Thursday, March 24, 2016

Chris Miller — Russia considers how to impose austerity in a time of recession

It's assumed that austerity is a given.
The oil price may have climbed off its low recently, but Russia’s government budget remains a shambles. Russia’s political class is beginning, slowly, to come to terms with a new reality: hitting this year’s budget deficit target of 3% of GDP without increasing debt levels will require significant tax hikes or spending cuts. For the first time since Russian President Vladimir Putin took power, the political class has to work out how to impose austerity in a time of recession.
Neoliberalism and moronism rules.

bne intllinews
COMMENT: Russia considers how to impose austerity in a time of recession
Chris Miller | Associate Director of the Program in Grand Strategy at Yale University


Bob Roddis said...

You MMTers are pretty loose with the use of the "M" word. I've noticed that you will not process or engage the Austrian observation that artificial and unsustainable investments can often be prolonged by additional injections of new funny money or government spending. That is pretty much all there is to MMT as if you guys discovered it. The fact that you refuse to acknowledge or engage our analysis about the prior investments being unsustainable (much less engaging the concepts of economic calculation or the socialist calculation problem) is quite telling.

Peter Pan said...

M as in moron? I agree use of this word has been spreading - even Tom is using it. I blame Matt Franko for starting this trend.

Matt Franko said...

"Stupid (moron) and blind!" Mat 23:17

Different Matthew...

Matt Franko said...

Bob WHO is doing the calculating?

If there is "calculation" being done, it HAS to be done by human beings... WHO are they?

Names please?

You are applying anthropormorphism when you use the figure of speech "economic calculation" since NOBODY is doing any calculating...


"Giving human characteristics to animals, inanimate objects or natural phenomena is a human trait called “to anthropomorphize.” Sadly, as in the tragic Sea World attack the proclivity is forgotten as we wonder why the animal behaved as an animal. Obviously, the tendency to anthropomorphize is a source of error."

Matt Franko said...

Bob its like saying "natural selection" (another figure of speech) is a real thing... when nobody is doing any selecting...

Peter Pan said...

Natural refers to nature, the environment. The process of evolution involves selection through attrition.

Peter Pan said...

Different Matthew...

Then I blame the Bible thumper.

Ignacio said...

Matt is also worth noticing that anthropomorphizing is a phase children go thought while they are developing cognitively. At 7+ y/o children should be past this phase.

Libertarians are basically manchilds who are unable to process certain information and come to terms with it. If you observe their ideological rants you will see this trait express itself quite often.

For them is all about metaphysics and grandiose claims, not much about reality or facts.

Tom Hickey said...

Markets are information transfer systems that operate on signaling. A perfect market maintains pure signal. A highly imperfect market is dominated by noise.

The neoclassical objective is to free markets of imperfections in order to improve the signal to noise ratio. Equilibrium at full potential require near a perfect market in aggregate — captial markets, resource markets, goods markets, and labor markets.

But there are no perfect markets and "the market" as the aggregate of all markets is imperfect and is infected with a lot of noise. Moreover, there are institutional, political, and social obstacles to free markets in that they create noise as different interests conflict. There are also economic obstacles like proprietary knowledge that prevent automatic adjustment to the myriad signals being generated.

The question is whether there i more optimal ways to communicate financial and economic information and that needs to be shown rather than assumed.

Where's the "calculation." Well, one could argue that "the market" is like a giant computer that deals with all signals as they are generated, but then the question arises why a bank of supercomputers could not do this, too if the data where fed into them in real time, e.g., from scans.

Peter Pan said...

An attempt at economic "calculation"?

Calgacus said...

Bob Roddis: Start at the beginning: there isn't any other kind of money than "funny money". There never was, never will be, never could be. So if nobody ever injected funny money (= fiat money, credit money), there wouldn't be any money for us to argue about. Gold isn't money and never was money. It is only so "valuable" because governments foolishly spend / spent their intrinsically valuable funny money on it. Of all the commodities in the world, which has the greatest supply compared to its uses?: Gold.

Bob Roddis said...

Calgacus: Wow. You are amazing. Gold and silver were never valuable to human beings and were never used as coins or a medium of exchange. Who knew?

Calgacus said...

Yup, that is the actual history. That's the reality. People get it perfectly backwards & thereby make things much more complicated for themselves than they really are. Gold & silver are pretty and shiny, but not enough to support the ludicrous valuations of the last couple thousand years. They were used for coins - by states, against counterfeiting, millennia after fiat/credit money had been in use.

Are the funny money dollars in your wallet valuable because of the expensive special paper they are made of? Or is it because the state has printed stuff on them that indicates they are a physical representation of, a "money-thing" for an immaterial creditary relationship?

It is a hard but crucial point for many to understand, but there is no "medium of exchange". There never was. Analyze finance or even barter or any "exchange" closely enough - and it disappears. Even "exchange" disappears. All there are, are creditary transactions. If A scratches B's back & B scratches A's, where is the medium of exchange?

I entirely agree that people use the word moron too much.

John said...

Money's history is as follows: credit money followed by commodity money and then barter exchange. The exact opposite of the economic textbooks. As Michael Hudson puts it, if the monetary history found in economic textbooks is true then everything historians, anthropologists and archaeologists know for a fact is total nonsense. Otherwise, history is true and economic textbooks are rubbish, which is exactly what they are.

So credit came first (for example, the thousands of cuneiform tablets still available), then came commodity money (mostly a silver standard, followed by bimetallic standards and lastly a gold standard) and then barter exchange (when society breaks down and regular credit money isn't useful, like in hyperinflations or in countries like Greece today).

In ancient history (for example, Rome), commodity money was useful for only two reasons. First, it wasn't easily counterfeited, although paper money was already available in China, but Europeans weren't as advanced as the Chinese and therefore commodity money was used. Second, it was a good way of paying mercenaries: they're not in a position to use cuneiform tablets, tally sticks or whatever in a war thousands of miles away. The gold and silver they were paid in had some intrinsic value.

Kristjan said...

Austrian story is complete nonsense of course. Bob never gets tired beating that economic calculation horse but that is understandable, what else is there left for you to defend your religion.

Some Austrians get it right half way at least: Government has money monopoly (Hayek). Of course what fallows is that there is uneployment created by this monopolist restricting supply.

Hayek seems to have been right that government is never politically or intellecually capable of suppling the right amount of money to the economy. The problem is more of political I think, during wars they are running the economy at full capacity. I wonder if Hayek would have been against war time spending or not? Lose the war because of economic calculation fairy? Hayek did all he could to make government intellectually and politically incapable of providing the right amount of money to the economy.

John said...

Kristjan, excellent demolition. As for the classical liberal/libertarian Hayek's being for wartime spending, he was after all a personal consultant to the neo-fascist dictatorship in Chile. When the time came, the "libertarian" turned supporter of neo-fascist dictatorship, not liberal democracy. Milton Friedman did the same. As for their economics, they tell absurd Robinson Crusoe stories, and refuse to look at all the historical and archaeological evidence.

It's a weird cult living in a fantasy of their own making. Hayek turned to political philosophy after getting the intellectual beating of a lifetime firstly from Keynes and then a far, far worse kicking by Sraffa. His "political philosophy", generous as it is to call his alleged thought that, was nothing more than the type of ridiculous propaganda that leaves you laughing uncontrollably. His Road to Serfdom is absolute stupidity for the absolutely stupid. The Hayek cult is as stupefyingly bewildering as the Hitchens cult, the Zizek cult, the Rand cult, the Rothbard cult...

Bob Roddis said...

1. Hudson’s alleged history does not change the laws of economics. That small primitive groups (where everybody knew everyone else) didn’t have money is evidence that they were small and primitive. In order to engage in significant commercial activity WITH STRANGERS AND FOREIGNERS, one requires a medium of exchange that all parties to the transaction deem valuable AND know that other third parties will also deem valuable in the future. Otherwise, you are trading away your cow for a handful of magic beans. People held gold and silver to be valuable so coins in uniform configurations made from those metals were used as money. Your pathetic game of obfuscation does not fly very far.

2. New left historian Gabriel Kolko demonstrated conclusively in 1963 that the Robber Barons could not and did not monopolize the market because markets cannot generally be monopolized. Instead, the “progressive” era was invented as a method for them to control government regulation and thus monopolize the market. The Federal Reserve was part of their monopolization scheme via control of the government.

3. Hayek was never refuted. I have never once found a non-Austrian who understands even the most basic Austrian concepts. You guys are certainly clueless on the subject.

4. Since libertarian theory prohibits the initiation of violence, I fail to see why Hayek’s attempt to rein in a bloody dictator was such a bad thing.

5. One must perform economic calculation to survive day to day. Each person has limited resources. Undistorted prices provide the essential information that allows each of us to select from the multiplicity of available alternatives. Good grief, even the hard left finally agreed in 1991 when the USSR collapsed that Mises was right about economic calculation (aka “the socialist calculation problem”).

Bob Roddis said...

"The Road to Serfdom" is brilliant and correct. In order to have economic central planning (and for what purpose??), the authorities must be able to ORDER and COMPEL their victims to behave in a certain manner. Otherwise, if people can ignore "the plan", how can there be "a plan"? In order compel compliance, the authorities need a swarm of secret police and SWAT teams. Violators must be punished, or there is no "plan". It's all pretty self evident.

There's even a comic book version because the concepts are so simple and self evident and because many commenters on this page are apparently unable to read actual books.

Kristjan said...

Bob, It is so simple yet no one you met outside the Austrian School has understood It. Have you considered that this could be a religion? It is very easy for people of faith to udenrstand their religion.

Kristjan said...

In the 1930s and 1940s there were debates between Keynesians and Austrians like Hayek, and the Austrians lost those debates.

Hayel agreed with Milton Friedman and he agreed with the evil government interventions towards the end of his life.
here is Hayek:

“Although I do not regard deflation as the original cause of a decline in business activity, such a reaction has unquestionably the tendency to induce a process of deflation – to cause what more than 40 years ago I called a ‘secondary deflation’ – the effect of which may be worse, and in the 1930s certainly was worse, than what the original cause of the reaction made necessary, and which has no steering function to perform. I must confess that forty years ago I argued differently. I have since altered my opinion – not about the theoretical explanation of the events, but about the practical possibility of removing the obstacles to the functioning of the system in a particular way”

Kristjan said...
Friedrich von Hayek created a large and self-contradictory volume of writings over a long lifetime in several fields. Widely regarded as brilliant, nevertheless some of them were dreadfully wrong. For example, The Road To Serfdom, was as badly wrong as "Dow 36,000". His Business Cycle Theory is considered outright wrong, except by zealots.
Interpreting Hayek's work is comparable to interpreting the Bible: no interpreter can fully reconcile everything without resorting to the most ludicrous apologetics. Like the Bible, support for almost any position can be found. For example, Hayek included quite a number of non-libertarian statements and support for social welfare. Cynics would think those were made to mollify liberals, provide plausible deniability, or provide breathing room for the requirements of propaganda. And they come embedded in enough unclear verbiage that any particular implementation of them could be criticized for not meeting Hayek's requirements.
Given that Hayek was a propagandist, it would be difficult to take his works at face value, even if face value could be determined. But if you look at Hayek's actual jobs and how he devoted his energies, they were always in service to the rich and powerful, starting with the Vienna Landlords Association. Hayek never held an academic position that wasn't funded by the wealthy.

John said...


It's not just Michael Hudson. It's every reputable ancient historian, archaeologist and anthropologist. Either they are all part of an elaborate lie or the Austrian story is wrong.

"I fail to see why Hayek’s attempt to rein in a bloody dictator was such a bad thing."

By that absurd standard, almost no one would ever be guilty of anything. Those apprehended can always claim that they were only involved in an unfortunate bid to rein in the the paedophile ringleader, the serial killer, the serial rapist, the war criminal, etc. Hayek showed his true allegiances: power and rightwing dictatorship. Never judge people by their words; always judge them by their actions. Hayek and Friedman were awful human beings and terrible economists and political thinkers.

"Hayek was never refuted. I have never once found a non-Austrian who understands even the most basic Austrian concepts. You guys are certainly clueless on the subject."

First of all, Hayek was demolished by Keynes and Sraffa. Every Austrian who knows their subject understands it. Even that charlatan Robert Murphy has accepted it but predictably has not let that get in the way of peddling snake oil. Whether he actually understands that it obliterates a large part of Austrian economics is unclear. He just goes on his merry way spinning Robinson Crusoe stories, idiotic fairytales about the money multiplier and all the rest of it. It tells you a great deal about the intellectual honesty about people like Murphy that he still churns out the same garbage even having been convincingly destroyed by Warren Mosler: Murphy's response seemed to be, that may be how the real world functions, but I want it to function according to my fairytale. Mosler's too much of a nice guy to have rubbed Murphy's face in his own ignorance.

We aren't clueless about the subject, but you are right that it can't be refuted, although it has been demolished. After all, this is an economic theory that is "axiomatically" correct! Austrian economics has been likened to the axioms of geometry. Evidence is irrelevant. If evidence conflicts with the theory, then the evidence is wrong! The evidence is wrong because we are axiomatically right! What kind of a theory is this? It's nonsense. Austrians think Marxist and Keynesian is wrong. Do the Marxists and Keynesians not have an equal right to say to the Austrians that they are axiomatically correct and that the evidence is wrong? This is not economics or social science; this is religious fundamentalism. Zimbabwe's Robert Mugabe can claim he has an economic theory that axiomatically proves there is no inflation and can never be any inflation, and any evidence to the contrary proves there is something wrong with the evidence!

I find it interesting that the Austrians still liken their subject to Euclidean geometry. It is a geometry that doesn't and can't exist in the real world! There are some phenomena in nature that are approximately Euclidean, but they're not Euclidean. Everything of any importance, like space-time, is non-Euclidean. Although it would do Euclid an injustice, it would be more befitting to its mathematical essence to call Euclidean geometry Platonic geometry. Just like the Platonic solids and geometrical figures, they are perfect, and more importantly unrealisable in the real world. You can't draw a perfect triangle or a cube. While Euclidean geometry and Platonic solids serve an exceptionally useful purpose, Austrian economics serves no purpose other than the indoctrination of any unfortunate bastards dragged into its cultish, freak show "philosophy" for the benefit of a tiny minority of enormously rich people masquerading as latter-day abolitionists and freedom fighters.

Tom Hickey said...


Kristjan said...

Well, they come in different colors. A lot of them save food and guns in their bunkers. Bob is not that type. In a way it is a religion of freedom. Most of them have no clue about real economy. If you had to guess who are the generators of the most idiotic statements about the economy then it is probably Austrians: there is no such thing as macroeconomy, there is no gdp. I even heard these people say that there is no import or export that we can speak of. Private agents sending their goods abroad, that's all there is. It would be ok if they didn't apply their fantasies to the real world but they do. Murphy was talking about a danger of hyperinflation when Fed started doing QE. They are clueless but you can't convince them. They criticise but when you start asking them about the stateless system they propote, then it turns out to be feudalism.

Bob Roddis said...

1. There’s no Austrian “story”. It’s logic. People would not have used coins made of metals as money in exchanges with strangers and foreigners if those metals did not have a pre-existing and organic value to most of the population. The fact that a government official thought up the idea of uniform coins does not change that. None of these alleged anthropological histories show any understanding of Austrian analysis nor do they refute it. Focus on the terms "strangers and foreigners" before shooting off your mouths.

2. Linking to the pathetic Lord Keynes and his idiocy about a single “natural” rate of interest vs. multiple “natural” rates of interest is truly pathetic. Apparently, that was the only “debate” Hayek lost with the statists. Talk about a meaningless sideshow. We endlessly mock LK on the Bob Murphy blog for clinging to such a dumbass “rate vs. rates” “argument”.

3. I’m a Rothbardian. Hayek has written many things I disagree with. I fail to see how the personal failings of Hayek (or Rothbard for that matter) impact their correct theoretical analysis (none of which you guys understand in the slightest and have thus never addressed). There’s a term for your above comments. Ad hominem.

John said...


1. It's logic of a sort. It sounds reasonable. In fact it sounds utterly convincing and indesputable. How it can possibly be otherwise? But it is otherwise. The historical evidence is overwhelming: credit comes first, commodity money comes second, and barter comes last. It doesn't sound right does it? It sounds absurd. But it's a historical fact, and we have to live with historical facts.

2. I don't think you quite grasp the nature of the argument. The whole Austrian understanding of interest rates, money and business cycles was laid waste. This is a demolition of the foundations of Austrian economics. Like the history of money, the Austrian theory of interest, money and business cycles sounds not only plausible but irrefutable. It's common sense, it's logic, but it just isn't true. What are we meant to say, I want it to conform to my unnatural logic? We all have to get over our intellectual prejudices and accept facts. I don't like the fact that my country, the UK, is not much more than an international criminal in world affairs. What else can I do but accept the truth?

3. If you are an intellectually dishonest person (Hayek and Friedman), your theoretical analysis is then very likely to be propaganda, not objective conclusions and unbiased explanation of social and economic phenomena. Like Lenin and Trotsky before them, Hayek and Friedman were not impartial observers who came to their respective economic and political philosophies after serious reflection. They were politically partisan from the beginning. This was made evident by their attitudes to neo-fascism. Unlike Hayek and Friedman, Rothbard seemed like a genuinely nice, funny and reasonably honest guy, and I would have loved to have had a beer with him, just like I would with Ron Paul. I agree with them on many things: foreign policy, military policy and the military economy, civil liberties, policing and criminal justice, to name a few. Their economics, however, is fantasy. Its theoretical foundations are a nonsense, while the rest of the subject matter ranges from misleading to shambolic. Take Rothbard's book "The Mystery of Banking". Yet again, it appears utterly convincing, but it is based on a total misunderstanding of money.

Subject to evidence, Rothbard wasn't a fraud or intellectually dishonest like Hayek. He simply misunderstood too much about the nature of economics and economic society. Whether this was based on a commitment to libertarian ideals which then informed his economics, or whether it was based on something else, I can't say. The Austrians, on the whole, are gracious enough to say that Keynesians aren't malicious liars but deluded fools. I think the same is true about the Austrians. Given their honesty on so many other subjects, I don't believe that they're liars in the same way as the neoliberals and neoconservatives. The only conclusion is that they have misunderstood far too many important things, thus leading them astray.

Other than that, I like the libertarians (real libertarians not the sham infiltrators who go back to their natural home in the rightwing of the GOP when embarrassment ceases)! They're almost certainly less likely to murder you than a Republican or a Democrat. You can have a proper debate with a real libertarian. Look at the stuff Ron Paul said at the debates!

Bob Roddis said...

John: Based upon Bob Murphy’s outstanding criticisms of David Graeber and the latter analysis of Murphy by “Lord Keynes”, there is NOTHING WHATSOEVER in this so-called anthropological analysis that contradictions Austrian analysis in the slightest.

The KEY Austrian concept is subjective value where, because we cannot read minds, its only efficient expression is through observing the prices and terms of voluntary transactions. That analysis is also central to the impossibility of economic calculation under socialism. You guys still understand nothing about Austrian analysis.

Among the many excellent points that Murphy made was that a barter society is going to be so primitive as to leave no written record. Such a society is more primitive than the “barter by credit” transactions Graeber describes. Further, the barter period could have lasted 20 minutes. It's irrelevant. The fact that the record allegedly shows that “barter by credit” actually preceded coins does not impact whatsoever the KEY Austrian concept described above.

Bob Roddis said...

John: I had not revisited this topic in five years. One point I’m not sure Murphy makes is that the “barter with credit” transactions described by Graeber are totally consistent with Austrian analysis. The terms of the credit transaction are based upon the subjective desires of the parties to the transaction.

You fail to understand that Austrian theory was not derived from the alleged history of money. It was the opposite. The very simple Austrian overview of the alleged history of money was derived from pre-existing Austrian theory. Graeber’s “barter with credit” transactions demonstrate the correctness of that analysis.

John said...


It's not just Graeber or Hudson. It's every reputable historian of money and numismatics. It's historians generally because they get drawn into money. If there's a war then how did monarchs fund wars and the like. Philip Grierson is a good author, if you can afford to buy his books. Here is where we part company: I believe the archaeological, anthropological and historical record. The true history of money will never be known. It is lost in the mists of time, because as Murphy himself says, agreeing with the historians and everybody else, writing did not exist when money first made an appearance. However, the earliest writing we know of is about credit transactions: debts and credits written on cuneiform. That's indesputable.

Bob: "...there is NOTHING WHATSOEVER in this so-called anthropological analysis that contradictions Austrian analysis in the slightest."

That is not correct. The Austrian theory is first barter exchange, then commodity money and lastly the invention of credit money. However, the archaeological, anthropological and historical evidence is the exact reverse: credit money comes first, then commodity money and lastly barter exchange. How does this not "contradict Austrian analysis" when it's the exact opposite? I guess we're going to have to agree to disagree.

Bob Roddis said...

Again, you simply do not understand Austrian analysis. The purpose of the “logical history of money” was to show that the creation of money was spontaneous, organic and voluntary as opposed to being the result of an edict from an authoritarian overlord under penalty of death. The fact that there were widespread barter/credit relationships prior to the invention of money (as opposed to “spot transactions”) still indicates that those relationships were spontaneous, organic and voluntary. This further buttresses the case against the “state theory of money”. Since no “progressive” understands Austrian analysis, they get real excited about further buttressing our case (thinking they have refuted it) with the discovery of the barter/credit relationships.

Bob Roddis said...

Lord Keynes" totally concedes concerning what I just said yesterday (only because he was unaware that I said it).