Quotation of the Day…

by Don Boudreaux on August 28, 2011

in State of Macro

… is from Jim Buchanan‘s 1987 essay “Keynesian Follies,” reprinted in Vol. 1 of Jim’s Collected Works (pp. 164-178):

Folly is defined as (1) lack of good sense or of normal prudence, (2) inability or refusal to accept existing reality or to foresee inevitable consequences.  Both of these definitions convey something of the policy stance that I associate with the term Keynesian.

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{ 62 comments }

Daniel Kuehn August 28, 2011 at 8:22 am

I first read Buchanan on constitutions years ago and it made a big impact on me, but the contrast with his discussion of Keynesianism never quite seemed to fit with the care that he has in speaking on other subjects. I remember thinking this even before I considered myself much of a Keynesian. He always seems to just be refering to an always theoretical/archetypal gang of unthoughtful liberal politicians or unthoughtful liberal advocates whenever he uses the word “Keynesian”. He never seems to be talking about “Keynesianism” – it just seems to be a word he uses to talk about something else.

indianajim August 28, 2011 at 9:53 am

Think about demographics, incentives, and evidence for a moment Daniel. A huge cohort of economists was trained by “unthoughtful” Keynesians. I don’t think that many have deprogrammed themselves because there are lots of undergrad macro texts out there full of this crap that continue in ever newer editions. Keynesian cross diagrams can still be found in some popular undergrad texts and they are not there, sadly, for the purpose of illustrating folly.

Daniel Kuehn August 28, 2011 at 9:57 am

I think you and I have a very different view of what “unthoughtful” Keynesianism is. I like Buchanan, but whenever I read him talk about Keynesianism I can’t help but get the sense he has in mind general economically illiterate leftists that he calls “Keynesianism” out of convention.

re: “Keynesian cross diagrams can still be found in some popular undergrad texts and they are not there, sadly, for the purpose of illustrating folly.”

I should hope they wouldn’t be used for that purpose.

kyle8 August 28, 2011 at 10:47 am

Unfortunately, those “economically illiterate leftists” have taken control of our government and given us the biggest dose of the Keynesian medicine ever. Now we are nearly bankrupt.

Invisible Backhand August 28, 2011 at 11:17 am

Right, because they blew the surplus we had on Jan 20, 2009.

kyle8 August 28, 2011 at 7:26 pm

That we had a deficit when Obama took office is neither here nor there, We have SINCE then had a massive bout of federal spending and it did not help at all, but rather harmed the economy, because Keynesianism is an idiot idea that only idiots or those blinded by utopian left wing fantasies believe.(or those who know it does not work but use it just to steal goodies from the government for their constituents, can you say unions?)

Daniel Kuehn August 28, 2011 at 9:57 am

I don’t think it’s “some” texts either. I’d bet it’s in almost all of them.

John Papola August 28, 2011 at 12:09 pm

You’ve got to love a graph built on a tautology based on an ideology which hates saving and yet starts it’s consumption function at greater than zero even if income is zero. So the cross is more or less a tautology built on a contradiction. Could there be anything less useful for understanding the world around us? Don’t tell me. I know the answer: the circular flow diagram, where we have one good being produced, no prices because there is no trade because trade requires at least two goods and, of course, no explanation for how the factory got there in the first place.

Intro-macro is a net drain on society.

Eric Hosemann August 28, 2011 at 9:40 pm

+1

Chucklehead August 28, 2011 at 9:47 pm

Give that man a P.H.D.
He can see through the chaff.

James N August 28, 2011 at 12:45 pm

“Right, because they blew the surplus we had on Jan 20, 2009.”

I don’t recall seeing a date in kyle8′s post. It would appear (pun entirely intended), that it must be in the same vein as your moniker.

anthonyl August 29, 2011 at 9:03 am

Surplus is not something governments should strive for either. For every dollar government holds is a dollar not in private hands. Not that holding more dollars brings prosperity in the first place anyway.

Kirby August 28, 2011 at 10:10 am

what’s incorrect about them?

Kirby August 28, 2011 at 12:04 pm

The cross diagram.

John Papola August 28, 2011 at 11:54 am

Daniel,

Because Keynesianism relies on government action, it MUST be grounded in the actual reality of politics and politicians who will be the administrators of the so-called stabilization policy.

The slight of hand whereby it doesn’t matter where spending goes because of the use of statistical aggregates simply reveals the theory to be sloppy and incomplete. But it is this sloppiness which allows Keynesians to disregard the natural folly of a theory built of government technocracy. The folly of “it doesn’t matter where the spending goes” mentality is PRECISELY why a Buchanan criticism along the lines you are describing is important. Where the spending goes DOES matter. Keynesians and Keynesianism is WRONG about that. And once you appreciate how wrong they are, all of the concerns of incentives and knowledge in Public Choice and Socialist Calculation come roaring back to maul the Keynesian framework for relying on a “gang of unthoughtful […] politicians”.

I don’t see Buchanan as engaging in party politics, which is how I interpret your remark. That these politicians may tend to be called “liberal” today (they’re not liberal at all in my view) isn’t really interesting given how often we hear Keynesianism in the mouth of “conservatives”. That it is historically the left who fully embraced Keynesianism speaks more to the fact that Keynesianism is best adapted to a statist (even totalitarian) worldview, even if Keynes himself was not a totalitarian. The “Left” has for a century embraced top-down command and rule by the intellectual elite. They were more honest about that view in the past than they are today, but Obama’s administration is clearly and squarely steeped in that worldview. But the elite are corrupted by bad incentives and couldn’t calculate if they weren’t.

Keynesianism fails on all fronts. It is the definition of folly in economics and that folly is what leads Paul Krugman to hope for a faked alien invasion or Larry Summers to believe that a tsunami can do “some economic good”.

John Papola August 28, 2011 at 12:03 pm

What I will say is this. We could imagine a way in which a Keynesian-like policy is enacted which is at least better.

During recessions: cut taxes
During booms: cut spending.

Romer’s work (when she wasn’t in government) suggests that Tax cuts are better “stimulus” and they also rely more on decentralized knowledge, so that’s better. Spending cuts are always good because government is a wasteful resource destroyer and the more we take away from it, the less destruction it will cause.

Maybe even I could call myself a Keynesian if THIS were the policy.

Alas, though, the sheer fact that Romer had to shill for a policy that went against her own life’s work is more proof that Buchanan is right and Keynesianism is corrupting when put into practice.

Economic Freedom August 30, 2011 at 4:01 am

http://www.reuters.com/article/2011/08/29/us-obama-economy-krueger-idUSTRE77S20220110829

And who the heck is this new guy in the CEA, Alan Krueger — a “labor economist”?

Anyone know anything about him?

Is it true that he’s the spawn of Freddy Krueger? (See link below for resemblance.)

http://tinyurl.com/3u87row

muirgeo August 28, 2011 at 4:28 pm

“Keynesianism fails on all fronts.”

Are you using some economic data to support this claim?

I look at the BEA stats and see a decreasing GDP as a percent of the prior year every year from 2004 leading right to the crash. Then the stimulus starts and the GDP goes from -3.5% to + 3.0%. And the jobs numbers go from -750,000 lost to + 200,000 gained a year later.

Now as the stimulus is fading the numbers are going the wrong way.

We’ve even committed to cut expenidtures , have cut NOT raised taxes, have not changed are trade policy and have seen record corporate profits… this fit WITH Keynesianism and goes against what the suplly siders argue for. I mean you guys are left with the nebulous ” regime uncetrtainty” to explain why the trillions of profits aren’t being invested when every survey says business owners biggest concern is the lack of sales ( ie lack of demand).

This appears all predictable to me and i’d suggest we will NOT see significant economic growth in the near future without some significant change in policy along a Keynesian directionas the neoliberals don’t even offer any policy recommendations except maybe to cut spending more. If that happens it will clearly reveal that they are wrong. As if the crashes themselves didn’t prove that.

It’s very curiour that you guys and the laizze faire neoliberal polices always procede the crashs and then you guys have the nerve to complain about how slow tamped down Keynsianism works to fix the mess.

tdp August 28, 2011 at 5:32 pm

Government spending keeps increasing and the economy keeps sucking and unemployment keeps remaining high. I don’t know what you’re talking about. Furthermore, any time government spending and GDP both grew substantially, the connection was purely coincidental. Whatever extra money the government was spending came out of the private sector, so the private sector could have spent to stimulate the economy just as effectively, if not more so. In fact, cycling the money through the hands of bureaucrats increases opportunities for them to misappropriate that money in a way not possible when the money being spent is spread out among the general population rather than under the centralized control of Big Brother. Additionally, a single, centralized government spending the money cannot possibly gather all the information that decentralized individuals on the market could gather, meaning that the chance that the money is malinvested to the detriment of the economy increases. Therefore, government spending actually prevented economic growth in these situations from being higher than it could have been, and the malinvestment of capital that occurred contributed to the next economic downturn that would follow. What is not seen is more important that what is seen, especially in the long term. You only see the government spending and the economy growing by x amount. You don’t see the money taken out of the private sector to fund that spending (the only other option is to inflate the currency, which would take real wealth out of the private sector by reducing its spending power) and all the growth that didn’t happen because of it, which would be greater than the x amount caused by the government spending.

DeeBee9 August 28, 2011 at 6:00 pm

Hmmm…Isn’t government spending (including “stimulus”, etc.) a component of GDP? So, wouldn’t we expect a big dose of government spending to make the computed statistic (GDP) rise, regardless of any change in actual output.

Pom-Pom August 28, 2011 at 8:03 pm

Exactly. Even stuff that isn’t goverment expenditure, but is expenditure caused by government, can be dubious contributors to GDP.

For example:
· getting my car smogged
· getting H&R block to fill out my tax forms
· hiring a lawyer to protect me from the government
· and on and on…

Dan J August 28, 2011 at 7:35 pm

Therefore, spend ten trillion dollars and watch unemployment cease to exist…. End of hunger, homelessness, etc.,…
There is a forest beyond those trees.
A stimulus is not supposed to be an endless expenditure. At $287,000 per job, according to obama economic team, it is a failure. When the money stops, so do the jobs. That’s not a fix or solution, only a bandaid…. Not even a good one.
An expenditure that only puts off inevitable layoffs, is not a solution. Then taxes shall be levied to pay on an expenditure that had a 12month minimal payoff, requiring loss of private sector jobs.
Trillions are being held in response to expecting tons of new costly regulations, taxes, energy costs, etc.,.. All of which is the Obama admin policy……’ energy costs will necessarily skyrocket’ – Barak Hussein Obama.
Who wants to be caught with their pants down when costs ‘skyrocket’.
The merchant raises prices on expected higher costs to cover the new shipment, not after. And, he will leave the prices higher for more profit until after competition forces him to lower prices or lose market share.
Muirgeo, part of the ‘intelligentsia’, thinks he knows everything.

Invisible Backhand August 28, 2011 at 8:31 pm

Don’t forget the 1.4 million jobs created by the stimulus:

http://www.factcheck.org/2010/09/did-the-stimulus-create-jobs/

Whappan? August 28, 2011 at 10:27 pm

Except the CBO didn’t actually measure the effects of the stimulus. They simply reran the models that predicted the added jobs.

maximus August 28, 2011 at 11:37 pm

geewizz, 1.4mil..why aren’t you out making a business instead of eating cheetos and drinking sugary drinks, typing shit on the internet… that is if the stimulus is working and all?

Chucklehead August 28, 2011 at 9:41 pm

The problem here is the government is measuring the wrong thing. GDP is a measurement of spending. or as they like to term it economic activity as measured in dollars.
What maters to society is not increased spending, but increased utility. With GDP , increased productivity is a bad thing, deflation is a bad thing. With society, spending less resources for a given utility is a good thing, as it is how society advances materially.
As long as the goal is GDP, the answer will be more government spending, more government overhead, and thus more barriers to increased productivity and improved utility.

John Papola August 28, 2011 at 9:58 pm

Please remind me which neo-liberal policies were in place before the crash, because from what I can see, we had pretty large scale deficit spending and increased regulation under George W. Bush. Was Sarbanes-Oxley “neo-liberal”? All that Keynesian stimulus from Bush surely wasn’t. What about inflationary easy money from the Fed? Is that “neo-liberal”? If only the talking points were backed by actual fact it would be easier to consider them anything more than hackery.

And, um, I thought the entire point of so-called “stimulus” was to reduce UNEMPLOYMENT. It’s a tautology to say the a massive increase in government spending increased nominal GDP whey nominal GDP is just an ex-post account of all spending including government expenditures. Now, it’s possible that increasing deficits could fail to increase NGDP if they crowd out other spending, but given the world-wide flight to treasuries in fear, that doesn’t appear to be the case in nominal terms, though it’s really hard to honestly say what’s going on. Government spending does make claims on real resources immaterial of low interest rates and it should be the REAL economy we concern ourselves with, not purely nominal nonsense.

We have clear predictions made by the administration and it’s keynesian stimulators about where unemployment would head. It was 7.6% in January 2009. We all can see what was claimed and what actually happened.

Again, Keynesianism is all about addressing unemployment, NOT simply boosting GDP for the sake of it. Remember, NGDP IS “Aggregate Demand”.

Methinks1776 August 28, 2011 at 10:26 pm

…if they crowd out other spending, but given the world-wide flight to treasuries in fear, that doesn’t appear to be the case…

I still fail to see how government borrowing does not crowd out private borrowers at the margin. I can understand an argument that the lower the rate, the fewer are crowded out, but no crowding out seems to be a stretch. Thus, I can never understand how Keynesians can claim that government doesn’t crowd out under certain conditions (excess capacity, high unemployment)

Dan J August 28, 2011 at 10:29 pm

Again, Keynesianism is all about addressing unemployment, NOT simply boosting GDP…… – Papola

It could not even accomplish much of that. And when the ‘stimulus’ ran dry, so did the ‘saved’ jobs.

maximus August 28, 2011 at 11:50 pm

Again, Keynesianism is all about addressing unemployment, NOT simply boosting GDP for the sake of it. Remember, NGDP IS “Aggregate Demand”.

John,
Isn’t the nexus of Keynes about wages? We might be splitting hairs here, but didn’t he think wages were sticky and that was the problem?

Love your comments, interviews, BTW. Keep it up…

John Papola August 29, 2011 at 11:13 pm

Thanks, Max.

Keynesianism does largely rest on the assumption of wages which are “sticky downward” but it’s worst theoretical and practical failures in my opinion are it’s blindness to the structure of production due to over aggregation and it’s built in socialist calculation problems.

The whole stick wages angle is a sham, though, because were it to be something truly taken seriously, keynesians would be the loudest advocates of policies which enable greater wage flexibility. They are, instead, the exact opposite, supporting all manor of rigidity-increasing regulations, mandates and minimums.

vikingvista August 31, 2011 at 12:37 am

“I still fail to see how government borrowing does not crowd out private borrowers at the margin.”

Same here. If you can get a guaranteed risk free 2% return in a (supposedly) low inflation environment, that doesn’t require any lendee evaluation, why would a conservative bank waste loanable funds on anything else?

anthonyl August 29, 2011 at 9:15 am

Stimulus was thwarted by cuts in state spending. Not that it would have worked anyway! I think I have all the roads I need now. You can stop building them.

W.E. Heasley August 28, 2011 at 8:29 am

Folly is defined as (1) lack of good sense or of normal prudence, (2) inability or refusal to accept existing reality or to foresee inevitable consequences. Both of these definitions convey something of the policy stance that I associate with the term Keynesian. – James Buchanan

James Buchanan defined Public Choice Theory as “politics without romance”. Most excellent definition!

Combining the two quotes:

Keynesianism: political-economy based on romantic folly.

Daniel Kuehn August 28, 2011 at 8:32 am

re: “Keynesianism: political-economy based on romantic folly.”

Why do you think this?

W.E. Heasley August 28, 2011 at 8:39 am

Daniel:

Folly is one thing. Having a romance with folly is quite another.

Daniel Kuehn August 28, 2011 at 8:43 am

Yes, I understand your synthesis of the two quotes W.E.. I’m curious why you think they apply to Keynesianism.

E. Barandiaran August 28, 2011 at 8:59 am

Among the many papers and books that Jim B. wrote about public finance and public choice since his graduation in the late 1940s, you may want to read this short one written in 1995:

http://ntj.tax.org/wwtax/ntjrec.nsf/0/68f7f882cd48d258852567ef0057a8a5/$FILE/v48n3347.pdf

W.E. Heasley August 28, 2011 at 9:15 am

Daniel:

Try starting with the essay After Keynesian Macroeconomics by Lucas and Sargent, Federal Reserve Bank of Minneapolis, 1979.

Daniel Kuehn August 28, 2011 at 9:58 am

Well regardless of Sargent and Lucas – why do you think that. Can you give me any explanation other than a citation? I would have hoped you could defend an assertion without me going off to read a whole essay, otherwise what’s the point of making the assertion?

W.E. Heasley August 28, 2011 at 10:18 am

Daniel:

Here to enlighten and by no means debate. Come to think of it, you are debating yourself as you are unsure. However, in order to give you the closure you seek, try this on for size……

Many have pointed out the flaws in the General Theory e.g. Lucas and Sargent , After Keynesian Economics aka After the Phillips Curve: Persistence of High Inflation and high Unemployment. Many others have empirically pointed out the flaws. Hence the theory is flawed. Moreover, the results of applying the theory are flawed aka results speak for themselves. But Keynesianism lives on in a persistent zombie kike fashion.

Maybe the “why” exists in the 1988 Milton Friedman essay entitled John Maynard Keynes. The essay was republished in the 1997 spring edition of the Richmond Federal Reserve Economic Quarterly. The following appears n the essay on pages 20 and 21. Friedman wrote:

“Keynes was exceedingly effective in persuading a broad group—economists,
policymakers, government officials, and interested citizens—of the two
concepts implicit in his letter to Hayek: first, the public interest concept of
government; second, the benevolent dictatorship concept that all will be well if
only good men are in power. Clearly, Keynes’s agreement with “virtually the whole” of the Road to Serfdom did not extend to the chapter titled “Why the
Worst Get on Top.”

Keynes believed that economists (and others) could best contribute to the
improvement of society by investigating how to manipulate the levers actually
or potentially under control of the political authorities so as to achieve desirable
ends, and then persuading benevolent civil servants and elected officials to
follow their advice. The role of voters is to elect persons with the right moral
values to office and then let them run the country.

From an alternative point of view, economists (and others) can best contribute
to the improvement of society by investigating the framework of political
institutions that will best assure that an individual government employee or
elected official who, in Adam Smith’s words, “intends only his own gain . . .
is . . . led by an invisible hand to promote an end that was no part of his
intention,” and then persuading the voters that it is in their self-interest to
adopt such a framework. The task, that is, is to do for the political market what
Adam Smith so largely did for the economic market.

Keynes’s view has been enormously influential—if only by strongly reinforcing
a pre-existing attitude. Many economists have devoted their efforts to
social engineering of precisely the kind that Keynes engaged in and advised
others to engage in. And it is far from clear that they have been wrong to do
so. We must act within the system as it is. We may regret that government
has the powers it does; we may try our best as citizens to persuade our fellow
citizens to eliminate many of those powers; but so long as they exist, it is
often, though by no means always, better that they be exercised efficiently than
inefficiently. Moreover, given that the system is what it is, it is entirely proper
for individuals to conform and promote their interests within it.
An approach that takes for granted that government employees and officials
are acting as benevolent dictators to promote in a disinterested way what they
regard as the public’s conception of the “general interest” is bound to contribute
to an expansion in governmental intervention in the economy—regardless of
the economic theory employed. A monetarist no less than a Keynesian interpretation
of economic fluctuations can lead to a fine-tuning approach to economic
policy.”

Fearsome Tycoon August 29, 2011 at 9:29 am

I’m curious about your theory that you can have Keynesianism without politicians. Do elucidate.

Economic Freedom August 28, 2011 at 11:02 pm

Break out the Irish harps, everyone, and let’s sing this lovely tribute to Daniel Kuehn (to the tune of “Danny Boy”):

Oh Danny Kuehn, our debt, our debt is soaring,
From state to state, across this land we love,
Our growth is weak, and unemployment’s roaring
‘Tis Keynes, ’tis Keynes, whose fault we’re thinking of.

[Sniffle. I love that old chestnut. As the saying goes: "It always brings a tear to me glass eye."]

Methinks1776 August 29, 2011 at 4:16 pm

LOL!

kyle8 August 28, 2011 at 11:02 am

observation?

vidyohs August 28, 2011 at 8:59 am

I don’t believe it can be said any better than this:

John S. August 20, 2011 at 1:03 pm
Krugmanian logic: Beating one dead horse didn’t work. Let’s hitch up an entire team of dead horses and flog them good and hard this time!

indianajim August 28, 2011 at 9:45 am

Agree; August hit a homer.

Invisible Backhand August 28, 2011 at 11:26 am

Hyuck hyuck hyuck that’s funny!

vidyohs August 28, 2011 at 12:56 pm

Probably the only time we will ever agree.

Invisible Backhand August 28, 2011 at 8:34 pm

Like Thomas Jefferson said, a simpleton can’t tell when he is being mocked.

vidyohs August 28, 2011 at 9:31 pm

Let us know when you get it figured out.

Methinks1776 August 28, 2011 at 10:27 pm

It’s almost as if TJ was speaking to you, eh Invisible Backwash?

Slappy McFee August 29, 2011 at 9:24 am

If you waste time mocking someone that doesn’t know they are being mocked, which one is the simpleton again?

rhhardin August 28, 2011 at 9:39 am

I take an evolutionary explanation.

All the problems that can be solve by direct action have already been solved.

The problems that remain are ones that respond to direct action with perverse consequences.

Those are therefore the ones that the left attacks with direct action, and the right is mostly always correct about.

tdp August 28, 2011 at 4:02 pm

I have stumbled on to the reason why people go on believing economic fallacies, or who choose to have government intervention (since they value its effects, or believe they do, more than the effects of free markets), and why the idea of a paternalistic state that can magically protect people from the evils of the world, and that pays everyone’s retirement, healthcare, etc., is so popular. As Gene Callahan writes in “Economics for Real People”:

“One of the benefits of studying economics is a deeper understanding of our own situation as acting humans. For instance, people often fail to properly account for the cost of their choices. Once we understand that our costs are measured in terms of our foregone alternatives, we might have a very different view of some common choices.”

In order to solve our country’s problems, we need to get more people to see the costs and consequences of the actions being taken by politicians and the government. Once people see that a free society affords everyone the chance to pursue his or her own interests (you are free to work 70 hours a week, make a ton of money, and keep it, or not work as hard and make less money because you prefer leisure, or give all your money away and become a monk) while a society with intrusive government only allows some people to do what makes them happy, a political paradigm shift will occur.

People who rail about the need for government to make sure there is a “fair distribution of wealth” forget not only that their actions serve to make everyone poorer, but also that in the absence of restrictive economic measures, people would aid each other through mutually beneficial exchanges on the free market if they didn’t care at all about others, while those who were altruistic would be free to hand out money to everyone who passed by.

Now to go totally off on a tangent…

People accuse markets of promoting greed and selfishness, but even when only motivated by their own self interest, in a free market with respect for private property, people cannot exploit others. They can only obtain what they want by offering something to another person that said person values. In a totally free economy, you can only advance your own position by simultaneously improving the position of someone else. Only with state intervention in the marketplace can people exploit others without paying the consequences (turning to their cronies in Congress to pass a law, for example).

The only government that is necessary to prevent exploitation and injustice is a legal system founded on respect for private property, a court system that enforces contracts and prevents aggression, fraud, and theft, and some form of civilian-controlled defense force. If you think about it, every example of exploitation in the world today or in the past, from the horrible conditions of diamond mines or factories or coffee plantations in Third World countries to historical oppression of certain classes or groups to pollution, comes from a failure to grant equality before the law, a failure to recognize the right of all people to own private property, prevention of theft and coercion, or a lack of definitive contract laws or a standardized, consistent system for awarding property rights even when property rights exist. Maybe its because I’m young and naive, but I think we could see a change in the way society is run and in how governments are set up if people could see that free markets, personal freedom, the rule of law, and private property rights could solve suffering, injustice, poverty, etc.

People like Johan Norberg and Hernando de Soto have started to advance these arguments, but I think that if a sustained, widespread effort to advance libertarian ideas on these grounds, libertarianism would have the best chance of its ideas becoming popular and mainstream and being adopted by governments.

anthonyl August 29, 2011 at 9:31 am

Very nice summary. We may not even need publicly funded courts as most court cases are about breach of contract and can be handled by arbitration.

tdp August 29, 2011 at 7:04 pm

You need public criminal courts, and you also need someone to be able to enforce the decision of arbitration courts. If there is no ability on the part of the government to force someone to comply with the decision of said court, one party could ignore the ruling. Without some state-run court system, there would be nobody with the authority to punish the violator of the agreement. The only way a private party can force you to do something (ie pay a debt) is if the state can force you to do so by threatening you with imprisonment. One of the few legitimate uses of this power is in just such a scenario. If the arbitrator is private (private court system), there is no institution that can enforce its rulings, since it is a private institution, like McDonald’s. McDonald’s cannot force you to pay them a $10,000 fine because they have no legal authority to do so. Why then would a private court have the same power? It could decide you should pay the fine, but it cannot punish you if you ignore it. With a public criminal and civil court system, there is a way to officially recognize and enforce the decisions of arbitration courts, since failing to comply with the terms of a mutually agreed to arbitration would represent further breach of contract, would it not?

Greg Webb August 28, 2011 at 8:04 pm

Excellent quote from Jim Buchanan! To an individual, spending an excessive amount of money in an attempt to correct any problem defies good common sense and normal prudence. Anyone who is unable or refuses to accept this reality or to foresee the inevitable consequences of spending an excessive amount of money is equally foolish. And, macroeconomics that does not have its foundation firmly rooted in microeconomics becomes popular when the needs of corrupt politicians and their political cronies are combined with those of egotistical economic philosophers like John Maynard Keynes.

Fred August 29, 2011 at 8:24 am

If you first remove money from the economy through taxation or the sale of bonds, skim a bit off the top to pay government employees who produce nothing of value, then divvy out that reduced money to political cronies, the economy will be better off than if that money was never removed in the first place.

That just fails the straight face test.

Randy August 30, 2011 at 6:35 am

Exactly.

Dan J August 30, 2011 at 12:59 am

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
Chapter VI, pg.235-236

Spend, spend, spend, spend, spend….. Obama admin policy

Dan J August 30, 2011 at 1:00 am

Sorry…. Keynes – economic consequences of peace

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