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Source link: http://archive.mises.org/9641/dismal-economics/

Dismal Economics

March 19, 2009 by

I remember how much I loved Mises University in 2006, which got me more into reading economics. I was a Rothbardian well before that, loyal to free banking, property rights and a total free market, but I had simply not been reading as much about economics, which I soon realized was, unlike topics like war, a very fun and energizing intellectual topic.

Sound economics, the study of production and distribution, explains the beauty of the market economy, is a great angle from which to appreciate the glory and humanity, and offers wonderful hope for the future. It is the joyous science. As a break from studying what was wrong with the state and especially its acts of mass murder, studying economics is akin to studying the very basis of civil society and human flourishing. It was easy to see the glass half full, since you were focusing on the water itself.

What a fantastic topic. And encouraging, I thought, since America and the world have come a long way in economic understanding. Full-blown socialism and old-style hard fascism (at least by name) had been largely discredited. Even the left knew markets could not be abolished altogether. Price controls and protectionism were less popular. The debate had, since World War II, shifted to our benefit, I had long thought.

Ugh. I knew the left and right alike were weak on economics, but the situation today is simply dismal. The idea that credit and spending should be unleashed to combat a crisis of too much credit and spending is no less frustrating, especially in its current ubiquity and calamitous implications, than the crazed idea that bombing, invading and occupying foreign nations would stem terrorism.

{ 14 comments }

Bruce Koerber March 19, 2009 at 12:47 pm

Destiny of America
Thursday, March 19, 2009

Ron Paul Is A Great American Statesman!

Ron Paul knows what Washington D.C. is like. He basically said that it is all about showmanship and political maneuvering. He basically said that philosophically the politicians could care less about contracts or the Constitution; it is all about ego-driven interventionism.

How draining that must be to be surrounded by such ungodliness constantly. We do not appreciate enough the monumental strength of Congressman Ron Paul.

Now that he has gained prominence the pressure from the unConstitutional coup has increased but he can handle that. What brings him strength and joy is the growth of the cause of liberty. And this is also what weakens the dastardly schemes of the unConstitutional coup.

We know what we need to do! We need to educate ourselves and others about liberty, about classical liberalism, about Austrian economics, about property rights and we need to pray for Ron Paul. He will humbly receive that extra assistance and use it in the battle to expose the ego-driven interventionists and their schemes, and also to inspire millions to join the fight for liberty and justice.

Florian Kren March 19, 2009 at 2:23 pm

“than the crazed idea that bombing, invading and occupying foreign nations would stem terrorism.”

Unlike spending to quell spending problems the method of convincing other people to stop their aggression by full scale bombing and invasion has been worked twice, Germany and Japan 1941-45.
That does not make it morla, nor does it mean that bombing is always a good idea to convince someone to stop aggression, but it cannot be dismissed because its wrong to think that it could yield the desired results, but because its immoral and will enable the government to grow.

mikey March 19, 2009 at 4:58 pm

I got hooked on Austrian economics young. I didn’t see the harm in it. All the other kids at school were doing it too.

I started out innocently enough, I picked up a book by Harry Browne that was lying around at a

friend’s. Soon though, I had graduated to the hard stuff. Mises (or “M” as the slang term went).

Hayek.Rothbard.

I think my parents suspected.I always denied it. I would tuck the QJAE inside a copy of Playboy.

I got away with it at first because I kept my grades up at school.

I had a close call after my birthday, I took a cheque my grandmother sent me to Scotiabank

and bought some silver bars.I met my Dad on the way out. I made up a story about being downtown to buy a bong.

I hit rock bottom a year ago when I registered to vote for R.P. I decided to get help. I checked myself into the Krugman clinic.I have been clean for a year now and recently accepted Keynes as my savior.It hasn’t been easy.One day at a time.

Taras Smereka March 19, 2009 at 5:12 pm

Florian, in WWII the US was fighting against governments that got their money from taxation. In the middle east we are fighting small bands of radical individuals who finance their activities from drug trafficking and money laundering. This significant difference is why we cannot win this war through force.

Peter March 19, 2009 at 5:14 pm

Unlike spending to quell spending problems the method of convincing other people to stop their aggression by full scale bombing and invasion has been worked twice, Germany and Japan 1941-45.

Neither stopped merely because of bombing or invasion, and they were states, not private individuals (terrorists): states can project much greater military power, but are vastly easier to fight and defeat.
(And of course there were many other wars before (and after) WWII)

Peter March 19, 2009 at 5:15 pm

mikey: ROFL

Oil Shock March 20, 2009 at 12:01 am

What happens when political money fails? People use gold! Here is a video from Zimbabwe

http://www.youtube.com/watch?v=7ubJp6rmUYM

sailDog March 20, 2009 at 2:12 am

Economics is indeed great, it does much to explain the human condition.

Notwithstanding the idiocy of the bail-outs and the Fed jumping into T-bills (aka printing money) the discipline is not the whole story. My impression here on this site is that lots of people think it is.

Take food for instance. Thomas Malthus pointed out the problems of exponential growth in a linear world. Simple math tells you he is right, but it is commonly believed that he was wrong, especially by Austrians. I suspect the world, in the next ten years, is going to get a rude shock. Starvation rates are going to soar.

As always the devil is in the detail. Yield levels are declining and stored grains are at all time lows. Many, if not most trends such as levels of Nitrogen, Potassium and Phosphates, fossil fuel inputs, arable land, drought and the impacts of climate change are adverse. At the same time there are more and more people to be fed.

Economics, to remain relevant, needs to incorporate different ideas into the way it values natural resources, especially non-renewable natural resources and renewable natural resources that have long or vulnerable replacement cycles.

Simple market dogma, in this crucial area, is woefully insufficient and has led us to this critical juncture. Inevitably, this means government intervention. For instance the grand banks, once the richest cod fishing grounds in the world, still have no cod. Was this an instance of market failure?

Instead of taxation on labour/income, which I believe should be abolished, resources could be taxed instead. Taxation levels are more or less arbitrary now; and hellish complex (I know, I am a CPA/CA). Taxing resources will be much easier, cheaper and simpler.

Florian Kren March 20, 2009 at 3:03 am

@Taras
Currently it looks as though Irak is a victory, the goal was to replace a hostile regime, which had some tendencies to help islamistic terrorists, with a democratic appearing regime, that fights against islamistic terrorists. And currently there is such a government in Irak.
So such wars are not necessarily not winnable by force.
And if afghanistan the war is not difficult to win because its against drug trafficking individuals, but because a neighboring state offers to some extent a safe haven to the islamistic terrorists.

@Peter
You should understand, why such wars are easier to win. The reason is, that states are more dangerous enemies, not 19 guys with box cutter, who under lucky circumstances can kill 3000 of you’re citizens, but millions of soldiers with tanks, planes and warships who could kill millions of you’re citizens.

For this reason one is ready to use vastly more force to achieve the goal and accepts far larger own and enemy civilian and military casualties.

Just compare what the enemy was threatened with, today the terrorists are threatened with having the country invaded and turned into a democracy with constitution and a somewhat free and prosperous economy.
Japan got a different message, what their fate would be if they didn’t surrender: “The alternative for Japan is prompt and utter destruction.” And this was no empty thread.

Today a NATO-Commander who suggests to kill drug traffickers runs into problems, while back then a commander who build copies of streets in berlin to test how the city could be set aflame got a monument.

So what i think is that, if the war on terror would have been fought with the same disregard for human life as WW2, then it would have been won in a matter of a few years at most.

An example for this is chetchenia, russian forces defeated there islamistic terrorists and they were able to defeat them, not because they have a better army than the US, but because they have lower moral standards.

This is therefore important to understand, because the US politicians are perfectly aware, that their moral standards limit their ability to win the war, if they hear to often, that the war cannot be won, they will one day decide, that its time to lower moral standards even further and that has to be avoided.

The difference is caused by

Haas March 20, 2009 at 3:13 am

@ Saildog- I can’t believe you would want to increase taxation on natural resources so that you could (increase?) food and other resources?what kind of solution is that??? taxing anything means it will decrease in quantity…since your basic logic here is flawed your argument fails…

You give the example :”For instance the grand banks, once the richest cod fishing grounds in the world, still have no cod. Was this an instance of market failure?”

If that is the view you take you obviously don’t come from an Austrian perspective… goodnight I have a party to go to.

Nate Y March 20, 2009 at 3:15 am

sailDog,

I think you are guilty of a confusion when you say “the problems of exponential growth in a linear world”. The world is not linear nor is it exponential. I believe you mean to say something like “humans tend to think in linear terms even when the phenomenon they are attempting to describe is exponential in growth. Exponential growth is typically counterintuitive to humans” This would be far more accurate would it not?

I’m going to assume you will agree.

Now that we have a clearer picture of the natural world, let’s take a look at this argument of yours:

“Economics, to remain relevant, needs to incorporate different ideas into the way it values natural resources, especially non-renewable natural resources and renewable natural resources that have long or vulnerable replacement cycles.”

Well, the most accurate and efficient method of determining the value of natural resources (indeed, of any and all resources) is the free market pricing mechanism articulated at length by Austrian economics. You rightly concern yourself with declining yields and stored grains. But certainly the answer to that problem is not to tax the items. All the taxes would do is discourage production. Why discourage production when the yields are already low?

Best thing to do would be to let the free market determine the prices (value) of resources.

Dick Fox March 20, 2009 at 2:50 pm

Sound economics, the study of production and distribution, explains the beauty of the market economy, is a great angle from which to appreciate the glory and humanity, and offers wonderful hope for the future. It is the joyous science.

Anthony,

I want to shout, “I AGREE!!”

I am so tired of economists who actually make economics the dismal science. Economics, especially the Classical schools: Austrians and supply siders, is the study of prosperity and wealth creation. Keynesianism and its offspring monetarism are definitely schools of the dismal science. Freedom makes the classical schools the joyous science.

Mikey,

I feel for you. Hopefully someone will kidnap you and deprogram you so that you can return to the real world. Don’t let the cults win man. Resist! Resist!!

Coury Ditch June 24, 2009 at 5:36 pm

Your last line inspired this:

“Let us spend our way out of debt, let us bomb our way out of terrorism, let us educate ourselves with deception, let us look for truth in liars — let us enslave ourselves for freedom.”

No. Let us be frugal, grateful, loving, and forgiving — that is all.

Coury Ditch June 24, 2009 at 6:02 pm

Mikey: HA! That was real good, laughed my ass off.

Anthony this post is great, thank you!

I have still been trying to express in words my newly found passion for economics. I am inextricably infatuated and I can’t figure out why?! haha.

There is also a wonderful quote by von Mises on the back of Bob Murphy’s Human Action Study Guide. I wish I could remember it. It expresses my passion once again in clear Misesian prose.

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