Our Economy Is Not a Child's Erector Set

I'm pretty confident that Steve H. is Muirgeo.

Don,

Go back and read it again. I'm pretty confident that Collins was referring to Bush being in control of 'his faculties'. She nor any other columnist has any expectation that he could effect economic remedies. Bush is extraordinarily out of touch and the economy is clearly his weakest domestic area.

I was stunned by the quotes, especially given his audience. What vexed Collins was that Bush doesn't even bother to dignify himself anymore...

So the subprime shenanigans are coming home to roost for Bear Stearns. Too bad they're being bailed out by JP Morgan/Feds. Really stupid. I think every single person and corporate entity should suffer for that stupidity.

"or that volcanoes won't erupt if they are fed a sufficient number of virgins"

What !?!? How else would you explain the rising number of volcanic eruptions since the sexual revolution ?

muirgeo --

The subprime problem is partially the result of government tinkering in the Community Reinvestment Act, the Equal Credit Opportunity Act and the Fair Housing Act, which gave banks a huge incentive to make loans to low income people without inquiring too closely into their ability to repay the loans.

"Nope all the evidence I can find suggest "good tinkering" is much better then the Herbert Hoover approach. But of course history has a way of repeating itself."

-muirgeo

I truly don't understand this sentence. Hoover was a born tinkerer. Trained as an engineer, he saw the economy as something to be controlled through the levers of power. His ascendancy to the presidency proved to be a disaster once he got his hands on those levers. FDR proved to be little better, except he did make everyone feel better by being a fantastic speaker. Most of FDR's policies were wasting effort like paying people to dig holes, then have other fill them in. This adds nothing to any economy, yet people were busy, making them feel were working. They weren't. Busy work is not value added. In fact, these programs distracted people from otherwise valuable labor.

I don't understand the following sentence either:

"One more thing. If the current "downturn" were occurring during a democratic administration I'm certain the howling would be horrific and unbearably."

The last recession began in November 2000, during the Clinton presidency, yet I don't recall any of the 'horrific and unbearably [sic]" howling.

Having read many of your posts you seem to think that democrats are heroes while republicans are demons. Do you really think that? Do you not realize that growth occurred in the 80's and 90's was due to split government and partisan politics stopping the trash that lives in each party? Both parties suck. The democrats are just as bad as republicans.

And this:

"The desperation of the current economy is hardly recognized when other well read economist predicted exactly this 3 years ago based on sound objective principles."

Desperation? Really? Hyperbole always weakens an argument. The unemployment rate is at 4.8% (http://www.bls.gov/cps/, it's right there in the upper right hand corner). In other words we're still at full employment. And gas consumption, a good indicator of economic strength, has pushed the price of oil to higher levels over the last few months. This indicates that consumers are still traveling and consuming. We are not in a recession (don't forget this means two consecutive quarters of negative growth before you start talking).

Also, predictions mean very little. You can always find someone who predicted current events. What really matters is consistency of predictions. I know a lot of people that have been predicting gloom and doom my entire life. Sometimes they're right, but they are almost always wrong. Meaning they're predictions are meaningless. Life today is better than five years ago and much better than 20 years ago. Paul Ehrlich comes to mind when I hear 'predictions'.

seriously. stop talking to him.

I'm glad that the ethanol subsidy has arrived on this table. If you need some education on the subject, here's a great start:

http://www.gmu.edu/departments/economics/
<br>
wew/articles/08/Big%20Corn%20and%20Ethanol


%20Hoax.htm

The seven members of the (FED) board are appointed by the President and confirmed by the Senate.[23] Members are selected to terms of 14 years (unless removed by the President), which are generally limited to one term.

Sam:

Progressives are a mentally afflicted lot.

I think the ethanol promotion is quite illustrative.

The problem with government 'management of the economy is that it creates incentives other than attainment of the stated goal. Rather than satisfy consumers, producers instead seek to affect the 'management' process in their own behalf.

Watching progressives promote government involvement in ethanol while simultaneously complaining about corporate subsidies should enlighten any impartial observer into the schizophrenic nature of proggresive sentiment.

Sam just saying that the fed has the greatest affect compared to the office of president.

"Were there past examples when some one DID control or even tried to control this economy on which you make this claim?"

Japanese industrial policy regarding multipe industries make the point that markets are smarter than governments.

First, the government-driven, next generation computing initiatives have produced little to no value.

I also believe that the Japanese government also tried to hold Honda down.

I could go on and on...

What's new?

Sam:

What do you think of the Bear Stearns bailout? This def reeks of administration toadyism.

Said the Mighty muirduck:

So the current horrific economy with its attendant lose of productivity and prosperity is not a problem?

1. Define "horrific economy".

2. Productivity is at an all time high.


3. Prosperity is at an all time high.

In short, you're spewing nonsense out of your ducky rear.

The FED controls one thing, the issuing of credit via monetary expansion. The FED does not control the economy, but does affect it.

So the current horrific economy with its attendant lose of productivity and prosperity is not a problem?

It is a problem, but there is little the president can do about it. The Fed (who is most able to do anything) is trying. President's have little control over the economy, especially in terms of immediacy. The Fed has the controls.

Quoting Hoover: The U.S. "had abandoned the laissez faire of the 18th century" and new emphasis placed on "social and economic justice." "We have learned that the impulse to production can only be maintained at a high pitch if there is a fair division of product...by certain restrictions on the strong and the dominant."

After the depression hit, The Nation wrote of Hoover: "What Mr. hoover is really trying to do, apparently without knowing it, is to create a Supreme Council of the National Economy in the United States, and it will be interesting to see how far he can go in our topsy-turvey capitalist economy. He is right in wanting a planned economy."

In other words, Hoover was a progressive.

All this from Thomas Woods 33 Questions About American History You're Not Supposed to Ask

Hoover was an interventionist. The idea that he sat back and did nothing as the Depression started is just incorrect.

http://en.wikipedia.org/wiki/Herbert_Hoover#Great_Depression

During the 1932 campaign, FDR criticized Hoover for being too interventionist. I can't find the cite right now, I'm afraid.

The idea that GWB's presidency has been non-interventionist is bizarre. Just look up the rate at which the US national debt has been growing. And no, it's not because of tax cuts - the Treasury actually took in more money after the tax cuts than it had projected it would before they kicked in.

Sorry, that didn't work out.

Here are the three links:

link 1

link 2


link 3

I didn't say the depression began under FDR, but he is now credited with its duration.

BTW, the government entity, which set the policies that fomented the depression, was created in 1913. It's charge was to 'smooth out' the economy and avoid the businesses cycles which had been blamed by the ignorant on capitalism.

Yes,I'm talking about that 'laissez faire' economy, as you put it, which was actually being burdened with increasing government intervention in the form of the FED (among others), chartered by congress in 1913, and was supposed to prevent the depression, instead, brought it on with easy credit. They probably thought they were growing the economy.

Smoot-Hawley was another government intervention during that great 'laissez faire' period...as you put it.

FDR was voted in because he was a consummate politician and had capable speech writers.

He is well remembered for the same reason and also due to a sycophantic press which help write the popular, if erroneous, history as most people today know it.


He also was the man in place during a war, and wartime leaders are always fondly remembered in a militaristic nation. It's part of the national greatness thing.

We already have gone over the prosperous period after the war, which you only want to credit FDR's policies with, apparently no other factors were extant during that period which could account for that prosperity.

Is popular history your forté?

Here are some links for your reading pleasure.

link 1

link 2


link 3

I didn't say the depression began under FDR, but he is now credited with its duration.

BTW, the government entity, which set the policies that fomented the depression, was created in 1913. It's charge was to 'smooth out' the economy and avoid the businesses cycles which had been blamed by the ignorant on capitalism.

Yes,I'm talking about that 'laissez faire' economy, as you put it, which was actually being burdened with increasing government intervention in the form of the FED (among others), chartered by congress in 1913, and was supposed to prevent the depression, instead, brought it on with easy credit. They probably thought they were growing the economy.

Smoot-Hawley was another government intervention during that great 'laissez faire' period...as you put it.

FDR was voted in because he was a consummate politician and had capable speech writers.

He is well remembered for the same reason and also due to a sycophantic press which help write the popular, if erroneous, history as most people today know it.


He also was the man in place during a war, and wartime leaders are always fondly remembered in a militaristic nation. It's part of the national greatness thing.

We already have gone over the prosperous period after the war, which you only want to credit FDR's policies with, apparently no other factors were extant during that period which could account for that prosperity.

Is popular history your forté?

Here are some links for your reading pleasure.

link 1

link 2


link 3

"....and yes, despite the current downturn,...."

The more I thought about this the more I was dismayed by it.


So the current horrific economy with its attendant lose of productivity and prosperity is not a problem? It's written off on a whim. The desperation of the current economy is hardly recognized when other well read economist predicted exactly this 3 years ago based on sound objective principles. But apparently if we tinker something much worse may come our way.... again like what? Another Great Depression? I mean what could be worse then what we currently have?

It appears a lack of tinkering has once again brought our economy to the brink.... but that's OK? Tinkering could cause something much worse... were is the evidence?

And please anyone who can't differentiate "tinkering" from a communist revolution.... grow up...... don't bother.

Nope all the evidence I can find suggest "good tinkering" is much better then the Herbert Hoover approach. But of course history has a way of repeating itself.

One more thing. If the current "downturn" were occurring during a democratic administration I'm certain the howling would be horrific and unbearably. The claims would be that the bad economy was a result of tinkering..... like when Carter in 4 short years caused economic collapse that was certainly all a result of his tinkering. Yes indeed a president has little effect on the economy unless 2 conditions prevail. He is laissez faire and it is good or he is democratic and it is bad. Too bad the contrary conditions seem to better fit the facts of history.

I've never seen anyone try and make a serious argument that the Depression ended in 1933, after the New Deal kicked in. But that is the argument you have to make if you're going to say that central planning fixed the economy.

Arguing that the Depression ended in 1933 seems a bit like arguing that World War II ended in 1940. Never mind ending, it had barely begun.

Finally, who is being intellectually dishonest?

Posted by: muirgeo | Mar 16, 2008 8:21:50 AM

You have been dishonest, muirgeo. Would you like a recap of some of the prior posts that you have trolled around here with? Then of the threads you've ducked from?

Finally, who is being intellectually dishonest?

Posted by: muirgeo | Mar 16, 2008 8:21:50 AM

You have been dishonest, muirgeo. Would you like a recap of some of the prior posts that you have trolled around here with? Then of the threads you've ducked from?

Muirgeo, please list the exact policy that will turn the economy around. You seem to have the easy button from Staples. I can tell you it won't be tax rebates (advocated stupidly by both parties).

FDR presided over the longest depression in US history...the....longest....depression....in....US....history.

Posted by: Sam Grove

Sam,

What year did the Depression begin? Who was the president at the time?

When did it end? Who was president?

Finally, who is being intellectually dishonest?

http://en.wikipedia.org/wiki/Image:Gdp20-40.jpg

Which party basically controlled politics the 30 years leading up to the Depression.

He presided over the Depression because the people realized how screwed up the policies were that lead to it. His policies lived on long after his death and we prospered for decades after. That's completely counter to the idea that planning doesn't help or that it makes things worse. Your reply is simply intellectually dishonest and still ignores the facts.

And of course the comments above that show the posters inability to think in any shades of grey are not even worth my commenting on.

“The stereotypical white shrimper boots”

Thibodeaux would call those Delcambre Reeboks.

muirgeo,

This blog is called "Cafe Hayek" for a reason:

http://www.econlib.org/Library/Essays/hykKnw1.h...>

In this simple sentence, Hayek demolishes central planning on any level:

But those who clamor for "conscious direction"—and who cannot believe that anything which has evolved without design (and even without our understanding it) should solve problems which we should not be able to solve consciously—should remember this: The problem is precisely how to extend the span of out utilization of resources beyond the span of the control of any one mind; and therefore, how to dispense with the need of conscious control, and how to provide inducements which will make the individuals do the desirable things without anyone having to tell them what to do.

Chris:

I suspect muirduck will have nothing to say about the Soviet Union, Cuba or Zimbabwe.

Keep your virgin daughters away from Murthaduck. He sounds like he's getting ready to feed the volcano.

On the other hand if they are examples of control (ill advised as you might claim) then you are stuck explaining our continued prosperity in spite of them. I really think the supposition is logically and factually flawed and the opposite position far from being a flat Earth equivalent.

I'm no fan of corporate subsidies (in fact, I hate them) but by using your own argument you must think they're a good thing, otherwise you'd have to explain our continuing prosperity in spite of them. Has every single economic policy been good for the economy? If not, you're stuck explaining our continued prosperity in spite of them.

I've been trying to quit smoking these past couple weeks. If I were to apply Muirgeo's logic, I should instead smoke even more. Clearly, since I'm still alive, all those cigarettes must have been good for me. Surely the diet & exercise couldn't explain how increasingly healthy I've been lately.

I quit last year for a few months. I felt better after quitting. If the economy improving after FDR stops messing with it somehow proves that FDR's policies were good for the economy, then it follows that all those years of smoking caused me to be healthier after quitting. Facts are facts, after all.

Well, the Soviets tried controlling their economy, as did the Chinese and the Cubans. The first two economies took off when they substantially abandoned the effort.

Don't you see, Chris? Like with FDR, the success that follows the abandonment of the policies is what proves they were good policies! Just like FDR!

Don, Don, Don,

Sigh. Your letter to the SSR NY Times assumes that they understand how absurd it is to think that someone could, let alone should, be "in control".

The nonletter part of you post would have made a far better letter to the editor.

muirgeo --

Well, the Soviets tried controlling their economy, as did the Chinese and the Cubans. The first two economies took off when they substantially abandoned the effort. Cuba's is stagnant. Meanwhile, Zimbabwe's economy show what happens when the government tries to take control.

Now, it's plausible to assert that these countries just weren't running their economies the right way. But, I have yet to see an example of a thriving economy that is centrally managed -- do you have one?

If you want another example of the idiocy that results when the government tries to "control" the economy, read up on Schechter v. U.S. and the National Industrial Recovery Act. FDR and his brain trust did not have the benefit of watching the Soviet economy collapse.

Well played Don. In fact, just the opposite of the NYT's "conventional wisdom" is positively true. The more the government tries to control the economy the worse the results. President Bush (or Obama or McCain or whoever) could give lofty speeches and hopeful statements and make promises galore. In reality, the President of the US cannot make the economy better but can certainly screw it up by trying to make it better.

Muirego,

I second the earlier comment: Go read about the Great Depression to see what happens when somebody tries to control the economy. Hoover with his "engineering" approach and FDR with his "I'll try anything to get me re-elected" approach.

FDR presided over the longest depression in US history...the....longest....depression....in....US....history.

Minarchists advocate government in 'national defence' and 'justice' but why would you want Guvmint in the two areas where weaponry are most likely to be concentrated?

Maybe minarchists don't so much 'advocate' it as much as will allow it, as most discussion with people over libertarian/free market policies after everything else is handled, inevitably boil down to those things. Basically, without a state, who will protect us from foreign state.

Personally, I would be OK with militias.

muirduck is hopeless.

"Were FDR's policies examples of control causing havoc? "

muirgeo

The Great Depression, maybe? Both he and Hoover thought they could control the economy. Hoover and the Fed caused the depression that began in 1929 by their actions. Of course there would have been a normal recession, but government actions worsened the situation into a depression. Don't forget that the economy got better after FDR's death, probably as a direct result of consumer confidence in the economy again and the confidence of investors that with FDR dead the government wouldn't nationalize their efforts.

Of course policy matters. That is never the argument on this blog. The argument is ALWAYS: "which policies should we have?" The policies argued for over and over tirelessly against those that think they should be in control are the following:

1. Strong property rights, which of course covers security. Prosperity could not happen if individuals did not feel secure in their person and property, nor would they labor so hard if they couldn't keep what's theirs.

2. The government oversteps itself almost always when it deviates from 1. Mainly because the government really isn't 'good' at anything the way private individuals are, so can only be good at things that share very broad support and can be easily coordinated.

Of course, those in office think that coordination is easy- just pass a law forcing coordination. But this doesn't work the way the markets work because there is no mechanism to which the government can respond to changing circumstances, i.e., when prices aren't there to transmit information to EVERYONE, very little can be done in response to changing demands, supply, etc.

Hope this helps your understanding, muirgeo.

Or to put it another way - if no government agency can plan at all then the only solution is Anarcho-Capitalism. Minarchists advocate government in 'national defence' and 'justice' but why would you want Guvmint in the two areas where weaponry are most likely to be concentrated? Why can't there be militias and mercenaries instead? Why can't people defend themselves and their families with their own weapons? I believe Plato pointed out the good people don't need laws and bad people will find ways around the law. Just as dangerous criminals don't care if they're illegally carry a gun. I think Anarcho-Capitalists are right - you can't draw the line between having Guvmint and being a Libertarian.

Addendum;

If Social Security or the Tax code or the Clean Air Act or the GI Bill are not examples of control then I suspect they have no effect on the economy. This would be good to know because it would bode good for the idea of universal health.

On the other hand if they are examples of control (ill advised as you might claim) then you are stuck explaining our continued prosperity in spite of them. I really think the supposition is logically and factually flawed and the opposite position far from being a flat Earth equivalent.

It would really be helpful to have some sort of experimental control. Something like an economy actually run on minimalist government intervention. But I can't even think of any we could use as an example. So again I'm not sure what the claim is based on.

" A defining characteristic of this economy that produces such enormous abundance for us all (and yes, despite the current downturn, it continues to produce prodigiously) is that no one is "in control." Don Boudreaux

This is an oft repeated sentiment here at Cafe Hayek that seems based on presumption with no foundation in historical fact. In truth it seems contradictory to the facts.

First you claim that "no one" is in control. But if some one did try to control this economy it would be bad for it.

How do you know this?

Were there past examples when some one DID control or even tried to control this economy on which you make this claim?

When were they? What disasters for our economy followed?

Were FDR's policies examples of control causing havoc? I'd argue the decades following were quite prosperous indeed.

The whole presumption that policy doesn't matter fails to explain the variance in our own economy through time and the variance of world economies from North Korea to Argentina to Ireland to Norway.

Yes no "One" is in control but policy matters!

Not to nitpick... but you misspelled your own name!

It would have been better to mention the "shenanigans" rather than make just another blind accusation. This president has really taken it for standing by his decisions. The latest "tax rebate" is a typcial "political shenanigan", Government drug insurance for seniors is typical, there have been others, but by and large the stereotypical has been a bursted dam of unfounded accusations by the drivebys.

The stereotypical white shrimper boots that Don always wears is a fairly accurate description of Don's analytical abilities lately.

"penchant for standard-fare political shenanigans "

That's the same sort of pot shot that the reporter took at the Pres for admitting he doesn't "control" people's lives.

Ready for those ideological weeds.

Roundup at the ready!

This is a categorical shot at the whole idea of government management of the economy via the FED, industrial policy, managed trade, etc.