Quotation of the Day…

by Don Boudreaux on September 20, 2011

in Economics, Myths and Fallacies, State of Macro

… is from page 101 of Frank Knight’s exhaustive 1937 review, in the Canadian Journal of Economics and Political Science, of Keynes’s General Theory:

[M]any of Mr. Keynes’s own doctrines are, as he would proudly admit, among the notorious fallacies to combat which has been considered a main function of the teaching of economics.

Be Sociable, Share!

Comments

comments

106 comments    Share Share    Print    Email

{ 106 comments }

geoih September 20, 2011 at 10:23 am

Keynesianism is about politics. It has nothing to do with economics.

Martin Brock September 20, 2011 at 11:58 am

Most of what’s called “economics” is about politics.

Michael September 20, 2011 at 12:50 pm

+1

vidyohs September 21, 2011 at 7:30 am

Macro economics for sure, Martin; but, I am not so sure about micro.

It would be difficult for you to make a case that I operate my business in a political way or for political gain, nor do I think it can be said that when I stopped on the way home last night to buy a half gallon of milk, that I did so in any political sense.

I could be wrong and if so, I’d like to see you or anyone else make the case.

vidyohs September 21, 2011 at 7:32 am

To add to that, I do believe that it is unfortunate for the American people that all the political, news, and media concentration is always on the macro side of economics and only a small subset of Americans understand that macro is mumbo-jumbo of the rankest order.

JS September 20, 2011 at 2:42 pm

I agree. The objectives of keynesianism are different from ordinary theory. They are based on what policies are most effective for a group to remain in power. Arguments against keynesianism always result in reduction of centralized power, which is anathema to power.

The republicans aren’t much different than the democrats because they don’t want to give up the prerogatives of power either.

Daniel Kuehn September 21, 2011 at 1:01 am

This is about the point where economists stop talking with you geoih, and the only people you have left to talk with are other people who hold your political views.

Russ Nelson September 20, 2011 at 10:46 am

That’s a great review. Read it last year for the first time. Amazing that Keynes’ ideas have ever had any traction. “Those who do not understand economics are doomed to reinvent it, badly.” — me, now.

W.E. Heasley September 20, 2011 at 10:51 am

A Fable:

One day, long, long ago, there lived a Keynesian who did not whine then spend, nor spend then whine. But it was a long time ago, and it was just that one day.

The End

Terry Pearson September 20, 2011 at 10:52 am

I thought “Keynesian” was a synonym for fallacy :-)

It is too bad that so many must learn the hard way and continue to push for these failed ideas.

Andrew September 20, 2011 at 11:01 am

You guys just refuse to think.

For example, what do you propose that people without jobs do to eat, clothe themselves and put a roof over their heads. Are you saying that there are jobs for the millions of unemployed that they refuse to do because they have, in the last two or three years, become lazy?

Give me a break.

Randy September 20, 2011 at 11:20 am

So your syllogism goes something like this, I suspect.

There are problems in the world. There are politicians who claim to have solutions to these problems. Therefore those who earn must submit quietly while the politicians take as much of the earnings as the politicians think best.

Andrew September 20, 2011 at 11:26 am

I don’t think I mentioned politicians. I asked for a proposed solution. What do you have to offer?

Xmas September 20, 2011 at 11:33 am

Allow more oil refineries to be built.
Allow new nuclear plants to be built.
Allow oil drilling off the Gulf coast, off the Atlantic Coast, off the coast of California. Allow oil drilling on the mainland US. Allow it in Alaska.
Allow an oil pipeline to be built from the Canadian oil sands to our newly built US refineries.
Allow windfarms along ridge lines and off the coasts. Allow high tension wires to be built across canyons.

And that’s just the energy sector.

Andrew September 20, 2011 at 12:39 pm

That sounds like a plan for creating more energy, not a plan for feeding people, clothing them or housing them. Are you saying that we don’t have enough energy now? Are you saying that all the unemployed will be put to work building this energy infrastructure? I don’t think that the numbers work – you won’t create 13-25 million jobs, and those are temporary jobs, right? Once the building is done, what happens?

Ken September 20, 2011 at 1:12 pm

“That sounds like a plan for creating more energy, not a plan for feeding people, clothing them or housing them.”

Not a whole lot of food, clothing, and housing if there is no energy to create them. Do you not understand the energy dependencies in the economy?

“Are you saying that we don’t have enough energy now?”

If he’s not, I will. Rolling blackout, brown outs and unreliable power is indicative of not having enough power.

“Are you saying that all the unemployed will be put to work building this energy infrastructure? ”

The foundation of the modern world rests on energy infrastructure. With a crumbling energy infrastructure, some Obama and the left have explicitly said they are in favor of this crumbling, the crumbling of the economy occurs.

“you won’t create 13-25 million jobs, and those are temporary jobs, right?”

No.

“Once the building is done, what happens?”

The rest of the economy that depends on energy production can use this new found capacity to produce ever more wealth.

Regards,
Ken

Josh S September 20, 2011 at 3:06 pm

Are you saying we have a housing shortage? Are you saying there’s a food shortage? If you believe there’s a food shortage, then…

Repeal ethanol subsidies
Repeal the Endangered Species Act

There are so many laws the government could repeal if it wanted to stimulate the economy. But it doesn’t want to stimulate the economy that badly.

Sam Grove September 20, 2011 at 3:32 pm

There’s no issue about feeding people, we know how to produce ample supplies of food or about anything people need.

The issue is whether we can get the job and wealth destroyer out of the way so people can serve each other through the voluntary mechanisms of the market.

Xmas September 21, 2011 at 6:30 pm

A day late, I know…

Andrew, you can look at any sector of the economy and find government hindering the growth of business. You remove the shackles of government and businesses will grow, they will hire more people and that will take care of feeding, sheltering and clothing them.

Automotive…let GM fail so that it can be picked apart and it’s assets given to productive companies.

Banking…let Goldman Sachs fail so it’s assets can be liquidated and the cash invested in productive activities.

Home ownership…let the housing bubble collapse so that the poor can purchase foreclosed housing on the cheap.

Farming…end corporate subsidies and protections for corn, rice, wheat, cotton and sugar. Allow cheap imports, allow farmers to produce the products that people actually want so those things will be cheaper.

Fearsome Tycoon September 20, 2011 at 11:41 am

Eliminate the FDA
Repeal Obamacare
Repeal federal minimum wage
Eliminate the income tax and replace it with a sales tax on consumer goods
Eliminate the capital gains tax
Shut down the Department of [obstructing] Energy
Shut down the EPA; replace it with a per-pound tax on pollutant emission

This is easy.

Andrew September 20, 2011 at 12:35 pm

Not sure how this fixes the problem that I pointed out currently exists. Perhaps you can draw a line of causation, but you’re making a lot of assumptions with no proof.

Ken September 20, 2011 at 1:20 pm

Andrew,

“Not sure how this fixes the problem that I pointed out currently exists.”

The FDA restricts new life saving and life approving medicine. It is a boondoggle that diverts billions of dollars away from medical research into the pockets of medical lobbyists and politicians.

Obamacare places enormous burdens on employers. If it costs $X to employ someone who produces $Y, then that employer will not hire if Y<X. It's easily seen that low profit jobs disappear because Obamacare now makes X too large.

The minimum wage keeps low skilled workers out of the job market. Entire sectors are destroyed because it is illegal to use this low wage labor.

An income tax taxes labor. As Pigou pointed out, taxing X reduces the consumption of X. Thus taxing labor reduces consumption of labor.

Capital gains represents a taxation of investment. See Pigou above.

The Department of Energy is the same as the FDA, but with regards to the energy sector.

The EPA is an economic killing machine and does not increase the protection of the environment.

Regards,
Ken

cthorm September 20, 2011 at 2:54 pm

>Shut down the Department of [obstructing] Energy

I agreed with everything else you recommended, but I have less of a problem with the Department of Energy overall than I do with specific parts of it. The Nuclear Regulatory Commission is truly Orwellian in that its function is to prevent the building of new (safer! more efficient! proliferation resistant!) nuclear plants while ensuring that aging nuclear plants host partially used fuel in unsuitable conditions. The arm of the DoE that funds energy research projects, which are wasteful but have a small chance of a big payoff, are kittens in comparison.

Josh S September 20, 2011 at 3:04 pm

Jobs aren’t being created because capital isn’t being created. Eliminate government restrictions on capital creation, and you’ll get more jobs.

Also: Repeal Dodd-Frank
Repeal the ADA
Repeal the CPSA

Dan J September 20, 2011 at 10:59 pm

More supply of energy with less costly regulations means cheaper energy. This also means all products and services can be reduced, and thru competitive markets, they will. Households will spend less on home electricity bills and fuel for transportation. Also, households will have more disposable income as prices for prodcts and services go down. All of this extra money means the ability to make more purchases of other wants that they did not purchase due to trade offs.
It is no secret. But, it takes away govt controls and influences. It also means ideological agendas cannot be realized.

Randy September 20, 2011 at 12:01 pm

Andrew, I have enough knowledge to solve most of my own problems (though not all). I believe that most people have enough knowledge to solve most of their own problems. I believe that politicians, being people, have enough knowledge to solve most of their own problems. I also believe that politicians solve their own problems by making other people’s lives harder.

Mark Bahner September 20, 2011 at 1:06 pm

“I don’t think I mentioned politicians. I asked for a proposed solution. What do you have to offer?”

Getting the federal government out of the business of stimulating home ownership would be one start. Getting the federal government out of setting minimum wages would be another. Getting the federal government out of setting lengths for unemployment insurance would be a third.

I’m sure I’ll think of more. :-)

Andrew September 20, 2011 at 1:23 pm

I’m not sure how any of these are a solution to people clothing, housing and feeding themselves, they just state your ideology. You make baseless assumptions.

Ken September 20, 2011 at 1:33 pm

Andrew,

Are you just completely unaware that over the last two decades the federal government has been diverting trillions of dollars into housing that otherwise would have been used to finance something else? Due to the distortions created by the federal government, a housing bubbles came up and finally burst causing a deep recession.

The federal government uses the minimum wage to keep people out of the work force. Millions of otherwise productive workers are left idle because the government doesn’t like how little they produce.

Government funded unemployment insurance incentivizes not getting a job. After all, most people enjoy leisure time far more than having to go to work. If they government is willing to pay a person to do whatever they want, what incentive is there to find a job and hand over 8 hours of their day doing something they really don’t want to do?

Do you understand incentives at all? In other words, do you understand economics in any way?

You claim Mark is making baseless assumptions, but his analysis is very knowledgeable.

Regards,
Ken

Randy September 20, 2011 at 1:37 pm

Andrew,

Yes, this is ideology – I hold myself responsible for myself and my family. And I don’t hold myself responsible for everyone else just because some politician says I have to.

No, this doesn’t solve all the problems of the world. Neither will any political ideology. People have problems. That’s life.

Fred September 20, 2011 at 2:02 pm

“I’m not sure how any of these are a solution to people clothing, housing and feeding themselves”

They need to come up with those solutions themselves.
It would be a lot easier for them to come up with those solutions if they could easily turn their hobby into a business without government interference, or if the price of their home was allowed to drop to its true value so economic resources could be allocated properly, or if potential investment dollars weren’t being appropriated by government and spent on subsidizing things nobody wants to buy…

In short, the solution is for government to get out of the way and allow people the opportunity to help themselves.

I know that’s not the solution you want. You want some miracle that magically fixes everything. But that miracle doesn’t exist.

Life sucks. Government makes it worse.

Andrew_M_Garland September 20, 2011 at 2:41 pm

Andrew,

Don’t be coy. Don’t ask for plans that you are itching to criticize. What is your plan?

Economic Freedom September 20, 2011 at 3:15 pm

What do you have to offer?

Abolish all minimum wage laws.

Abolish laws mandating that an employer negotiate against his or her interests with labor unions.

Abolish all federal/state/city licensing requirements (such as the mandate that one spend $650,000 on a “medallion” for permission to own and drive one’s own taxi in New York City).

Abolish any law, anywhere, that obstructs free entry — i.e., non-privileged entry — of labor into the labor market.

Abolish any program that incentivizes workers to choose to remain unemployed rather than a take a less-than-ideal job. Any variation of “the dole system” would be an example of such a program.

Abolish the EPA.

Privatize as much federal land as possible.

Reduce the corporate tax.

Reduce the capital gains tax.

Repeal the 16th Amendment of the Constitution (i.e., abolish the individual income tax).

Any one, several, or all of these policy changes would greatly reduce unemployment.

Until 1997, Hong Kong had no minimum wage laws and no coercive union policies (unions were simply voluntary associations of workers with no legal clout to force an employer to do anything). Unemployment rate at that time? Effectively zero.

Methinks1776 September 20, 2011 at 11:53 am

Andrew,

You guys just refuse to think.

Beyond irony. Here you insist that somebody else create and innovate in order to employ you. You absolve yourself of any responsibility to become the job creator.

Are you saying that there are jobs for the millions of unemployed that they refuse to do because they have, in the last two or three years, become lazy?

Talk to any employer and ask him how many times people looking for jobs have asked if the date of employment can be delayed so that it corresponds with the date of their final unemployment check. During the interview (real smart move).

Incentives matter. Without question, politicians are creating incentives for people not to find ways to find employment. Keep in mind, of course, that employment doesn’t have to come from someone else. People can always leverage their skills to start their own business. Why wait for someone else to provide you with a job? How lazy.

For those brave and creative souls who are trying to start a business, the alphabet soup of government regulatory agencies and controls on who can and can’t invest in a start-up are making the task 100 times harder than it should be. If I had to start my business in this environment, I wouldn’t be able to. It wouldn’t be worth it.

People will find ways to employ themselves or find employment because they must so they can eat. If you shower them with endless unemployment checks and stomp out every avenue for self-employment, you will get what we have today – a sad bunch dependent on politicians stealing from others to support them. This, of course, suits politicians of all stripes just fine as it increases their power.

Greg Webb September 20, 2011 at 12:04 pm

Excellent analysis, Methinks1776!

Andrew September 20, 2011 at 12:42 pm

Not everyone can be a “job creator” unless everyone works for themselves.

Suppose that you’re a kid that just graduated from high school and you can’t afford to go to college, or don’t think the debt burden worthwhile, what do you do? What resources do you have available to you? You don’t have land. You don’t have capital. You think a bank is going to loan you money to start a burrito shop (when there are already six of them in town)? Seriously, what do you do?

jjoxman September 20, 2011 at 12:54 pm
Andrew September 20, 2011 at 1:11 pm

1) Start a business – with what? You putting up the capital? You know demand is weak right now, don’t you?
2) Travel the world (with $10,000) – the money comes from…?
3) Create art. That’s the same as #1. You’ve heard the term “starving artist,” right?
4) Make people laugh. millions of buskers – sounds great.
5) Write a book. Good idea. How do people take care of themselves while they’re writing?
6) Work in a charity. Isn’t that the same as getting a job?
7) Master a game. Which feeds, clothes and houses you how?
8) Master a sport. I think that’s the same as “get a job.”

Come on. Some may do these things and be successful, but there are thousands upon thousands graduating every year, they can’t all become Jeopardy champions, can they?

Methinks1776 September 20, 2011 at 4:21 pm

Start a business – with what? You putting up the capital? You know demand is weak right now, don’t you?

How much demand was there for facebook when Zuckerberg started it? He did no market research. How much demand was there for DOS when Bill Gates started out?

Trial and error is how we find things that work. Again, your lack of imagination is your problem. A lot of people are not so lacking.

If you can’t answer any of these questions yourself, why do you suppose anyone else can for someone else?

Ken September 20, 2011 at 1:08 pm

Andrew,

That high school graduate could buy a lawn mower and a cheap truck and start a lawn care business.

He could start a contracting business doing small item repairs to people’s houses. A small investment in tools and know-how and he’s off and running.

He could buy a car and hire it out as a taxi.

In all of these positions, he becomes a job creator and each are low capital jobs that turn decent profits.

The left is out to destroy this high school graduate’s prospects. Of course, thanks to our compassionate lefty friends, the fees associated with starting any of these business are pretty large. The left, bizarrely, supports a medallion style taxi system, guaranteeing no taxi driver can be self employed. Insurance costs, registration fees, legal rules to hiring, and so on cripple this high school graduate’s wealth creating capacity. The “solutions” put forth by the left aren’t solutions at all.

It’s almost as if those solutions are just ways for politicians to gather ever more power unto themselves and more control over others. But it’s okay because caring leftists are doing it, amaright?

Regards,
Ken

Andrew September 20, 2011 at 1:20 pm

Ken,

Thanks for at least trying to be serious. I grant you some can do these things and be successful, but this isn’t about 1 or 2 or three people, it’s about an entire graduating class in a town or city finding work.

The medallion system is coveted not by “lefties”, but by current cabbies. Anyway, the issue is one of demand. Perhaps there aren’t enough cabs in XYZ city, but even if the doors were opened, how long would it take for the market to be saturated? About a week, I’d guess.

You are thinking micro. The problem is macro. You assume that a reasonable solution for an individual extends to everyone, when this is not the case.

Ken September 20, 2011 at 1:27 pm

Andrew,

“The medallion system is coveted not by “lefties”, but by current cabbies.”

False. It is coveted by taxi cab companies, against the independent cabbie. Lefties have always been in the pocket of big business, due to the kickbacks they get from big business (see GM, Goldman Sachs, etc). Take a look at what’s happening in DC right now and tell me that the politicians are putting this in place because it’s “coveted” by cabbies.

“Perhaps there aren’t enough cabs in XYZ city, but even if the doors were opened, how long would it take for the market to be saturated?”

Do you not understand the feedback system of profits and loss in a free market system? DC has an open door policy relating to taxis right now and the cabbies are doing just fine. Are you seriously suggesting that politicians have more information and have better incentive to react to the needs of taxi services that cabbies?

“You are thinking micro.”

Because everything comes down to micro.

“The problem is macro.”

Which uses discredited models as Arnold Kling discusses.

“You assume that a reasonable solution for an individual extends to everyone, when this is not the case.”

False.

Regards,
Ken

Fred September 20, 2011 at 2:10 pm

“You are thinking micro. The problem is macro.”

What is macro but millions and millions of unique micros?

“You assume that a reasonable solution for an individual extends to everyone, when this is not the case.”

You assume that a reasonable solution exists that applies to every unique situation, when this is not the case.

Liberty is the solution. It allows every unique individual to find their own path without a government roadblock at every turn.

Andrew September 20, 2011 at 2:38 pm

Ah, the fallacy of composition rears its head again.

And we’re not talking about models here. We’re talking about the lives and well-being of people living in a society.

Lots of blah, blah and attacking. Little in the way of real solutions that could be put to work today.

Fred September 20, 2011 at 2:58 pm

“Ah, the fallacy of composition rears its head again.”

You are asking for some magical pill.

“We’re talking about the lives and well-being of people living in a society.”

I’m saying that every situation is unique, and only the people in that unique situation know best what to do.

The solution is to give them the freedom to do it.

That means removing barriers to free enterprise.

I have several hobbies that I would love to turn into a business. Eventually employ some people even.
But I can’t. The fees, licensing, taxes and regulatory requirements are too great.

Oh well.

Josh S September 20, 2011 at 3:08 pm

“Little in the way of solutions”

No, we’ve offered lots in the way of solutions. You just don’t like those solutions because they don’t create opportunities for graft.

Andrew September 20, 2011 at 3:55 pm

No, you haven’t offered solutions. You’ve offered policy ideas that you claim will (by some undescribed method) lead to food, clothing and housing for those who can’t find jobs. You simply have no evidence for asserting that these policy ideas will lead to a particular outcome.

People with freedom but without opportunity don’t have much.

One here says that they can’t come up with a money to pay for some licenses to start a business, but they expect an 18-year old graduate to go out and start one? Which is it? What are the rules that get in your way? Be specific. What are all these government roadblocks getting in the way of your entrepreurship?

Methinks1776 September 20, 2011 at 4:23 pm

No, we’ve offered lots in the way of solutions. You just don’t like those solutions because they don’t create opportunities for graft.

That’s exactly right.

The more I read from this Andrew, the more I realize you’re right. Another troll.

Randy September 20, 2011 at 4:29 pm

Andrew,

Actually, I don’t expect an 18 year old to start a business (though certainly that is an option). I expect him (or her) to work at McDonalds or the like for 4 or 5 dollars an hour. I expect him to live in the basement of his parents house or to share a place with a roommate or roommates. I expect him to continually seek opportunities to improve his skills until he finds his proper place. It isn’t easy, but millions of us have done it, and he can too.

Ken September 20, 2011 at 4:59 pm

Andrew,

“And we’re not talking about models here.”

The what are we talking about? Unless you’re talking about a specific person in a specific situation, by definition, you HAVE to be talking about a model.

“Little in the way of real solutions that could be put to work today.”

Only because you don’t like the solution. I see you completely ignored what Arnold Kling had to say on the macro side. It’s not surprising, though, you’re not interested in hearing your models are flawed. You’re only interested in “solutions” that make your models look good. In other words, you’re not interested in the real world.

“You simply have no evidence for asserting that these policy ideas will lead to a particular outcome.”

There is plenty of evidence. It just doesn’t confirm your bias, so you ignore it.

“People with freedom but without opportunity don’t have much.”

Freedom and opportunity are pretty much synonymous in this context. Being economically free MEANS having the opportunity to exploit certain situations for personal and mutual gain. A plumber exploits other people’s ignorance or laziness or lack of time to perform plumbing tasks and charges for his service to perform plumbing. The government actively hampers and reduces these opportunities. The list given by Fearsome Tycoon and Xmas were specifically talking about eliminating government’s reduction of opportunities.

Regards,
Ken

Fred September 20, 2011 at 6:02 pm

“People with freedom but without opportunity don’t have much.”

People with freedom can create their own opportunity.

“What are all these government roadblocks getting in the way of your entrepreurship?”

For starters anything related to food or drink must be done in a separate kitchen. So if I wanted to do something like sell baked goods at the local variety store, I would need to add a new kitchen to the house. But I can’t do that since local building codes require that I live on at least two acres before they’ll issue a building permit.

I’d call that a roadblock.

Wouldn’t you?

Fred September 20, 2011 at 6:57 pm

Andrew,
As far as discouraging entrepreneurship goes, what about all those lemonade stands that were shut down this past summer (no I will not provide links other than google)?
What is more American, more free enterprise, than a kid selling lemonade in the summertime?
Yet many of these stands were shut down by nice men with guns who informed children and parents that they needed to spend hundreds of dollars on permits before they would be allowed to sell lemonade. In at least one case the profits, all $4 if I remember correctly, were confiscated.
Land of Opportunity my ass.

Methinks1776 September 20, 2011 at 4:19 pm

Andrew,

No offense, but you’re assuming that since you’re not creative enough to come up with solutions to these questions, nobody is.

I don’t have the answers to your questions because, as a human being, I am not omniscient. I only know my own narrow specialty and my own specific skills and preferences to figure out what to do for myself. And even then, I am one of many in my little area, each of us differentiating ourselves in some way. Lots of us are independents and don’t wait for someone else to provide us with employment.

I don’t know what skills you have in your narrow field. I created something nobody else created in my narrow field, but it wouldn’t have occurred to me nor would I have had the skills to create facebook.

It is not for you or me to create grand plans for people we don’t know anything about in fields you and I know nothing about. We simply haven’t the knowledge. All we can do is get out of their way.

This is not ideology. It is reality. If you think you are omniscient enough to plan for the many, then you will have to explain how you got that way, as will anyone who makes that claim. Life is filled with problems that you cannot resolve with grand plans.

Darren September 20, 2011 at 6:34 pm

Andrew,

You are absolutely correct. Not everyone has the knowledge/skills/talent/resources to start their own business. So, why should those that *do* have these things be impeded in creating jobs for those of us who don’t? Who does it really hurt?

Dan J September 20, 2011 at 11:10 pm

I have a small idea. Simple. Will require effort and time. Savings of a few thousand and a meager beginning. Not expecting it to make me rich. I will be happy and thoroughly proud of myself if I can make it sustainable without future input from other income. I will be wildly ecstatic if I manage to turn it into multiple units. And, I am no Ivy Leaguer. I am no college grad. I am just motivated and willing to try. Will take a few years. Let ya know if I find the numbers to add up for my perspective of success, as I have previously given.

Greg Webb September 20, 2011 at 12:06 pm

Andrew, what would you do? How do you know that your proposed plan would work?

The Other Tim September 20, 2011 at 12:14 pm

Your comment hasn’t got anything to do with anything.

Keynesianism is an economic theory concerning how to restore the economy to its state prior to recession. It doesn’t work according to two centuries of economic thought. Where did you get it into your head that “but people need jobs” is a response to that?

Andrew September 20, 2011 at 12:44 pm

Huh?

The Other Tim September 20, 2011 at 1:43 pm

“Huh” is right. Your post and the topic don’t have anything to do with each other.

Andrew September 20, 2011 at 2:35 pm

The review, which is in a paper that I don’t choose to pay $5 to read, seemingly asserts that Keynes thinks that some of his own theories are incorrect, right? So the poster is essentially calling the Keynesian solution crap. To which I say, what’s your solution?

The Other Tim September 20, 2011 at 4:33 pm

We’re not obliged to give one. Now, you can find one if you look not very hard at all, either here or in the voluminous literature that’s been written on the subject by more knowledgeable libertarians than us, but it’s not a requirement of those who expose flaws in theories that they provide superior replacements.

Methinks1776 September 20, 2011 at 5:15 pm

Well said, other Tim.

indianajim September 20, 2011 at 12:37 pm

It appears that some people without jobs are doing quite well without one, thank you very much! (Moral hazard you know about, I assume, but in case you don’t know, you might find this video (“My EBT”) illuminating:

http://www.youtube.com/watch?v=o64Fz-KW1Dk

Invisible Backhand September 20, 2011 at 12:41 pm

Libertarians just don’t have the same mental landscape as normal people. Here’s a helpful guide to the 24 types of libertarians.

http://i.imgur.com/G5ZWG.png

The Other Tim September 20, 2011 at 1:45 pm

And (nearly) every one of them is more delightful than the statist stooges throughout history.

Libt September 20, 2011 at 2:42 pm

That will show those darn libertarians how wrong they are !

Greg Webb September 20, 2011 at 2:55 pm

But, despite using many different names (i.e., progressive, liberal, social democrat, socialist, national socialist, fascist, international socialist, communist, etc.), there is only one type of statist – stupid.

Invisible Backhand September 20, 2011 at 3:09 pm

You forgot unionist, johnny reb.

The Other Tim September 20, 2011 at 4:35 pm

Both the Union and Confederacy were staists. Go find other strawmen to tear down.

Greg Webb September 20, 2011 at 4:59 pm

LOL! Ah, the personal attack! The typical response of a statist who is losing an argument on the merits.

Methinks1776 September 20, 2011 at 4:25 pm

Well said, Greg.

Invisible Backhand September 20, 2011 at 9:02 pm

I love how you retreat behind the ‘personal attack’ after calling someone stupid.

Methinks1776 September 20, 2011 at 9:10 pm

There’s a difference between a personal attack and accurately assessing your lack of intelligence. Do you prefer retarded?

Josh S September 20, 2011 at 3:12 pm

Here’s a nice graphic showing the different kinds of statists:

http://www.aaanything.net/wp-content/gallery/dictators-must-go/dictators_collage.png

Methinks1776 September 20, 2011 at 4:34 pm

Oh, another one. Waaah. Irritable Bowel is obsessed with Libertarians but hates them.

Who cares?

Invisible Backhand September 20, 2011 at 9:04 pm

Hey methinks, remember the part about that I will support and defend the Constitution and laws of the United States of America against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same;

Didn’t think so.

Methinks1776 September 20, 2011 at 9:14 pm

Sig Heil. Drop a little more acid. You have nothing to lose.

Randy September 21, 2011 at 6:54 am

That is an interesting question; what to do when the enemies of the Constitution are giving the orders.

JS September 20, 2011 at 3:07 pm

Contrary to your assumed wisdom, labor is a scarce factor of production, which means that there should be no unemployement, except by choice.

Now, the reason for unemployment is entirely political–due to laws. These laws are so many that they can’t be recounted here, but besides laws restricting the free contracting of labor, we have welfare and unemployment benefits that significantly reduce the incentive to work as well.

In relatively unregulated markets, there would be no involuntary unemployment. Further, a basic wage rate for unskilled labor would support a household if the division of labor were allowed to geometrically expand as it should.

What most economic ignoramouses don’t understand is that the intensification of the division of labor, through invention, innovation and increased efficiencies, increase the purchasing power of the currency by itself. This is equivalent to everyone continuously getting a raise without having to improve their own specific productivity to an organization.

What the division of labor does is to increase the goods and services available for a population, without that population having to numerically expand. The result is that everything produced will become cheaper. If you don’t grasp this, imagine a family of farmers who labor all day for their food, but when they discover a faster way to harvest crops, they free up their time make a new item for their household. Their wealth has increased without a further expenditure of labor. “presto” But note that the increased wealth could only occur when the displaced labor went to work making the new product.

Now take that example and apply it geometrically to a dynamic huge economy. It would be nearly umimaginable how wealthy that society would become if expansion would be allowed to occur naturally. But for political purposes, people protest when they lose their jobs, as well as the companies who they work for, and they elect politicans who retard the economic expansion in order to provide security for people. If we apply this mentality to the example of the farming family above, they would not utilize their invention to harvest crops faster and they would not expand their wealth by using their leftover labor to make new things.

So, to answer your question, the society that experiences unemployement is lazy. The voters are afraid of the uncertainties regarding the implications of unencumbered economic compitition and would rather use politics to provide for them.

JS September 20, 2011 at 3:31 pm

The stagnation of our economy is a result of the laws that impregnate it. Further, the laws are the will of the people. These same people falsely believe that the stagnation is somehow caused by what remains free rather than by what freedoms have been restricted.

They can look at statist societies and easily see the correlation between regulations and poverty, but they refuse to. Their opinions aren’t guided by logic, but by their emotions, such as envy and fear. They wake up every day seeking whatever information they can find that supports their emotional belief system. They’re philosophies can all be reduced to communist doctrine. If it were acceptable to their fellow citizens, they would become outright communists as long as they calculated that it wouldn’t interfere with their own social status.

As we know, the statists need to employ propaganda in order to take away liberty and reduce societal competition. They were and still are the masters of disinformation, and many of the gullible liberal posters here are nothing more than their useful idiots. Keynes became popular when England was a fabian society. His theory is not applicable to anything resembling a free society, just as free market principles aren’t applicable when markets and private property are declared illegal.

A person is either for liberty or slavery. A person claiming to advocate partial slavery as better than liberty is only taking as much as he can take from you. If he had the power, he would enslave you completely to his will. The Keynesians are just that. They argue for partial slavery as being more secure for people and when things don’t work out, they blame your freedom for causing your circumstances.

GiT September 21, 2011 at 12:02 am

I think you really hit the nail on the head and cut to the fundamental disagreement at work here, which I really appreciate.

I think whether or not labor is a /sufficiently/ scarce factor of production is really in many ways the key question. I say sufficiently because it seems to me that labor must be scarce enough such that the wage it earns at least equals what it costs to subsist.

I would ask what makes you think labor is, in fact, sufficiently scarce, given that the population of those who need work, and the population of those with the requisite skills for the work available, is not, like the production of widgets, guided by the market, except in a very general sense in a way that can take years or decades to show up in reproductive and educational decision making?

Increases in productivity certainly increase purchasing power, driving subsistence wages lower, but I’m not sure what guarantees that the marginal productivity of labor would have any necessary relation to wages, and could not, possibly, fall below the cost of subsistence, no matter how low.

My knowledge of economics doesn’t take me very far here and I get somewhat lost in all the moving parts. What, if anything, guarantees that a more efficient economy will have places for all those who want work? Couldn’t increases in labor productivity nonetheless go along with a decrease in the marginal productivity of labor which would make some workers simply superfluous?

Though everyone has every incentive to try and make a profit from human capital, I’m not sure anything guarantees it will always be possible to do so.

Finally, you go on to talk about fear, laziness, and an unwillingness to confront uncertainties.

What makes workers lazy is their unwillingness to confront the fear brought about by uncertainty.

But you then equate the exposure to such uncertainty as freedom and liberty.

Certainly, people are freed to face the anxiety requisite in having to compete for their subsistence.

But making decisions solely in response to your fear about how to win your subsistence is what Kant would call heteronomous – it is making decisions as determined by external factors. This would be contracted with autonomy – making decisions precisely out of ‘laziness,’ out of having nothing which you must do and therefore being able to chose to do whatever you want.

You call that laziness. Many might see such unfettered decision making, freed from any existential anxieties, as a sort of freedom.

It is certainly most efficient to have everyone make decisions in absolute fear of the uncertain consequences of their actions. I’m not sure it’s a desirable way to live, however. Some people have much more space in which to make trade-offs between the dictates of the market and the leisure or laziness of making decisions independent from what the market dictates is a most profitable and efficient use of their time.

PS: I don’t mean to caricature your position by playing up the fear aspect, only to emphasize the stakes of the laziness/freedom question.

Dan J September 21, 2011 at 12:15 am

Is it freedom or laziness when individuals are incentivized to not seek employment when all basic sustenances are provided via govt taking fom one and giving to those in ‘need’ for very long periods of time?
While the ‘basics’ may seem meager ( or are meager), an individual can wait as long as the sustenance is provided.
In many cases the sustenance provision can lead to dependency.
The umbilical cord will need to be cut or the sustenance reduced to push the bird to fly on its own.
I may be out of my league in addressing the two of you, but, it seems that many have chosen to not extend beyond a comfort zone to address their employment.

Dan J September 21, 2011 at 12:28 am

If you are living in Mich. And you have exhausted your ideas and abilities to secure employment for self sustenance attainment, in Mich, is it not conceivable to think of relocation?
Moving beyond a comfort zone. Or, to dumb down your qualifications and resume for lower paid employment and looking to gain advancements after employment. A year or two in, and confessing to having more abilities than stated, is unlikely to be met with disdain.
There is a difference between desired expectations and a acclimating yourself to the a new environment to get the advantage. There might be a heckuva lot more complaining about desired expectations rather than adjusting.

GiT September 20, 2011 at 11:26 pm

I think Andrew’s basic concern is that nothing guarantees that the supply of jobs will equal the demand for jobs.

And the real issue with this is that nothing guarantees that the marginal price of labor will equal the marginal cost of subsistence for a laborer.

The solutions all suggest various ways individuals can increase their marginal productivity through increasing their human capital (by having a bright idea and identifying some room for making a profit), or revising downwards their marginal costs of subsistence.

These solutions assume that in any situation anyone with enough determination can either figure out how to make a profit or figure out how to lower their cost of subsistence such as to either earn a wage which meets their needs or have needs which meet the available wages.

We need to assume this, because, as far as I know, nothing necessarily connects the (minimum) price of labor to the price of basic subsistence.

This problem is especially intractable because unlike unsellable goods and machines, people generally are not comfortable with letting unsellable workers rot.

Now we have the hope (which may be well supported) that a less burdensome government would make demanding a wage which meets one’s needs or revising downwards one’s needs so as to meet the lowest available wage easier.

What we don’t have is any guarantee that in every case the lowest available price for a laborer will meet the lowest possible cost for sustaining a laborer.

I think Andrew wants that. Or, even more strongly, I think he wants the lowest available price for labor to reflect not just the lowest possible costs for sustaining a laborer, but for sustaining a laborer with a certain level of comfort.

Dan J September 20, 2011 at 11:37 pm

That’s a long trip around the barn to say the union mantra of ‘livable wages’.

GiT September 21, 2011 at 12:10 am

Yes, it is. It’s a long way around because I’m essentially asking whether, given an interest in every one being able to live, we can do without the mantra.

Perhaps you are okay with wages being unlivable, and as such with people not living because of the wages they are paid.

But if someone isn’t ok with that, then maybe some proof that the supply of jobs will always meet the demand for jobs at a wage level which does not result in sub-subsistence living would be a nice tonic against them making the political demand that society do something to prevent people from dying in the streets.

Dan J September 21, 2011 at 12:20 am

Never heard of an unlivable wage. Only a complaint against wages that don’t meet a desired expectation. As is, some wages meet exactly the level of excepted production and skill. There are few wages that are ever enough, considering the insatiable wants of an individual.

Dan J September 21, 2011 at 12:32 am

And, mo there will not be zero employment. People come and go, opening up positions. Currently, employers and employees are making lateral moves. Hiring of an new or needed employee from another firm, I.e. Already employed individual. Cannot blame them. Hire someone who is up to date on current schematics and employment expectations. Cost less to train or retrain.
Employment is available for most who seek it. Just not up to desired expectations.

Dan J September 21, 2011 at 12:39 am

And…. Sub-sustenance or sub-subsistence ?
Minimum level of desired expectations? When you are unemployed and unable to meet sustenance, isn’t any wage subsistent? New adjustments are to be made. Roommates, lowered cost foods, less luxuries, etc.,….
Then, your activities and employment allows for making connections and expanding your network. Or, your constant complaining and insistence that you are above it all will keep you at the level.
Tough road. Weeds out the ‘doers’ and ‘won’t doers’.
Nice work, if you can get it.

Randy September 21, 2011 at 7:10 am

GiT

I’ve pondered roughly the same idea. In a society obsessed with work, what happens when work is no longer necessary? And from what I can see, we’re well along that path already. I call it the Luxury economy, which is an economy in which most of the productive population creates luxuries as opposed to necessities. Our ability to produce necessities cheaply has made true “work” less necessary. It also allows us to rearrange our moral code in such a way as to devalue true “work”, and I think our most recent generations are already doing this. They start their working lives later, do work that few would have recognized as work a couple of generations ago, and retire earlier. But we still have a political organization that is stuck in the 1930s – and that is the real problem. And as stated many times by many in the converstaion above, the solution is to let people find their own way – and to get the political organization out of the way.

John Galt September 21, 2011 at 1:31 am

The terror attack, like the original day of infamy, could actually do some economic good. – Paul Krugman 9-14-01.

Dan J September 21, 2011 at 2:04 am

He wasn’t wrong. From his perspective, those with money need to give it up. Destruction forces relinquishment of wealth to others. Thousand are poorer, or dead, and thousands of others now get the wealth the formers once possessed.
We need tsunami to get this economy juiced. Pick a coastline.
How about mid Atlantic? Right up Chesapeake Bay…. Into the Potomac… And……

John Galt September 21, 2011 at 1:32 am
Andrew September 21, 2011 at 10:41 am

So, just say, that the government (created by the people, mind you) could easily provide decent housing, food and clothing for everyone in the country. Why should it not?

Fred September 21, 2011 at 10:53 am

Because it can’t. You can’t have everyone living off everyone else. It just doesn’t work.

Government doesn’t produce anything. It only takes from one and gives to another.

For government to provide housing, food and shelter for one person, it must first confiscate the resources necessary to do so from someone else.

Is it right for one person to forcibly take what another has produced so they don’t have to produce for themselves?
If not, then why is it OK for government to do so on their behalf?

Ken September 21, 2011 at 11:04 am

Andrew,

Firstly, it cannot provide decent housing, food and clothing as any inner city can attest. The defilement of humanity in America due to your exact sentiment should give you pause, but instead you plow full speed ahead. They have infamous names like Pruitt-Igoe, Cabrini Green, and Franklin Terrace.

Secondly, the reasons why these places became hells on earth directly answer your question “Why should it not?” Because, as Freidrich Hayek pointed out, lack of knowledge. Anonymous bureaucrats and politicians have no knowledge of the preferences (something wholly discarded and ignored by big government types), local economic dynamics, or actual needs of others, so can’t possibly provide what people want and need. Having things provided to you that you don’t want or need, without the means to get what you want or need debases ones humanity. You get the above mentioned hell holes.

Thirdly, it’s insanely wasteful. What is spent on public housing and food stamps would be better spent just giving people money to be spent how THEY want, not how the politician wants.

Fourthly, ALL government spending starts with the force of TAKING that money from someone else.

Regards,
Ken

Ken September 21, 2011 at 11:09 am

Andrew,

I also forgot to mention the most important places where the government was assumed to provide everything: Stalinist Soviet Russia and Maoist Communist China. Do these two nightmarish places NOT give you pause that government is definitively NOT the institution to be used to provide people with material goods?

Regards,
Ken

Andrew September 21, 2011 at 2:57 pm

This is hardly fair. Those places weren’t democracies. They were dictatorships. That’s not what we’re talking about (at least it’s not what I’m talking about).

Also, I didn’t say that the government should build apartments or hand out beans. Perhaps, as one of the above posters suggested, handing out some money might be just as good. Isn’t that kind of what we do with food stamps? Why not extend that to everyone? Why not extend that to clothes or housing?

Government taking money? The government creates the money. Where does it come from if not from the government? You know that all money is debt, right?

BTW, this thread is getting way to long. This is a bad way of discussing this stuff. Perhaps there is a better forum.

Ken September 21, 2011 at 3:14 pm

Andrew,

“This is hardly fair.”

Forcing me to pay for some criminals housing, yet that’s what you’re saying you want to do.

“Those places weren’t democracies. They were dictatorships.”

The Soviet Union was indeed a democracy. Any idea what a “soviet” is? The Soviet Union is a perfect example of the tyranny of the masses. Of course, it did turn into a dictator of one, but it got there because of the tyranny of the majority and the popular demand that the government do something. Take some time to study the Russian civil war and find out how by using simple majorities, a nightmare came to earth.

Something similar happened in China, but you’re right, China wasn’t a democracy. However, this ignores the fact that the communist uprising was hardly unpopular. Only after the creation of tyranny, through populism, did the Chinese (and Russians) begin to feel the consequences of majoritarian tyranny. Unfortunately, many, like you, didn’t learn the important lesson: limited government is important.

“Why not extend that to everyone? Why not extend that to clothes or housing?”

Because that money has to come from somewhere. There are only three ways the government can get money: 1. Taking it (taxing), 2. Printing it (the treasury and Fed) and 3. Borrowing it (treasury). All of these damage wealth creators, the very people on which an economy depends.

Additionally, the implicit assumption underlying your reasoning is that all people deserve a uniformly equal amount of everything, which is completely absurd. People who produce more wealth earn more money. The only other way to get money is to cozy up to a politician the way special interests do and collaborate with politicians to take from the many to give to themselves.

Salaries are directly linked to productivity.

“Government taking money? The government creates the money. ”

Again, this comes from your misunderstanding of what money is. Money is not really what people are interested in. People are interested in wealth, something for which money is used as a proxy since a barter economy is very inefficient. The government creates NO wealth.

“You know that all money is debt, right?”

No it isn’t.

Regards,
Ken

Fred September 21, 2011 at 3:20 pm

“The government creates the money. ”

No. The government (the Fed actually which is an independent bank) prints the money.
Money is anything that society uses as a means of exchange. Gold dust, sea shells, whatever we agree upon (or use because the law prohibits us from using anything else).

“You know that all money is debt, right?”

Is a gold coin debt? When you could redeem a silver certificate for actual silver was that debt?
What we have is fiat currency. It is backed by nothing. But it’s not debt.

Governments like having a monopoly on currency because governments borrow big. By printing money with nothing to back it they create inflation. Inflation benefits debtors, and who is a bigger debtor than the government?

Dan J September 22, 2011 at 12:59 pm

The minute govt mandates the least productive must be given whatever is needed to make their standard of living equal to mine, I begin living as the least productive do. Why would I work harder for no advantage. This is what typically happens in union shops in Detroit. Everyone works to the lowest common denominator that is ‘satisfactory’…… No pun intended….. Few ever put forth extra effort. There is no reason to exert extra energy when there shall never be reward.

Andrew September 22, 2011 at 4:00 pm

@Fred:

If you’re calling anything of value money, then we are at an impasse — we can’t have a discussion. This is not the usual definition of money and not one that I bet most would agree with, but if that’s how you choose to define it, so be it.

@Ken,

Are you more wealthy if you have more dollars in your bank account? If so, then the government can indeed create wealth. It can put more money in your bank account. Are you with Fred? Is anything of value money?

Ken September 22, 2011 at 4:06 pm

Andrew,

“Are you more wealthy if you have more dollars in your bank account?”

No. My wealth only increases when I use that money to purchase something, like software, a car, etc.

Regards,
Ken

Ken September 22, 2011 at 4:18 pm

Andrew,

One of the defining characteristics of money is fungibility, meaning I can use it to purchase anything. A car has value, but isn’t fungible. The programs I write have value, but they aren’t fungible. Neither one of these things can be used to purchase the other whenever I feel like it. If I write a program worth $10K, I can’t just go out and trade it for a car that’s worth $10K. I’d also have to find someone who wants the particular program that I wrote AND has a car worth $10K AND is willing to make that trade.

However, it’s easy to find a buyer of my program for $10K if he pays me in money. Similarly, I can easily then take that money to any car dealer and purchase a $10K car.

So no, things that have value are not money. Money is a measure of value. What you’re trying to say is that a foot and distance are the same thing. But they are distinctly different. One is the measure of the other. Thus I don’t have to move an entire football field to measure out another one. I can just tell someone a football field is 160 feet wide and 360 feet long.

Money is a measure of value. It isn’t value itself.

Regards,
Ken

Randy September 21, 2011 at 8:32 pm

Andrew, to answer your question with a question…

The political organization takes in $3+ trillion a year, so if they wanted to do as you suggest they certainly could. But they don’t. Why do you suppose that is?

Andrew September 22, 2011 at 2:46 pm

Political organization? What do you mean?

Previous post:

Next post: