had earlier gone into things that customers today see little value in? Or at least see far less value in today than they saw in them at the height of the boom?
What about all the debt that people have accumulated? Are you trying to say that irrespective of the debts on their individual personal balance sheets, just putting a little money into people’s hands will get them to step out and spend? How did you come to this conclusion?
” And the taxes they pay on their restored income are what will pay off the debts incurred by a government in kick-starting the process. ”
ROFLMAO….. Thanks for the good laugh. You really are a good comedian.
” THAT will make Carrier get back into production, hiring back the mechanics it fired at the start of the recession. ”
Maybe Carrier overestimated the demand for air-conditioners because it saw too much easy and cheap credit flowing to itself and to its consumers. Maybe their decision to invest in as much capacity as they had done was wrong after all. Maybe to leave people who made wrong decisions to face the consequences of their mistakes is not a bad idea after all. Maybe this will avoid a situation where more good money is thrown after a lot of bad money.
Maybe all the mechanics they fired (and many more still on their rolls) should find alternate employment in some other industry where demand still exists. Maybe they should reassess their expectations and take the jobs they can find at the rates that the market is ready to pay them.
In short, maybe Carrier just deserves to fail and the resources locked up in that wasteful activity ought to be redeployed in other productive sectors of the economy.
How did you discount all this? Why is returning to the boom important? Does repeating the mistakes of the past help? Does giving alcohol to cure an alcoholic of his alcoholism help?
birdbrain, you truly are nuts!!!!
” Our economy is stalled for a handful of reasons, but the main one preventing a recovery is a lack of spendable income in the pockets of potential consumers. ”
And how do you propose to “put” spendable income in the pockets of potential customers? How do you even know who the potential customers are for what product? Are you proposing to put money in everyone’s pockets? How do you think you will do that?
OK! Granting you are not that stupid (birdbrain though you are), how do you expect to find the money to “put” in the hands of potential customers? I presume you mean government doing that, but given that government has and earns no money of its own and is currently running at a huge deficit, I see no option but creating money out of nothing and then spending it and distributing it through the banking system.
Since every new unit of money thus created devalues every pre-existing unit of money, how do you propose to justify this outright theft? Given that money creation by government and distribution through the banking system essentially enriches bankers and those closest to the banking system at the expense of retirees and other fixed income earners, how do you justify this massive wealth redistribution? Since you propose to distribute this newly created money through the banking system, you are in effect robbing Peter (the retiree) to pay Paul (the banker). How do you propose to justify that?
Given that massive credit expansion backed by creation of fiduciary media was in the first place responsible for the creation of the business cycle (that’s ABCT, incidentally), how do you suppose that this round of money creation will not create a fresh boom and a bust?
michael, you have just too many questions to answer. It was fun posing these questions. I am sure it will be even more fun reading your answers.
Hi Bala, I’m back. I can see it was fun for you, posing these questions. And I hope I’ll be equally entertaining in offering these answers.
“And how do you propose to “put” spendable income in the pockets of potential customers?”
The best way is through hiring them to do work that needs to be done but isn’t getting done in the private sector. We’re seeing a lot of road repairs now, some of them not really needed. (I was in a town yesterday that was jackhammering up all their existing, perfectly good curbs and putting in new ones.) But in most cases these infrastructure projects are performing productive work.
The second best way, but the quickest and easiest to administer, is by extending unemployment benefits.
“How do you even know who the potential customers are for what product?”
Doesn’t matter. If you boost the incomes of all potential customers (that is, poor people who would spend more except they can’t) they’ll buy a wide range of stuff. Probably more goods than services, although they’ll pay down consumer debt and catch up on their auto and home loans. Those are all good places into which capital might be injected. That is, places that would benefit from an upswing in demand for their goods and services.
“Are you proposing to put money in everyone’s pockets?”
Not at all. That’s what’s wrong with the current, Democratic approach. Far better bang for the buck when we only put money into empty pockets. Then it’ll all get spent immediately, and enter the consumer sector of the economy.
None of the already full pockets need more federal cash.
“How do you think you will do that?”
If I were the king I could implement an efficient program to boost the economy now and retire the injected funds later. But I’m not the king. And the governmental gridlock we now have will continue not being a very attractive prospect.
“OK! Granting you are not that stupid (birdbrain though you are), how do you expect to find the money to “put” in the hands of potential customers? I presume you mean government doing that, but given that government has and earns no money of its own and is currently running at a huge deficit, I see no option but creating money out of nothing and then spending it and distributing it through the banking system.”
Just as you describe. I presume you’re aware of how the Fed originates new funds?
“Since every new unit of money thus created devalues every pre-existing unit of money, how do you propose to justify this outright theft?”
Unlike the way it’s been done during the second Bush administration, I would get back to the old, responsible, Keynesian formula. Inject money during the lean times, inject enough to stimulate production through increasing demand, then as we approach full employment (I would say when we get to around 5% unemployment) begin withdrawing money through high taxation. That’s the path we were on in the late 1990s, before we were rudely interrupted by spending increases and tax reductions.
It’s not that hard to do. After all, in 1945 our government owed far more to its backers as an expression of GDP (then the GNP), and we paid off our war bonds easily, in only a handful of years. It takes political will… and if the sand-in-the-gears crowd will only pipe down, it can readily be done.
“Given that money creation by government and distribution through the banking system essentially enriches bankers and those closest to the banking system at the expense of retirees and other fixed income earners, how do you justify this massive wealth redistribution?”
Your best question yet. I’d replace every elected officeholder who helped frame the terms of the TARP bailout and the recovery program in ways that funneled the money to the very banks whose irresponsibility led to the mess we have today. And also the elected varmints who diluted the language in the current reform bill to the point where it’s nearly a joke. Members of both parties share responsibility for our tepid, unproductive response to the crisis. Voter education would be a good beginning.
“Since you propose to distribute this newly created money through the banking system, you are in effect robbing Peter (the retiree) to pay Paul (the banker). How do you propose to justify that?”
It was done over my strenuous objection– one no one heard because I’m just one citizen. I’d have put strings on the bestowal of huge sums of money, to ensure that it was all lent out in productive ways. I’d have set performance goals for every bank receiving emergency loans.
As you probably know, I’m a retiree, not a banker. I offer no justification for the way the plan actually went down.
Given that massive credit expansion backed by creation of fiduciary media was in the first place responsible for the creation of the business cycle (that’s ABCT, incidentally), how do you suppose that this round of money creation will not create a fresh boom and a bust?
Sorry, Bala, I didn’t answer your last question.
“Given that massive credit expansion backed by creation of fiduciary media was in the first place responsible for the creation of the business cycle (that’s ABCT, incidentally), how do you suppose that this round of money creation will not create a fresh boom and a bust?”
Balancing between boom and bust is like the circus performer, balancing on a board on a ball. It takes some fine tuning and good footwork. A strong, able executive would be needed, and an acquiescent Congress. That way he or she could work the gas a little, work the brake a little and get the economy to settle down.
Right now we don’t have the right people available. Those who could get the job done aren’t politicians, so they’re not in the game. That, in fact, is our best argument against an electoral democracy: the most important jobs are left to the politicians, that is, craven, insincere beauty contest entrants. They’re not given to intelligent and well grounded technocrats who understand the situation.
Several I’d entrust with the job: Joseph Stiglitz, Jeffrey Sachs, Robert Reich. They’d get the plane back on the ground with a minimum of hurt. Your candidates would certainly also get the plane back on the ground again… no doubt by crashing it.
The great one has spoken on ABCT.
“Balancing between boom and bust is like the circus performer, balancing on a board on a ball. It takes some fine tuning and good footwork.”
Great argument – you’ve convinved me, I shall burn my copy of Human Action when I get home. I especially liked your attention to detail and scrupulous avoidance of lame, tired and utterly inane (bordering on retarded) analogies.
The Kid:
[Howls, howls!] It’s the “bordering” that’s infuriating, isn’t it?
So, aggressively ignorant person (or liar), you are a retiree. What is your goal here (other than having fun)? To protect your pension, or to protect your grandkids from knowing how your generation ruined their lives?
Infuriating doesn’t even get close. He called me “obtuse” cos I kept asking him to define what money was
http://blog.mises.org/12905/milton-friedman-and-the-human-good/comment-page-1/#comment-693820
his rambling “defintion” proving that he’s never actually given it any thought. He is indeed one of that generation who lived on their grandchildren’s dime and yet has no idea he did it.
Well, he lived on “his* grandfather’s dime, and his father’s generation raised a passel of ignorant brats who more than any other slowly destroyed *our* children’s chances of starting out in a stable country. But yes, they ate the seedcorn.
We *are* pissed, aren’t we? I mean *pissed*. Maybe it’s primal fear that motivates his seemingly uncontrolable bleeting. If that’s so: don’t be *so* scared of me at least, I have great sympathy for those suffering from premature senile dementia. The worst you’ll ever get from me is harsh language. You stop propagandizing and I’ll have almost no problem with you. If I had the power, I wouldn’t even rip away your SS teat. Your corporatist masters owe you something.
michael,
You seem to be more of an a***hole than a birdbrain. Across 5 posts, I asked a number of questions. The first 4 posts contained questions that questioned the validity of your position and claims. You ignore all that and go on to the last that just requires you to lay out “action points”. It is a different matter that you have said enough for me to get into one more exercise of tearing you to pieces if I choose to.
However, the fact that you have not bothered to address all the fundamental criticisms of your position only reveals that you are not here to learn but to troll. I will still get back shortly with the promised “tearing to pieces”.
michael,
” And I hope I’ll be equally entertaining in offering these answers. ”
I don’t know what’s more entertaining – your dishonesty or your stupidity.
My responses will be in bits and pieces as I will be doing it in the middle of a working day.
” The best way is through hiring them to do work that needs to be done but isn’t getting done in the private sector. ”
What is this work that “needs” to be done but isn’t getting done in the private sector? Why is it not getting done in the private sector? Given that the private sector is inherently profit-seeking, could it be that the work does not yield a profit and hence the private sector is not doing it? Maybe the work isn’t profitable because those who “need” it probably do not see value in it and are hence not willing to pay for it? Maybe the “need” has been wrongly assessed? Maybe the “need” is something that the intended beneficiaries may, on their own, satisfy using other alternatives? Even worse, maybe the purported beneficiaries do not have this “need” at all. Maybe the “need” is only of those in government to use the muscle power of government to attain private benefit.
Just to give you an example, yesterday, when I was driving down a highway (out here in India), I had to drive up a flyover that was under construction. When I reached to top of the flyover, I realised something very interesting – that the flyover had nothing underneath that needed it to fly over. That’s when it struck me like a bolt from the blue as to why the flyover was being built – It makes it possible for politicians to line their pockets by awarding contracts based on the amount of bribe they receive.
That was quite an eye-opener, you see. In other countries, the precise and specific reasons may be different. The nature of the benefit accruing to the politicians could be different. However, that they benefit is undeniable.
All that apart, does this not mean that government is just taking on loss-making work that the private sector does not want to touch? Don’t you think this will blow a deeper hole in government finances and make that vaunted retirement of debt that much more illusory?
” But in most cases these infrastructure projects are performing productive work. ”
The real difficulty is defining the term “productive work”. By the Keynesian understanding, digging ditches and filling them up again is “productive”. A lot of sensible people would disagree, but then Keynesians know better, don’t they?
Bala, according to your theory, the simplest way to end this recession is for every factory owner to re-hire all his ex-employees, open up his shuttered plant and get them back to work! Once they fill the shelves to bursting with new goods, everyone will once again do their part by buying the stuff. Is this a fair summation?
I agree. It could very well work that way. So why don’t they do it?
Answer: they’re all waiting for someone else to go first, and take the risk. In a business slowdown, everyone suddenly gets very cautious. They don’t pull their heads out of their shells until the economy is up and running again. And their collective reticence is precisely the reason why we remain stalled until something tips the scale toward a resumption of normal activity.
Historically, that something has been an injection of spending, on the part of the only institution we have with the funds and the will to spend. That is, the government. If you don’t want that, we just have to wait the years and years necessary to force producers to again resume producing, and bankers to again resume lending. And as we saw back in the 1930s, that can take a very long time.
Unemployed heads of family, long after the federal dole has run out, just don’t have the luxury to wait that long. Their families starve in the meantime. Yet your prescription for this great ill appears to be to Do Nothing.
Do I read you correctly?
A very brief note: you also ask “What is “full speed’? How did you determine it?”
The economy will have returned to “full speed” once there is no longer any substantial spare capacity, nor any substantial unsatisfied demand.
” Bala, according to your theory, the simplest way to end this recession is for every factory owner to re-hire all his ex-employees, open up his shuttered plant and get them back to work! Once they fill the shelves to bursting with new goods, everyone will once again do their part by buying the stuff. Is this a fair summation? ”
No. It is not a fair summation. The simplest way is to leave it to every business owner to decide and make your decisions yourself as a participant in the free market.
In effect, my response is “laissez faire” (since I take you as a representative of the interventionist State).
” Answer: they’re all waiting for someone else to go first, and take the risk. In a business slowdown, everyone suddenly gets very cautious. ”
Nonsense. Just a stupid attempt to peddle Keynesian bullshit such as “animal spirits”. We’re talking of humans, incidentally.
” Historically, that something has been an injection of spending, on the part of the only institution we have with the funds and the will to spend. ”
Spending is not the way to prosperity. Production is. More Keynesian fallacies regurgitated mindlessly.
” If you don’t want that, we just have to wait the years and years necessary to……. ”
1920-21
” And as we saw back in the 1930s, that can take a very long time. ”
The 1930′s were a period of heavy government intervention to “save” the economy. That intervention prolonged the Depression.
” Unemployed heads of family, long after the federal dole has run out, just don’t have the luxury to wait that long. ”
On a free-market, they adjust their expectations and take the job that they get at the pay offered.
” Yet your prescription for this great ill appears to be to Do Nothing. ”
If you are talking of what I should do, then yes – Nothing. If you are talking of what the “head” of the family and other family members should do, they need to come back to reality and take what they can get.
” Do I read you correctly? ”
No. You insist on regurgitating your predigested nonsense all over the place.
” The economy will have returned to “full speed” once there is no longer any substantial spare capacity, nor any substantial unsatisfied demand. ”
What is substantial? There goes……
michael
well go ahead disprove the entire theory
from A to Z we are waiting for this one
In fact, Russ,I just now see the problem clearly. It’s a defining difference you and I have in our orientation.
I’m not here to present any grand economic theories. Nor am I here to ‘disprove’ the theoretical constructions of the Austrians. They exist in a pure universe of mathematics, where axioms and theorems abound, to be either mathematically proven or disproven according to the classical formulae of proof.
That approach, however, doesn’t workout here in the messy old organic world, the world of people who don’t always act rationally or according to the expectations of geniuses. Out here, eternal truths can’t be proven or disproven. It’s all relative, mushy and subject to change. And what I’m doing at mises.org is comparing the abstractions of the Austrian School with the reality of our working economic and political life. I’m testing those axioms and theorems as to whether they can be supported as being applicable to our situation. That is, whether they can either be verified or falsified in light of reality.
And so far, the Austrians aren’t doing that good. One problem is that they always ignore or overlook externalities that make the actual problem a lot more complex than the model of it they draw. In other words they make things simpler than they actually are. Parts of the puzzle that don’t fit the solution they have in mind are simply thrown out. All I’m doing is putting those inconvenient parts back in.
The other thing is that for consistency’s sake, they contradict the obvious realities of human behavior. That is, for example, they assume that the mere supply of a consumable will lead to its demand. But no one can make us eat turnips, no matter how many turnips show up on the market, or how low the price being asked.
Whereas human nature dictates that if lots of people show up in the marketplace one day waving their money and shouting for more turnips, the farmers will then decide to grow more turnips. It’s demand that stimulates supply, always. Not the other way around.
I could go on and on. But this is the flavor of my view of the shortcomings of the Austrian approach. Taken as an elegant construction in a mathematically perfect world, I’m sure the theory retains internal consistency. Thus there’s little sense in attempting to disprove it. But it’s not relevant to anything here in 21st century America.
We have, for example, no price inflation. Haven’t had a serious problem with that for the past thirty years. So the motivation to subjugate every other consideration to the curbing of a nonexistent inflation damages our perceptions of what really needs to be done. Yet at the same time, the abstract equation that any expansion in the money supply must equal something like inflation makes total sense. Do you see the problem now?
You should have a deeper understanding of Austrian economics before you criticize it, because you are waaaaaaaaaaay offbase.
“They exist in a pure universe of mathematics, where axioms and theorems abound, to be either mathematically proven or disproven according to the classical formulae of proof.”
Austrian economists don’t believe in using more than the most basic math in economics. They restrict themselves to verbal logic.
“One problem is that they [Austrians] always ignore or overlook externalities that make the actual problem a lot more complex than the model of it they draw. In other words they make things simpler than they actually are.”
If a model of economics is so “realistic” and “complex” that it can’t be understood, then it is no good to anyone. Simple models are useful because they are understandable, and because those understandable models can then be used as baselines for more complicated models where the simple model is perturbed by complications.
“That is, for example, they assume that the mere supply of a consumable [i.e. turnips] will lead to its demand.”
No, they don’t. They assume that an increased supply will lead to a lower price, given a certain demand, than a smaller supply would. They don’t predict that people will suddenly develop a hankering for turnips. In fact, many Austrians shy away from predictions at all for just this reason. They prefer to say that if supply zigs, and if demand zags, then the prices will do such and such.
“But it’s not relevant to anything here in 21st century America.”
Austrian theory is based on pretty generic assumptions that apply to all modern economies, certainly including our own. Really, you need to read more, before you criticize Austrian econ. I am by no means an expert on the subject, but I am head and shoulders above you with respect to the subject. Wow.
“Haven’t had a serious problem with that [price inflation] for the past thirty years.”
Say what?? You are aware that a mere 10 years ago, at the beginning of Bush’s tenure, gasoline was $1.46 a gallon? 30 years ago, according to a quick Google lookup, gas was $.79 a gallon. The average price of a house was $13,650, 30 years ago, compared to $174,000 now! What a laugh! Where’s your respect for the evidence?! In fact, if you bother to go further back, in the last 100 years, about equal to the time we’ve had the Federal Reserve System, inflation has been such that a nickel in 1910 could buy you a dollar’s worth of goods now. In other words, savings tucked into a mattress would be worth a mere 5% of what they should be. If you bothered to actually look at the facts, you’d know that they completely corroborate Austrian theory.
” If you bothered to actually look at the facts, you’d know that they completely corroborate Austrian theory. ”
Looking at the long run, are you? How naughty!!! Don’t you know that in the long run, we are all dead?
Hah! Cute. Doesn’t putting your tongue in your cheek like that hurt?
Yes, in the long run, we are all dead. But maybe our grandchildren will not be, so it would be nice to leave them a civilization worthy of the name, would it not?
Russ,
I really admire your patience with this guy. The more I read your posts, the more I learn. Thanks.
Russ: It’s hard to keep this cumbersome thread straight, but about forty comments back we had this exchange:
“Should be”, compared to what?”
“By “should be”, I mean of course what the value of peoples’ money would be if much of that value was not essentially stolen from them by price inflation. In other words, “should be” is the purchasing power of money with 0% price inflation, or at least close to it.”
Good question. What “should” a unit of exchange be worth? I would maintain that it should be worth that rate that affords maximum utility for its users.
And the consensus we’ve seen among a number of recent money managers is that a strict ‘zero’ rate of inflation is not optimal. The interest rates required to keep the rate at zero are confining enough that they constrict commerce, leaving us a little more on the “hard money” side than on the “easy money” side. It leaves us with unused capacity, including unused workers not working.
The rate they find optimal is one of no greater than four percent, ideally two or three percent. That makes the money flow freely but does not materially impede those whose incomes are relatively fixed. That is, not unless they plan to be fixed for one hundred years.
In fact I don’t think there’s anyone any more who puts their savings in a mattress– or even an old-style bank savings account. Everyone understands that money gets old and has to be refreshed, in the same way that vegetables get old in the crisper, and no matter how long you try to keep them, you have to buy new ones every so often.
Another way to look at it is that the value of a unit of currency is a reflection of the total size of the economy divided by the number of units in circulation. That’s not the way we do it here, but it seems sensible.
However that would only be the case in a society where we made our decisions in an atmosphere of complete knowledge. And that’s not the case, to put it mildly. Instead, prices go up whenever a provider of goods or services sees such demand for his goods that he thinks he can get away with hiking the price. So if there’s too much money wanting to get invested in stocks, the Dow Jones goes up. If too many people are buying almonds, the prices go up. And so forth.
Right now, of course, this is not a serious concern. We have so much unused capacity in our economy that task number one is to put some of it back to work. And that means coming up with more money and putting it where it will do some service for us. That is, in the pockets of people now desperate for work.
“What “should” a unit of exchange be worth? I would maintain that it should be worth that rate that affords maximum utility for its users.”
But isn’t maximum utility for a “user” (i.e. owner) of a “unit of exchange” obtained when that unit of exchange maintains its purchasing power? I certainly can’t see why a person would want his money to lose value!
“The interest rates required to keep the rate at zero are confining enough that they constrict commerce, leaving us a little more on the “hard money” side than on the “easy money” side. It leaves us with unused capacity, including unused workers not working.”
Yes, crazy bubble-induced spending may stimulate irrationally exuberant “commerce” in the short term, but it also stimulates business cycles in the long term. The easy money is what causes malinvestment, which eventually causes recessions, which cause unemployment. Wouldn’t steady employment be better for the common worker than cycles of feast and famine?
“The rate they find optimal is one of no greater than four percent, ideally two or three percent. That makes the money flow freely but does not materially impede those whose incomes are relatively fixed. That is, not unless they plan to be fixed for one hundred years.”
Huh. Let’s see…. Let’s say that a reasonable life expectancy after retirement is 20 years. That’s not uncommon nowadays, especially as many people retire earlier. So, if the inflation rate is 3%, then over 20 years…. 1.03 ^ 20 = 1.81. For 4%, 1.04 ^ 20 = 2.19. Let’s average them out and call the result 2. So that works out to 100% inflation over the 20 years, which means that a person’s money would be worth half as much at the end of the 20 years as at the beginning? Call me crazy, but it seems to me that this could indeed “materially impede” the lifestyle of a retired person, even if he doesn’t live to the ripe old age of 165. Even a rate of 2%, which intuitively seems low, results in 81% inflation over 30 years, which is also a quite possible lifespan. That means that a person’s savings will slowly dwindle to 55% the purchasing power that they once had, all the while the person’s costs of living are probably increasing due to increased healthcare costs. This is serious. Actually, it’s criminal. We’re literally robbing our grandmothers and grandfathers (or mothers and fathers for those of us who are older), in order to try to prop up our lifestyles. The really sad part is that this attempt to engineer prosperity won’t work. We’re beggaring our ancestors for nothing.
“In fact I don’t think there’s anyone any more who puts their savings in a mattress– or even an old-style bank savings account. Everyone understands that money gets old and has to be refreshed, in the same way that vegetables get old in the crisper, and no matter how long you try to keep them, you have to buy new ones every so often.”
I know older people whose investments stop at certificates of deposit. And considering how many people I know who also lost half their retirement savings in “professionally” managed funds, such as 401(k)s, I’m not so sure that the old folks at home are the stupid ones. If even professional money managers can’t keep their investments from tanking, what luck is an amateur supposed to have? And when you are older, you don’t want to risk your money in investments that might lose principal in the short term; you need that money to live on. Unlike younger investors who care less about fluctuations and more about long-term trends, an older person needs low-risk, steady-return investments.
“So if there’s too much money wanting to get invested in stocks, the Dow Jones goes up. If too many people are buying almonds, the prices go up. And so forth.”
Ummm, yes. That’s how the price system works. If there is an increased demand in widgets, then the price goes up. This gives an incentive for producers to produce more widgets. Eventually the supply and demand for widgets equilibrates. This is how the system is supposed to work. And thank goodness it does, because history shows that central planning of widget production (such as in Soviet Russia) doesn’t work nearly as well. The price system works as a huge neural network that dynamically reallocates scarce resources as demands and supplies change, and it does so much better than planning ever did or probably could.
“We have so much unused capacity in our economy that task number one is to put some of it back to work. And that means coming up with more money and putting it where it will do some service for us. That is, in the pockets of people now desperate for work.”
I believe that you have your heart in the right place. I want people to get back to work, and the economy to get back on track, every bit as much as you do. I just disagree on what is the best way of doing that. Trying to stimulate the economy by using makework to increase demand is not the answer. It may put money in the pockets of the unemployed in the short term. But it also delays the recovery in the long term, IMHO.
I see you’re keeping your end of the debate in good working order, Russ.
Me: “What “should” a unit of exchange be worth? I would maintain that it should be worth that rate that affords maximum utility for its users.”
you: “But isn’t maximum utility for a “user” (i.e. owner) of a “unit of exchange” obtained when that unit of exchange maintains its purchasing power? I certainly can’t see why a person would want his money to lose value!”
It may seem a fine point, but money is only a medium of exchange. You don’t “own” it, I don’t “own” it. It has utility only when you and I make an exchange. And it works best when you and I can use it to meet on a price– that is, when we both have confidence in it.
The US$ holds a very high degree of user confidence. So it persists as the world’s reserve currency, the one against which all others are measured.
It’s a tradeoff of potential gains. Sure, it would be nice of the dollar I earned today could be stored in a vault and then a century later, my surviving kin could pull out that same dollar, fresh as a daisy. But that’s not my primary objective, I can live without that certainty.
If the price of certainty is a stalled economy, with lending at a standstill and joblessness rates doubled, I’ll give up the strong currency for one that loses 3% of value each year. In a heartbeat.
And we’ve tried structural fixes for inflating economies enough to know that austerity programs, of the sort that absolutely shut down inflation, work only with tremendous pain being inflicted on the population being structurally adjusted. So I’m against radical cures.
What you’re looking for is an ideal world where that dollar you earned when you’re twenty is still there for you when you’re 65. And I hate to tell you, Russ. The world will be changed anyway, in every way, in another 45 years no matter which way we evolve. Ain’t going to happen.
The fix is to put that dollar in a conservative basket of investments, each hedged against the other and each of which offers reasonable protection against a very mild rate of inflation: at least a 3-4% ROI. Because WITH that package you also get reasonable job security, the knowledge that you’ll probably either keep your job or be able to transfer to a new one in every one of those 45 years.
Just a dozen or so income-years lost to cyclic booms and busts propelled by strict monetarist regimes can dent the hell out of your retirement plans. Or rather, let’s say the long bust followed by an absence of boom– which is what I would predict will happen if we try a strict zero inflation program. See what the experience has been when Japan tried it. Or the Asian Tigers in 1998. It hasn’t been that sublime an experience for them.
Russ, the verbal logic you employ is one that obeys the same kinds of rules as mathematics. And such rules fall short of what is needed to evaluate wet objects, like humans. We’re not like numbers or atoms, each one composed of identical elements. We’re each different. Some have grand ambitions, and grand drives to achieve them. Some just sit and dream. Others contrive to have other people do their work for them. And yet others seek to control the world. No neat, logical equation suffices to describe our collective behavior.
I realize you have trouble interpreting me properly because your use of language is disturbingly literal. Another problem is tunnel vision; you zero in on a small number of issues that matter to you without ever glimpsing the big picture. For example, the cost of gasoline. Yes, the numbers have increased. But so have incomes. Measure the cost of a gallon of gas in terms of the number of minutes one has to work and it’s not bad at all.
You also omit from your calculations the fact that gas obeys the same laws of supply and demand as the rest of the commercial world. Supplies have flattened out in the intervening 30 years, both by conscious design as refiners limit the number of gallons they refine, and also because proven reserves in the world’s major oil fields have flattened out or declined.
Meanwhile the number of gasoline users has skyrocketed. They aren’t just in the US and western Europe, but also now in China, India, the Pacific Rim nations, Iran and just about everywhere else. Of course the cost is going up!
“..inflation has been such that a nickel in 1910 could buy you a dollar’s worth of goods now. In other words, savings tucked into a mattress would be worth a mere 5% of what they should be.”
“Should be”, compared to what? You’re richer now by far than your great grandfather was a hundred years ago, even measured in the tiny little dollars you have so many more of.
I would offer you this wise advice, based on sound Austrian theory: don’t save your pounds and pence under your mattress. Try to keep up with the times, we now live in a dynamic economy. Put them in dividend-yielding instruments that stay ahead of our puny one and two percent inflation.
michael, if humans aren’t like numbers as you say the why do you look to control the economy through government intervention? You aren’t even taking your own premises seriously.
You’re not even taking your premise of falsifiability seriously since you claim to disprove free market theories when there is not presently a free market.
You know what?
” And such rules fall short of what is needed to evaluate wet objects, like humans. We’re not like numbers or atoms, each one composed of identical elements. We’re each different. Some have grand ambitions, and grand drives to achieve them. Some just sit and dream. Others contrive to have other people do their work for them. And yet others seek to control the world. No neat, logical equation suffices to describe our collective behavior. ”
These are some of the reasons Austrians give to explain why Mathematics is not an appropriate tool for the development of Economic Theory. It’s nice to see you agreeing with that.
” Another problem is tunnel vision; you zero in on a small number of issues that matter to you without ever glimpsing the big picture. For example, the cost of gasoline. Yes, the numbers have increased. But so have incomes. Measure the cost of a gallon of gas in terms of the number of minutes one has to work and it’s not bad at all. ”
Nice way to say “Work till you drop dead”. You know what? I really loved this quote that I made it my e-mail signature. Maybe it will help you understand the problem.
It is an especially cruel result of inflation that instead of simply being able to hoard money, people must “invest their money into the financial markets, lest its purchasing power evaporate under their noses.” – Jörg Guido Hülsmann
” I would offer you this wise advice, based on sound Austrian theory: don’t save your pounds and pence under your mattress. ”
Don’t worry!! Hülsmann has already offered that advice. Except that he also tells us that we are forced to do so under the threat of wealth confiscation through inflation.
“Russ, the verbal logic you employ is one that obeys the same kinds of rules as mathematics. And such rules fall short of what is needed to evaluate wet objects, like humans. We’re not like numbers or atoms, each one composed of identical elements.”
To a certain extent, of course, you are correct. And, as a matter of fact, Austrian theory tends to take this into account much better than any other economic school of thought does. Gene Callahan goes into this in “Economics for Real People”, which I urge you again to read. Your point is exactly why Mr. Callahan named his book “Economics for Real People. (In fact, I urge you to read this book first, before anything else, because is is intended for laymen who do not know anything about Austrian economics. It will help you to learn to think economically. Only then try to tackle something more hardcore like Rothbard’s “Man, Economy and State” (along with Murphy’s study guide), and only after that try to take on the “Bible”, Mises’ “Human Action” (again with Murphy’s study guide).)
But having said that, there are many cases where human action does tend to be predictable for the most part. For instance, all other things being equal, most people prefer to spend less money for a product rather than more. People in general tend to like to make more money by renting their land or housing, rather than less. Etc., etc. This is where economics comes into play. If people were completely unpredictable in the large, then you’re right, Austrian economics would be useless. But so would any other economic theory, including the Keynesian one that you subscribe to. This is why Matthew Swaringen correctly noted that “You aren’t even taking your own premises seriously.” If you were, then you would realize that if your argument did indeed put Austrian theory to rest, it would demolish your “analysis” (and all other analysis) as well.
“Another problem is tunnel vision; you zero in on a small number of issues that matter to you without ever glimpsing the big picture. For example, the cost of gasoline. Yes, the numbers have increased. But so have incomes. Measure the cost of a gallon of gas in terms of the number of minutes one has to work and it’s not bad at all.”
That’s not the point. You said that price inflation hasn’t been an issue for the last 30 years. I came back with the evidence that you so crave, to prove that there has indeed been severe price inflation during the last 30 years, not to mention the last 100 years. So now that I’ve decisively proven you wrong on thi spoint, you claim that this isn’t really important after all, because wages have inflated as well. Yes, they have, but that doesn’t matter if you’re living on a fixed income, as many people are, does it? To them, it matters. In fact, it matters to anybody who has savings. That inflation is also what drives people to invest their money in the “cloud economy” that you so disdain; because if they don’t, then they lose their savings. Getting rid of price inflation would get rid of much of the incentive for investing in the “cloud economy”, and then maybe more people would invest more in the real, productive economy instead, or at least save their money until such time as the productive economy is a good investment again instead of losing it in speculative paper schemes.
Any, the problem isn’t that I have tunnel vision. When discussing a particular point, I actually discuss that particular point! Go figure! The real problem is that you, when proven wrong on a particular point, make excuses or try to divert attention to something else.
Russ wrote:
“..inflation has been such that a nickel in 1910 could buy you a dollar’s worth of goods now. In other words, savings tucked into a mattress would be worth a mere 5% of what they should be.”
michael wrote:
“Should be”, compared to what?”
By “should be”, I mean of course what the value of peoples’ money would be if much of that value was not essentially stolen from them by price inflation. In other words, “should be” is the purchasing power of money with 0% price inflation, or at least close to it. A person who has come into money that was saved from 100 years ago should be able to buy as much with it now as a person could have 100 years ago, more or less.
“I would offer you this wise advice, based on sound Austrian theory: don’t save your pounds and pence under your mattress. Try to keep up with the times, we now live in a dynamic economy. Put them in dividend-yielding instruments that stay ahead of our puny one and two percent inflation.”
But if the only way I can protect my money is in the “cloud economy”, which you have shown such distaste for, it seems I’m damned if I do and damned if I don’t!
Michael wrote:
“Another problem is tunnel vision; you zero in on a small number of issues that matter to you without ever glimpsing the big picture.”
Michael you are completely full of crap.
I gave you a couple of books to read. The first one I recommended was Economics in One Lesson by Henry Hazlitt. The “one lesson” you learn in that book is:
“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups”
“Tunnel vision” is certainly not something the Austrian economists suffer from.
Michael also wrote:
“For example, the cost of gasoline. Yes, the numbers have increased. But so have incomes. Measure the cost of a gallon of gas in terms of the number of minutes one has to work and it’s not bad at all.”
But this is due to greater technological improvements in the oil industry. Your understanding of the underlying forces applying to productivity is shockingly bad.
To put it simply:
Government intervention decreases productivity.
Technological improvement increases productivity.
If we have greater productivity in the oil industry today than 30 years ago, then that simply means that the productivity we have gained from technological improvement has been greater than the productivity we have lost due to government intervention.
So Michael, please stop vomitting your mindless rants on these forums until you have educated yourself on the subject at hand. Read those 2 books I recommended. Then, and only then, will I be happy to properly debate you on any topic you may wish to discuss.
Russ, I agree with you but would add one note (I’m sure you know this). In a sound money economy there would be price deflation due to productivity gains in almost every sector in the economy that have been achieved over that 100 years. So the person would be able to buy more goods and services in 100 years than they could at the time they had saved the money.
So even if the Fed achieves a 0% inflation rate it’s still stealing from people.
Jay: You tell me this, without amplification:
“To put it simply:
Government intervention decreases productivity.
Technological improvement increases productivity.”
Just saying it doesn’t make it so. You’ve provided no examples to support your sweeping statement. Meanwhile take a look at my comment below, beginning with “So much subject matter… What I’m gleaning from your comments is that government-backed projects are never useful, never cost-effective and never give us anything we can actually use– unlike privately funded works.”
I go on to list a tremendously long list of government-financed basic research programs that have led directly to game-changing increases in productivity. You should look over the list closely before making a blanket statement based on nothing but belief.
Had the government, for example, not decided to fund the development of the Arpanet, you would not now be reading this. Because we would have no internet.
Whoa! Yeah, the Arpanet. Checkmate, Jay.
Michael,
The successful ideas were developed by individuals. Whether government intervened or not these ideas would have surfaced and made their mark.
Without government intervention the internet would still have been developed.
You are only looking at what is ‘seen’. You are ignoring the ‘unseen’.
Every single government project comes only at the expense of some unknown private project.
What failed to come into existence as a result of these funds being diverted to ARPANET? Maybe something even better? Maybe not. There is no way to know for sure.
Was it a good investment? Without profit and loss to guide our judgement, we can never know.
Russ: Are you really trying to bolster your arguments by saying things like this?
“People in general tend to like to make more money by renting their land or housing, rather than less.”
Duh. People would rather make more money than less money. Which proves the validity of Austrian theory over normal economic theory. Oh-kay…
Then you say this:
“You said that price inflation hasn’t been an issue for the last 30 years. I came back with the evidence that you so crave, to prove that there has indeed been severe price inflation during the last 30 years, not to mention the last 100 years. So now that I’ve decisively proven you wrong on thi spoint…” etc.
Price inflation since 1980 has not been a serious issue. Most Americans are comfortable with a universe where costs go up less than 3-4% each year, and only complain about those costs that go up faster than the background rate. Let’s take a closer look at your “proof”:
“You are aware that a mere 10 years ago, at the beginning of Bush’s tenure, gasoline was $1.46 a gallon? 30 years ago, according to a quick Google lookup, gas was $.79 a gallon.”
Gas prices are subject to a great many market variables. They are not a direct function of any expansion in the money supply. The ratio of miles driven to barrels of oil pumped tells you more than anything else why gas prices go up. Yes, there has been some increase, a doubling over thirty years, assuming your numbers are correct.
“The average price of a house was $13,650, 30 years ago, compared to $174,000 now!”
No. The average home VALUE in 1980 was $47,200. The average SALE PRICE would have been more.
http://www.census.gov/hhes/www/housing/census/historic/values.html
And here, similarly, we have artificial forces pushing up home prices beyond anything we might attribute to a simple expansion in the money supply. The most basic postulate of the real estate industry is that to justify the selling point that homes appreciate faster than any other store of value, home sales prices have to increase faster than any other price category.
The practise is very corrosive to our economy. Plus, a moment’s reflection will tell anyone that such a thing is unsustainable. Home costs can’t outcompete all other costs indefinitely without perceived values eventually collapsing. And in fact people in the industry over a lifetime notice that the cycle takes about thirty years, measuring from collapse to collapse.
The myth is perpetuated by sales brokers and developers, who make more money in an economy where their incomes can continually exceed the rate of inflation. So they urge the appraisers they hire to always go a little on the high side when appraising market value.
Want to see the actual historic rates of price inflation? Here’s the database, from 1913 to date:
http://www.inflationdata.com/inflation/inflation_rate/historicalinflation.aspx
michael,
With respect to your argument that the government gave us the Internet, microwaves, Velcro, liposuction, etc., etc., etc….
First, let’s assume, just for the sake of argument, that private industry could not have given us these things (although I don’t necessarily agree with that). Now, most of what the government gave us was originally invented to make or support war or other questionable endeavors (i.e. NASA). For instance, the Internet was first conceived as a way of making military command and control systems that were fault tolerant in the case of nuclear attack taking out communication lines. All the wars that stimulated that technological advance certainly cost us something, yes? Are we better off with war, plus the Internet, etc.? Or would we be better off if there were no WWI, WWII, Korea, Vietnam, Cold War, etc., and no Internet, etc.? How can we really say? All you’re taking into consideration is the plus side of government, the benefits (i.e. the Internet), while ignoring the downside of the whole issue (war, destruction, death, trillions of dollars funnelled into war and pointless boondoggles like NASA instead of more fruitful endeavors, etc.) Your selective vision is a classic example of what Bastiat was talking about; you see what is there to be seen, but you do not stop to consider what might have otherwise been. You also selectively focus on the benefits of government, but not the costs, while focusing solely on the costs of private enterprise, but not the benefits.
Even if you say that all the wars we’ve had were not our fault, but merely something that we had to deal with after the fact (a very debatable assertion), that still doesn’t mean that we would be better off with all the war that sparked this technological advance. It just means that we wisely tried to make the best of a bad situation by converting war technology into peaceful uses once we had a chance.
Jay: Your reply is a morass of ungrounded speculation:
“The successful ideas were developed by individuals. Whether government intervened or not these ideas would have surfaced and made their mark.”
The individuals were employed toward a productive end by the government… NOT by private industry. And their products were disseminated without profit. In fact, at no cost to the user! It’s going to be a really hard case to make, that this could have been done more cheaply by a profit-oriented entity.
And government did not “intervene”. It initiated and it innovated. Things you believe cannot be happening.
“Without government intervention the internet would still have been developed.”
Calls for speculation. Prove it.
“You are only looking at what is ‘seen’. You are ignoring the ‘unseen’.
Every single government project comes only at the expense of some unknown private project.”
Calls for a ridiculous expansion from an unsupported hypothesis. Likewise, you could say that every innovation or invention impedes some other person from making that same innovation or invention. Or that every private enterprise gets in the way of the government entering into that same enterprise. It’s a poor argument. And it’s dogma.
“What failed to come into existence as a result of these funds being diverted to ARPANET? Maybe something even better? Maybe not. There is no way to know for sure.”
Yes there is. Private enterprise was perfectly able during those years to perform basic research into the possibility of an electronic, real-time communications network based on computer technology and satellite communications. Yet they didn’t. They didn’t have the basic idea, they didn’t have the financial resources and they didn’t have the vision.
There was no barrier. Yet they didn’t compete.
“Was it a good investment? Without profit and loss to guide our judgement, we can never know.”
Have we profited from the Internet? I guess there’s just no way we can ever know.
Sigh. I really need to go to sleep so my apologies if this is brief.
a) My point was that it was INDIVIDUALS that developed the ideas. They would have developed these ideas regardless of who was funding it.
b) Did you not understand my post about the wonders of profit?
c) The government did intervene when it confiscated all those funds from the private sector in the first place.
d) All government funds are ultimately taken from the private sector. So all government spending must occur only at the detriment of private spending. Hence we must always factor in the “unseen” as well as the “seen”. Read Economics in One Lesson ffs.
e) When the public sector takes on a project, it crowds out the private sector on similar projects. This is because the public sector has virtually unlimited funds to draw on and do not have any profit/loss incentives. The private sector has limited funds and must make a profit to survive.
f) What would exist right now if the government hadn’t of intervened? No way to tell.
I’ll leave it to your incredibly brilliant mind to work out which of your comments each of my comments were responding to. Sleep time…
Sleep well, Jay. It’s early afternoon here, so you must be on the other side of the world.
“My point was that it was INDIVIDUALS that developed the ideas. They would have developed these ideas regardless of who was funding it.”
By the same token you might say that individuals in the private sector didn’t do anything they couldn’t have done had they been working for the government. Yes, we are each an individual. Yes, we do work for our keep. And yes, we either tend to work for a private company or for some government.
“Did you not understand my post about the wonders of profit?”
I don’t recall reading your post about profit. But I don’t need much prompting to understand the utility of the concept. I worked for others for many years, for myself for many years, and had others working for me for many years. In each instance, my primary goal was to profit. And when I did, it was not only a wonder but a personal triumph.
If we return to my specific instance, the Interstate Highway System in the USA, we have a grand project from which every American has benefited greatly. By lowering the costs of surface transportation by an order of magnitude, the project has enhanced the profits of everyone in the nation. Yet it was performed on a nonprofit basis, as a public service.
“The government did intervene when it confiscated all those funds from the private sector in the first place.”
The government performs services for the public good.
The government charges a fee in exchange for such services.
You are free to move to some locale where there’s no government providing any services. Two I’ve found that at least levy no taxes are Macau and Brunei.
“All government funds are ultimately taken from the private sector. So all government spending must occur only at the detriment of private spending.”
Every privately offered service and commodity also comes with a fee attached. The question at issue is whether the fee being asked is appropriate and justified. You have to answer that one yourself. I choose to live in the USA and pay taxes because I think it’s the best deal around. And the specific instances of government-led innovation I cite here have all been extremely good ideas, IMO, giving an excellent “bang for the buck”.
There are another 309 million people who agree with me. And so many more wanting to get in that a major worry among US residents is that the lifeboat will be swamped if we allow them in. Now how can that be so, if this is such an oppressive place to live and work, with all initiative stunted, and the government taking by force everything we earn? Wouldn’t we all instead be wanting to get out?
Could private industry have done better in these specific instances? That’s idle speculation. The plain fact is, they didn’t. Nothing happened in any of these areas I cite– not until a government agency got the job done.
Russ wrote:
“People in general tend to like to make more money by renting their land or housing, rather than less.”
michael wrote:
“Duh. People would rather make more money than less money. Which proves the validity of Austrian theory over normal economic theory. Oh-kay…”
No, it doesn’t prove the validity of Austrian theory over normal economic theory. It proves the validity of Austrian theory over your non-theory which says that people, in their infinite variety, are completely unpredictable, and thus economic theory is a waste of time. Duh. My point is, people are predictable, in some ways. They are especially predictable when their actions are considered as collective aggregates, because oddball behavior gets averaged out.
“Price inflation since 1980 has not been a serious issue. Most Americans are comfortable with a universe where costs go up less than 3-4% each year, and only complain about those costs that go up faster than the background rate.”
Your assertion that price inflation has not been a serious issue is based only on your subjective assessment of what other people are “comfortable with”? Well, I would retort that most Americans, if they are comfortable with %3 inflation a year, are morons. That works out to a loss of about one third of a person’s savings in the space of a mere ten years. That’s a serious issue, whether the mindless morons out there realize it or not.
“The average home VALUE in 1980 was $47,200. The average SALE PRICE would have been more.”
I said before that I only did a quick Google search. I didn’t claim the data was iron-clad. But assuming that the figure of $47,200 is correct as the price of a home 30 years ago, that still works out to a house costing 3 and 2/3rds more than it did thirty years ago. That’s still pretty serious price inflation. (And why would sales price be considerably more than the value of the home? Why would consumers spend considerably more for a house than it was actually worth? In fact, what is the “value” of a house, other than the price at which it can be sold?)
“And here, similarly, we have artificial forces pushing up home prices beyond anything we might attribute to a simple expansion in the money supply.”
Yes, we do. The forces are also caused by the government, though. For instance, the Community Reinvestment Act, which basically coerces banks into making loans to people who the banks know are bad risks; the quasi-governmental agencies Freddie Mac and Fannie Mae, which buy that debt from the banks so that the banks won’t complain too loudly, etc. But the fact is that all these policies did was focus the cheap money created by the Fed’s monetary inflation into the housing market. If there were no cheap money out there, these policies would have had much less effect. I won’t dignify your rant about the evil housing industry being the cause of the problem with a response (other than this sentence, of course); it doesn’t merit one.
“http://www.inflationdata.com/inflation/inflation_rate/historicalinflation.aspx”
Hmmm…. I went to the CPI page, and what did I find? The CPI listed for 2009 is 214.537, which works out to 114.537% inflation since 1982, the baseline year. The earliest years listed, 1913 and 1914, have a CPI of 9.9 and 10. If I’m not mistaken, this means that $10 in 1914 had about the same purchasing power as $214 last year. This corroborates my previous claims about long-term price inflation over the past 100 years.
This is all quibbling, though. Neither of us will convince the other that we are right with this stuff, because we are working from completely different premises. The center of our differences are:
1) I believe that economic theory is worthwhile, and leads to real truths that are not dependent on time, place and culture; you believe that people, in their infinite variety, are so unpredictable that any attempt to arrive at timeless economic truths is a waste of time.
2) You believe that the economy can be made to be anything we want, by legislative fiat, if only we have the will; I believe that economic laws are real, and will prevent uninformed attempts to engineer the economy from having their intended effect.
As long as we disagree on these fundamental issues, any other discussion of details is pointless. I would love to discuss fundamentals with you, but I’m not sure that this thread is the proper place.
Will the “government business” [liar and/or idiot] do a better job in these specific instances? That’s not idle speculation, around here that’s speculation that if you don’t “voluntarily” fund will get you a visit from the preppie version of two guys named Vinny and Rocco.
1. “First, let’s assume, just for the sake of argument, that private industry could not have given us these things (although I don’t necessarily agree with that).”
Let’s not assume that, Russ. It’s a straw man argument, one I’m not asserting.
2. “Now, most of what the government gave us was originally invented to make or support war or other questionable endeavors..” etc.
That’s undeniable. War, an evil goal, has indirectly been responsible for much good. Funny thing, that.
But now we get to the crux of the discussion:
3. “Your selective vision is a classic example of what Bastiat was talking about; you see what is there to be seen, but you do not stop to consider what might have otherwise been. You also selectively focus on the benefits of government, but not the costs, while focusing solely on the costs of private enterprise, but not the benefits.”
What I see are innumerable inventions and developments that define our present age… none of which were developed by private industry. Maybe it COULD have done so. But it didn’t. Therefore it’s hard to sustain the argument you fellows collectively assert, that government never creates anything of value. Manifestly, it does.
I am not trying to ‘prove’ the opposite, that government is the ONLY creator of things of value. All I’ve done is disprove one of the commonest of assertions one reads in this forum. The one that says that government activities are always sterile, and can create no wealth.
michael, no one is asserting that government can’t do anything useful. What they are asserting is it’s impossible to know if it was more useful than actions that would have been taken had the resources used on the government project been used for private ends instead.
There is also the economic calculation problem. How do you measure the benefit relative to other desired services when there was no control through the price system? How do you know that it was created efficiently compared to how competitors would have done it?
“What I see are innumerable inventions and developments that define our present age… none of which were developed by private industry. Maybe it COULD have done so. But it didn’t.”
Of course, it didn’t. Private enterprise has a hard time competing with public ventures, as somebody else here pointed out earlier. If a public venture isn’t going well, it can simply suck more money from the public trough to keep things going, whereas private ventures have limits on their amounts of funding. Private ventures eventually go out of business if they continue to fail, whereas a public venture just keeps passing the losses on to the public. Private companies compete with other private companies, which drives costs down, whereas public ventures have no competition, often by legislative diktat. And since private companies seek profit, they balance their research and development budgets against the profits they will probably make from them, thus using the price system to judge when R&D is justified and when it’s not, whereas government just keeps on spending money with no real care about whether the costs of R&D are justified.
“Therefore it’s hard to sustain the argument you fellows collectively assert, that government never creates anything of value. Manifestly, it does.”
We don’t argue that the government never creates anything of value. We just assert that when governments do create things, they probably to do so at a much higher cost than private enterprise could have, were it given the chance. Or, perhaps private enterprise would have (rightly) decided that the costs of developing a good make it not worth the effort.
Russ, I hope you can find this. The thread is beginning to get tangled.
I said: “Price inflation since 1980 has not been a serious issue. Most Americans are comfortable with a universe where costs go up less than 3-4% each year, and only complain about those costs that go up faster than the background rate.”
To which you replied: “Your assertion that price inflation has not been a serious issue is based only on your subjective assessment of what other people are “comfortable with”? Well, I would retort that most Americans, if they are comfortable with %3 inflation a year, are morons.”
Well, that may be your subjective opinion. But the fact is that the economy is here to serve the people, not the other way around. And people are happy when (a) price inflation doesn’t exceed about 3% and money and jobs are relatively easy to find. They don’t seem to be as happy when the inflation rate is zero percent or less, because that signals a recession (a slowed down economy), when money and jobs are much harder to find. So I’m afraid their vote trumps yours. You would like to see zero inflation above any other value. And they, the American people, would rather be working and paying their bills.
Next, you say “..assuming that the figure of $47,200 is correct as the price of a home 30 years ago, that still works out to a house costing 3 and 2/3rds more than it did thirty years ago. That’s still pretty serious price inflation.”
And if you’ll recall my comment, I agree with you wholeheartedly. I was in the business for those thirty years in question. And I know how real estate works in this country. And I am against the model that requires a constant appreciation in home prices (“values”) above the background rate of general price inflation, to work. It’s not a sustainable model and it causes BIG problems whenever there comes a time for a major readjustment.
(Backgrounder: I made my personal career during times of readjustment, so I suppose it’s an ill wind that blows no one good.)
“(And why would sales price be considerably more than the value of the home?)”
I’m afraid the concept of value is a subjective one. A home, like any other commodity, is ‘worth’ precisely what someone is willing to pay for it. You can offer more objective yardsticks, such as construction cost, but those (while important to the producer of the good) are unworkable concepts when it comes to pricing.
“(..Why would consumers spend considerably more for a house than it was actually worth? In fact, what is the “value” of a house, other than the price at which it can be sold?)”
That’s the mystery and the magic of American real estate. People willingly pay more than a house is worth because of their belief that they can find a ‘greater fool’ tomorrow. In fact price bubbles really take off when people start pulling money out of sound investments in order to buy more real estate than they either need or can really afford. They become what we call “house poor”, denying themselves pleasures to keep their mortgage current. And in time they need a greater fool to take this expensive hot potato off their hands.
I didn’t say it was reasonable. But that’s the way the crowd operates. It’s the same in any asset bubbles, tulips, stocks, you name it.
I hope you get a good night’s sleep. We can battle with boffers again tomorrow. (Signing off.)
birdbrain (michael),
” But the fact is that the economy is here to serve the people, not the other way around ”
False either way. Neither is the economy here to serve the people nor are the people here to serve the economy. So there goes your foundation.
How do you manage to come up with this much nonsense?
” I’m testing those axioms and theorems as to whether they can be supported as being applicable to our situation. ”
They may not be applicable to the situation because there are elements of the “situation” that do not meet the specification “on a free market”
” That is, whether they can either be verified or falsified in light of reality. ”
They cannot be verified or falsified in the light of “reality”
So then, what this all is is just an imaginary exercise. If wishes were wings, we all could fly.
Please note that I said ‘They cannot be verified or falsified in the light of “reality” ‘
That means an arbitrary subset of reality as you insist on taking does not help verify or falsify.
It also means that the theory is based on an extremely fundamental aspect of reality that man acts. The theory is actually so reality based that you cannot refute it.
So this
” So then, what this all is is just an imaginary exercise. ”
is as stupid as it can get. It shows how hopelessly little you know of Austrian Economics while commenting on it.
What all this means is that michael, who has so far refused to read up on Austrian Economics, better start reading up. Otherwise he is going to make a bigger fool of himself.
Of course, if your intent is to be worse than a troll, please continue doing what you have been doing all along.
Bala, I feel like I’m arguing with a half-wit. No matter what degree of detail I go into in formulating an argument, to you it’s a sufficient refutation just to say “Man acts”.
“..the theory is based on an extremely fundamental aspect of reality that man acts. The theory is actually so reality based that you cannot refute it.”
Birds act, insects act, every living thing acts. This sort of idiocy, presented as though it means something, just makes me shake my head in wonder.
michael,
You are absolutely incorrigible. Your crooked mind knows no limit to the amount of twisting you can do to an argument.
I showed “Man acts” as the aspect of reality that forms the founding principle of Austrian Economic Theory just to show that it is based on reality. That was to counter your absolutely idiotic statement that it does not apply to reality.
How “easy” it must be to say “birds act”, “insects act” and rubbish like that. Birds and insects are not exactly “volitional” by nature. Their rational faculty is limited by their own nature. “Man”, on the other hand, is a rational animal with a volitional consciousness. That makes a lot of difference, you see, when we analyse all the effects of all orders (first, second, third and so on) of man’s actions.
Of course, your primary point is that man is no different from the birds and the insects, which of course is very revealing of your mind and its abilities. I think it would be a good idea to call you a bird-brain henceforth.
Possibly a minor point, Bala, but birds are indeed volitional creatures, as well as rational ones. What they don’t do is speak or philosophize.
A crow can watch four hunters go into the woods and then three walk out. He won’t go near those woods, because he knows one hunter still remains. So he can count, extrapolate an unseen condition from known data and decide upon a best course of action. He’s not that dumb.
What he can not do: write a book about it. Pester all his friends about it. Feel smug about it. Those are human attributes.
He’s got you there, Bala. Except for the part about having friends, he has shown that he doesn’t have the brain of a bird.
michael,The same study you quoted (to demonstrate that crows too are rational and volitional) also shows that they cannot count beyond 4. That was demonstrated when the crows went in if n people went in (where n>4) and n-x people walked out (where n>x>0). Sort of explains why not everyone who appears human is human after all. Some, like michael, turn out to be birdbrains because their cognitive development happened to be arrested at the level of the birds.
Incidentally, why did you choose to stop at 4 people knowing fully well that the results were different for 5 or more people/ Does it reflect another deliberate attempt to hide and avoid the inconvenient?
Some of us are brighter than others, Bala. Even among humans. It’s a matter of degree.
But your point was that only man is volitional, that only he can assess data out in the world and formulate intentional acts. And that’s clearly not so. That’s a trait we not only find in the higher birds and mammals, but in the very first motile organisms that appeared on earth.
Back when organic matter mostly occurred in inert blobs, monocellular creatures, the protozoans, developed a light-sensing organ, one that in time further developed into the eye. And they used it to more efficiently access food than was possible just by random, Brownian motion. Curiously, researchers found that they did not use this sensory information to move toward the light. They found instead that these first rational, intentional creatures used it to avoid the darkness. How they were able to make this distinction makes for an interesting story.
I am gratified that you’re aware of the crow data. Retaining and using such knowledge places you in a category above that of some of our fellow posters.
Ass, your use of these facts is analogous to another kind of ass saying that Einstein’s theories invalidated Newton’s.
michael,
” Retaining and using such knowledge places you in a category above that of some of our fellow posters. ”
Misrepresenting studies to “prove your point” places you at the level of the cheat. Thanks for completely discrediting yourself and showing yourself unworthy of discussion.
I’m done trying to educate you.
Michael, I strongly suggest a review of Bastiat’s “That Which is Seen and That Which is Unseen.”
By definition of the I.R.S I am an extremely productive member of society. I pay (excessive) taxes (to fund government philanthropy) INSTEAD of hiring additional employees or funding my wife’s excessive spending habits. I guarantee my entrepreneur spirit and my wife’s shopping spirit would do more to ‘stimulate’ the economy if we got to keep the fruits of our own labor than more tax payer funded government planning/philanthropy.
Is it a coincidence that the nations unemployment rate has steadied itself as unemployment insurance has begun to run out? I think not. Could it be that necessity ‘forces’ folks to look for or create a job? YES.
http://www.econlib.org/library/Bastiat/basEss1.html
Mikey: Had you not been fortunate enough to be doing business in the United States I think you might neither be paying taxes nor hiring new employees. You gain the advantages of using a ready-made infrastructure, including streets and highways, a framework of law and order and a supply of reasonably well educated people from which to choose your new hires– all in exchange for your payment of taxes.
They’re overhead– part of the cost of doing business. However you are free to move to a better venue. I can think of two countries that have NO taxation. You can choose to do business either in Macau or Brunei.
BTW I’m already taking a second look at the Seen and Unseen. It relies on partial analyses to make those of its cases I’ve looked at thus far. It seems there are not only the Seen and Unseen, but also the Never Even Conceived Of.
“BTW I’m already taking a second look at the Seen and Unseen. It relies on partial analyses to make those of its cases I’ve looked at thus far. It seems there are not only the Seen and Unseen, but also the Never Even Conceived Of.”
Present your case for this.
Way to throw down the gauntlet, Matthew. I’ve begun that Sisyphean task in several other blogs, mostly having to do with the additional unseens inherent in chapter one: the Broken Window Fallacy.
And I won’t waste a lot of energy here. But as a lifelong fixer of broken windows, I would remind you that over time, all products of the human hand wear out and break down. When they do, our material wealth shrinks– in this example, by one window. If we then want to increase our wealth, we can either repair that window or, at a somewhat greater expense, replace it. Such a decision spends down our finite store of money, but increases the number of useful windows we own by one (1).
It’s folly to say that it logically follows that we might increase our wealth by fifty windows by breaking fifty of our windows. Simple addition and subtraction tells us that we have first reduced the number of windows we have by fifty, and then increased them by fifty– leaving us with a net increase of zero windows and a big repair bill to pay.
Likewise in 2. The Demobilization, the choice is simple. If you need the thousand soldiers to fend off possible invasion, pay them… even if they do nothing but drill and sit at the barracks all day. They are your insurance policy. But if you choose to economize by sending them all home, be prepared for the unintended costs of having unemployed men with time on their hands, men who know how to handle weapons.
This was the error the US engaged in when we took Iraq and then, as Artie Bremer’s first supreme folly, disbanded the armed forces. A half million angry soldiers took their weapons home and faced a situation of dire unemployment. What did they do next? I think you will recall. It was called the Insurgency.
5. Public Works. I’ll quote Robert Reich, who says this well:
“The National Interstate and Defense Highways Act– forty thousand miles of straight four-lane freeways to replace the old two-lane federal roads that meandered through cities and towns– was justified by Congress as a means of speeding munitions across the nation in the event of war. Its practical effects would be to spur national productivity by radically lowering the cost of transporting goods across the land, boost the sale of automobiles, and generate suburban sprawl.”
This was a project that paid off big time, in bringing efficiencies of distribution to what previously had been a very provincial nation. Had we relied on private initiative it never would have been done; no single group of investors could have come up with the capital needed without government assistance. Such local turnpikes as would have been built privately would have been unpopular and expensive, as their natural monopoly would have led investors to charge exorbitant fees. So this was a giant public works program that benefited the entire country, industry, labor and consumers alike.
I could go on. But you get the drift. What Bastiat is doing in his lengthy exercise, to me, is offering us a useful exercise in methods of thought, but at the same time being something of a pedantic twit.
I noticed that in none of these cases do you actually reply to the actual case as it was given. Rather than talk about purposefully broken windows you talk about windows breaking down. Having ignored the actual case you then go on to talk about there being no net change in windows if we replace them all, along with the “repair bill” (without any mention of what that means to the people involved). You make no reference at all to Bastiat’s discussion of what is now not done since we spent the money on windows instead.
So having completely avoided the case of the broken window where does your conclusion on government intentions go…
“This was a project that paid off big time, in bringing efficiencies of distribution to what previously had been a very provincial nation. Had we relied on private initiative it never would have been done; no single group of investors could have come up with the capital needed without government assistance.”
It looks like a non-sequitur statement about how we have to have government intervention because no one collaborates or invests in long run projects without it. No proof is ever necessary for these statements (they are therefore axiomatic and unquestionable) .
So rather than starting from the premise of human action you start from the premise we need government and use that premise to attempt to falsify everything that doesn’t fit this view.
It doesn’t seem to me like you use reason to advance this premise. Instead you tend to combine or mediate a lot of different positions without ever stating the reasoning behind your point of view on any particular subject. I hardly ever know what your actual conclusions are. I know what some of what you are against, but I definitely can’t predict what you are actually striving for. You agree on some negatives relating to government interventions, but never actually position yourself clearly on any issue so that we could even attempt to determine all of your underlying assumptions.
The only consistent assumptions I see are
1) private investment sucks because it is too focused on the short run
2) government intervention is necessary for big useful projects or many things we “must” have (health care, unemployment insurance, roads, etc.) I’m surprised you haven’t argued for food insurance yet given this reasoning and the importance of food.
Matthew, you’re so anxious to score some points that you’ve overlooked what I’ve actually said.
You: “I noticed that in none of these cases do you actually reply to the actual case as it was given. Rather than talk about purposefully broken windows you talk about windows breaking down. Having ignored the actual case you then go on to talk about there being no net change in windows if we replace them all, along with the “repair bill”…”
My original comment: “It’s folly to say that it logically follows that we might increase our wealth by fifty windows by breaking fifty of our windows. Simple addition and subtraction tells us that we have first reduced the number of windows we have by fifty, and then increased them by fifty– leaving us with a net increase of zero windows and a big repair bill to pay.”
It appears to me that I was talking precisely here about “purposefully broken windows”. Not so?
So much subject matter…
What I’m gleaning from your comments is that government-backed projects are never useful, never cost-effective and never give us anything we can actually use– unlike privately funded works.
Yet government grants and directly managed programs are responsible for most of our basic research. Research that private industry later benefits from for free. You would be unaware, then, that the internet you use so freely, because it is free, is a gift from our Defense Department? Google up Arpanet if you want to read the basic history of the World Wide Web.
And those pharmaceuticals we owe so much (literally!) to the pharma industry? Wasn’t the majority of that basic research done through the National Institutes of Health? And then given away free?
Fiber optics, lasers, transistors, hard plastics, carbon fibers, ceramic synthetic materials, LEDs. Satellite communications, integrated circuits. Thanks, big government.
Here’s one I’ll bet you never heard about. The origin of integrated, computer-directed manufacturing processes. Those are the processes that allowed us to increase industrial efficiencies by an order of magnitude, and led to just-in-time ordering and many other advances on the old assembly line system. That was started with a $75 million program co-sponsored by NASA and the USAF back in 1981, which became the CAD/CAM (Computer-Aided Design/Computer-Aided Manufacturing) program.
Here’s a short list of just the medical advances NASA programs have given us: CAT scans, MRIs, pacemaker and artificial heart implants… read the entire list:
http://www.boeing.com/defense-space/space_exploration/benefits.html
Then we come to this: “It looks like a non-sequitur statement about how we have to have government intervention because no one collaborates or invests in long run projects without it. No proof is ever necessary for these statements (they are therefore axiomatic and unquestionable) .”
What do we call it, when I call attention to a single program (the Interstate Highway System) that would never have taken place due to cost constraints, except that the government alone had sufficient resources to back it… and you then claim I said that we can NEVER have any kind of “long run project” without government intervention? I wouldn’t call that an error. More like a knowing misstatement, it would appear.
Get better, Matt. If I haven’t given enough proof of something to satisfy you, just ask me for more. Or better yet, just look up the answer yourself. Government research has given us the perfect research tool in laying the basic groundwork for the Internet.
“It appears to me that I was talking precisely here about “purposefully broken windows””
You got me on that one. I was referring to all your other statements before this where you went on about windows breaking down on their own, etc. In context, it did not seem obvious to me that you were referring to breaking them purposefully, you seemed to imply that they were just breaking on their own here.
But regardless, Bastiat never claimed we gain wealth by breaking windows, so I’m not even sure what you are talking about honestly. It sounds like a pseudo reply to Bastiats argument. You say something about windows being broken without ever going through the reasoning Bastiat presented.
As for government projects/research and all of that which you talk about I’d argue you are making these mistakes constantly from not even understanding Bastiat’s argument about the seen an unseen. You talk only of the good government has done (internet, etc.) and I’m not contending that government does absolutely nothing useful with the money they steal.
On the contrary, my contention is that people would do more of what they wanted with the money if the government didn’t steal it. When it comes to research, private research is better. It isn’t tied into gaining research grants by scaring people. You actually have people out there working on science or engineering to improve specific things. Modern day PCs (that thing you use to get on the internet) came not from government. Phones, Cell Phones, Automobiles, etc. were privately produced.
Would private companies make something like the internet? Who can say, I’d argue probably, you’d say.. definitely not, but it’s unprovable. Ultimately this is a nonstarter. You’ve already made your conclusion before we even started the discussion as I wrote before.
“What do we call it, when I call attention to a single program (the Interstate Highway System) that would never have taken place due to cost constraints, except that the government alone had sufficient resources to back it… and you then claim I said that we can NEVER have any kind of “long run project” without government intervention? I wouldn’t call that an error. More like a knowing misstatement, it would appear.”
This is an example of ridiculous if there ever was one. I say things like you don’t believe in long run projects (because you claimed railroads, highways, the internet, etc. couldn’t take place without government intervention) and then after you’ve just given me this huge list of things that supposedly couldn’t happen with private industry, you tell me that’s not what you are saying at all.
Or perhaps you took “long run projects” here to refer to something else, even though contextually it should have been clear that I was talking about all the public works projects the government does that have a broad scope.
Given this part of your reply, I’m not sure what to say honestly. You’ve just told me 2 mutually exclusive things (if you were interpreting the phrase I used contextually)
1) that private industry just can’t have the resources to make highways
2) that private industry can have the resources to make highways
So which is it?
Matthew, now you’re just blowing smoke my way.
Bastiat’s first argument is this:
“It’s an ill wind that blows nobody some good. Such accidents keep industry going. Everybody has to make a living. What would become of the glaziers if no one ever broke a window?”
This purposely ignores the greater good, which is that a person with a need (repair of a broken window) has that need satisfied. That is an economic good. The good of the glazier is secondary. Yet Bastiat ignores the primary good, for the purpose of proferring his argument.
So if you ignore that primary good and concentrate on the second, you only see the money being transferred from the property owner’s pocket to that of the glazier– which from the property owner’s POV is a net loss. And you conclude thusly:
“And if we were to take into consideration what is not seen, because it is a negative factor, as well as what is seen, because it is a positive factor, we should understand that there is no benefit to industry in general or to national employment as a whole, whether windows are broken or not broken.”
The lie in his argument then follows:
“On the first hypothesis, that of the broken window, he spends six francs and has, neither more nor less than before, the enjoyment of one window.”
A flagrantly false argument. Before, he had not the enjoyment of one window. He had the aggravation of one broken window. So of course he has gained, in the amount of one (1) intact window. And he has paid for that gain an appropriate amount.
(Let’s hear it for our repair and rehab industries, without which what we own would continually be worth less and less!)
Then there’s this:
“You’ve just told me 2 mutually exclusive things (if you were interpreting the phrase I used contextually)
1) that private industry just can’t have the resources to make highways
2) that private industry can have the resources to make highways
“So which is it?”
I was speaking, as you know but choose not to mention, of the entire Interstate Highway System. Not only did private industry NOT make that investment, they manifestly could not have ever made that investment. Just the purchase of the required rights of way (47,000 miles of linear property) would have exceeded the lending capacity of any consortium of banks. The project was just too big!
So the answer is “no”. However private enterprise does have the right to build any small highway of its choosing, and to charge an appropriate toll for its use. Yet somehow they choose not to do so. I can find very VERY few private highways in the US, other than streets and cul-de-sacs in private developments. Yet such projects are not illegal. Why?
And “It looks like a non-sequitur statement about how we have to have government intervention because no one collaborates or invests in long run projects without it. No proof is ever necessary for these statements (they are therefore axiomatic and unquestionable).”
Now you’re just getting tedious. Again, I do not reason from the specific to the universal. The Interstate Highway System is one instance of a government program that (a) was beyond the reach of any private consortium and (b) has paid off handsomely for us all. It would be a grave error in logic to extrapolate from that that THEREFORE no private outfit can ever possibly compete with the glorious government.
In fact I can think of a project that really cries out for private competition: the delivery of first class mail. This is an instance of a government monopoly on a service, and one that people love to hate. I would like to see that sector opened up to private firms, just as package delivery was made better by allowing UPS and Fedex in. In fact USPO package delivery has improved in recent years, spurred to become better by having that competition.
In short, it’s not me who’s arguing from principle to the point where the principle becomes insanely untenable. It’s you. I argue only specific counter-instances that disprove universal rules.
“On the first hypothesis, that of the broken window, he spends six francs and has, neither more nor less than before, the enjoyment of one window.” Bastiat
Before, here, means before the window was broken. Before the window was broken, he has the enjoyment of one window, and now, after repairing it for 6 francs, he has again the enjoyment of one window, “neither more nor less”.
First, I’m not arguing that any single private company would have developed something exactly like the interstate highway system. Rather, I’d say it would be likely that multiple independent agents would have made separate sets of roadways that would be interconnected, much in the same way that servers on different networks allow connections between them.
Second, I’m aware that industry hasn’t competed with the government much in road production, but that’s because 1) To make private roads businesses have to get government permission, seek easements to gain the necessarily land to produce the road, etc. This process is a large burden, but #2 is more important. 2) Public roads aren’t paid primarily by users of the road (those who need roads to serve customers, or to drive from one place to another). So the costs of the system are hidden from those who truly should be paying for them. This makes toll roads seem like a horrible evil to drivers when in fact they may cost less to produce and maintain than public roads.
Public roads encourage (by spreading the cost) people to drive more (or carpool less, fly less, etc.) than they otherwise might. They extract the cost of the road not just from regular users but from people who will never or rarely use a given road. In this way public roads bring about more pollution, waste tremendous wealth on roads that are rarely used, etc.
“In short, it’s not me who’s arguing from principle to the point where the principle becomes insanely untenable. It’s you. I argue only specific counter-instances that disprove universal rules.”
I’m not claiming not to argue from principle. On the contrary I’d agree to this. However, I was questioning what your principle was based on what you had said thus far (which didn’t include this bit about privatizing first class mail) and because you rarely state what policies you actually advocate it’s very confusing to figure out what position you will take.
In my case I’m not a utilitarian, so even if I believed that government intervention or production of a given good might be more efficient than private industry that wouldn’t be the only important question. There is still the very real fact that government is stealing from people to do whatever it does. However, I expect since you are (at least more of) a utilitarian that you should at least prove this greater effectiveness and efficiency of what government produces.
How do you know that the interstate highway system is better, cheaper, more efficient, provides the right incentives, etc. compared to an alternatively produced private system? This system would likely include a combination of many different travel methods designed to keep costs as low as possible (since consumers would go with the cheapest option that benefited them the most).
“Before, here, means before the window was broken. Before the window was broken, he has the enjoyment of one window, and now, after repairing it for 6 francs, he has again the enjoyment of one window, “neither more nor less”.”
Gerry, I assume you’ve been reading my posts. Does it still escape you that in time, everything grows old and breaks?
By Bastiat’s logic, if you break your leg and a doctor fixes it, the doctor does no useful work… because before you broke your leg it did not need fixing.
The problem I see over and over here is that all of you must so twist and contort your arguments that in the end you have your head on totally backwards, or even 360 degree turned around. Bottom line: repairs are vital to retaining the value of those objects one owns. One’s wealth continually erodes over time– and only repair work restores its original value.
1- That “everything grows old and breaks” has nothing to do with the ‘broken window fallacy’ of Bastiat. The story has to do with useful things, not with unuseful ones.
2- Bastiat’s logic: nowhwere he says that glazier does no useful work. So your analogy with the doctor doesn’t holds at all.
3- That maintenance and repairs retain the value of those objects one owns is certain, but again, it is not what the ‘broken window fallacy’ is about. It is not about if it is a good thing to repair or not what is broken, but about if it is a good thing or not that what is useful must be broken.
Matt, you do seem very confused by my comments. And the core of your confusion seems to lie here:
“I’m not claiming not to argue from principle. On the contrary I’d agree to this. However, I was questioning what your principle was based on what you had said thus far (which didn’t include this bit about privatizing first class mail) and because you rarely state what policies you actually advocate it’s very confusing to figure out what position you will take.”
That’s because I don’t argue from principle. Principles were meant to be broken, and none of them apply universally. So an argument based on principle is naturally inferior to one based on observation.
This, to you, seems inconsistent, and thus frustrating. Because each argument draws on objective fact and appeals to differing principles. Yes, we can find instances where government spending is off-base, ineffectual and counterproductive. But no, we can also find instances where it’s done a lot of good, and done things private spending is incapable of doing. So the two principles (a) that government spending is always bad, and (b) that government spending is always good, are both equally off base.
The US Postal Service does very good work. However, with no competition, first class and bulk mail deliveries are inefficient. Parcel deliveries by the USPS, however, have improved significantly due to competing pressures from Fedex and UPS. So we can deduce from our OBSERVATIONS that (a) direct competition tends to improve efficiencies of service, and (b) the government could perform a useful service by opening up first class and bulk mail delivery to private competition.
That’s my method, to argue from fact and then proceed to provisional general rules. I never go so far, though, as to claim I’ve discovered some kind of universal rule, aka the Truth. Because I don’t think there is any such bird.
Above, you seem confused by this:
“But regardless, Bastiat never claimed we gain wealth by breaking windows, so I’m not even sure what you are talking about honestly. It sounds like a pseudo reply to Bastiats argument. You say something about windows being broken without ever going through the reasoning Bastiat presented.”
Were you to go back and read me again, you;d see that I present two conclusions. First, that when someone has a broken window through natural forces, whether they be a tree branch or an indolent vandal, an economically useful service is performed by repairing or replacing it. And second, that it does not follow that breaking a window and then replacing it constitutes meaningful or productive economic activity.
You are in agreement with me, as we both are, I suppose, with Old Dead French Guy. It’s not confusing. In the one case, the transformation from having no useful window to one useful window is a gain. In the other case, the transformation from one window to none, and then to one again, is a negative use of energy.
We agree! Yippy kiyay!
Public Works. I’ll quote Frederic Bastiat.
“Nothing is more natural than that a nation, after having assured itself that an enterprise will benefit the community, should have it executed by means of a general assessment.”
What Bastiat doesn’t agree on, is “when I hear this economic blunder advanced in support of such a project. “Besides, it will be a means of creating labour for the workmen.”.”
http://bastiat.org/en/twisatwins.html#public_works
michael wrote: «Simple addition and subtraction tells us that we have first reduced the number of windows we have by fifty, and then increased them by fifty– leaving us with a net increase of zero windows and a big repair bill to pay.»
… less the good(s) or service(s) that we could have bought with the money to pay the bill !
Another way to say it.
If we don’t break the windows, the net increase of windows is also zero, and, in addition, we have the ‘bill-money’ to spend on what we find useful to buy, thus increasing further more our wealth.
You’re not even paying full attention, Gerry. I gave that example as being one where NO useful work was being done. And all you did was agree with me.
Please try to keep up. Neither of us believes we can increase wealth by breaking and then repairing windows. Nothing could have been further from my actual argument.
To agree with you was not *all* I did. I also added something to complete your example: don’t you saw it ?
Please try to pay more attention next time.
“You gain the advantages of using a ready-made infrastructure, including streets and highways, a framework of law and order and a supply of reasonably well educated people from which to choose your new hires– all in exchange for your payment of taxes.”
I actually agree with this to a certain extent. Unlike many here, I am not an anarchist. But you can take your logic too far. Just because some taxation and some government is better than none, that doesn’t imply that more taxation and more government is always better. There is a sweet spot, and either above or below that sweet spot, things get worse. Sorta like the Laffer Curve.
I’m probably best described as veering between minarchist and somewhat anarchist*, but while I do feel that a framework of law and order–the ability to enforce contracts and the right to… well, “to life, liberty, and the pursuit of happiness**” (as it has been so eloquently phrased) is necessary, I do think that private enterprise could probably do a better job of creating a street and highway system and educating people… A private education system would likely allow better for the fact that individuals have varying talents and would probably also turn out young people who, having had some say in and being better matched to their education, are less dissolute than many of my peers are today.
*One point of my confusion is that I’m not entirely sure exactly how Austrian anarcho-capitalists define “anarchy”. I’ve heard it defined one way such that the impression I got was that no group or individual was to rule, but before I discovered the Austrians, my idea of anarchy (similar to that of the general public) was total absence of law and therefore disorder, and, sort of ironically, mob rule. Perhaps one of you would care to clear this up?
**By which I don’t mean that people are entitled to happiness, only that they should be free to act (as long as it doesn’t infringe on their fellow man’s rights) as they choose to secure their happiness.
“I do think that private enterprise could probably do a better job of creating a street and highway system and educating people.”
I definitely agree with respect to education. After all, the majority of people voted for Obama last time, so how educated exactly can they really be?
As for roads, I’m not so sure, but sure as hell the government doesn’t do a great job here. At least not in the Detroit area, where the roads are a standing joke. Literally. For instance, “What is the Michigan state animal?” “The orange barrel!”
“*One point of my confusion is that I’m not entirely sure exactly how Austrian anarcho-capitalists define “anarchy”. …”
One point of confusion is that Austrian economics is not necessarily anarchist. Mises was not an anarchist, nor was Hayek. It’s mainly the Rothbardian branch that espouses anarchism as a silver bullet. Also, there are non-Austrian anarcho-capitalists, such as David Friedman.
SJ wrote:
“*One point of my confusion is that I’m not entirely sure exactly how Austrian anarcho-capitalists define “anarchy”. I’ve heard it defined one way such that the impression I got was that no group or individual was to rule”
That’s pretty much it. Private police, private courts, private everything.
No government does not mean no law. The law will still exist but may be slightly different from court to court. Since the courts are competing private businesses, it’s in their best financial interests to reach decisions that the majority of the people will respect. Also, innovation and progress will occur in the courts industry leading to all manner of new ways to reach just decisions.
“No government does not mean no law. The law will still exist but may be slightly different from court to court.”
So courts will not just interpret the law, but will make up the law itself to suit their own preferences? That’s a switch on our separation of lawmaking powers and judicial powers.
Will no one have any input on just what is to be “the law” other than these profit-oriented courts? Should we not find that prospect just a little bit scary?
“Since the courts are competing private businesses, it’s in their best financial interests to reach decisions that the majority of the people will respect.”
When courts become profit-oriented private entities they will naturally give precedence to whichever litigant pays the best. If citizens sue a corporation for its abuses, which side will offer the court its best return on investment?
michael,
There is such a thing as “long-run”, you see. For an agency like a private-sector court, for instance, maintaining such an amorphous thing as “reputation” is important in the “long-run”.
So, your attempt is little more than a straw-man.
Michael wrote:
“Will no one have any input on just what is to be “the law” other than these profit-oriented courts? Should we not find that prospect just a little bit scary?”
Scary? Not at all. It sounds great.
You seem to have a problem with the word “profit”. Profit is a wonderful mechanism.
If a business makes a large profit, all that means is that they are taking resources that people value low and transforming them into a product or service that people value much greater. Big profits for a business means that that business has found a better use for resources. ie society’s resources are being utilised in a manner which brings greater satisfaction to the people than before. This is a good thing.
Actually, the only differences between private law and State law is that private judges can’t steal (eat tax money), can’t pretend to be super human and are subject to competition. It might well be a disaster, but so is what we live under.
I guess the “IP” believers have me on another Commie charge:
Stooges of the world unite; you have nothing to lose but your chains!
Jay: Who appoints these judges? Obviously that person will get better service, and his enemies vanquished by such a kangaroo court.
Equally obviously, you don’t want to have judges whose charge is to represent all the people, and see them as equal before the law. You describe a system that rewards those who can best reward the judges, through some sort of legal bribery. It’s the direct opposite of equal justice under law.
Michael,
Bala already answered this above.
Have you not heard of a little thing called reputation?
“Is it a coincidence that the nations unemployment rate has steadied itself as unemployment insurance has begun to run out? I think not. Could it be that necessity ‘forces’ folks to look for or create a job? YES.”
Well, it could also be that when people fall off the unemployment rolls, they are no longer considered unemployed by government statisticians, yes?
Also, while some people are certainly milking the system, there are others who are not, and would much rather be working. The simple math of the matter is that if there are X employment opportunities open in the economy, and Y people looking to fill those positions, and Y > X, then some people are going to go unemployed, yes? Mises said that there is no such thing as involuntary unemployment in a free market. I don’t believe he meant that statement to apply to markets distorted by government intervention as well.
The author of the article, by his title and the two graphs, seems to suggest that more ‘state’ interventions means more unemployment, and, ultimately, that it is those interventions that create the unemployment.
If it is so, then we have to see unemployed people as involuntary victims of those interventions.
So government provides the need for it’s own existence? This is hardly a contentious proposition. It’s been using every disaster it encouraged or allowed to call for more power for a long time.
This is one big blog.
I’ve seen bigger. Try looking for the IP debates out there, for example.
CORTEZ SEZ: “It gets better. In addition to these graphs, other interesting news is out regarding taxes.”
Shoulda seen ‘em coming what with Demopublican wars and Republicrat Keynesianism. But not to worry, the increases only apply to those who “voluntarily” assess themselves.
MICHAEL, Do you accept responsibility for the acts of your government servants (your agents) who are paid with your taxes? You know, folks like George Bush and Private Lynndie England (http://www.newyorker.com/archive/2004/05/10/040510fa_fact)? Do you ever feel remorse for their bloody acts undertaken on your behalf in the course of their duties? Just wondering.
Ned: This was a nitwit reply. There’s no contradiction between being antiwar, as I’ve been since 1960, and understanding that some sort of government is the only thing standing between us and barbarism.
Maybe if you read more history you’ll come to understand what happens to societies when governments collapse. Hint: it’s only liberty for the strongest of the militias that arise.
Thank god Michael was on the case since 1960, maybe his government could have senselessly murdered *tens* of millions of foreigners since that time.
You never tire of complaining about our wars. yet you apparently take great pride in never having tried to do anything about them. It’s a curious moral stance, IMO.
Yeah, you (en masse) will make sure I never stop complaining about American wars of profit and domination.
*You* never seem to tire of unfounded assumptions, strawmanning, ignoring everything that doesn’t suit your bias, and an all-around blinkered existence.
Failing is not always not trying one’s best. Education is not easy, look what your public school did to you. Oh wait, you can’t. Yeah, not easy.
That Obama fooled you is no excuse, simpleton, he’s *your* agent. Afpak *and* Iraq, the Iraq massacre that he funded time and again, when he wasn’t working out deals with other Dems to make it look like he wasn’t? *Your* wars, chump.
“Maybe if you read more history you’ll come to understand what happens to societies when governments collapse. Hint: it’s only liberty for the strongest of the militias that arise.”
maybe if you look around the web site you can finally shut the hell up
So in your view Stalin, Hitler, etc. were the lesser of 2 evils if barbarism and anarchy were the alternative?
I realize this is a leap from Bush, because I don’t consider Bush to be as bad as either of those 2, however, I’m trying to figure out exactly where we could have a government you’d prefer less than anarchy.
Matthew, I’d have expected superior logic from you. It’s not apparent to you that Hitler and Stalin were both what followed when lawfully constituted governments collapsed?
In Russia the Empire collapsed from a failure of its ability to govern effectively. And Weimar Germany handed the reins of power to Hitler for precisely the same reason. Yes, totalitarian rule does normally follow the abdication of governments.
So I disagree with the logic that says we should just bring down the US government, to see what happens next.
michael, it’s not apparent at all but because I don’t agree with your premise. A time of revolution against an existing government is not anarchy unless there is no clear force of power seeking to create a new government. In both of the scenarios you pose here there were groups that were responsible for the collapse in order to achieve power.
In some cases, these groups are truly popular (and desirable even) compared to the current government regime which is run by a totalitarian monarch. The Czar wasn’t exactly a great guy. The people of Russia had legitimate problems with him. So it seems like you are saying that because his government was “lawfully constituted” that they should have kept him around because you can only ever get worse by revolting.
I’m not arguing that Stalin wasn’t worse than the Czar, but the reason he came to power wasn’t because the people were supporting a peaceful anarcho-capitalist conversion, but because they were supporting a communist society. Much the same applies to Hitler, where Germans wanted to get back to being a powerful nation and achieve similar goals for worker rights through a command economy.
“So I disagree with the logic that says we should just bring down the US government, to see what happens next.”
No one here has called for us to “bring down the US government” at least not in any violent fashion like Hitler or Stalin took over after their horrible former regimes to make something even worse. We know how that path goes. The whole society should be founded on non-aggression so it makes little sense to start in some ridiculous way like that.
In the event that some selfless group of patriots decides to bring down the government, replacing it with nothing at all but ‘liberty’, it is certain that armed groups will immediately appear to take control of the situation, and subjugate the people. This is what always has happened. because there exist thieves and murderers, a;ways kept in check only by a strong central government.
Anarchy is a will ‘o the wisp. It calls you forward, but the free state you so long for disappears with the attainment of the dream. And you’re then working for folks that make the USG look very good in comparison.
Look at Mexico. The government there is weak. Should it fall, what happens next? Organized killers take over.
Re: Michael,
I’m from Mexico, Michael, and you have no idea of what you’re talking about. The fact that people in Mexico are forbiden to arm themselves for self-defense seems to have flown past you.
“I’m from Mexico, Michael, and you have no idea of what you’re talking about. The fact that people in Mexico are forbiden to arm themselves for self-defense seems to have flown past you.”
Omigosh, Mex! You mean there’s no highly armed narcoterrorist gangs competing for control of Mexico with the existing state? Because guns are against the law?
I had no idea.
Wow! Mountains of his stupidity all over this blog, and he once again piles new heights.
mpolz: I don’t think I’ve ever heard you voice a single economic opinion. Why is that?
Not my specialty, lots of guys lay out the theories and facts far better than I can, I let *them* do it. Even still, this stuff ain’t rocket science, it’s obvious people don’t *want* to understand, or act on it. So really, I don’t think preaching economics is of any use in maximizing liberty. There are a few people here that represent most of human kind and should be indicators of the inevitable failure of economic understanding to overcome evil. One of them is Mark Hubbard, he is a complete moron, good luck with that. Russ is the arch pragmatist and tribalist that will always defeat the earnest Kinsella or Surda. And you represent all of the lying populist corruptors. What your two basic types offer will always sway the Hubbardesque masses. Only a true religion could overcome it, and that is why you both, like all intelligent statists, vilify religion.
To possibly anticipate: I don’t have any idea why I’m here, I know that it is utterly futile, this caterwauling here. I left for a few months recently, was just about to do so again before you asked me (I think) your first question after about 87 comic misrepresentations. I’d like to say goodbye to the two or three people who sometimes enjoy my silly comments. Peeace.
“Russ is the arch pragmatist and tribalist that will always defeat the earnest Kinsella or Surda.”
Well gee, thanks for the arch pragmatist part, anyway. I think Kinsella and Surda are more dogmatists than earnest, but hey, that’s just interpretation.
PS: Just testing to see if I’ve been censored. My last reply to your post was filtered as spam, even though it most certainly had no links or anything in it.
Mr. Tucker, Except for a little squiggle at its end, those graphs look suspiciously like the St. Louis Monetary Base (BASE): See http://mises.org/markets.asp
Are these the facts that Bernanke says he needs to change his mind?
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