Quotation of the Day…

by Don Boudreaux on October 25, 2011

in Hayek, Hubris and humility, Scientism, Seen and Unseen, State of Macro

… is from page 285 of Hayek’s 1978 collection, New Studies in Philosophy, Politics, Economics and the History of Ideas; specifically, it’s from Hayek’s January 1966 essay in the Oriental Economist entitled “Personal Recollections of Keynes and the ‘Keynesian Revolution’”:

He [J.M. Keynes] certainly from the beginning was much given to thinking in aggregates and always had a faible for (sometimes very tenuous) global estimates.  Already in discussion of the 1920s arising out of Great Britain’s return to the gold standard his argument had been couched entirely in terms of price- and wage-levels, in practically complete disregard of the structure of relative prices and wages, and later the belief that, because they were statistically measurable, such averages and the various aggregates were also causally of central importance, appears to have gained increasing hold upon him.  His final conceptions rest entirely on the belief that there exist relatively simple and constant functional relationships between such ‘measurable’ aggregates as total demand, investment, or output, and that empirically established values of these presumed ‘constants’ would enable us to make valid predictions.

Be Sociable, Share!

Comments

comments

114 comments    Share Share    Print    Email

{ 114 comments }

Nikolai Luzhin, Eastern Promises October 25, 2011 at 9:41 am

is this one of the essays paid for by the Kochs?

http://www.thenation.com/article/163693/letter-charles-koch-friedrich-hayek

Dan H October 25, 2011 at 9:44 am

Running out of arguments already comrade?

Nikolai Luzhin, Eastern Promises October 25, 2011 at 9:58 am

just reporting the facts, letting the reader decide if Hayek suffered “incentive caused bias”

Rich Berger October 25, 2011 at 10:12 am

The amazing thing is that Hayek knew in 1966 that Koch would give him advice about his entitlement to Social Security and Medicare in 1973 and crafted his opinions accordingly. In fact, Hayek knew this back in the 1930′s – a remarkable man, indeed.

Nikolai Luzhin, Eastern Promises October 25, 2011 at 10:19 am

1) From whom did Hayek intend to curry favor, throughout his life?

2) From whom was Hayek seeking favor in 1966?

3) What was the Hayek/Koch relation in 1966?

My two cents is that Hayek had incentive caused bias that “bent” his writing

Ken October 25, 2011 at 1:03 pm

1) and 2) Why would Hayek need to “curry favor” with anyone?

3) You’re the one making accusations. The burden of proof always lies with the accuser, pinhead.

You should have saved your two cents.

Regards,
Ken

J. W. October 25, 2011 at 3:45 pm

Your “two cents” is straight ad hominem.

Dano October 25, 2011 at 1:14 pm

“Also in 1931, Hayek critiqued Keynes’s Treatise on Money (1930) in his “Reflections on the pure theory of Mr. J. M. Keynes”[55] ” (Wikipedia)

Charles Koch was born in 1935 — please explain to me how Koch could bias Hayek 4 years before he was born.

Nikolai Luzhin, Eastern Promises October 25, 2011 at 10:12 am

As for arguments, No.

Right now the fate of he World is being decided by the German Parliament. A vote for the bailout will be a vote for Modernity (and Keynes). A vote against will likely send us all over the Zero Bound.

We are past the time for arguments. History will now judge, save for crackpots like those who still think the South fought the Civil War on principles, or like those here who think Hayek had anything to say about anything.

Dan H October 25, 2011 at 11:35 am

I see no arguments for anything in there.

You annoy me.

Darren October 25, 2011 at 12:14 pm

A vote against will likely send us all over the Zero Bound.

Out of curiousity, do you happen to have any examples of economies that went “over the Zero Bound”?

Nikolai Luzhin, Eastern Promises October 25, 2011 at 12:29 pm

The World 1929

Europe, now

Japan, 1990

Mexico, recently, but we bought its (Brady) bonds

France did well before the Revolution and, I would argue, during the Revolution

USA was headed in that direction under Articles of Confederation

carlsoane October 25, 2011 at 2:42 pm

Nikolai:
Those are good examples. Understanding how those crises resolved might be informative.

With the new constitution, the US consolidated all the debt accumulated under the Articles of Confederation and issued new bonds backed by greater powers of revenue generated by tariffs.
Napoleon used a combination of the reinstatement of hard money, restructured taxation and debt liquidation to address the hyperinflation that had set in. He also started a huge war of conquest.
The US increased military spending but also underwent austerity (personal savings increased greatly and consumption was strictly rationed) during the Second World War. Europe underwent severe austerity after the war, was forgiven its debts, and got infrastructure stimulus in the form of the Marshall plan.
I don’t know enough about the Mexican crisis to comment.
Japan is stuck despite years of stimulus spending.
Europe’s current crisis is unfolding.

In my estimation, debt and tax restructuring and austerity were more important factors for successful resolution than was stimulus spending. What especially gives me pause about concluding from these examples that debt-financed stimulus spending gets countries out of liquidity traps is the fact debt-financed spending seems to have been the primary cause of some of them.

Greg Webb October 25, 2011 at 1:54 pm

Hohoho, Nikki!

A vote by the German Parliament against the bailout of the irresponsible EU members would be a vote representative of the wishes of the German people. A vote in favor of the bailout would be a vote representative of the German elite who would like to continue the fiction of a united Europe while increasing Germany’s power to enforce economic discipline upon those irresponsible EU members.

You are pretending at knowledge and have proven yourself to be a crackpot. For as an intelligent Observer noted elsewhere socialism is condemned to the dustbin of history. As that Observer, quoting the Vatican, said:

“. . . it is only too evident what an upset and disturbance there would be in all classes, and to how intolerable and hateful a slavery citizens would be subjected. The door would be thrown open to envy, to mutual invective, and to discord; the sources of wealth themselves would run dry, for no one would have any interest in exerting his talents or his industry; and that ideal equality about which they entertain pleasant dreams would be in reality the levelling down of all to a like condition of misery and degradation. Hence, it is clear that the main tenet of socialism, community of goods, must be utterly rejected, since it only injures those whom it would seem meant to benefit, is directly contrary to the natural rights of mankind, and would introduce confusion and disorder into the commonweal. The first and most fundamental principle, therefore, if one would undertake to alleviate the condition of the masses, must be the inviolability of private property.”

Nikolai Luzhin, Eastern Promises October 26, 2011 at 5:38 am

Mr. Webb says that a vote for the Euro bailout will protect the German elite

if true, that means he expects the middle and lower classes in Greece, Italy, Spain, Portugal, etc. to suffer to the benefit of the German elite

Here is some news—don’t think that is going to happen

Ken October 25, 2011 at 4:43 pm

I don’t buy your premise, but even if I did: Fiat justitia, ruat caelum.

Nikolai Luzhin, Eastern Promises October 26, 2011 at 5:55 am
Sam Grove October 25, 2011 at 2:15 pm

Never had any real arguments, hence the quick resort to ad hominem and, often, pure fabrication.

vidyohs October 25, 2011 at 10:08 am

After you appeared here, I read a couple of your comments just to see what you were, and they have been so blatantly stupid that I never felt an urge to reply, but I am idle this morning for a few hours before I go to Beaumont to practice my beloved capitalism.

All your link shows is that Hayek had a SSN, paid into the program well above the quarters necessary to be fully vested, and that there is nothing in the SSA that prevents him from collecting the benefit(s) anywhere in the world, just like myself or anyone else that meets the SSA criteria.

And, that Charles Koch was kind enough to inform Hayek of that in case Hayek was unaware.

I do hope you’re better skilled at Molotov cocktails and industrial sabotage then you are are intellectual debate, cause you’re certainly a loser at the latter.

Nikolai Luzhin, Eastern Promises October 25, 2011 at 10:16 am

vidyohs

I assume that when you have questions about Social Security you talk to the Kochs.

Most people go to the Social Security office

The reason that they were talking about Social Security was that Koch was, apparently, no longer willing to pay Hayek or Hayek had asked for money, begging favor, and Koch was refusing, already having what he wanted from Hayek

IOW you have no ability to look at facts and see what is really at stake

vidyohs October 25, 2011 at 10:27 am

One last reply to a really stupid assumption.

You have absolutely zero facts in that letter that back up a single one of your assumptions.

But, being totally wrong is one of the recognizable traits that identify a looney lefty.

Ahdios mofokka!

Nikolai Luzhin, Eastern Promises October 26, 2011 at 5:41 am

vidyohs

can’t handle the truth?

Hayek runs with real dogs—he gets fleas

we are all ultimately known by the company we keep

My two cents is that Hayek didn’t believe a word of it. He’s like the left’s Noam Chomsky. Smart, totally self-centered, useless

Rugby1 October 25, 2011 at 4:43 pm

@ Nikolai Luzhin, Eastern Promises

“The reason that they were talking about Social Security was that Koch was, apparently, no longer willing to pay Hayek or Hayek had asked for money, begging favor, and Koch was refusing, already having what he wanted from Hayek.”

Let me see if I understand. Koch mails Hayek stating; “Although you will be unable to stay…..”

With no context what so ever you take this statement to assume that Hayek was begging favor or somehow influenced by Koch.

I guess whatever you need to do to discredit one of the greatest economists of the modern age is what you will do. Don’t address the arguments, instead address the man. Nice ad-hominem.

Nikolai Luzhin, Eastern Promises October 26, 2011 at 5:43 am

Do you think Hayek would write:

I’m begging for you help. I have no were else to turn?

Seriously dude, why is Koch Hayek’s adviser on social security?

Nikolai Luzhin, Eastern Promises October 26, 2011 at 6:00 am

discredit one of the greatest economists of the modern age

says who?

I don’t see any of his “work” being used to address the current situation. His “work” didn’t help anyone foresee the current situation. And, all the evidence is in and it shows that markets are unstable and will crash and burn, unless regulated. That is pretty much an end game for Hayek

Invisible Backhand October 25, 2011 at 11:20 am

Nikolai (I have not seen the movie, it sounds too depressing for me), you might want to check out my blog, it might have some info you are looking for:

http://www.reddit.com/r/CafeHayek/

I’ve been watching here since that article came out, and no Russ and Don have never mentioned it.

Nikolai Luzhin, Eastern Promises October 25, 2011 at 12:20 pm

One makes a very stupid mistake when one assumes one’s hero is honest without making room for the possibility that one is being played. Most lawyers learn that bitter lesson their first year out of law school when then clerk for a judge.

For example, I think a lot of Buffett and Munger, but I always first filter what they have to say against obvious questions such a “bias to the favor” or “incentive caused bias.”

Hayek was a very bright man, bright enough to know that Keynes was right.

Writers do not have to be honest with us. Look at the recent TV show the Sopranos. This was not a TV show about gangsters, but you would never get the producers and writers to admit such.

When you have ambition and genius (look at Einstein’s ambition if you doubt such plays out), always be alert

Nikolai Luzhin, Eastern Promises October 25, 2011 at 12:33 pm

added to my favorites

Invisible Backhand October 25, 2011 at 1:06 pm

No prob

Fearsome Tycoon October 25, 2011 at 1:13 pm

I think Don gets pay $2000 by the Koch brothers for every blog post.

Sam Grove October 25, 2011 at 5:45 pm

You make it easy to judge Keynes by his advocates.

kyle8 October 25, 2011 at 6:57 pm

I’ll see your Kochs and raise you a Soros.

Nikolai Luzhin, Eastern Promises October 26, 2011 at 5:50 am

so you admit that the Kochs were attempting to use Hayek

Andrew_M_Garland October 25, 2011 at 7:44 pm

I understand. The only reports which can be believed that are critical of liberal policy, are those published by liberal organizations. The rest are lies paid for by business interests.

Nikolai Luzhin, Eastern Promises October 26, 2011 at 6:10 am

Dear Mr. Garland

You are half right. I apply Charlie Munger’s rule. I don’t believe anyone who does a report paid for by business. I look for incentive caused bias everywhere; it is in a lot of liberal reports. For example, it does not follow that because human activity contributes to climate change that cap and trade makes sense (someone can obviously rig that game and capture “rents”). In sum, I am very very skeptical of most everyone.

I am one of the few true Keynesians. I think Obama should say he is going to tax the rich to pay down debt and that he is going to gain control over health care and other social program costs so that he can do just that. I would bust up the big banks by quickly ending their deposit insurance. If you want insurance, put the funds with the gov’t at nominal interest. In the 1930s we didn’t have the technology to do such. Today, we do.

House of Cards October 25, 2011 at 8:24 pm

LOL! I love how that leftist rag, “The Nation,” claims that Koch “urged” Hayek to apply for Social Security, when in fact, the letter simply informs him of certain facts regarding the program. I see no urging there.

Nice try, commie.

Nikolai Luzhin, Eastern Promises October 26, 2011 at 5:44 am

why was Hayek involved with Koch at all?

House of Cards October 26, 2011 at 8:30 pm

Hayek receives a letter from Koch and that spells “involved”?

Jon October 25, 2011 at 10:07 am

It is kind of funny reading the back-and-forth over the years between Hayek and Keynes. In many ways, they’re like dueling bloggers. Makes for interesting (insofar as interesting as economics can be) reading.

Gil October 25, 2011 at 11:09 am

If they had the intenet there would be flame wars.

Nikolai Luzhin, Eastern Promises October 25, 2011 at 10:27 am

Keynes on Hayek:

John Maynard Keynes said of it: “In my opinion it is a grand book…Morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement.” Having said that, Keynes did not think Hayek’s philosophy was of practical use; this was explained later in the same letter, through the following comment: “What we need therefore, in my opinion, is not a change in our economic programmes, which would only lead in practice to disillusion with the results of your philosophy; but perhaps even the contrary, namely, an enlargement of them. Your greatest danger is the probable practical failure of the application of your philosophy in the United States.”

Andrew_M_Garland October 25, 2011 at 7:55 pm

Would you care to translate what Keynes meant, if you have studied Keynes enough to know? What does Keynes mean by “changing our economic policies would fail, but expanding them might work”.

If policies should be changed, how can strengthening the current ones be a substitute for changing them?

Nikolai Luzhin, Eastern Promises October 26, 2011 at 6:13 am

greater regulation of securities and banking

people forget that Keynes was a master of the stock markets and very well understood all the abuses of investment banking, etc.

Jon October 25, 2011 at 10:35 am

I’ve got a question that will (hopefully) spur some good debate:

What is the goal of economics?

I ask because this seems to be the underlying issue between Keynes and Hayek. From my understanding, Hayek sees the economy as an organic (“spontaneous” to use his word) thing that allows us to interact and help each other. Keynes tends to see the economy as a man-made institution that can be controlled to some degree and an be made to help everyone.

So, I ask the question again: what is the goal of economics: to enable self- and interdependence help or to help everyone itself?

Methinks1776 October 25, 2011 at 11:12 am

I always thought economics was simply the study of how people make decisions. You’re sort of asking what the role of government is, aren’t you?

Jon October 25, 2011 at 11:14 am

No. I am asking why do we have economics. What do we expect from it?

Methinks1776 October 25, 2011 at 11:31 am

Sorry to answer your question with a question, but what do we expect from the study of history or French literature? (Most) human beings have a natural intellectual curiosity. We seek to understand how the world around us works, in part because we want to make better decisions ourselves. At least that’s what I expected from anything I studied, including economics.

Jon October 25, 2011 at 11:33 am

I guess what I meant to ask was that, for example, we study History so as to understand culture and try not to repeat past mistakes. We study Biology to understand life. What do we look for when we study economics: are we looking for how individuals react, or how the aggregate reacts (or are they the same?). Does that make more sense?

Methinks1776 October 25, 2011 at 11:48 am

No. Sorry. the answer still seems to be “to better understand the world around us.”

In general, I don’t think people study economics so they can figure out aggregates vs. individuals. First of all, I don’t think most people who are considering a course in economics have enough education in the subject to think in terms of macro vs. micro.

Invisible Backhand October 25, 2011 at 1:10 pm

No. I am asking why do we have economics. What do we expect from it?

Economics has been an important part of warfare since the days of kings, and really took off during the mercantilist era.

Some economists fulfill the role of priests or shamans, convincing the people that god is on their side and their cause is just.

You might try “Confessions of an Economic Hit Man” by John Perkins.

Don’t forget truth is the first casualty of war so your researches will not be easy.

Rugby1 October 25, 2011 at 4:50 pm

“You might try “Confessions of an Economic Hit Man” by John Perkins.”

You have to be kidding me. That book is so light on facts I thought it would float off my desk if I was not holding it down. To cite that as your source that economists play the role of priests and shamans, is to live in the valley of the absurd.

Andrew_M_Garland October 25, 2011 at 8:02 pm

Bad economic ideas don’t arise from the dead by themselves. They are dug up and reanimated by interest groups which want to capture government policy.

EO -> Economics in One Lesson: The Lesson
By Henry Hazlitt (1946)

== ==
[edited excerpt] Economics is haunted by more fallacies than any subject known to man. This is no accident. The difficulties of the subject are great enough, and they are multiplied a thousandfold by the special pleadings of selfish interests.

Every group has interests antagonistic to all other groups. Some public policies benefit everybody in the long run. Other policies benefit only one group at the expense of all other groups.

The group that benefits by such policies has such a direct interest in them that they argue for them plausibly and persistently. The group hires the best buyable minds to present its case. It will either convince the public that its case is sound, or so befuddle the argument that clear thinking becomes next to impossible.
== ==

Invisible Backhand October 26, 2011 at 10:53 am

@Andrew_M_Garland

Bad economic ideas don’t arise from the dead by themselves. They are dug up and reanimated by interest groups which want to capture government policy.

“The reason we have so many well-funded libertarians in America these days is not because libertarianism has acquired an enormous grassroots following, but because it appeals to those who are able to fund ideas.”

The Wrecking Crew, Thomas Frank

Don Boudreaux October 25, 2011 at 11:16 am

I think of economics as – using pre-Keynesian language – microeconomics (the study of how incentives, constraints, and expectations affect a representative individual’s decision-making), and macroeconomics (the study of how complex order does or does not emerge unplanned from the disparate plans and decisions of countless individuals).

Of course, the commonly understood meaning of the term “macroeconomics” has long been, and remains today, wholly different from the way I define it here (mine being a pre-Keynesian usage that I believe traces back at least as far to Keynes’s contemporary, the Swede Erik Lindhal [1891-1960], and perhaps even farther back.)

Jon October 25, 2011 at 11:28 am

Which is precisely my point. It seems to me that much of the intellectual disagreement in the field of economics is the fact we have two entirely different definitions. Liberal economists, like Hayek, Don, myself, and Russ, look at incentives/constrains and individuals. Modern economists, like Keynes, Krugman, et al., see the economy as aggregates. Because of this, we have two entirely different viewpoints that probably never will be reconciled.

That’s not to say that discussion isn’t valuable. It’s just that we have to understand we may be talking about apples and oranges but calling them both kiwis.

Nikolai Luzhin, Eastern Promises October 25, 2011 at 12:23 pm

modern economists have broader deeper minds that can handle the paradoxes

we see your viewpoint and recognize it as being limited

hence Keynes hint that Hayek wasn’t practical, as in there are paradoxes that your theories can handle

Greg G October 25, 2011 at 12:54 pm

Jon

Regarding the individual vs aggregates controversy, discussion of Keynes often generates more heat than light. Consider the way Voelker tamed inflation in the early 80′s. He started with a belief that inflation was caused by too rapid a growth in the aggregate money supply as compared to the aggregate of goods and services on offer. This led him to raise interest rates and keep them high until he believed these aggregates were in balance. This policy was a great success. Note there is no claim here that the aggregate is not the sum of the individual decisions in the economy. The claim is that this can be a useful way of thinking about the economy and considering policy options.

muirgeo October 25, 2011 at 10:09 pm

Methinks,

“I always thought economics was simply the study of how people make decisions.”

Ewe boy…that explains a lot. Yeah…no you’re probably thinking of psychology. We’re talking about economics here.

Methinks1776 October 25, 2011 at 10:16 pm

Which is what, Muirdouche? Enlighten us with your infinite wizdumb.

Jack-o'-lantern October 25, 2011 at 10:28 pm

He can’t enlighten us with his wisdumb. He’s busy answering questions for Howard Stern.

Methinks1776 October 25, 2011 at 10:39 pm

“duuhhh…oil, water and CRoPs. Pool dem altogethurrr”

brotio October 26, 2011 at 12:26 am

He’s busy answering questions for Howard Stern.

Yasafi isn’t nearly funny enough to be on Howard Stern.

Methinks1776 October 26, 2011 at 12:39 am

No, you’re right, Brotio. The people Stern interviewed could run circles around Muirdiot’s eeentuhlekt.

Greg G October 25, 2011 at 11:26 am

Jon

Why would it have to be either or? Hayek wrote a lot about the “evolution” of various practices and institutions, but he tended to use the term “evolution” as a compliment for the developments he liked, while arguing that the developments he didn’t like were messing up the evolution. It all looks like evolution to me.

Jon October 25, 2011 at 11:30 am

I think it is either-or. I mean, if you view the economy as organic, then your prescription/diagnosis for problems is different then if you view it as aggregates.

As for the term evolution, it was probably not Hayek’s best word choice. I would have used “mutation.” Mutations can be both good or bad but usually arise to solve some problem.

Greg G October 25, 2011 at 11:35 am

Jon

Or you could view that as two sides to the same coin. Either way, your point is well taken that different perspectives on this quickly lead to different policy choices.

Jon October 25, 2011 at 2:01 pm

Truth about the two sides of the same coin, Greg.

In response to your statement above about Volcker and the 80′s:

I see your point about the aggregate being the summation of the individuals. However, I do not think I am being too clear in my point, and that is entirely my fault (failure to understand always rests with the communicator).

I guess I am asking where the focus is: Volcker and his lot focused on results from the aggregate. Hayek and his lot focused on results from the individual. In other words, Volcker’s concern was “how is the overall economy doing?” whereas Hayek’s concern was “How is the individual doing?” Does that make more sense?

Methinks1776 October 25, 2011 at 4:12 pm

What is “the economy”, Jon?

Jon October 25, 2011 at 4:30 pm

Methinks1776:

That, sir, is a good question and the point I am trying to make. To ask “what is the economy” is the economical equivocation to the metaphysical question “What is Truth?” There is no one correct answer. To try to shrink it down into simple equations (C+I+G+NX=Y) is foolish. To pretend we understand every reaction to our actions is stupid. To act as though it is a tool for oppression is blindness.

The economy is not some creature that can be directed by a skilled driver. Nor can it be divined by priests and pedagogues. The economy is us: a million billion individuals acting on our own and because of (or despite) our intentions, we help others in return.

To think otherwise is foolish.

Methinks1776 October 25, 2011 at 4:51 pm

Oh, I see where you’re going with this, Jon.

I have always thought of the economy as all individuals acting in their own interest. Billions of people making billions of trade-offs. This doesn’t stop if someone attempts top down control. The process merely becomes perverted. The hubris to even think one can try!

just fyi, I’m not a sir :)

Jon October 25, 2011 at 5:04 pm

Oops! Sorry about that

Methinks1776 October 25, 2011 at 5:34 pm

The probability of someone commenting of on this site being a man is extremely high. I would have made the same assumption.

muirgeo October 25, 2011 at 10:33 pm

“The economy is not some creature that can be directed by a skilled driver.”

No? Then what explains the difference between the economies of North Korea and China. Or 1950 China and 2010 China. Or 1050 USA and 2011 USA?

My short take on the economy…POLICY MATTERS. That is what libertarians are hesitant to admit and it is why I suspect it is hard to pin them down on what is a good economy and what is a bad economy. They usually won’t describe good and bad in context of results or data they usually refer to structure and principles.

Russ and Paul Krugman have been debating this and the rules and structure seem to matter more than results to conservatives/ libertarians and such.

When you try to pin them down they will describe the structure of the rules as what defines a good economy…but care less about results than Keynesians / liberals tend to.

That’s why we liberals look at aggregates…they define results better. And that’s why libertarians look at individuals more because they are more concerned with how the rules effect individuals liberty and freedom.

This is a great argument and one that simply doesn’t logical bode well for the libertarian perspective when it is put to thought experiments about the implications of what it is they believe.

muirgeo October 25, 2011 at 10:42 pm

“The hubris to even think one can try!”

But the hubris IS to think you could ever have a libertarian society. THAT can not happen. Because as you said the economy includes unions, and governments and states and collectives and tribes and all sorts of complexities…. Right now the hubris IMO is to believe there is something better then people lead democracy. The answers are sloppy and more pragmatic than ideal. We are really not that far from having a very good and efficient and fair society.

The answer could be libertarianism but that seems so far fetched considering human psychology and current social structure. Libertarianism would be massively massively radically different from anything we’ve seen or currently have. Keynsians are nothing more than pragmatist.

Greg Webb October 25, 2011 at 11:31 pm

Muirgeo, you quoted someone else as saying, “The economy is not some creature that can be directed by a skilled driver.”. Then you said, “No? Then what explains the difference between the economies of North Korea and China. Or 1950 China and 2010 China. Or 1050 USA and 2011 USA?”

Policy does matter. The people, and the millions of transactions that the people make, are the economy. A totalitarian regime, because it’s elite wants to stay in power, oppresses the people and thwarts their activities designed to make a living and enrich themselves.

North Korea is truly a totalitarian regime that has treated its people brutally and restricted their economic activities. Thus, North Korea is terribly poor.

China, in the 1950s, was a totalitarian regime similar to North Korea. Since then, China has granted greater economic freedom to its people with the resultant economic growth occurring.

The US has relatively, and significantly, more economic and individual freedom, and thus, is fabulously more wealthy than China on both an aggregate and individual basis.

And, that is what the commenter meant when he or she said that the economy was not some creature that could be driven by some skilled driver. Because the economy consists of the economic actions of millions of individuals. And, when they are driven by central planners, the aggregate economy and the effects on individuals is disastrous. Just like in the Soviet Union, China, North Korea, etc.

Libertarians are not hesitant to admit that policy matters. In fact, libertarians advocate for greater economic and individual freedom because it has been proven that spontaneous order and greater income and wealth occur where individuals are allowed to freely pursue their economic activities with minimal government interference.

Bad economies are very politicized and controlled economies. Good economies, as I said before, are where individuals are allowed to freely engage in economic activity with minimal interference by government. But, even if freer societies did not result in greater economic activity and create greater weath, libertarians would still support greater freedom for individuals. It is the only moral choice. Fortunately, they don’t have to make that choice.

Keynesians/regressives focus on aggregates because to them some people are smarter than others and those people, the elite, should rule while everyone else works. Keynesians/regressives divine causation among those aggregates where, if there is some correlation, it is loose at best and, at worst, nonexistent. Yet, when the results from those policies are bad, Keynesian/regressives are quick to run away from the aggregates and blame individuals for not behaving as the Keynesians/regressives predicted. In other words, the Keynesians/regressives just want to hold onto power for they are afraid to serve others because they think that they were meant to rule. That’s why Benjamin Franklin said that public servants step down to accept office and serve the public, and not rise up to office in order to rule the citizens.

This is not a great argument between Keynesians/regressives and libertarians. No one is entitled to rule. God made us all equal and the Founding Fathers intended the Constitution to restrict government power, protect certain individual rights, and keep the factions fighting each other so that liberty for individuals might survive human nature’s failing of wanting to control our environment including the other people in that environment.

Greg Webb October 25, 2011 at 11:45 pm

Muirgeo, you quoted someone else as saying, “The hubris to even think one can try!”. Then, you said,”But the hubris IS to think you could ever have a libertarian society.”

You misunderstand libertarianism. Please refer to my previous comments on this subject that I made on your blog. Libertarianism advocates minimal government interference with the freedom and economic activities of individuals. It is not a no-government society. Rather, it is a limited, minimal government society. And,libertarianism is about Human Action, and you ought to read Mises book by the same title.

Keynesianism essentially supports a return to the very old idea that the elite are smarter than the many, and thus, should rule over them. Keynesianism is dogmatic, not pragmatist.

Methinks1776 October 26, 2011 at 12:07 am

Right now the hubris IMO is to believe there is something better then people lead democracy.

That’s because you’ve never lived in a cat lead democracy. They are far superior.

The answer could be libertarianism but that seems so far fetched considering human psychology and current social structure.

Or the answer could be cats. Think outside the cage, Muirdiot. Outside the cage.

Keynsians are nothing more than pragmatist.

Huh? I thought you were looking for ideal not pragmatic. Do you know what those words mean? No worries. The cats will sort you out – just as they sorted out that pigeon in Brotio’s yard.

Greg Webb October 26, 2011 at 12:26 am

;)

brotio October 26, 2011 at 12:30 am

^ HSIROTFLMAO @ Methinks post above! ^

muirgeo October 26, 2011 at 8:32 am

Oh having three cats I’ve thought much about cat democracy. It would be a very lazy yet a very content place. But a simple thought experiment will show it wouldn’t work because no one would vote. So yeah I’m way ahead of you.

Fred October 26, 2011 at 8:37 am

“Oh having three cats”

That explains a lot.

Muir is a cat-lady!

Michael October 25, 2011 at 11:59 am

Having read some of your responses below, I think I see what you’re getting at, but isn’t this sort of like asking what the goal of physics is?

Obviously, it doesn’t have one. The goal of physicists (as opposed to physics–the distinction is important in my mind) is discovering the truth about the natural world.

Economists are the same way, but what they study is more nebulous, more open to interpretation. I suspect one’s interpretation is strongly influenced by world view, but I won’t do Dr. Sowell the injustice of trying to repeat his argument from A Conflict of Visions.

Michael October 25, 2011 at 12:00 pm

Well, “responses above” now. Stupid comment section. My kingdom for an edit button.

Jon October 25, 2011 at 12:17 pm

Right. The sheer nebulous nature of economics makes a definition hard. Part of the reason why I approach my field as a philosophy as opposed to science.

And I understand the physics/physicist thing. My cousin is a PhD candidate and he has given me that lecture many times :)

Greg G October 25, 2011 at 2:07 pm

Jon

I think you can learn a lot from both approaches. But be careful. Start thinking like that and soon we will have you coming over to the dark side.

Jon October 25, 2011 at 2:25 pm

Sorry Greg. I sold my soul to my evil corporate overlords long ago for a kitkat bar and front row tickets for Springsteen ;)

Greg G October 25, 2011 at 2:26 pm

Jon

Many have made worse deals.

Ken October 25, 2011 at 1:10 pm

Jon,

we study History so as to understand culture and try not to repeat past mistakes.

This is incorrect. People study things because they find them fascinating or to find out what really happened in time X or because some cute chick was majoring in history.. The repeated mistake of creating an ever more powerful government has been repeated throughout history time and again, yet historians routinely call for this mistake to be made at least on more time because, this time, it’s different.

The study of economics is the study of resource allocation. Many study it with the intention of using it to control other people’s lives (see Keynes and every politician in the western hemisphere). Others study it because it’s fascinating. There are a bunch of reasons. To think that there is or should be on big reason for the study of anything is to think like a child.

Regards,
Ken

Jon October 25, 2011 at 1:53 pm

I didn’t mean to suggest there should be one big reason for the study of economics. My point was actually the opposite (see above). Many different people approach economics from money different angles, so to attempt to limit the field in any way is a mistake. I was merely trying to show a distinction between the sciences (such as biology) and the philosophies (such as economics).

LowcountryJoe October 25, 2011 at 4:44 pm

Winner! I’m really glad you wrote what you did here. I thought I was going to tackle it — doing a worse job of summary — and am delighted that it was not only already done but done far better than I would have done it.

Greg Ransom October 25, 2011 at 11:00 am

As in this case, your comments section has been made close to worthless by trolls.

If this continues, you might consider simply shutting it down.

Rich Berger October 25, 2011 at 11:21 am

Why spoil the fun because of a few stinkers? The troll did try to divert attention from Hayek’s excellent point by means of a feeble ad hominem. What Hayek said was very important and it’s similar to the old story about the drunk looking for his keys under the streetlight. He didn’t lose his keys there, but he was looking there because there was light. Just because we can define statistical aggregates does not mean that they are stable or are the appropriate entities for analyzing the economy.

Nikolai Luzhin, Eastern Promises October 25, 2011 at 12:25 pm

poor Greg

what do you do come here to seek shelter in denial

what is this blog supposed to be a cheerleaders section or a discussion?

You quote Hayek and Keynes and this is … what

I quote Keynes on Hayek and I am a troll

LowcountryJoe October 25, 2011 at 4:58 pm

It is supposed to be about discussion. So when are you going to make a legitimate attempt to add to it in any meaningful way? We’re trying to make it painfully obvious to you that, so far, you’ve not demonstrated this at all. You’ve gotten those signals, right?

Josh S October 25, 2011 at 1:20 pm

Eventually, people learn to ignore the trolls. I’ve noticed muirgeo doesn’t generate the responses he used to, and Invisible Backhand is already being ignored. Nikolai Luzhin will join that list soon.

People respond to Daniel Kuehn because he acts like an adult.

Don Boudreaux October 25, 2011 at 1:22 pm

Yep.

Methinks1776 October 25, 2011 at 1:29 pm

whether or not kuehn has always acted like an adult, he’s never been troll.

Invisible Backhand October 25, 2011 at 3:15 pm

I perform a valuable fact checking function. For example, I actually read some of the links to see if they say what is claimed:

http://i.imgur.com/ulE4S.png

Methinks1776 October 25, 2011 at 3:24 pm

You are confused. “invaluable” does not mean “worthless” and the “function” you think you perform is utterly worthless.

Invisible Backhand October 25, 2011 at 3:36 pm

proofread

Methinks1776 October 25, 2011 at 3:44 pm

You’re right. I got distracted by something more intelligent and more interesting than you. “valuable” doesn’t mean ‘worthless” either.

Josh S October 25, 2011 at 5:30 pm

What’s the market value of that function, and who’s paying you to do it?

Invisible Backhand October 25, 2011 at 6:36 pm

What’s the market value of that function,

There’s no market maker I’m aware of. But it has non-monetary value:

val·u·a·ble   [val-yoo-uh-buhl, -yuh-buhl] Show IPA
adjective
1. having considerable monetary worth; costing or bringing a high price: a valuable painting; a valuable crop.

2. having qualities worthy of respect, admiration, or esteem: a valuable friend.

3. of considerable use, service, or importance: valuable information.

and who’s paying you to do it?
Nobody. A more interesting question is who is paying Don Boudreaux?

http://www.gmu.edu/centers/publicchoice/contributors2.html

You’ll notice some familiar names if you study wingnut welfare at all.

Another interesting questing is, “What is public choice theory?” You won’t learn much about it at CafeHayek. I suggest starting out with “Regulation and Public Interests” by Steve Croley

This is your last chance. After this, there is no turning back. You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill – you stay in Wonderland and I show you how deep the rabbit-hole goes.

Josh S October 25, 2011 at 8:04 pm

It certainly has no value to me, since I spend no time reading your nonsense.

Invisible Backhand October 26, 2011 at 10:54 am

You just did.

Ken October 25, 2011 at 1:24 pm

If this continues, you might consider simply shutting it down.

Real smart, genius. Translation: give the trolls what they want, legitimizing trolling and emboldening trolls.

You should think, Greg, before you write. Or maybe you do what the Cafe shut down.

Regards,
Ken

Economic Freedom October 25, 2011 at 3:18 pm

You are one of my least favorites. You quickly resort to insults like “pinhead” in this comment thread. I consider you a troll of grotesque proportions. Please find another right-wing, Koch brother cause. You disgust.

Ken October 25, 2011 at 3:31 pm

EF,

That’s just hurtful. I mean my insults in the most positive way possible.

Now be a good little boy and go fuck yourself.

Regards,
Ken

Invisible Backhand October 26, 2011 at 10:56 am

What’s your real name and address, Ken?

Ken October 27, 2011 at 12:36 am

IB,

My real name is Ken. What’s yours? Why do you want to know what my address is? Why would you think I would give it to you, someone who is pretty unhinged?

Regards,
Ken

Paul Brinkley October 25, 2011 at 11:44 am

For those who might be wondering: “faible” is apparently French for “weakness”. (It wasn’t immediately clear to me from context.) I don’t know what connotation follows from expressing it in another language.

This is offtopic, but I was wondering if our esteemed professors have seen the new movie “Margin Call” yet, and if so, what they thought of it. (I saw it at the AFI in Silver Spring, and enjoyed it. Eric Dale’s “bridge” monologue was my favorite in the movie. Guess why. :-) )

Darren October 25, 2011 at 12:11 pm

…relatively simple and constant functional relationships…

Simplification of a process is very seductive to anyone. A subject is so much easier and requires less thought if it can be broken down to a small set of simple premises. Items that disagree can easily be thrown out as outliers or exceptions which are cancelled out by other exceptions.

Greg Webb October 25, 2011 at 3:15 pm

His final conceptions rest entirely on the belief that there exist relatively simple and constant functional relationships between such ‘measurable’ aggregates as total demand, investment, or output, and that empirically established values of these presumed ‘constants’ would enable us to make valid predictions.

It is in these assumptions that Keynes and his followers made their mistake.

Lynn Atherton Bloxham October 26, 2011 at 9:12 am

The Hayek observation was quite iformative in delving into the (possible but highly likely) foundation for Keyne’s focus in so much of what he thought and wrote.
I appreciate the dialog that explored even more thoroughly the progression of thought on actual economic freedom, Several comments were quite well thought out and are valuable contributions in support of the voluntary exchange process.
I would ask the “opposition” to please frame your remarks more coherently. Sometimes, it seems, even the most studious of us have difficulty understanding your point.

Previous post:

Next post: