What Keynes really meant

by Russ Roberts on March 15, 2009

in Stimulus

Over at this bloggingheads conversation with Arnold Klings, some commenters thought we weren't fair to Keynes. Here is the response I posted there:

What did Keynes really mean? It's hard to say. His masterwork is a bit
opaque and has been interpreted by many generations of acolytes.

In the current environment, we are told that consumers aren't spending
so aggregate demand has fallen. (This is typically discussed as if the
reason for this drop is irrelevant). Therefore government must step in
as the spender of last resort. This was the defense of the so-called
stimulus package of $787 billion. Those who defended it did not defend
it on the merits of what was in it, but rather simply on its magnitude.
And many of those defenders (including Paul Krugman and Robert Reich)
said it was not big enough.

Their basic argument is Keynesian in nature—that aggregate demand,
C+I+G, must be boosted up to its former level and that this can be
achieved through an increase in G. And according to the Administration
(and the study it produced written by Jared Bernstein and Christina
Romer), every dollar of government spending would produce 1.57 (or was
it 1.54?) dollars of income.

The presumption is that it does not matter what G is spent on. The most
important thing is to get spending into people's hands so that they
will in turn spend it and the multiplier will kick in.

The presumption is that the multiplier is a constant. It does not
matter how G is financed. It does not matter what G is spent on. It
does not matter why C is down. G just needs to go up. This is silly
pseudo-science.

The presumption is that if G goes up, C will stay unchanged. This
ignores any possibility that people will be aware that their taxes are
going to go up very dramatically in the future and they will do nothing
in response.

The presumption is that the borrowing or printing of money to finance the increase in G will have no effect on aggregate demand.

The presumption is that the people who get the money from the government will spend it rather than save it.

These last points are empirical questions. Actual estimates of the
multiplier are all over the map. We don't have a lot of evidence on
either side that is reliable. Anecdotal evidence is generally
restricted to World War II on the encouraging side and Japan's recent
experience on the discouraging side.

I have argued
that economists generally came down on one side or the other of the
stimulus package based not on their economic understanding but on their
political and philosophical biases. I still believe that. I think we're
in macroeconomically uncharted territory.

Interested viewers might also enjoy this debate between Brad DeLong and Michele Boldrin. Boldrin's also argues that simply increasing G is not sufficient to induce recovery.

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DAVE March 15, 2009 at 5:48 pm

my question is (not trying to be rhetorical): that if all we have to do is get people spending again (i'm thinking like a jumpstart?), why do all this fancy stuff? just mail a cheques to people who need it and let them go and spend it on beer and whatnot?

kurt March 15, 2009 at 6:06 pm

No, no, Dave, if cheques will be handed out to people they will just deposit them at their bank. We need bureaucrats managing the spending so this doesn't happen!

Don Boudreaux March 15, 2009 at 6:13 pm

I write to second Russ's point that Keynes's magnum opus — The General Theory of Employment, Interest, and Money (1936) — is opaque. Compelling evidence for this claim is the fact that in the 73 years since the publication of that book, a mini-industry has developed among economists debated over just what is that "Keynes meant."

Somewhere — and I now forget just where — Cambridge's own Joan Robinson reminisced about how "Maynard" himself didn't understand what his own revolution was about.

Not to pull rank on anyone, but I've read The General Theory from cover to cover quite carefully. It is, to use Keynes's own description of Hayek's book Prices and Production, "a frightful muddle."

John V March 15, 2009 at 6:40 pm

I was under the impression that Keynes put a lot of qualifiers on when exactly the complicated circumstances aligned to make this spending helpful.

Sam Grove March 15, 2009 at 8:05 pm

What does it matter what Keynes meant when all that matters is what politicians and their advocates think it means?

muirgeo March 15, 2009 at 8:15 pm

So what I want to hear from all the Keynesian skeptics is WHERE is demand going to come from if not the government. Investment is frozen because banks created and now all hold unknown amounts of debt… consumers have huge personal debt, are losing their jobs and those who are working have stagnant wages… so where will the demand come from?

Also why is the government borrowing to invest and create jobs and demand any different then a private company doing the same?
In THIS particular situation it makes sense for the government, being the spender of last resort, to stimulate the economy by creating jobs and getting money flowing.

muirgeo March 15, 2009 at 8:42 pm

"The presumption is that it does not matter what G is spent on. The most important thing is to get spending into people's hands so that they will in turn spend it and the multiplier will kick in."
Russ Roberts

This is not true. Today as in the past specific projects that are/were needed for long term benefit as well as being able to supply rapid investment and jobs have been detailed. Today energy infrastructure, national infrastructure and health care investments are all such projects that "fit the bill".

In Keynes 1938 letter to FDR he wrote specifically on what investments should be made , "Now one had hoped that the needed supplementary factors would be organized in time. It was obvious what these were—namely increased investment in durable goods such as housing, public utilities, and transport."

JP March 15, 2009 at 8:52 pm

Prof. Roberts: THANK YOU! I've long suspected that this emperor has no clothes. But I'm just an educated amateur — surely, I tell myself, there must be more to Keynesianism than meets the eye. It's helpful to hear from a specialist that appeals to "the multiplier" really are just a fancy way of kicking the can down the road.

Darren March 15, 2009 at 9:22 pm

The idea of a multiplier has never made sense to me. Because if it does what its promoters say, we should stop private production entirely, pour all money into government, and let the multiplier work its magic. Why bother with capitalism at all?

LowcountryJoe March 15, 2009 at 9:34 pm

The idea of a multiplier has never made sense to me. Because if it does what its promoters say, we should stop private production entirely, pour all money into government, and let the multiplier work its magic. Why bother with capitalism at all?

Could it be that the multiplier effect in the non-government portion of the economy is greater? Perhaps much greater.

LowcountryJoe March 15, 2009 at 9:52 pm

So what I want to hear from all the Keynesian skeptics is WHERE is demand going to come from if not the government.

Uh, the private sector as they keep more of their paycheck.

Investment is frozen because banks created and now all hold unknown amounts of debt…

It's frozen? In that case, wouldn't reducing the taxes on investment income (dividends/interest income) and also capital gains be a better stimulus?

It's funny, but before the mark-to-market regulations, companies seemed to be more stable and we didn't have such a moving picture regarding assets.

Now, Ductor, please explain all the debt that banks are holding. How does a bank hold debt? Or did you really mean assets? Or did you really mean liabilities? What did you mean? Is this a discrepancy?

consumers have huge personal debt, are losing their jobs and those who are working have stagnant wages… so where will the demand come from?

You're the Keynesian. Perhaps you could tell us if the Keynesian way of doing things is going to make job loss worse than it would have been, further not stimulating shit for demand.

Also why is the government borrowing to invest and create jobs and demand any different then a private company doing the same?

When private companies borrow and spend, they're trying to grow their business so that they can pay back the loan and create equity. When government spends money, the motive is never growth and equity: instead it is to quiet the voters and retain loyal constitients that will keep the ashats in power. You have never taken the time to internalize the responses we leave for you…that's apparent and it been old. Advance the discussion already, Doctor.

In THIS particular situation it makes sense for the government, being the spender of last resort, to stimulate the economy by creating jobs and getting money flowing.

I just wish that you were the taxpayer of first resort. Unfortunately, with the inflation and national debt this country will have going forward, it'll be future generations that will pay for the idiotic thinking like that of which you just displayed here.

Randy March 15, 2009 at 9:53 pm

"Today as in the past specific projects that are/were needed…"

Yes, isn't it fortunate that the government just happens to have some things it wants to spend money on lying around…

brotio March 15, 2009 at 9:54 pm

"So what I want to hear from all the Keynesian skeptics…" – Mierduck

So what I want is for Mierduck to back up his assertion that our hosts cheered on President Bush's economic policies.

It's been over two weeks now since you made that accusation, Mierduck. Surely you've found evidence to support your claim by now?

kurt March 15, 2009 at 9:55 pm

muirgeo, all that is needed is for incomes of certain workers to come down so that business becomes profitable again. Profit figures are the only way to restore confidence in the economy.

tarran March 15, 2009 at 10:18 pm

Honestly,

It's time the followers of Hayek in Mises started heavily promoting Henry Hazlitt's The Failure of the New Economics.

he went through Keynes work and just dug up all the inconsistincies, non-sequitor's, question-begging that fills the book.

Now though I have analyzed Keynes's General Theory in the following pages theorem by theorem, chapter by chapter, and sometimes even sentence by sentence, to what to some readers may appear a tedious length, I have been unable to find in it a single important doctrine that is both true and original. What is original in the book is not true; and what is true is not original. In fact, as we shall find, even much that is fallacious in the book is not original, but can be found in a score of previous writers.
Frankly, when I began this task I did not think I would arrive at so sweeping a conclusion. My first thought was that I might do a short work, analyzing Keynes's chief doctrines so that the reader who wished a critical analysis would be able to find one in a brief and readable form. But when I actually embarked upon a line-by-line analysis, my experience was strangely like the one John Stuart Mill describes in his Autobiography regarding his analysis of Sir William Hamilton: "As I advanced in my task, the damage to Sir W. Hamilton's reputation became greater than I at first expected, through the almost incredible multitude of inconsistencies which showed themselves on comparing different passages with one another/'9 So I have found in Keynes's General Theory an incredible number of fallacies, inconsistencies, vaguenesses, shifting definitions and usages of words, and plain errors of fact. My desire for thoroughness in pointing these out has carried the length of this book much beyond what I originally intended.

I strongly recommend people read it. And then ask how a guy like Krugman could support an economist who confused marginal productivity with physical productivity, soemthing that would get an F to any freshman economics student.

SheetWise March 15, 2009 at 10:33 pm

I'm just a simpleton. I always thought that money, even well managed fiat money, implied real demand. It implies demand in the sense that the money wouldn't exist if there wasn't supply.

This isn't that complicated. For money to be created ex ante, you simply must believe in the tooth fairy.

As a simple man, I hesitate to connect the dots. Certainly I'm missing something, and I wouldn't want to be portrayed as a buffoon.

I'll figure this out eventually. In the meantime — I'll dabble in barter, keep a little cash, and see how this "money" thing works out.

Oil Shock March 15, 2009 at 10:37 pm

Muirgeo is one big fan of Keynes who has never read any of Keynesian Bull Sh!+.

Cheers March 15, 2009 at 10:40 pm

Actually, I'm now convinced that I need to read the general theory, even after having sat in course after course of professors making abstractions out of C+I+G. And despite seeing firsthand how wrong several assertions are particularly around individual and group behavior.

Maybe tomorrow though… I just got a headache from reading Krugman's introduction to it. I am forced to retain respect for him as a seemingly more learned man than I, but it's made particularly difficult by statements such as "and brilliantly explained the implications of that fact – in particular, the trap in which the Bank of England and the Federal Reserve found themselves, unable to create employment no matter how much they tried to increase the money supply"

Jay March 15, 2009 at 10:41 pm

Don't forget about the fact that the stimulus package is going to drive the 10-year Treasury yield up over 5%. Buy PST. It is going to reach 70 in the next year.

Sam Grove March 15, 2009 at 11:01 pm

So what I want to hear from all the Keynesian skeptics is WHERE is demand going to come from if not the government.

Why is there an economy?

Government spending for the purpose of faking demand is just arbitrary and is bound to stimulate for demand for government contracts/subsidies, etc., rather than for consumable goods and services.

We don't live off of the exchange of currency, that's just accounting.

We live off of the production of goods and services.

If people have chosen to reduce current consumption, then it means they are desirous of investing in future consumption.

When the government spends our money for us, then it is preventing us from investing in our future consumption.

IOW, monetary stimulus attempts to subvert the reallocation of resources to future production.

Martin Brock March 15, 2009 at 11:28 pm

Don't forget about the fact that the stimulus package is going to drive the 10-year Treasury yield up over 5%. Buy PST. It is going to reach 70 in the next year.

I'm not so sure.

Here are data on holdings of U.S. Treasury securities for the last ten years.

From '07 to '08, securities held by the public rose 0.76 trillion dollars, and securities held by the Federal government itself, including the Federal Reserve, rose 0.26 trillion.

From '08 to '09, securities held by the public are estimated to rise 0.59 trillion dollars, and securities held by the Federal government itself, including the Federal Reserve, are estimated to rise 1.7 trillion.

We aren't selling more Treasury notes to the public. We're selling less. So why would the price rise? We aren't truly borrowing money from the public to finance the "stimulus". We're creating the money to spend it.

Creating the money is inflationary, so you might think that buyers of Treasury notes would demand higher nominal yields to keep their real yield up, but Bernanke has already stated that he could starting buying notes from the public in this scenario.

Then instead of creating money and giving it directly to the Treasury to spend, he'll create money and give it to holders of Treasury notes to spend. He can do that, and he's already said that he would if necessary, and "necessary" means that U.S. resources are unemployed.

So I wouldn't bet on the Treasury note bubble deflating soon unless you think the rising unemployment stats are largely behind us.

Superheater March 15, 2009 at 11:48 pm

Everytime I hear of the supposed miracles of Keynesianism, I think of the miracles of alchemy, those 100 mile per gallon gizmos that don't exist because Exxon had a mole in the patent department, perpetual motion machines, the existence of bigfoot…

Martin Brock March 15, 2009 at 11:52 pm

So what I want to hear from all the Keynesian skeptics is WHERE is demand going to come from if not the government.

Money is the entitlement to consume or to invest (to reorganize productive resources). Ideally, we're entitled this way by writ of our productivity, but this ideal hardly governs all money creation in reality.

If you like, all money always comes from the government. All wealth doesn't come from the government, but all money does. Money is not wealth. Money is an entitlement to consume or invest.

So the issue is not whether the government will "stimulate demand" by entitling people to spend money to reorganize resources idled by the recession. The issue is how.

As a libertarian, I want free resources organizing themselves profitably, so I want credit extended to organizations expecting to grow profitably, including entirely new organizations. Again, the question is how to govern extensions of credit for this purpose.

I don't expect state expenditure, by some central planning apparatus distributing credit to established, bureaucratic agencies, contractors, local governments and the like, to organize resources this way. I expect this expenditure to delay the profitable reorganization.

We can discuss alternative policies I favor instead, but the fundamental, libertarian answer to your question is: from the people who are unemployed. They decide how they'll reemploy themselves, but they may not simply busy themselves however they like and expect to consume whatever they like. They must employ themselves at least expecting to produce goods desired by others, and if they ultimately do not realize this expectation, they must reorganize themselves and try again. This organization process never ends.

muirgeo March 16, 2009 at 12:36 am

If people have chosen to reduce current consumption, then it means they are desirous of investing in future consumption.

Posted by: Sam Grove

That or they don't have a job, fear losing their jobs or have seen their wages fall behind their expenses.

muirgeo March 16, 2009 at 12:40 am

When the government spends our money for us, then it is preventing us from investing in our future consumption.

Posted by: Sam Grove

That IS true…. wouldn't it have been nice if Reagan, Bush1 and Bush2 had not increased the debt by $10 trillion during times of a growing economy. Keynes certainly wouldn't have supported such mal-investment.

Andrew_M_Garland March 16, 2009 at 1:01 am

I have put together a few pieces about Keynesian economics and various beliefs. Where have I gone wrong? I would appreciate insightful criticism.

———-
Cargo Cult Economics

A direct look at spending and saving reveals that these are only different terms for types of purchases. They should both be equally "stimulative", if you want to see things that way.

———-
Let's Counterfeit Our Way to Wealth

I think it is more than strange to believe that when the government buys 2 TV sets, the government gets 2 TV's and someone else gets one for free (or it's equivalent value). This is entirely due to counting transactions and calling them wealth.

If Obama (or Keynes) is correct, that there is a 1.5 wealth multiplier on spending, then $100 in spending produces $150 in wealth, and we should all benefit from counterfeiting. It is not my fault that the belief in a multiplier is so outrageous that it leads to this outrageous result.

———-
Econ 201: The Myth of the Economic Multiplier

A direct examination shows that money is used for transactions. Money and goods are repeatedly exchanged, but extra production is not "stimulated". Only the original value that earned the money is created, then it is traded. The multiplier is 1.

Excerpt: "The appearance of 6 rolls at the table is new value appearing in the dinner table economy. The wave of spending and re-spending sends value around the table. The Economic Value approach sees 6 rolls of spending, followed by a wave of 5+4+3+2+1 of re-spending, for a total of 21 rolls of Economic Value, and a 3.5 Economic Multiplier (3.5 x 6 = 21). But there are only 6 rolls. The re-spending distributes the rolls; it doesn't create more rolls. The real value of 6 rolls is overcounted by looking at the roll-passing transactions."

Oil Shock March 16, 2009 at 1:10 am

That IS true…. wouldn't it have been nice if Reagan, Bush1 and Bush2 had not increased the debt by $10 trillion during times of a growing economy.

I am not a big fan of the names you named. YOu would have more credibility if you could criticize a democrat 1 out of 100 times and give praise to a republican 1 out of a 100 times. The fact is you haven't, you can't and you won't. Every one of Reagan & Bush 1 budgets were passed a congress and senate that had Democratic majority, and the last of the Bush2 budgets were passed by a democratic majority. Have you checked the number of democrats who voted in favor of the other Bush 2 budgets? Do you have a word of criticism for them. Have you ever blamed Clinton for signing the Gramm-Leach act? I know you have plenty of criticism against it, have you counted the number of democrats who voted for it?

You have made one thing very clear here. I even doubt your sincerity to your own purported ideology, what matters to you most is not ideology but democrat and republican divide.

Jody March 16, 2009 at 2:05 am

If people have chosen to reduce current consumption, then it means they are desirous of investing in future consumption.

Posted by: Sam Grove

That or they don't have a job, fear losing their jobs or have seen their wages fall behind their expenses.

Posted by: muriego

Fearing losing their job inducing savings (or lower consumption) is an example of Sam's point. To ensure future consumption (post job-loss), you save now, spend later.

A drop in income => drop in consumption can be a better counter-example depending on the specifcs.

Sam Grove March 16, 2009 at 2:45 am

That IS true…. wouldn't it have been nice if Reagan, Bush1 and Bush2 had not increased the debt by $10 trillion during times of a growing economy.

If you MUST be partisan about, yes, it would have been nice. It would have been nice also if the Democrats, AND Republicans, (but mostly Dems) had not invested so much of our wealth in extending and maintaining empire and war as in Korea, Vietnam, etc.

That's been the result of over a century of so-called "progressive" government.

As someone pointed out elsewhere, the nominal Keynesians are excessively focused on money, apparently believing that merely increasing the flow of it is equivalent to value creation.

Consumption MUST follow production.

Stimulating consumption when the market is signaling misallocation of resources only increases the misallocation, resulting in greater poverty later.

I recommend this talk from March 01, 2004 "How Recessions Become Depressions" by Sean Corrigan.

vikingvista March 16, 2009 at 4:13 am

Multipliers research of multiple recent recessions from that right wing institution known as the IMF:

"The average fiscal multiplier across all 43 recession episodes is -1.5." –p17

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=879624

vikingvista March 16, 2009 at 4:39 am

"For money to be created ex ante, you simply must believe in the tooth fairy."

The problem is with confusing money transfers with wealth. Go back to basic microeconomics:

Person P1 gives A to person P2 in exchange for B. When done voluntarily (and rationally and informed), this is because P1 values B more than A, and P2 values A more than B. After the transaction a new state of higher wealth has been created.

B can be anything of value, but it COULD be $100. If it is, then we can say A<$100 to P1 and A>$100 to P2. We might survey P1 and P2 after the fact to find out that P1 would've accepted as little as $90, and P2 would've paid as much as $105. The total of P1 and P2's wealth created might be estimated as $15.

Notice that $15 is not $100. But the GDP does increase by $100. Now imagine P2 would only be willing to pay $80, but is forced by government to pay $100. Now total wealth has decreased by $10, but GDP still increases by $100, and the Keynesians pat themselves on their backs.

Another thought: imagine there is only a fixed amount of dollars in the world. No more will ever be printed. Would you say that wealth creation is then impossible? Money is best treated as just another commodity.

Since in a FREE economy money transfers are observed to only occur with wealth creation, Keynesians make the leap that ANY money transfers reflect wealth creation.

Then they count the multiple transfers of their initial spending percolating through the economy as growth even though it only refects growth of MISALLOCATION of resources. As such, their multipliers probably have the wrong sign.

Murali March 16, 2009 at 5:17 am

Just one nit to pick. Superheater said something rather ironic and maybe I'm the only one who sees the humour:

…I think of the miracles of alchemy, those 100 mile per gallon gizmos that don't exist because Exxon had a mole in the patent department…

You should have more faith in capitalism: It has earned it.

What do you think of 91.7 miles to the gallon (39km to the litre), 814cc rotary engine, 0-60mph in 3.5sec and it looks like a dream. It emits less than 60g of CO2 per Km. Presenting, the Frazer-Nash remake. It consists of a carbon fibre monocoque chasis and she looks absolutely gorgeous. Lets just say technology wise, we're almost at the 100 miles per gallon mark.

But thats a luxury car a cheap Honda can get fuel efficiency at about 20km to the litre. Eventually the technology is bound to spread. Mind you, superheater, just a small nit that I picked.

But what is the lesson to be learned here? That if people start talking about technological marvels, we should not scoff and say "impossible it will take a miracle". No, we should instead say "Give me a free market and I will give you your 'miracle'"

Alex Fabijanic March 16, 2009 at 5:44 am

"we're in macroeconomically uncharted territory"

Nonsense. Austrian school of economics has charted it long time ago. If we don't stop and change the direction, we'll go over the cliff.

vidyohs March 16, 2009 at 6:14 am

Now here is an individual that has it right.

"But what is the lesson to be learned here? That if people start talking about technological marvels, we should not scoff and say "impossible it will take a miracle". No, we should instead say "Give me a free market and I will give you your 'miracle'"
Posted by: Murali | Mar 16, 2009 5:17:58 AM"

I'll discard one muirduck and draw to this Murali.

Murali March 16, 2009 at 8:22 am

I'll discard one muirduck and draw to this Murali.

Posted by: vidyohs | Mar 16, 2009 6:14:42 AM

Vid likes me??? Now thats surprising; I'm more likely to agree with Martin and Gil than with Vid.

vidyohs March 16, 2009 at 9:15 am

That may be so, Murali; but Gil could never have written the quoted paragraph you did. Martin, possibly; but not the ducks.

And, in this case it is obvous from that paragraph you at least know the answers. You my not like the answers, but you know them. The ducks have never made it that far.

As for Martin, quote one thing that he has ever written that is correct, not convoluted beyond recognition, expressed in an original way or is original, stated succinctly, and you did not already know it.

BookLover March 16, 2009 at 9:20 am

Hi everyone – I'm a history student who's doing an module involving some Keynesian thinking and was looking for a good book to look at to start.

I've seen this book around but not sure if it's any good? Is there a better place to start?

Randy March 16, 2009 at 9:35 am

"Give me a free market and I will give you your miracle."

That is good, Murali. Its not really a miracle of course. Its just common sense that the ability of free people to innovate is almost limitless. But still, well said.

vidyohs March 16, 2009 at 9:50 am

See there Murali,

According to Brotio, Randy and I are the two most staunch conservatives that participate here.

Damn, but you have to be careful, Murali, when you think good thoughts and write good things you're in grave danger of being admitted into superior company, and admired by superior intelligence.

If you want to remain in the good graces and company of such as Gil, you need to dumb down your posts a tad…..no a lot.

:-)

Martin Brock March 16, 2009 at 10:14 am

Vid likes me???

Give him time.

Murali March 16, 2009 at 10:28 am

Vid Here's one of my favourites
…The whole idea is ludicrous on its face. There is no market capitalism without forcible propriety, and there is no forcible propriety without a state. Capitalist economics and state are fundamentally inseparable….

Posted by: Martin Brock | Mar 6, 2009 9:33:03 PM

He makes an important point which I think many here do not acknowledge. When one exchanges one's labour for goods, one does so in a sociopolitical framework that includes taxation. However much one might wish it we did not purchase property rights against being taxed. This throws the whole 'taxation is illegitimate coercion' argument out of the window.

A lot of Martin's arguments on political economy often follow from what I explicated

I'm no libertarian Vid. I may like the free market, and I may have liberal positions on scoial issue, but I do not take seriously the claim that government is illegitimate, that politicians in general are crooks, that government is necessarily innefficient etc. (I live in Singapore, if anyhting, the government here is efficient. And we do it with comparatively low tax rates to boot) Hence, I dont really fit within the libertarian framework. (besides, I think drug dealers are evil, little better than murderers really)

Gil, makes important points. He makes some interesting criticisms that should be taken seriously. Sure, he underestimates the efficacy of markets but certainly not as much as Muirgeo does. Much of what he says would not seem out of place coming from the mouth of a libertarian.

I am much enamoured with Will Wilkinson's Liberaltarian project. I believe Gill would be an interesting addition to such a coalition and would be part of the coalition Will was looking for.

And Muirgeo is certainly no Trumpit. Trumpit is some weird caricature. I've seen Muirgeo take some baby steps towards a more free market view but then he backslides because he doesnt get positive reinforcement. That Muirgeo often sees things in terms of Republican vs Democrat is obvious. I'm not even contesting that he doesnt acknowledge that there are other more useful and interesting ways to view political issues. Muirgeo has plenty of his faults and probably deserves a lot of the criticism that he gets. But brotio seems to be bringing up some of the sillier things that muirgeo said many threads ago. Sometimes more than one of you guys bring up what Muirgeo might say in response to certain posts. Not to start a flame war, but its a bit childish, no? Muirgeo may deserve whatever he gets if he ets what he gets in response to the silly things he already has said. He does not deserve to be made fun of for silly things he may or may not say.

Oh… and I dont get the "duck" thingie.

Good talking with you Vid. Hope are subsequent conversations are just as amicable.

Sincerely

Murali

Crusader March 16, 2009 at 10:44 am

here's an example of Sam's point. People save more money now due to uncertain economy, or can't make big purchases because of lost job or paying down debt. Later on when they are in a superior financial scenario, they can buy that washer/dryer to replace their 15 year old set.

vidyohs March 16, 2009 at 12:09 pm

Murali,

This will be relatively lengthy, no way to get around it as you touched on so many things.

If we only take the very narrow view of market capitalism that Karl Marx and those of his ilk did, as well as Martin himself in that quote you pulled, then Martin may have a point. However, if you ask yourself the simple question of, "what is market capitalism in all its glory" then Martin is revealed as narrow minded and narrow focused, so much as to be considered wrong. Wrong certainly in that it appears he can only see that one understanding.

Now if anyone attempts to debate Martin on my point or argue with Martin one will always and inevitatbly become involved in chasing Martin (the weasel) in an endless chase around the mulberry bush, in which he will take the most obscure words in your reply and make those the focus of his next argument to you, totally ignoring the point you actually and clearly made. I choose not to do that after having experienced it a few times early on. I just see it repeated with others.

An example of a year's worth of contest: Google the Coinage Act of 1793, read it, and ask yourself what prevents Martin from acknowledging that the Act describes a dollar and sets its value; and, that the act does so in a way that was good when written and still applicable 130 years later. That straighforward acknowledgement just chokes Martin's gullet and he can't do it, even though it is as clear as the founding fathers could make it. His objections to that simple fact are so silly as to be unbelievable.

Anyway, think of capitalism as a system and not a single act, and Martin becomes visibly wrong. No one person can dictate or decide where capitalism begins in market transaction nor what qualifies as a capitalistic act except that it involves private ownership of capital goods (including money), private investment of those goods, and of course private realization of the profits generated by the investment. There is no hard and fast law that determines what a capital good is, nor what shall be considered as an investment, nor where and how any market transaction shall take place, nor how each individual market shall view the goods or the investment.

In the ancient world salt was one of the most precious capital goods. It was mined or extracted, traded endlessly, and in many cases wound up being hoarded by merchants as a hedge against the future, because salt was a capital good that they knew was even more certain than gold to be desired by all men and women. Trading by private owners and investing by other private individuals in capital goods is capitalism, now your task to make Martin correct is to separate the miners of salt from the hoaders of salt in that system and label one as market capitalist and dismiss the other as……?

I can set up a trading group right here in my rural neighborhood, totally invisible from the state, and myself and fellow participants can be thriving capitalists in everyway one can interpret the word. Capitalism does not have to involve stock markets to be capitalism.

Martin is wrong in his assertion, and your acceptance of that is also wrong, that in all exchange of labour for goods one does so in a sophisticated framework that includes taxation. There is a tremendous level of non-taxed economic activity in this nation, and always will be. For instance the last time I had my computer guru down to work on my computer, he spent 10 hours here exchanging his labour for goods, money and a good dinner. I paid him cash and took no receipt. Bingo, we proved Martin wrong. I always pay my barber in cash and he always puts it in his pocket, bingo no sophisticated system of taxation applies. Your problem and Martin's problem is the lack of knowledge that this goes on, and both of you seem to lack the imagination to understand the magnitude.

In my perspective, Martin always writes way above his head and it seems to alway fall flat when measured against the real world of the street. His other problem is that he seems unable to think and write on the street level. He claims great convoluted theories that seem to be supported only by his other great convoluted theories. Last but not least it is boring to get lost in his profusive, expansive, and detailed answers to every single person that posts as if he assumes to be the final authority on any and all subjects.

I don't dislike Martin, don't know him but at least he isn't visibly crazy like the duck is.

I am no libertarian, God knows how many more times I will have to state that. Libertarians are too statist and too far to the left for my taste. I am nestled right up close to, but not, the anarchist. I am smart enough to know I need servants but I'll be damned if I willingly accept them exercising power over me, their master.

I agree that sometimes Gil makes some good points and observations, but he inevitably ruins those by taking that hard left turn in his presentation. My wife and I have as best friends a couple that are flaming left wing radicals; yet, they are witty, funny, and in most ways seem normal. It is just in their political philosophy that they are unhinged. So, we don't talk politics much. That only occurs when the female drops an occasional socialist bomb in the conversation. She has the rare ability to misinterpret, or deliberately misinterpret, all of the political/social data she sees or hears.

An example, "The USA has the 26th worst health care in the world!" She dropped that bomb at my dinner table one Sunday, and her husband was there nodding his head in agreement. He and I both were legal videographers who spend many hours in the finest medical center in the world, huge and unequaled anywhere in quality and in teaching, yet she and he could think that stupid.

Turns out a quick search on Google revealed that they had seen the website on health care delivery in which the USA was rated as 26th, and their hatred of free markets and capitalism immediately translated that word delivery into quality. Nor are they willing to acknowledge that there are many factors that go into the delivery of health care and one of the most important is how it measured in the first place. I read the info the the website and my brain just said, "Not surprising considering the huge number of illegals we serve, not to mention the even larger LBJ welfare creatures we serve as well."

Gil seems to function pretty much the same way.

Now, you never see me project my assumptions onto anyone, nor will you see it. No matter how strong my imagination may suggest a possible course of action, my training resists that impulse. When you read my posts you will note the careful use of qualifiers where appropriate: maybe, possibly, likely, seems like, appears to, probable, etc. When you see me make a statement without a qualifier you can take it to the bank and deposit it.

I will not even criticize muirduck in his capacity as a doctor, because there is no way possible for me to know that without going out to check him out personally. And, I am not that curious. You might have seen my description of what I call "tunnel intelligence"; knowing and understanding that is what allows me to know that outside of muirduck's tunnel he seems to be a total socialist evangelical, which to me is the same as saying he is an idiot. I see it as possible that those two muirduck's can exist because I began to see people like that frequently since the mid 60s, and the ratio to normal people seems to be increasing.

I don't necessarily believe drug dealers are evil, no more than ice cream salesmen. Anytime there is a known buying market there will always develop a supplying market. A guy wants to buy drugs, someone will bring them and sell them. It will happen successfully no matter how diligent the prohibitors. All the evil is created in outside interference with that legitimate market transaction; but it originates with the buyer. No buyer, no market.

I see the drug user as stupid but voluntary. Legalize drugs like they once were before the 20th century and we will soon have no more of a drug problem than they did then, which was amazingly small.

The duck thingie? :-) takes a little imagination and understanding to stay with the explanation but I think you can handle it. Ok?

Recall the old saying, "If it waddles like a duck, looks like a duck, quacks like a duck, swims like a duck, it's a duck."

Meaning it is what it is on the very face of it.

In the case of muirgeo, he became muirduck long ago for this reason, which was carefully explained to him and everyone else.

"If it writes like a 13 year old socialist girl, expresses the world view of a 13 year old socialist girl, shows the emotive writing like a socialist 13 year old girl, and seems to have no more real world knowledge than a 13 year old socialist girl, it's a duck." Hence muirduck, Gilduck, et. al. Most participants here have accepted that twist as slightly humorus and appropriate.

STrUmPiT is so far stupid that he doesn't deserve the "duck" label. I sometimes think that STrUmPiT writes what he does for the same reason that I take a stick and stir it around in a fireant mound, just to spread chaos in the inhabitants.

But, yes I do have the compiled list that is labeled "Stupidity of the Duck" a compilation of muirpidities written over time by muirduck. The list certainly justifies the label. They are all stands-alone stupidities, they need nothing supporting for context.

Anyway keep writing things like this:

"But what is the lesson to be learned here? That if people start talking about technological marvels, we should not scoff and say "impossible it will take a miracle". No, we should instead say "Give me a free market and I will give you your 'miracle'"
Posted by: Murali | Mar 16, 2009 5:17:58 AM"

and you'll be welcome to drink wine and break bread at my table anytime you come through Houston.

Have a good day, Murali.

Sam Grove March 16, 2009 at 12:16 pm

that politicians in general are crooks

There are different kinds of corruption.

Maybe not all politicians are "on the take", though one has to wonder why most of our congress critters are regularly visited by lobbyists, but there is the corrupting effect of political power.

1. The desire to get reelected affects even the well intentioned. They must secure the support of various groups of disparate interests which necessitates a certain amount of, uh, dissembling.

2. Citizens become subjects of their power and officials usually succumb to the enticement of seeing themselves as above the ordinary person. Even those subject to the power succumb to this effect.

Political power not only corrupts the wielders of power but it tends to corrupt their subjects as well.

Sam Grove March 16, 2009 at 12:24 pm

(besides, I think drug dealers are evil, little better than murderers really)

Drug prohibition ensures that the illicit drug market will be served by the bottom criminal class.

Once upon a time, in the U.S., many drugs that are now prohibited, could be purchased at the local pharmacy.

Who thinks of the local pharmacist as evil?

MnM March 16, 2009 at 12:31 pm

Now if anyone attempts to debate Martin on my point or argue with Martin one will always and inevitatbly become involved in chasing Martin (the weasel) in an endless chase around the mulberry bush

I don't think Martin is quite that bad. He's clearly a thinking person, and that's far more than we can say for those trolling this blog. I enjoy Martin's contributions to conversations here. In fact, I agree with him, in spirit if not content, far more than I disagree with him.

vidyohs March 16, 2009 at 1:41 pm

MnM,

I agree that Martin's spirit seems to be in the right place, I believe that I have indicated that on rare occassion; I just don't see consistent evidence that he knows where his own head is much less how to get it down to the street.

But, what the hell, that is why they make elastic isn't it. We just aren't all the same.

MnM March 16, 2009 at 3:02 pm

Fair enough, Vid. However, I'd like to go on record as saying I feel the guy gets dumped on too much. ;o)

Martin Brock March 16, 2009 at 3:11 pm

The Coinage Act defines the price of gold and silver of specified purity in dollars. It makes no sense to say that the act defines "the dollar" in terms of fixed amounts of gold and silver, because the same act entitles the mint to coin pennies from copper of unspecified purity without any relationship to banked gold or silver. If "the dollar" is a fixed amount of gold or silver, what about all of these copper coins of unspecified purity?

Later statutes enacting gold standards simply say "the price of gold shall be $35" or words to this effect.

More significantly, what about all the banknotes? Money under a gold standard is not gold but is a promissory note for gold representing the abstract value of anything, relative to the value of gold. Gold is thus the standard of value, because it has a standard price.

Bankers under a gold standard create these notes to denominate the value of collateral securing their loans, like the houses they lend against, not the value of gold in their vaults. The dollar volume of these notes far exceeds the dollar value of all the gold in bank vaults, even all the gold on Earth, because the notes represent the value of houses and such, not simply the value of gold.

That's not my convoluted theory. It's monetary history, and you don't need to take my word for it. You can ask Milton Friedman or George Selgin, or you can listen to the November 17, '08 podcast of EconTalk titled "Selgin on Free Banking". You just don't.

Martin Brock March 16, 2009 at 3:50 pm

I paid him cash and took no receipt. Bingo, we proved Martin wrong.

Vid simply omits the fact that he receives a monthly check from taxpayers himself.

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