Some Links

by Don Boudreaux on September 12, 2011

in Environment, Hubris and humility, Social Security, State of Macro, War

Cato’s Michael Tanner weighs in sensibly on the “Is Social Security a Ponzi scheme?” question.  He answers “yes.”

In my latest column in the Pittsburgh Tribune-Review, I offer further thoughts on Keynesianism.

EconLog’s David Henderson points us to a fine blog-post by David Friedman on global warming.  I would add to Friedman’s list of the three parts to the argument in favor of vigorous government action to correct global warming a fourth part, namely, the assumption that private efforts that enable us to better deal with the effect of global warming – e.g., the continuing improvement in air-conditioning, and the continuing improvement in weather forecasting – are either more costly than, or less effective than – and have worse third-party effects than – would any likely effort by governments to deal with global warming.  (In Friedman’s essay this point is recognized; but it deserves to be listed explicitly as among the assumptions that global-warming alarmists make, often without thinking about it.)

George Will on 9/11.

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Daniel Kuehn September 12, 2011 at 12:12 pm

Maybe I’m just lazy and adolescent but this – “Why do entrepreneurs and businesses, otherwise eager to take risks and compete for consumers’ dollars, remain inactive during prolonged recession?” seems to be precisely the question that Keynesians address. Have Mankiw and Krugman’s recent writings on investment caused you to rethink your claims in this post: at all?

kyle8 September 12, 2011 at 12:55 pm

Keynes addresses it but fails to accurately answer it.

Daniel Kuehn September 12, 2011 at 1:52 pm

Admitting that alone would be a tremendous improvement. I think it’s wrong, but it’s better than the suggestions that Keynes and Keynesians don’t concern themselves with the question and are focused on consumption.

indianajim September 12, 2011 at 2:25 pm

You seem to have glossed over this in Don’s op ed:

“If, for whatever reasons — say, “animal spirits” — people cut their spending, pessimism will spread throughout the economy, causing spending to remain inadequate.

This Keynesian explanation is adolescent. Lazily identifying the symptom as the underlying problem, Keynesians then craft a “theory” that shows just how inadequate spending can in fact cause inadequate spending. How clever of them!”

Here “people” refers to people who invest; for it is these people who Keynes applied the term “animal spirits” to. And it is not rocket science to anyone who understands the subject to see this and to further see that “inadequate spending” used the first time in the above means lower investment spending which causes in the Keynesian theory lower consumption spending (the second use of the term “inadequate spending”). How someone as smart as you could misread this is beyond me.

Seth September 12, 2011 at 5:00 pm

Are you referring to Mankiw’s NYT’s piece?

He did acknowledge that investment is a driver of booms and busts, but only pointed out animal spirits and lack of consumer demand as the potential causes.

Methinks1776 September 12, 2011 at 11:54 pm


Would those recent writings from Krugman be the ones where he laments sluggish investment and then advocates destruction of capital and more regulations to force firms to spend? I was wrong that Krugman dismisses regime uncertainty and government aggression as a variable. He, like Romer, believes it helps. Do you think business is too stupid to read or too dumb to understand the implications?

Why would firms replace capital purposely destroyed and why would firms invest in businesses where government is artificially raising costs by jacking up regulation?

Anotherphil September 12, 2011 at 12:53 pm

“Why do entrepreneurs and businesses, otherwise eager to take risks and compete for consumers’ dollars, remain inactive during prolonged recession?””

Because they don’t take foolish risks, unless they subsidized-see Solyndra.

kyle8 September 12, 2011 at 1:07 pm

What underlies all recessions is a bubble. and what underlies all bubbles is an excess in debt. The only real solution is time. It takes time to wash out the bad debt and reduce inventories.

But time is necessary but not sufficient. It also needs constancy, because recessions are driven by fear. There is not much a government can do except in those instances where perhaps lowering taxes(permanently) or lowering regulations may help. But the most important thing a government can do is offer a climate of certainty.

Not a climate of rapid change. All that we have seen recently is an almost textbook case of what not to do. Excessive meddling in the money supply, inflation, ever increasing business regulation, temporary tax cuts. overspending, over-borrowing. All of these things contribute to uncertainty, they do not help, at all.

Invisible Backhand September 12, 2011 at 10:30 pm

What underlies all recessions is a bubble.


kyle8 September 13, 2011 at 6:52 am

I would suspect so. How much info do we have for that time period?

I am certain that if there was a recession it was preceded by some sort of over speculation and debt since that seems to happen every single time I have ever observed or read about.

Invisible Backhand September 13, 2011 at 12:08 pm

I’m in awe of your complete lack of self awareness.

EG September 12, 2011 at 1:31 pm

“So what Sept. 11 actually began was the U.S. reaction…to the challenge of terrorism. ”

Oh my! I wonder how much hate-mail George Will will get from the Paul-istians (or is it Paul-anians?) for such utter lack of adherence to Holy Scripture. Doesn’t he know that 9/11 was America’s fault?

Though I didn’t quite understand this parallel to Pearl Harbor (or rather the attempt to draw one).

Josephine Stalin September 12, 2011 at 2:21 pm

Well said EG.

Like my Uncle Joe said: Death solves all problems – no man, no problem.

George Will understands that everyone imposes his own system as far as his army can reach. America serves to enlighten the world with the understanding that capitalism is a weapon whose effects depend on the righteous holding it in their hands and aiming it at whomever we deem to be unrighteous.

The Ron Pauls and John Galts will continue to serve us, once they realize their is no Libertopia or Galt’s Gulch to run to, there is no boundaries to the American Empire nor limits to the force it can bring to bear against whoever it perceives as an enemy.

kyle8 September 12, 2011 at 2:46 pm

Hey at least you admit that it is an Empire.

Of course, it ought not be an Empire, or a hegemony. It ought to be a balanced, rights oriented republic of limited powers and limited foreign aspirations, but That will mean defeating people with your mindset to return to that.

And it will happen, because you see, there is no money left for an Empire.

Josephine Stalin September 12, 2011 at 4:41 pm

My Dear Kyle VIII,
Your statement, although seemingly insightful and persuasive, is not rational and thus a great comfort to me that you are no threat to my human-powered nation state and that you will continued to mail me child support checks for my Federal Family.

1. Given Uncle Sam is stealing money from his subjects.
2. Given that losing money by theft causes harm to Sam’s subjects.
3. One ought not cause harm to ones’ subjects and leave them penniless.
4. Therefore, Sam ought to stop stealing money from his subjects or his empire will come to an end.

Premises 1 and 2 are “is” statements, describing facts of what is happening. Premise 3 and Conclusion 4 are “ought” statements, that describes how things should be happening. But what is the source of the knowledge in 3 and 4?
Initially this argument appears to be valid if the premises are true, but unless we can logically support Premise 3, it is not sound. What can you possibly cite to give us rational knowledge that things ought to be different than the way things are?

Hume, Aristotle, Rand, and others argue you can’t, and that ought statements, and all other supposed moral knowledge, are not rational.

Because ideas are more powerful than guns, I would no more wish my potential enemies to have threatening ideas than I would let them have guns

kyle8 September 12, 2011 at 4:58 pm

I reject your reality and substitute my own.

(that always works)

Chucklehead September 13, 2011 at 8:41 pm

I think i’m in luv….

EG September 12, 2011 at 5:30 pm

Do you guys know who to say anything other than quotations from the Book of Lew Rockwell (pbuh)? Can Ron Paul-itanians ever address other people in a fashion not reminiscent of communist zealots attacking the bourgeois?

Jack Costello September 12, 2011 at 5:33 pm

Unless I am guilty of misreading him, I presume the Pearl Harbor reference was an attempt to contrast that ‘unavoidable war’ with the ‘self-inflicted wounds’ which Will would contend were incurred by the wars in Iraq and Afghanistan. In essence, he seems to be saying that the US over-reacted, or at least reacted badly, to 9/11.

Its hard to argue that America did respond perfectly to the attacks. Invading Afghanistan was necessary but the aftermath was poorly handled, and even if invading Iraq was the right thing to do, it was not necessary and was catastrophically mishandled from 2003-07. Still, I don’t think this is one of George Will’s better articles.

By far the best of the plethora of recent articles on 9/11 which I’ve read is this one by Llewellyn Rockwell at the Mises Institute:

EG September 12, 2011 at 10:41 pm

Thanks. But I’ll skip the last link, if you don’t mind. But then again, what would have been a more “appropriate” response, and what would have resulted in “better results”? Unless someone provides alternatives to these questions, commentary is…well…all in hindsight.

Someone writing an article in 1942 would also have lamented at how poorly the war was going and how the strategy was failing. (this isn’t written to support any part of the “war”, or the way it was carried out. Rather to point out that armchair strategists and generals have said far more interesting things, with the benefit of hindsight.)

Sam Grove September 13, 2011 at 2:05 am

Doesn’t he know that 9/11 was America’s fault?

Are you sure that’s the claim?
Are America and the federal government one and the same?

EG September 13, 2011 at 2:51 am

Yes excuse me. Its America’s government fault. Its still looney tune material.

D. F. Linton September 12, 2011 at 1:38 pm

I think referring to Keynesian solutions as an “unintended gift” to politicians is too kind by half. I just can not doubt that Keynes wrote the General Theory precisely to justify politically popular programs of spending and the social control of investment. The final chapter of the General Theory is too much ignored.

Jim September 12, 2011 at 2:17 pm

The economist and President of Czekoslovakia Vactav Klaus has written a number of (I believe) defining articles in the Financial Times on global warming. His argument is substantively the same as David Henderson’s, although in some respects more detailed. He argues the following questions must be addressed:
• Is global warming a reality?
• If it is a reality, is it man-made?
• If it is a reality, is it a problem? Will the people in the world, and now I have to say “globally”, better-off or worse-off due to small increases of global temperature?
• If it is a reality, and if it is a problem, can men prevent it or stop it? Can any reasonable cost-benefit analysis justify anything – within the range of current proposals – to be done just now?

He argues we can only answer ‘yes’ to the first question, and that the largest danger to proposals for the last question are that they substantively reduce freedom, adaptability, standards of living, and growth. All are more important than a couple degrees higher temperature over a period of a hundred years.

kyle8 September 12, 2011 at 2:52 pm

He leave out another important argument: Is anything we do right now, as effective as dealing with the problem (if any) at a later time. Meaning that lowering our collective wealth now could seriously effect the wealth of the world at a later time if something must be done.

Or to put into other words, a wealthier future is better equipped to deal with the problems of the future.

I would also say that we cannot even answer the first question as a yes. We do not know if we are still in a waxing period of the interglacial, or if we are about to move into another glacial period.

That is pretty important because the natural climate swings between the glacial periods make anything humans can do look like nothing.

John Galt September 12, 2011 at 8:06 pm

If it ain’t broke, don’t fix it?

“There is an element of deceit associated with the intervention bias, accelerating in a society of the professionalization. Few understand that procrastination is our natural defense to let things take care of themselves, to exercise their antifragility; it results from some ecological wisdom, and is not always bad — at an existential level, procrastination is my body rebelling against its entrapment.”

–Nassim Taleb –

Fred September 12, 2011 at 3:24 pm

“they substantively reduce freedom, adaptability, standards of living, and growth.”

If you are someone who feels that people should be controlled, and that liberty is a bad thing (nobody taking orders and asking permission.. it’s anarchy!), wouldn’t you view this not as a bug but as a feature?

EG September 12, 2011 at 10:48 pm

I have a problem with non-scientists discussing matters to which only someone with the appropriate knowledge can provide answers to. Matters which aren’t just limited to whether this or that atmospheric phenomenon is happening, but also matters of how we can adapt.

Be it Klaus, Henderson…or David Friedman (although wasn’t he a physics PhD?). If it weren’t for all the hippies and know-it-all mouths on the other side of the debate, I’d be even more concerned. But at this point the water is already a bloody mess. (there’s better places to have this discussion, like WUWT)

PS: He isn’t president of Czechoslovakia

Sam Grove September 13, 2011 at 2:08 am

The task of scientists is to find the knowledge and make it available to the rest of us so we can make appropriate decisions, not to decide for us.

EG September 13, 2011 at 2:48 am

Most of the time we’re not discussing the merits of a particular scientific theory. Most of the time, we’re just making them up. That goes for both sides (and I happen to believe that AGW is c***, but we’re not immune)

Chris Bowyer September 12, 2011 at 4:37 pm

Given that there is major overlap between the people who believe in anthropogenic global warming and the necessity of counteracting it, and the people who believe in Keynesian notions of war-as-stimulus, how on Earth do they reconcile the fact that the former belief warns against economic destruction, when the latter regards such things as stimulative? Why is it good economics to drop a bomb on a factory and have to upgrade it, but bad that a rising shoreline might force us to build new homes further inland? There is more than a little tension between the two ideas, even though those who believe one are, I’m fairly sure, much more likely to believe the other.

kyle8 September 12, 2011 at 5:00 pm

Well, just, just, because! You are a denier, and probably one of those pathetic evil tea partiers.

Methinks1776 September 12, 2011 at 11:59 pm

or, in the words of Joe Biden, a “Barbarian”.

indianajim September 13, 2011 at 8:00 pm

Or in the words of Congressman Andre Carson of Indiana, one of those who want to see people of color hanging from a tree.

Chucklehead September 13, 2011 at 8:43 pm

Who is Rick Santelli ?

Economiser September 12, 2011 at 6:08 pm

Sacrilege! Thou shalt not question the gospel of the Church of Progressivism.

Floccina September 12, 2011 at 4:58 pm

Social security is a welfare program disguised as a Ponzi scheme to make palatable to the American voter.

J Cuttance September 12, 2011 at 9:53 pm

chortle, snort +1

Invisible Backhand September 12, 2011 at 10:32 pm

A lot of times ‘your mother’ is considered an insult but here it is a question: What about your mother?

T Rich September 13, 2011 at 1:24 am

You worry about your mother! I and my siblings will worry about mine. You seem to believe that SS is the savior of old folks. Well, it certainly does allow kids to walk away from them and have them be completely alone in their retirement. Great deal for the oldsters – being alone with your government check must be wonderful.

The unintended consequence of all these welfare programs is the destruction of the nuclear family. Was it perfect before? No. Is perfect even attainable? No, it is not. We have become an extremely wealthy society – much more wealthy than before SS (and not as a result of SS, either). We could – IF WE KNEW IT WAS OUR RESPONSIBILITY – do a better job of taking care of our parents than we were able to in the 1920s, 30s and 40s. That responsibility has been assumed by the government – and like children, we have become spoiled by lack of responsibility.

Sam Grove September 13, 2011 at 2:11 am

Just what I was thinking.

Warren Smith September 13, 2011 at 8:31 am

Regarding David Friedman’s article on global warming and the difficulties with predicting gradual responsive change across long time frames:

In the 1930′s the USA planted roughly 40 million acres to oats and 3 million acres to soybeans, by 2010 the acres in oats had slid to 3 million while the acres in soybeans had risen to 75 million.
Fewer horses, better chemistry.
Also corn acres and wheat acres less than 10% different than their 1940 levels despite the fact that our animal and human populations have increased by three fold.

I find this to be remarkable and doubt that any modeling of the future could have ever predicted any one of these individual changes…never mind this set of inter-related changes in even so carefully studied a field as the US farm economy. Considering that US agriculture is so much more limited a data set than multiple global economies, the issue of global prediction would seem to be impossible.

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