Dr. Bob Murphy is at it again. Instead of the "government as a household" fallacy, Dr. Murphy insists that the government should be run like a private business.
An excerpt:
"Larry Summers and other apologists for larger government debt can continue coming up with clever arguments, but they can’t evade the basic truth: in a time of recession, when all other institutions in the world are watching every penny and eliminating unnecessary spending, the government should too. Indeed, even some projects that are “worth it” during boom times should nonetheless be axed during a severe recession when tax revenues have plummeted. This is exactly what a private business would do."
Article Source: http://www.theamericanconservative.com/articles/would-private-business-run-up-more-debt-than-government/
Hmm...wonder how Europe is fairing under austerity?
I can't believe how stupid people can be???? Never ceases to amaze me...
ReplyDeletersp
That is the chief reason that Mitt is being touted as the obvious replacement for Obama, since Mitt is a businessman and Obama a career politician.
ReplyDeleteA lot of people who know nothing of MMT, monetary economics and sectoral balances are falling for it.
"Hey, it's just commonsense, isn't it?" Well, no. That's why human developed science. It's just common sense that the sun rises and sets, isn't it? Well, I guess for some people and they probably think that the earth is flat, too.
1. You guys are pretty bold for people so dumb that you cannot be bothered to understand the basic concept of the Austrian School, economic calculation.
ReplyDelete2. As John Carney has written:
MMTers do not seem to fully appreciate the problems of ignorance and calculation that inform Austrian economics. They seem to recoil at even thinking about them because of the implications for the limits of political action.
http://tinyurl.com/7sycbey
That’s a nice way of saying that:
a) You MMTers are oblivious to the problems of ignorance and calculation that are ever-present in human society;
b) The problems of ignorance and calculation that are ever-present in human society render your policy proposals to be insane;
c) You suspect in your little hearts that a and b are true, but recoil from finding out for sure.
We can try and psychoanalyze why you guys won’t grapple with basic Austrian concepts, but the fact remains that you will not, have not, and apparently cannot. Anyone with a basic understand of Austrian concepts can see that a mile away. Maybe you guys just aren’t very bright.
3. Average people do not believe that government spending and deficits cause prosperity. In fact, only 20% of “progressive” leaning young people believe that government spending and deficits cause prosperity.
http://www.forbes.com/sites/johnzogby/2012/05/02/libertarian-bent-of-young-voters-tests-obama/
Average people simply need to be informed that there are people called Keynesians and MMTers who actually think that deficits cause prosperity and that such insane policies are purposeful.
Further, they need to be informed that Friedrich Hayek won the Nobel Prize in Economics for demonstrating that our economic problems are caused by purposeful Keynesian policies. There’s a reason that the MSM will not allow that message to get out.
Bob,
ReplyDeleteMaybe this process scales:
http://www.youtube.com/watch?v=EYFSLajdG1o
then what?
I'll tell you what, it would be govt regulation of the monetary system just like we have now.
Rsp,
Bob,
ReplyDeleteYou are pretty bold for someone so dumb that you cannot be bothered to understand the basic concepts algebra: addition and subtraction.
Government surplus + private sector surplus (domestic +foreign) =0
If the private sector is trying to increase its savings rate, it is mathematically impossible for the government to decrease its deficit (hint: take a derivative of the above).
So please don't start with economic calculation (which you showed on those pages not to understand) because already at the level of primary school arithmetic you are out of your depth, and so apparently is Murphy.
and this is where we point out that MMT is descended from Schumpeter - Austrian...
ReplyDeleteBob the assumption of economic calculation is designed precisely to limit policy activity. It's a rational for free markets based on the assumption of ontological individualism and Locken private property rights of individuals. It's an ideological foundation for a type of economics, just as other approaches to economics have their philosophical foundations. Virtually all the different approaches claim that their assumptions are based on naturalism.
ReplyDeleteNo one denies that a complex economy cannot be modelled formally at this point as can physics. Precise predication is not possible so far. But it's a huge jump in logic from there to claim that as a result, no calculation is possible, and we should just get out of the way and let nature take its course. If we did that, we'd still be hunting with bows and arrows and poking the ground with sticks to grow beans. Or exchanging coconuts and fish. :)
If most government officials are properly indicted and there is no longer a significant "government sector" screwing up the economy, people will be able to save just fine. "To save" means to forgo consumption. It does not mean carving out phony new claims on existing resources. That sector balance stuff is a load of crap and no one but you guys will ever believe it.
ReplyDeleteNo one denies that a complex economy cannot be modelled formally at this point as can physics. Precise predication is not possible so far. But it's a huge jump in logic from there to claim that as a result, no calculation is possible, and we should just get out of the way and let nature take its course.
ReplyDeleteI'm perfectly fine with you guys going to the American public with an expressly Leninist economic philosophy while avoiding the Hayekian insight that there is no other place in the galaxy to obtain the necessary economic information upon which your schemes rely other than from free market prices.
What we have with Trotsky and his comrades in the Great October Revolution is the spectacle of a few literary-philosophical intellectuals seizing power in a great country with the aim of overturning the whole economic system — but without the slightest idea of how an economic system works. In STATE AND REVOLUTION, written just before he took power, Lenin wrote,
"The accounting and control necessary [for the operation of a national economy] have been simplified by capitalism to the utmost, till they have become the extraordinarily simple operations of watching, recording and issuing receipts, within the reach of anybody who can read and write and knows the first four rules of arithmetic."
With this piece of cretinism Trotsky doubtless agreed. And why wouldn't he? Lenin, Trotsky, and the rest had all their lives been professional revolutionaries, with no connection at all to the process of production and, except for Bukharin, little interest in the real workings of an economic system. Their concerns had been the strategy and tactics of revolution and the perpetual, monkish exegesis of the holy books of Marxism.
The nitty-gritty of how an economic system functions — how, in our world, men and women work, produce, exchange, and survive — was something from which they prudishly averted their eyes, as pertaining to the nether-regions. These "materialists" and "scientific socialists" lived in a mental world where understanding Hegel, Feuerbach, and the hideousness of Eugen Duehring's philosophical errors was infinitely more important than understanding what might be the meaning of a price.
http://mises.org/daily/4515
The use of the word "austerity" to describe Euro economies that are still using fiat funny money with controlled interest rates and perhaps slightly lower levels of outrageous government spending is an abuse of the language.
ReplyDeleteFurther, to attribute to Austrians such as Bob Murphy or me said Euro policies is an abuse of the language.
But then again, you are the guys who claim that government deficits are necessary in order for the "non-government sector" to "net save".
http://consultingbyrpm.com/blog/2011/12/the-rumors-of-irish-austerity-are-greatly-exaggerated.html
Bob,
ReplyDeleteDo you think the Indians are still the rightful owners of all property in North America?
rsp
Bob, we've argued down to the boundaries of our world views and you think that due to our unrealistic assumptions, our model is representation of an imaginary world instead of the natural world, and we think the same of you and other doctrinaire proponents of Austrian economics, and neoliberalism, as well.
ReplyDeleteSo I guess we'll just have to agree to disagree since there is no common ground between us.
Bob Roddis:
ReplyDelete1. I like your claim (quoting John Carney) that “ignorance . . . informs Austrian economics”. Just what I’ve always thought.
2. Next, there is you claim that "To save means to forgo consumption. It does not mean carving out phony new claims on existing resources.”
There are actually two quite distinct meanings of the word “save”. One, as you rightly point out, consists of forgoing consumption. The second, consists of accumulating money, which is presumably what you meant (roughly speaking) by the phrase “carving out phony new claims on existing resources”.
3. You can use words like “crap” if you like. Do you seriously thing anyone is impressed by this? I could answer your points by calling them a “load of crap” (which is what I think they are). But I try to be a bit more constructive.
I'm sympathetic to the plight of the Indians, as are most libertarians. They arguably traded away various rights at various times and at other times, were conquered by the US army and other armies. I'm not sure what to do about it at this late time. Most areas of the world were originally conquered in what were "illegitimate" takings. Lew Rockwell linked to the following post on Memorial Day.
ReplyDeletehttp://freedominourtime.blogspot.com/2012/05/what-to-remember-on-memorial-day.html
The central tenet of libertarianism is the total and strict prohibition on the initiation of force. The "government sector" sure violated that rule when dealing with the Indians.
Bob,
ReplyDeleteThat position sounds somewhat consistent.
I have a hard time understanding how property gets to be "private" without some state/govt entity first claiming it thru violence (or legitimate threat of violence, duress).
And then the govt "deals" it to a favored person/legal entity.
I live in Maryland which the story goes The Crown owed Lord Baltimore (Roman Catholic) a large amount of debt so the King gave Lord Baltimore the land in lieu to form a Catholic colony. Since then, Lord Baltimore and his descendants has sold most of it off to other "private" entities.
A friend of mine recently purchased one of the Thousand Islands in the St Lawrence river, he is only the second owner since The Crown (third entity to ever "own" it).
I dont see anything ever being "private property" without ever first going thru govt...
Resp,
Trading beads for Manhattan shows the absolute failer of economic calculation.
ReplyDeleteIn the fantasy world, the Austrians believe that the government is the only one that can influence price. Of course they forget that man's natural survival instinct isn't to go it alone and negotiate by himself, but to collude, plot and scheme for the slightest edge. Forming mutual benefiting trusts and cabals to dictate the terms of trade. This free market myth can only exist if humans didn't associate with each other and just bought and sold in "the market" which is impossible. Humans natural gravitate to analogous individuals and form alliances against others. Not one Austrian has ever given me an historical example of this free market. The excuse i always here for free market failings is " well that wasn't a completely free market". Like a member of a cult explaining why the mother ship didn't appear to take them away this time.
For economic calculation to work.
Perfect Information. All actors must have the same information at the exact time and the same ability to analyze said data. but the hard part is to actually get the perfect information as the other side of the market will try to deceive and deprive you of information that helps you get the best price. After all, their job is to do the opposite.
Lack of collusion. Which goes against man's survival instincts
Austrians fall to realize that markets are always planned. Either the government plans them or the next higher power faction of that market plans them. The only reason cooperations use the government for control is because that is the highest power faction in the modern nation state. If the Nation state didn't exist they would be the highest power. As we always see with weak governments, war lords, drug lords ( Mexico) and corporate fuadlism are the overwhelming result of a weak state. Not to mention being conquered by a more organized state which every American should be familiar with.
ReplyDelete"Trading beads for Manhattan shows the absolute failer of economic calculation."
ReplyDeleteYou realize that this is a myth, in fact, perhaps the first "urban myth." Even if it happened substantially as believed, there are insurmountable problems. As I understand it (beowulf can set me straight) or a valid contract transferring ownership of property under common law, one party has to own the property that is being exchange for consideration. Under common law, this would have to have been allodial title, fee simple, or conveyance by the sovereign. None of these applied as far as any record goes and the claims are sketchy and contradictory. Moreover, Native Americans had no concept of private ownership in the same sense as the Dutch or English colonists. Secondly, there must be clarity and agreement regarding the terms. The Native Americans could not have had a clear understanding of what they were entering into because these were customs and concepts that were foreign to them and they had no reference point for understanding. This was a snatch.
I should add to the above that this is still going on in the developing world. It's a classic rip-off based on legal razzle-dazzle designed to swindle indigenous people's ancestral land. Just a step up from 'the right of conquest."
ReplyDeleteThe US planted its flag on the moon first. Does that give the US claim on the entire moon in perpetuity? Just wait for it.
"'Of course they forget that man's natural survival instinct isn't to go it alone and negotiate by himself, but to collude, plot and scheme for the slightest edge. Forming mutual benefiting trusts and cabals to dictate the terms of trade. This free market myth can only exist if humans didn't associate with each other and just bought and sold in "the market" which is impossible."
ReplyDeleteIt's based on the assumption of ontological individualism, which holds that humans naturally act only in their own self-interest, i.e., as individuals. Even bacteria cooperate and coordinate to gain advantage.
Most individualists know this and realize that the stronger coordinate to take advantage of the weak. They just don't like a "government" doing it. Ruling elite based on property rights? No problem. Natural course of events. Meritocracy, in fact.
The wonders of economic calculation before Keynes came along and messed everything up:
ReplyDelete1720: Bursting of South Sea Bubble (Great Britain) and Mississippi Bubble (France)
Crisis of 1772
Panic of 1792
Panic of 1796–1797
Danish state bankruptcy of 1813
Panic of 1819 – pervasive USA economic recession w/ bank failures
Panic of 1825 – pervasive British economic recession in which many British banks failed, & Bank of England nearly failed
Panic of 1837 – pervasive USA economic recession w/ bank failures; a 5 yr depression ensued
Panic of 1847 – a collapse of British financial markets associated with the end of the 1840s railroad boom.
Panic of 1857 – pervasive USA economic recession w/ bank failures
Panic of 1866 – the Overend Gurney crisis (primarily British)
Panic of 1873 – pervasive USA economic recession w/ bank failures, known then as the 5 yr Great Depression & now as the Long Depression
Panic of 1884
Panic of 1890
Panic of 1893 – a panic in the United States marked by the collapse of railroad overbuilding and shaky railroad financing which set off a series of bank failures
Australian banking crisis of 1893
Panic of 1896 – an acute economic depression in the United States precipitated by a drop in silver reserves and market concerns on the effects it would have on the gold standard
Panic of 1901 – limited to crashing of the New York Stock Exchange
Panic of 1907 – pervasive USA economic recession w/ bank failures
Panic of 1910–1911
1910 – Shanghai rubber stock market crisis
Wall Street Crash of 1929, followed by the Great Depression – the largest and most important economic depression in the 20th century
http://en.wikipedia.org/wiki/Financial_crisis
http://en.wikipedia.org/wiki/Post-war_displacement_of_Keynesianism
ReplyDeleteBob, some more nuggets from wikipedia which may be of interest:
ReplyDelete"Economic historians have labelled the period from about 1951 - 1973 as the Age of Keynes or more commonly the Golden Age of Capitalism due to its relatively high average global growth, low unemployment, reduction of inequality, lowering of public debt and very low incidence of financial crises.
After the transition period of the 1970s, the period that spanned from about 1980 - 2009 has been labelled the Washington consensus era.[7]
The Post-war displacement of Keynesianism was a series of events which from mostly unobserved beginnings in the late 1940s, had by the early 1980s led to the replacement of Keynesian economics as the leading theoretical influence on economic life in the developed world.
The displacement of Keynesian thinking was driven by those who leaned towards purer free market policies rather than the mixed economy which require a significant role for government intervention. Their motivations included a dislike of large governments which they saw as prone to interfere excessively in the lives of their citizens; an intellectual preference for Classical or Neoclassical economics and related schools; or in some cases a belief that their individual interests were best served by promoting a limited role for government. Efforts against Keynesianism took place on three fronts – in the academic world, in politics, and in the wider world of business and public opinion."
cont...
"So prominent was Friedman in overturning the Keynesian consensus that the efforts to do so are sometimes referred to as "Milton Friedman's counter revolution." However there were several other key influences. Professor Roger E Backhouse lists the Lucas critique which led to the increasing influence of Rational Expectations and Real Business Cycle Theory ;[6] Professor Gordon Fletcher identifies the same influences as Backhouse while also adding S H Frankel's attack which was based on the work of Georg Simmel along with the influence of the Austrian School and especially Hayek, who enjoyed a resurgence in the 1970s; [18] Anatole Kaletsky again gives the same influences as Backhouse, saying the Policy Ineffectiveness Proposition was an especially significant statement of anti-Keynesian thinking. [10] Journalist Adam Curtis describes how game theory and other ideas arising from the Cold War provided additional support for the theories Hayek had articulated in the 1940s, and helped them gain wider acceptance.[19]
ReplyDeleteThese attacks were so successful that by 1980 Robert Lucas was saying economists would often take offence if described as Keynesians.[20]
...
For the Anglo-American economies, Keynesian economics typically was not officially rejected until the late 1970s or early 1980s. Formal rejection was generally preceded by several years of the adoption of monetarist policies aiming to reduce inflation, which tended to counteract any expansionary fiscal policies that continued to be employed until Keynesianism was formally discarded.[36] In Britain Keynesian economics was officially rejected by Margaret Thatcher's new government in 1979, ending the Post-war consensus. There had been initial unsuccessful attempts to establish free market favouring policies as early as 1970 by the government of Edward Heath. In 1976 the then Prime Minister, James Callaghan, stated that "spending our way out of recession" is no longer an option. According to Skidelsky, Callaghan's statement is widely seen as marking the end of the Keynesian age.[7] In the US it was Reaganomics that fully displaced Keynesianism in 1981, again this had been preceded by a significant movement in the direction of monetarism by President Jimmy Carter's 1979 appointment of Paul Volcker as Chairman of the Federal Reserve."
Bob, stop referring to everything in mainstream economics and politics since the 1930s as "Keynesian". It just makes you look ignorant and stupid.
y,
ReplyDeletegood point about monetarism since 1980.
What I have noticed over the years, is that many say "Inflation is everywhere a monetary phenom" or whatever the quote from Friedman was.
Mike was on CnbC recently with Forbes Ozanian and Ozanian reiterated this to Mike like it was gospel. These people are still out there.
We have been under a very monetarist moron management since 1980 and this has led to our problems imo.
They think they can look at "money supply", interest rates, etc and make decisions based on these accounting records.
The people who believe in monetarism are morons and they have been in charge, this is the problem, not "Keynesianism".
Again good point...
rsp
Another odd thing about Bob is that he seems to be incapable of differentiating between communism and Keynesian economics.
ReplyDeleteThe "economic calculation problem" developed by Mises and Hayek was a criticism of centrally planned communist countries without a system of market-determined prices. The argument being that without such a system, it is "impossible" to allocate resources rationally and efficiently.
This is a very strong, though exaggerated, argument against communism, but is not particularly relevant to Keynesian economics.
The argument also rests on the assumption that "free markets" necessarily allocate resources in the most rational, efficient and therefore optimal way. Keynesians disagree with this assumption, and history has proven it to be incorrect.
This is why Keynesian economists advocate government involvement in the economy, so as to overcome the inevitable flaws and deficiencies that arise within markets.
On top of this there is also the ambition to achieve wider social goals which markets may be incapable of achieving on their own (universal education, healthcare and housing, for example).
The aim is to thus to achieve the optimum balance between government and markets, rather than assuming that either one holds all of the answers.
The Chartalist analysis of money develops the basic Keynesian view further by demonstrating that government has always been a part of the economy. Government involvement is not somehow "unnatural" - it is fundamental. The idea that the market economy somehow created itself and then at a later date government came along and started interfering is simply a myth.
Arguably a lot of mainstream economics since the late 1970s has been about using government power to impose certain "free market" myths (through monetary policy, supply-side policies, etc), which ultimately favour capitalist/financial elites at the expense of the wider population.
ReplyDeleteAs MMTers and post-Keynesians point out, most of these myths are founded on a completely incorrect understanding of how the monetary system actually functions (loanable funds, crowding out, etc).
Bob,
ReplyDeleteIf most government officials are properly indicted and there is no longer a significant "government sector" screwing up the economy, people will be able to save just fine.
Um.... how?
Did you not understand the simple equation I just wrote?
Saving is withdrawing money from circulation, it does not mean that it is automatically spent on investment (it it were so we would have no recessions, ever). What would be the source of the hoarded money if the issuer is absent? Think a little...
PeterP,
ReplyDeletemoney would be dug out of the ground remember?
btw MMTers don't say say people can't save unless the government runs a deficit, only that (in the monetary system we actual have at present) domestic net accumulation of financial assets (in the domestic currency) - i.e. "net saving" - can only occur if either the government sector or the external sector runs a deficit.
But anyway, I'm off to dig some new money out of the ground. I've got my pickaxe - California here I come!
In Bob's defense, he is against Monetarism as well as Keynesianism. MMT is against Monetarism, too. So we agree on something anyway.
ReplyDeleteI'm still waiting for a historical example of the vaunted free market economy working wonders. Maybe the local markets during the Agriculture Era?
But credit/debt is needed even a simple fish-coconut economy if the coconut gather already has enough fish and the fisherman wants more coconuts. Hard to get away from that "funny money."
Bob's "economic calculation" argument depends upon the assumption that free markets always allocate resources in the best way possible, and that any and all "interference" in free markets by government necessarily creates negative "distortions" which screw everything up and lead to worse outcomes.
ReplyDeleteHe has yet to provide any evidence or substantive argument for why this assumption is correct.
One only has to do the slightest bit of research to realise that it is, in fact, utterly bogus.
In the real world, both government and markets have important economic roles to play. MMT is basically about trying to define the optimum balance between the two, so as to achieve the best economic and social outcomes for all.
y: "Another odd thing about Bob is that he seems to be incapable of differentiating between communism and Keynesian economics."
ReplyDeleteNot odd at all for Libertarian (Rothbardian) Austrians. They hold that anything short of their position is "socialism" at least and anything in the left range is communism. This is not a new phenomenon btw. It was raging in the Fifties with the John Birch Society and the other right-wing extremists that saw red or at least pink in everything that they disagreed with. It was actually worse then than it is now.
(*at the very least, given realistic expectations about what can actually be achieved, politically and socially.)
ReplyDelete