Vulgar Keynesianism on Steroids

by Don Boudreaux on October 26, 2011

in Country Problems, Debt and Deficits, Growth, Myths and Fallacies, Seen and Unseen, State of Macro

Here’s a letter to the New York Times:

James Livingston rightly proclaims “the moral worth of consumer culture” and correctly notes the trivial fact that increased savings do not automatically result in increased and widespread prosperity (“It’s Consumer Spending, Stupid,” Oct. 26).  These points, however, are inadequate to support his conclusion that economic growth is driven overwhelmingly by consumer and government spending, and that “[p]rivate investment isn’t even necessary to promote growth.”

Such an astounding conclusion requires a potent argument.  But Prof. Livingston delivers only a storm of feeble anecdotes, post-hoc fallacies, and non sequiturs.

An example of the latter is his observation that “Between 1900 and 2000, real gross domestic product per capita (the output of goods and services per person) grew more than 600 percent.  Meanwhile, net business investment declined 70 percent as a share of G.D.P.”  Yep.  But this fact does not remotely mean that “net business investment atrophied” or that it plays no crucial role in economic growth.

Because each dollar successfully invested raises G.D.P. by multiple dollars, net-investment’s decline as a share of rising G.D.P. (and not, please note, absolutely) is evidence of the impressive success of private investment rather than of the proposition that economic growth requires only “[c]onsumer debt and government spending.”

Sincerely,
Donald J. Boudreaux

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Daniel Kuehn October 26, 2011 at 9:06 am

Let’s not call a view that excludes private investment any sort of Keynesianism – vulgar or otherwise. If you’re not talking private investment, you’re not talking Keynesianism.

I wish I had more time to digest this article – it’s bizarre but intriguing because he’s clearly not some pundit. His observations seem to be in the very long run, but the obvious interpretation to me seems to be “growth causes increasing capacity to consume”, not “consumption drives growth”. That lack of detail on how he’s drawing causal lines is confusing enough – I have no idea why he thinks trends from 1900 to 2000 tell us anything about short-term determinants of growth. I would have thought these are two entirely different phenomena.

Jon October 26, 2011 at 9:15 am

I am just completely baffled by the conclusion of this article: only consumer and government spending is required for economic growth.

Where do new innovations come from? How do we increase our standard of living? How are new jobs created? Through investment.

It’s true that it is not true Keynesism. But it does spawn from the Keynesism equation and is horribly mutated and twisted into some economic and intellectual abomination. To call these claims Keynesism is like calling a haunted house a cute family home. The structure is there but it has been perverted.

Greg G October 26, 2011 at 9:41 am

I agree Jon. From 1941 to 1966 we had a reasonably sound form of Keynesianism practiced with very good results. When the Viet Nam war increased the deficit, that started to unravel. All along the way, a wide variety of self-identified “Keynesians” promoted larger deficits than Keynes would have approved.

Then Milton Friedman and Reagan convinced a lot more people that “deficits don’t matter” and we were off to the races with public debt. To call that Keynesianism is perverse but at least it is called “vulgar” Keynesianism here.

Craig October 26, 2011 at 7:09 pm

“Then Milton Friedman and Reagan convinced a lot more people that “deficits don’t matter””

What was Reagan to do? He understood that lower taxes would spur economic growth; and the Democrats in Congress (they controlled the thing back then) refused to cut spending. Perhaps, in the face of the economic growth of the time, it was they and not Reagan who convinced people that deficits don’t matter.

Greg G October 26, 2011 at 7:22 pm

Craig

He could have used the veto. The deficits he ran after the economy returned to health were unprecedented for a time of full employment. Don’t take my word for it. Take Cheney’s.

Randy October 26, 2011 at 9:55 am

Jon,
I disagree. I read the afterward to the General Theory in which Keynes states his socialist intentions quite clearly. I therefore believe that the theory itself is subterfuge, and that it was intended to be subterfuge.

Greg G October 26, 2011 at 10:43 am

Randy

I think it is important to remember the historical period in which Keynes was writing. There was a much greater threat then, than today, from Fascism on the right and Socialism and Communism on the left. Keynes saw himself as trying to steer a course between right and left to save capitalism. Unemployment was the main thing feeding the authoritarian movements on the right and left at that time. That is why Keynes was so focused on it.

yet another Dave October 26, 2011 at 12:30 pm

Fascism on the right and Socialism and Communism on the left.

This statement is grossly incorrect – fascism was/is very much on the left. I guess it’s convenient for leftists to pretend otherwise so they can distance themselves from at least one of the heinous manifestations of their ideas, but it’s still wrong.

Jon October 26, 2011 at 12:35 pm

Actually, man, Fascism is considered an extremist conservative movement. Fascism is usually about the returning to some glorious past, that much progress is overdone/useless and there is one cultural identity.

Conversely, Communism is a leftist extreme movement as it represents progressive behavior (the equalization of classes, state-provided necessities, etc).

In both cases, they are totalitarian regimes, sure. But that is really where the similarities end.

yet another Dave October 26, 2011 at 12:51 pm

Jon,

You are correct – fascism is considered an extremist conservative movement. By those who are incorrect.

Fascism is National Socialism. No matter how often you repeat the lie it is still very much a thing of the left.

PrometheeFeu October 26, 2011 at 1:31 pm

Just because NAZI stands for “National Socialist Party” does not mean the nazis were leftists. Their original socialist platform was very rapidly abandoned in favor of a very reactionary platform. Jon is right to point out that fascists most often invoke conservative/reactionary ideologies of nationalism and idealization of the past. If you want to attach the fascists to one side or the other of the political spectrum, they belong firmly on the right. I wonder how you define right and left to see the fascists as leftists.

That said, the communists and the fascists have a lot more in common with each other than with the moderates on either side of the political spectrum.

Methinks1776 October 26, 2011 at 1:54 pm

Jon is right to point out that fascists most often invoke conservative/reactionary ideologies of nationalism and idealization of the past.

That would be a valid point if the left didn’t do that constantly. First of all, nationalism was a key component of not only Soviet Socialism, but also the American left (also the right, but the point is the left). Second, the left constantly idealizes the 1950′s and 1960′s. Paul Krugman is a major offender.

As for economic Fascism and Socialism, the difference us small. In Socialism, means of production are explicitly owned by the state. Under Fascism, the means of production are nominally privately owned but controlled by the state. Control of the means of production is what’s important, so the two are extremely similar.

Personally, I find that if you go right far enough and left far enough, the difference between them, in effect, disappears.

Jon October 26, 2011 at 1:59 pm

Both left and right politicians tend to invoke nationalism, but it is a trait associated with conservatism. As a conservative, I notice this a lot in my social gatherings. I don’t get it a whole lot when I am in more leftist circles (that’s not to say it doesn’t occur).

Methinks1776 October 26, 2011 at 2:06 pm

I didn’t realize Paul Krugman and ordinary lefties are politicians. Unless you think they are, that trait is not exclusive to politicians.

Maybe you don’t get it in your specific leftist circles, but I do. You get it from leftists on this blog.

Jon October 26, 2011 at 2:15 pm

I really just mean a definition of conservative. A conservative is ” a political and social philosophy that promotes the maintenance of traditional institutions and supports, at the most, minimal and gradual change in society. Some conservatives seek to preserve things as they are, emphasizing stability and continuity, while others oppose modernism and seek a return to the way things were” (source: Encyclopedia Britannica). By that definition, Fascism is conservatism. Especially the Nazis, which were all about returning to the glorious past.

Look, no one likes to acknowledge the fringe radicals in their respective groups. I’m a Libertarian. Do you think I like being grouped into the anarchists? I’m a Christian. Do you think I like being associated with the fundamentalists? But, it is what it is.

yet another Dave October 26, 2011 at 2:29 pm

Short of falling for the lie told often enough it’s impossible to conclude that fascism is a product of the right. Fascism is socialism with a very slight twist – obviously a thing of the left. Methinks described it quite well so I see no reason to repeat what she said.

Methinks1776 October 26, 2011 at 2:47 pm

virtually no part of that definition jives with Fascism, Jon.

It’s not about being lumped in with this or that group. Ignorance abounds and it always will.

Darren October 26, 2011 at 4:30 pm

One major characterteristic, from my understanding of fascism, was that it was militaristic. Mussolini, considered the ‘father’ of fascism (from the work ‘fasces’) was a revolutionary socialist (as opposed to a more orthodox Marxist). He was inspired by the events of WW1 and came back with the idea of organizing society more along military lines, at least with many of the same ideas and principles. It was a means to implement socialist policies more rapidlly.

Methinks1776 October 26, 2011 at 5:39 pm

Darren, I agree. The willingness to use brute force to maintain extreme conformism to a single ideal, usually based on some concocted, supposedly shared characteristic is a major component of fascism.

Justin P October 26, 2011 at 9:41 pm

Buy American is a form of nationalism.
They are constantly looking backward to an idealized New Deal past. Their constant imagery of looking for the “next FDR” is common, just look at Muirducks avatar for christsake.
Both fit with Jon’s definition for fascism.
Also look at the warlike rhetoric coming from fringe Leftist groups like #OWS.

dsylexic October 26, 2011 at 12:46 pm

“Keynes saw himself as trying to steer a course between right and left to save capitalism.”

just like dubya wanted to save capitalism from itself.
freedom and capitalism doesnt need to be ‘saved’ from anyone.it is as arrogant as trying to save earth from human beings -as environmentalists want to do.

Greg G October 26, 2011 at 1:43 pm

The fact that the Nazis had “socialist” in their name doesn’t mean any more than the fact that so many communist countries managed to get “democratic ” in their names. Both were crude Orwellian attempts at propaganda. The Nazis weren’t socialist and the communists weren’t democratic.

Jon October 26, 2011 at 1:46 pm

Right Greg. Calling the Third Reich socialist is about as correct as calling the Democratic People’s Republic of Korea (the North) democratic.

Greg Webb October 26, 2011 at 2:10 pm

Greg and Jon, please read the party platform for the National Socialist Party (i.e., Nazi Party) If you do, you will recognize socialist ideology. Sometimes even socialists tell the truth. Quit trying to run away from who you really are. Embrace your big government roots.

Greg Webb October 26, 2011 at 2:15 pm
Jon October 26, 2011 at 2:18 pm

I’m not saying they didn’t possess some socialist ideas. Sure they did. But they had more conservative ideals. I mean, the GOP has some socialist ideas (restrictions on abortions, for example), but does that make them socialist?

And for the record, I am a registered Libertarian.

yet another Dave October 26, 2011 at 2:38 pm

Jon,

How do you construe limitation on abortion as socialist? My understanding is the position is based on the belief that the unborn child is an individual with rights that should be protected. Whether you agree or not I don’t see how that can be twisted into being socialistic.

Jon October 26, 2011 at 2:42 pm

State legislated morality. The individual is unable to make an educated choice for herself, so the state makes the choice for her. Same argument behind Obamacare.

Jon October 26, 2011 at 2:43 pm

Sorry, not Obamacare. I meant the government legislated health regulations (no trans-fats, for example) that are often decried as socialist.

yet another Dave October 26, 2011 at 3:04 pm

State legislated morality. The individual is unable to make an educated choice for herself, so the state makes the choice for her.

That line of thinking fits well with prohibitions against gambling, drugs, prostitution, etc, but how does that apply to the belief that the unborn child is an individual with rights that should be protected?

Jon October 26, 2011 at 3:26 pm

It’s still the legislation of morality. Some do not believe that child is an individual until it is born.

House of Cards & Economic Freedom October 26, 2011 at 3:45 pm

@ Greg G:

The Nazis weren’t socialist . . .

Not so. The Nazis (and sundry other fascists) weren’t Marxists — though quite a few had been at some earlier time in their lives — but the difference between German Nazism , Italian fascism, and Soviet communism is mainly institutional (and cultural). As far as economic policy is concerned, they’re very similar.

Here are some excerpts from the political platform of the Nazi party of 1924:

7. We demand that the state be charged first with providing the opportunity for a livelihood and way of life for the citizens.

9. All citizens must have equal rights and obligations.

10. The first obligation of every citizen must be to work both spiritually and physically. The activity of individuals is not to counteract the interests of the universality, but must have its result within the framework of the whole for the benefit of all. Consequently we demand:

11. Abolition of unearned (work and labour) incomes. Breaking of debt (interest)-slavery.

12. In consideration of the monstrous sacrifice in property and blood that each war demands of the people, personal enrichment through a war must be designated as a crime against the people. Therefore we demand the total confiscation of all war profits.

13. We demand the nationalisation of all (previous) associated industries (trusts).

14. We demand a division of profits of all heavy industries.

15. We demand an expansion on a large scale of old age welfare.

16. We demand the creation of a healthy middle class and its conservation, immediate communalization of the great warehouses and their being leased at low cost to small firms, the utmost consideration of all small firms in contracts with the State, county or municipality.

17. We demand a land reform suitable to our needs, provision of a law for the free expropriation of land for the purposes of public utility, abolition of taxes on land and prevention of all speculation in land.

18. We demand struggle without consideration against those whose activity is injurious to the general interest. Common national criminals, usurers, profiteers and so forth are to be punished with death, without consideration of confession or race.

20. The state is to be responsible for a fundamental reconstruction of our whole national education program, to enable every capable and industrious German to obtain higher education and subsequently introduction into leading positions. The plans of instruction of all educational institutions are to conform with the experiences of practical life. The comprehension of the concept of the State must be striven for by the school [Staatsbuergerkunde] as early as the beginning of understanding. We demand the education at the expense of the State of outstanding intellectually gifted children of poor parents without consideration of position or profession.

21. The State is to care for the elevating national health by protecting the mother and child, by outlawing child-labor, by the encouragement of physical fitness, by means of the legal establishment of a gymnastic and sport obligation, by the utmost support of all organizations concerned with the physical instruction of the young.

24. We demand freedom of religion for all religious denominations within the state so long as they do not endanger its existence or oppose the moral senses of the Germanic race. The Party as such advocates the standpoint of a positive Christianity without binding itself confessionally to any one denomination. It combats the Jewish-materialistic spirit within and around us, and is convinced that a lasting recovery of our nation can only succeed from within on the framework: The good of the state before the good of the individual.

Watch this lecture by economist George Reisman (Pepperdine University) from 2005:

http://www.youtube.com/watch?v=oHpXjm78Pjs

“Why Nazism Was Socialism and Why Socialism is Totalitarian ”

(I will post a separate link to the lecture transcript)

See also this book:

“The Vampire Economy: Doing Business under Fascism”
by Gunter Reiman

(Now a free PDF download. I will post a separate link for the PDF.)

House of Cards & Economic Freedom October 26, 2011 at 3:46 pm

@ Greg G:

“Why Nazism Was Socialism and Why Socialism is Totalitarian”
Lecture by George Reisman (Pepperdine University)

http://mises.org/daily/1937
(transcript of lecture on YouTube)

House of Cards & Economic Freedom October 26, 2011 at 3:48 pm

@ Greg G:

“The Vampire Economy: Doing Business under Fascism”

by Gunter Reiman

Now a free PDF download at:

http://mises.org/books/vampireeconomy.pdf

Greg Webb October 26, 2011 at 3:51 pm

Jon, the Nazis had a lot of socialist ideas. That is why they were first called the German Workers Socialist Party. The Nazis did not value human life, which is why they permitted abortion, especially if the child was non-Aryan, deformed, mentally retarded, etc. The Nazis were also in favor of euthanasia. This devaluing of the sanctity of life is very much socialist doctrine.

Jon October 26, 2011 at 3:55 pm

I wouldn’t go quite as far as to call the devaluation of life a socialist doctrine. Many conservative groups devalue life, such as the Westboro Baptist Church (gays are bad and deserve Hell), al Queada (infidels are bad and deserve Hell), white supremacists (everyone who is not white are bad and deserve Hell), etc.

yet another Dave October 26, 2011 at 4:06 pm

It’s still the legislation of morality. Some do not believe that child is an individual until it is born.

Those who believe a child is not an individual until birth are not those seeking to outlaw abortions, so their opinion is irrelevant to whether the GOP position is socialistic. If the GOP position is based on protecting individuals (as is my understanding) it is clearly NOT socialist in any way. Some people consider private property immoral – does that make laws against trespassing and theft legislating morality?

Jon October 26, 2011 at 4:10 pm

In some ways, yes.

Regardless, the principle remains the same. It is the use of legislation to determine what one can or cannot do with one’s own body. Big government is big government, regardless who’s interests it serves. If big government is socialism, than this is socialism.

J. W. October 26, 2011 at 4:25 pm

Jon: “the GOP has some socialist ideas (restrictions on abortions, for example)”

yet another Dave: “How do you construe limitation on abortion as socialist?”

Jon: “State legislated morality. The individual is unable to make an educated choice for herself, so the state makes the choice for her.”

yet another Dave: “how does that apply to the belief that the unborn child is an individual with rights that should be protected?”

Jon: “It’s still the legislation of morality. Some do not believe that child is an individual until it is born.”

But in that case, legislation against abortion is no more or less “legislation of morality” than legislation against murder and theft.Evidently, “some do not believe” it wrong to take others’ lives and property in instances that the law regards as murder and theft. Yet we do not call laws against murder and theft “socialist.”

Jon October 26, 2011 at 4:31 pm

Crimes of murder and theft are crimes against humans. There is some…discussion about whether a fetus is a life or not.

Some hold religious beliefs that it is a person from the moment of conception. Others do not. That is the matter here. I mean, it cannot be a crime against a living thing if the thing is not living, can it? This would be legislation determining when something is alive or not. The same arbitrary beurocratic decisions decried by many as socialist.

No matter the issue, it’s Big Government all over again. The only difference is it’s an option you believe in.

Look, you either believe in individual’s rights to choose all the time or none of the time. If you only support it until it interferes with what you believe, than you only pretend to support individuals.

yet another Dave October 26, 2011 at 4:37 pm

It is the use of legislation to determine what one can or cannot do with one’s own body.

That’s the thing – one side describes it as you do. The other side says it’s the use of legislation to determine what one can or cannot do with another person’s body. From the perspective of that side, such legislation is simply part of the basic function of government to protect its citizens (leaving aside federal vs. state issues). That’s why it’s obviously not socialism no matter how much you disagree with them.

Please note I’m not taking a position on abortion or defending the GOP – I’m disagreeing with your socialism claim.

Jon October 26, 2011 at 4:40 pm

Don’t worry, Dave, I know where you are coming from. I think, of course, this is an issue we will never agree upon.

J. W. October 26, 2011 at 5:08 pm

“Crimes of murder and theft are crimes against humans. There is some…discussion about whether a fetus is a life or not.”

And there have been discussions in other times and places about the status of other segments of the human population, but such discussions do not render laws against slavery and slaughter, in those contexts, as “socialist.”

In the age of discovery, European theologians and philosophers discussed whether the natives of the Americas were even human beings. If the answer were “no, they are not,” then perhaps ownership of those natives could have been justified. Yet such a position does not render advocacy and legislation against slavery as “socialist,” even though (to paraphrase you) it cannot be a crime against a human being if the thing is not human.

In the time leading up to World War II, intellectuals in Germany distinguished between “life worthy of life” and “life unworthy of life.” The latter denoted someone whose killing was justified. Laws against murder, under this line of thinking, would only protect a “life worthy of life.” One could call the extension of protection to, say, the mentally handicapped as “Big Government,” though most people tend not to use the term in that way.

To refer to human opinion merely in order to distinguish between “legislation of morality” and other legislation is a non-starter. There are always going to be some people whose moral views conflict with what many people would consider to be the most reasonable legislation.

Methinks1776 October 26, 2011 at 5:47 pm

Jon,

Many conservative groups devalue life, such as the Westboro Baptist Church (gays are bad and deserve Hell)

I don’t happen to share that opinion about gays. However, there’s an ocean of difference between declaring that gays deserve hell and actually putting them there. The fact that most people who believe that there’s something wrong with homosexuality are unwilling to kill gays sort of proves your assertion that they devalue life wrong.

I don’t like everyone either and I think some people should rot in hell, but I’m unwilling to do anything to help them get there. I value life.

I am from the Soviet Union, where life was completely devalued. Socialists not only called for large scale murders but committed them with astonishing regularity. Tens of millions of people were exterminated by Socialists and it was very much part of the Marxist/Leninist doctrine to do so.

House of Cards & Economic Freedom October 26, 2011 at 6:03 pm

@Methinks1776:

However, there’s an ocean of difference between declaring that gays deserve hell and actually putting them there.

Bingo.

James Strong October 26, 2011 at 11:17 am

Your point about innovation is great :-) .

Greg G October 26, 2011 at 2:24 pm

Greg Webb

You should consider the possibility that the Nazis might have been willing to lie.

Greg Webb October 26, 2011 at 6:00 pm

Greg G, you said, “You should consider the possibility that the Nazis might have been willing to lie” in response to my comment, “. . . “Sometimes even socialists tell the truth. . . . . “.

I’m way ahead of you, Greg G. Since all Nazis are Socialists and Socialists only sometimes tell the truth, then Nazis can, and will, lie. Much as all Socialists do. Thanks for making my point for me.

Greg G October 26, 2011 at 6:09 pm

Every day here I learn a little more about how much of Libertarianism depends on using language differently than the rest of the non-libertarian world.

Greg G October 26, 2011 at 4:12 pm

HoC & EC

The Nazis put everything they could think of into their platform that they thought would get them votes. But their real purpose was militaristic and nationalistic, not some notion of economic justice. That rhetoric was just a cover to take over the economy for military purposes. I notice the Nazis promised equal rights for all citizens. Are you buying that too?

All the participants in WWII exercised an extraordinary amount of control over their economies during the war.

yet another Dave October 26, 2011 at 5:03 pm

…their real purpose was militaristic and nationalistic, not some notion of economic justice.

Can you read minds? Short of that I don’t see how you can justify such a claim to knowledge. I understand that you’re really committed to the fascism is not leftist belief, but fascism was/is socialism with a very small twist no matter how badly you want it to be not that way.

I notice the Nazis promised equal rights for all citizens. Are you buying that too?

Maybe you missed the part where they carefully defined who could and could not be a citizen and what the exceptions were to who would enjoy those equal rights. Their actions were consistent with the (very disturbing) platform Greg Webb posted.

Greg Webb October 26, 2011 at 6:05 pm

Socialists lie all the time to gain power. It does not matter if they call themselves communists, international socialists, national socialists, fascists, nazis, socialists, progressives, liberals, etc. The goal is power. The lying about wanting to help others is the sales job.

House of Cards & Economic Freedom October 26, 2011 at 10:45 pm

But their real purpose was militaristic and nationalistic, not some notion of economic justice.

I have no idea what “economic justice” is and neither do you — unless it refers to a kind of egalitarianism, i.e., an equalizing of economic outcomes. If that is the case, than “economic justice” can only be accomplished by means of militarism, nationalism, and other forms of coercive state control over the individual. And that means that the ulterior purpose of Nazi militarism and nationalism (not to mention the ensuing atrocities) were for the sake of ensuring a good, clean, economically just (meaning “Aryan” and “Jew-free”) world. I suggest you watch the George Reisman video I linked to. Also, to see the measure of socialist control over the economy in Hitler Germany, download the PDF of “The Vampire Economy” I linked to.

You’re still free to hold onto your present position even in spite of all the evidence to the contrary I’ve provided.

Ken October 26, 2011 at 1:06 pm

Isn’t the neoclassical view that innovation is exogenous to the firm?

PrometheeFeu October 26, 2011 at 1:32 pm

Well, I don’t think that’s the view. I think that’s just the model. But yes, neoclassical models are often silly.

Greg G October 26, 2011 at 1:59 pm

One more similarity between far left and far right: Only Marxists and Libertarians envision the state withering away.

Jon October 26, 2011 at 2:05 pm

We Libertarians do have a purpose for the State, it’s just very reduced. We are not anarchists, after all.

Methinks1776 October 26, 2011 at 5:52 pm

That straw man wasn’t even artful.

Greg Webb October 26, 2011 at 6:14 pm

Nope, Greg G. That’s wrong. The old left vs right argument is nonsense. The measure is of government power. 0% government power is on the left and 100% government power is on the right. True anarchy is basically no government or 0% government power. The intent of the Founding Fathers for the US was about 10%. Monarchists, Nazis, Fascists, Socialists, International Socialists, Communists, etc are all much higher on the scales ranging fron 50% to 80% government power. A true totalitarian regime is at 100% government power.

Greg G October 26, 2011 at 6:37 pm

Greg Webb

I understand how you propose to organize this analysis in terms of government power and even agree that can be one useful way to look at it. My point is that, what you call “the old right left argument” is the language the rest of the world outside libertarian circles uses to talk about this. Language is entirely conventional. A tree is a “tree” simply because we agree to call it that. Libertarians insistence on developing a private language to talk about this stuff is one of the reasons you guys are not gaining traction outside of your own circles. Recent days on this blog have seen attempts to redefine “market failure” and “crony capitalism” as well. Good luck with this project to change the way the rest of the world uses language.

rbd October 26, 2011 at 9:30 am

Is national GDP even relevant? I much more concerned with what’s happening here in Texas than I am with any national reference to the economy.

Will October 26, 2011 at 10:06 am

I can see why you would be more concerned with what is happening locally, but very little is purely local. I have not looked specifically, but I imagine most business in Texas rely on a lot of production from outside Texas.

rbd October 26, 2011 at 10:42 am

I agree with your assessment. But when the doctors (politicians) begin to prescribe medicine (stimulus, etc) based on the level of one figure (natinoal GDP), I get concerned.

Will October 26, 2011 at 12:06 pm

True. There is nothing with more potential for disaster than a politician who only looks to one sentence to support his argument without reading the whole book.

James Strong October 26, 2011 at 11:21 am

Considering the fact that Texas trades with other states I think national GDP is quite relevant.

Fred October 26, 2011 at 9:35 am

Economic growth is driven by spending? Spending on what?
In order to have something to buy an investment must first be made.
Investment precedes spending.

Something about putting the cart before the horse…

muirgeo October 26, 2011 at 11:02 am

In order to sell something you must have a customer with cash.

Corporate profits are at record level. Why are they ramping up production to sell things…THE SURVEY SAYS….POOR SALES.

So what fits with the real world? People ready to spend money but no investment in prodction. Or lots of capital but no where to invest ( other than lobbyist and the US government) because people are not buying things.

Methinks1776 October 26, 2011 at 11:07 am

…THE SURVEY SAYS….POOR SALES.

Can you say that louder with more dot dot dots? I didn’t hear your screams the first time.

muirgeo October 26, 2011 at 12:53 pm

methinks,

That’s a play on the old game show Family Feud, where the moderator shouts out the survey results, “SURVEY SAYS” and the actual results of the NFIB survey showing poors sales as the primary concern of business.

I didn’t expect for you to pick that up. But no problem.

Methinks1776 October 26, 2011 at 1:43 pm

I really think you should write in all caps all the time. With lots of dot dot dot punctuation.

muirgeo October 26, 2011 at 6:22 pm

Anyway the survey says what it says the problem is sales/demand/wages and your need to avoid addressing such facts by focusing on grammar and ad homs is plenty enough to see how intellectual vacant you. In a real debate I’d make short work of you. You’re not even a hint of a challenge. You couldn’t defend your positions based on logic, fact or rational thought. So all your inane replies are simply individual declarations of defeat to me… but again I do appreciate the grammar checks so keep IT UP………

Methinks1776 October 26, 2011 at 9:43 pm

Intellectually vacant. Still, Muirdiot, it would have been better in all caps and sprinkled with unintelligible bullshit about people led democracies.

Help me help you, Muirdouche. Help me help you.

brotio October 27, 2011 at 12:20 am

In a real debate I’d make short work of you. – Yasafi Muirduck to Methinks.

Other than Muhammad Ali, no one who boasts so vociferously about their abilities has been able to back up the bluster. You, Sir Lardass, are no Muhammad Ali.

Fred October 26, 2011 at 11:11 am

In order to sell something you must have a customer with cash.

In order to sell something you must have something to sell. That means there must first be investment.
If nobody wants to buy then that could mean a lot of things.

Perhaps it is over priced. Solution: lower the price.
Perhaps it sucks. Solution: produce something else (i.e. investment).
Perhaps it was part of a fad that is now over. Solution: produce something else (i.e. investment).

Spending for the sake of spending is not a solution.

Justin P October 26, 2011 at 9:48 pm

+one

Sam Grove October 26, 2011 at 11:38 am

And how do people get money to spend?
From jobs.
And where do jobs come from?
From business.
Where do businesses come from?
Investment…

ding ding ding

Will October 26, 2011 at 12:16 pm

Specifically for me, I would agree, I need cash to buy stuff and would gladly take more to spend more. Please tell your congressional representative to lower taxes and to stop taking so much money from me and I will gladly spend more cash (an probably invest more). I would even gladly take donations from you to have more cash on hand. I do believe I will spend the cash stimulating the economy quicker and more efficiently than anything the government can do. After all, my spending does create “shovel ready” jobs. Just imagine the possibilities for the economy if the government took less from everyone.

Darren October 26, 2011 at 4:41 pm

In order to sell something you must have a customer with cash.

No. In order to sell something, you must first create the item to be sold. Products don’t just fall off trees into the hands of retailers.

Ken October 26, 2011 at 4:48 pm

What!? But I was sold beans for a product tree from which I was assured products would fall.

Regards,
Ken

Jon October 26, 2011 at 4:49 pm

Was it an Apple tree? Like the company Apple?

Wait, I can do better. Come back to me.

SmoledMan October 26, 2011 at 6:25 pm

Guess what muirdiot? Companies like Microsoft are investing billions in building data centers for the FUTURE. That’s called INVESTING.

Jae October 26, 2011 at 9:58 am

I admire Dr. Boudreaux, so I hope this doesn’t come across as insulting or smarmy. However, I do not perceive the value of these “letters.” Surely few if any get published, so they are read by few people.

With due respect, I think his efforts would be better spent on a blog such as Mark Perry’s Carpe Diem. Perry provides meaty data that are often eye-opening and potential debate changers. There is a mountain of economic polemic, but a dearth of free market data that can be used by the pro-freedom cadre.

dave smith October 26, 2011 at 10:09 am

You are wrong. They are read on this blog by perhaps hundreds of economics professors and students. They help us clarify our thinking and make us aware of how much truly bad economic thinking there is out there. The influence of blogs like this one are huge on the teaching of economics.

Also, and I don’t want to speak for anyone else, these letters are likely a form of therapy for our good host.

Methinks1776 October 26, 2011 at 10:18 am

Jae,

Each letter is published on Cafe Hayek.

James Strong October 26, 2011 at 10:33 am

A lot of the arguments made by Krugman and other writers for the NYT are powerfully persuasive at first glance for laymen like me. I’m very glad that Don Boudreaux takes the time to show the fallacies in these articles.

James Strong October 26, 2011 at 10:34 am

Having said that, you’re right in the sense that meaty data is always a plus. I think that is why Boudreaux frequently links to Carpe Diem’s data to support his own arguments.

Jae October 26, 2011 at 10:47 am

Which, James, is exactly my point.

James Strong October 26, 2011 at 11:06 am

I think the current setup of Carpe Diem statistics plus Don Boudreaux analysis works pretty well. Maybe I’m misunderstanding you but I don’t think Boudreaux’s efforts would be better spent writing on Carpe Diem. In my opinion they complement each other quite well as-is.

Statistics are an essential supplement to economic thinking, but they can also be very dangerous and easily misused. As Boudreaux demonstrated in this post, a statistic that on the surface appeared to be confirming the author’s argument actually goes against the author’s argument once you understand the underlying logic.

In my opinion, one of the biggest problems in political debates is that they frequently degenerate in to statistic-slinging contests. Politicians, in particular, love statistics because it allows them to make effective arguments without actually understanding any concepts.

It’s easy to find statistics. There’s a whole universe of statistics and numbers out there on the internet. On the other hand, there aren’t that many people bothering to explain the fundamental logic and concepts behind said statistics.

Jae October 26, 2011 at 11:48 am

Not “writing on Carpe Diem,” but operating a similar blog with data and analysis.

It is easy to find statistics, but that is beside the point. It is not easy to locate useful and effective presentations of statistic as presented by Mark Perry. What other blog offers such a thing? The great thing about Perry’s blog is that it transcends the free market blog ghetto.

As a rule, economists do a very poor job of providing useful data to the democratic mob, and an even poorer job of explaining the data. Mark Perry is an important exception (though he is not quite the free market purist that I am). For a non-economist I have an unusually large library of books by economists. I regularly read web sites by economists and their fellow travelers. But Perry’s is the site where I most often find exciting and useful new information (or old info freshly presented) worth sharing. The non-economists I know are not much interested in dialectic, but are impressed by a chart showing the decline in manufacturing jobs vis-a-vis government jobs.

I’m not an academic. I appreciate that Dr. Boudreaux reaches out to non-academics. I am proposing that he can reach a broader audience and be more effective. I’m not suggesting that he mimic Carpe Diem, but that the general approach of combining novel presentations of data with analysis is powerfully effective.

If only 5 percent of his letters are indeed published, and probably a much lower percentage at WSJ, NYT, and other large circulation publications, then this is good evidence that the approach is ineffective. A 95% failure rate is not impressive. And as I stated, these letters probably cause editors to pigeonhole the professor as a crank, and reduce his chance of having a longer piece published.

HaywoodU October 26, 2011 at 11:05 am

What the lady said above plus, about 5% get published as stated previously by the author.

Seth October 26, 2011 at 10:45 am

Speaking of eye-opening stats, in the right margin of this blog it says that the site’s feed has 32,000 subscribers.

I’m guessing on any given day for any given post that’s more regular readers than random Letters to the Editor for many of the publications Don writes to.

Jae October 26, 2011 at 11:02 am

Seth, it’s a point well-taken, and I’m not opposed to the odd brief observation. But the letters to the editors are essentially a charade, and, I think, one which diminishes Dr. Boudreaux’s credibility. I can never forget Mencken’s comment that almost all writers of letters to newspapers are fools, and Dr. Boudreaux is most certainly not a fool. I’d much rather read a proper essay by him from time-to-time.

I hope my criticism is mildly taken and doesn’t hurt the professor’s feelings. Like the respondents to my posts here, I view him as a valuable ally of freedom and sound economics. Mine is a practical criticism, much as one would give a candidate for office about the effectiveness of his ad campaign. This has been pestering my for awhile, and I decided to bring it up.

Dr. Boudreaux’s “letters” are similar to what I include when I share something to Facebook, but far less than I would state in an essay I expected to be taken seriously. Not only his time, but that of many other economists, would be better spent providing readers with data and smart analysis thereof. Letters to editors are not famously influential.

Seth October 26, 2011 at 12:13 pm

Consider that you are judging the medium with broad strokes. Good points are good points, no matter what medium is used.

Don has explained the value he receives from writing the letters – frequent writing and point-sculpting practice. I’m glad he decides to share those with us in real time.

Jae October 26, 2011 at 12:33 pm

Seth, the medium is quite important (if not entirely “the message”). The same idea properly packaged is far more effective than if packaged ineptly. There is a reason that iPad ads do not feature the CEO of Apple explaining the virtues of his product to a static camera.

Readers quote columns far more often than they do letters. You can buy collections of columns by Sowell, Walter Williams, and many others, but no collection of letters to editors that I can think of.

Rothbard is a good case in point. It is an understatement to say that he was a frequent writer. I’m presently reading his essay collection, “Making Economic Sense.” Its 400-odd pages are worth reading, even though there is repetition, because he constructed thorough but tight essays. Good essayists are remembered, but even the best writers of letters to editors are quickly forgotten.

Dr. Boudreaux used to write some nice essays for The Freeman:

http://liten.be//zX5OU

Methinks1776 October 26, 2011 at 1:46 pm

Jae, Don writes for the Freeman still. I usually see his work posted here before I ever get my issue.

I can’t understand why you think Don should write his blog the way you prefer instead of the way he prefers.

Jae October 26, 2011 at 10:46 am

Dave, I don’t know if you visit Carpe Diem, but it provides data that are not just useful for economists, but indispensable to editorialists. While Dr. Boudreaux’s “letters” maybe contain pearls of wisdom, they do not provide the substance that is the foundation for the publication of many other articles. I’m a fan of interesting polemics, to be sure, but these posts are too brief to be of much value. The Earth doesn’t rotate around economists and their students, there are many more people who need to satisfy their intellectual curiosity and be influenced. For those of us who are confirmed free marketeers, Dr. Boudreaux is preaching to the choir, while Mark Perry provides useful and sometimes startling data that can be passed along to people outside of the choir.

I should think that Carpe Diem has a good-sized readership of economists and their students, too, since it has a higher traffic rating than does this site.

I simply think that Dr. Boudreaux’s energy and wisdom could be better spent. If these “letters” are actually sent to the identified publications, they will quickly come to view the good professor as a crank, not a shrewd intellectual. The letters makes it less likely that, when the time comes, journals will publish a Boudreax op-ed piece that really deserves to be read.

If students of economics are clarifying their thinking by reading letters to editors, then they can stop accumulating those gargantuan student loans, accumulate a library of economics texts, and get their degrees from some online university.

rbd October 26, 2011 at 10:47 am

I love Mark Perry’s meaty blog, but I also love Don’s unqiue and unrivaled ability to knit together a sentence using metaphors and analogies that clarifies coudy economic topics. Each (blog) has their own place, and I’m thankful that not all blogs take Perry’s approach.

Ken October 26, 2011 at 1:58 pm

Jae,

I think his efforts would be better spent on a blog such as Mark Perry’s Carpe Diem

His time spent on Carpe Diem might benefit you more, but not him. If it truly benefited Don more to blog on Carpe Diem, he would be doing it. Instead, he chooses to belong here. Substituting your preferences for his isn’t “better”.

Regards,
Ken

Miles Stevenson October 26, 2011 at 10:05 am

Every time I hear the claim that spending is what grows the economy, I can’t help but think of the hilarious scene in Douglas Adams’ “Hitchhikers Guide to the Galaxy” series, in which a small group of people colonized an uninhabited planet, declared that the leaves from a certain tree will be used as the form of currency for their new civilization, and then thought themselves “rich” after gathering piles and piles of leaves as they went hungry and had no shelter in which to sleep.

Ken October 26, 2011 at 1:08 pm

“It now takes the equivalent of thirty-seven deciduous forests to buy one ship’s peanut.” :)

Will October 26, 2011 at 10:17 am

How hard is it to understand that when government spends, it does so by taking from some one else? How is that growth? How hard is it to understand that what business investors does with their money is a risk taken by that investor with incentives to invest correctly; whereas, when the government spends it is a risk to taxpayers money and has no incentive to spend as efficiently as the business investor spends his own money? See Solyndra, Fannie, and Freddie as compared with Apple, Google, and Amazon as the best examples we have seen lately.

Also, the greatest mechanism of growth between 1900 and 2000 was the corporation because it spread investment to the public and does so more efficiently than the government ever will.

Fred October 26, 2011 at 10:32 am

How hard is it to understand that when government spends, it does so by taking from some one else?

I think it comes from the socialist/collectivist fallacy that government and society are one in the same.

Nikolai Luzhin, Eastern Promises October 26, 2011 at 2:07 pm

There is no Ricardian equivalence. Why does it keep raising its head?

Nikolai Luzhin, Eastern Promises October 26, 2011 at 2:05 pm

While I agree with some of James Livingston writes (to the extent he recognizes the paradox of thrift), how he frames the discussion strikes me as, at best,out of context and shallow.

It is obvious what he is about and why the Times published the piece, but one has to question.

For example, a paradox that he does not recognize is that tax cuts lead businesses to invest elsewhere, because they fear future compensating tax increases. Robert Dugger makes the sound case for this, which he calls Fiscal Adjustment Cost. Readers here should read Dugger, who offers far more insight than Hayek

Beyond that, he makes unbelievable leaps of cause and effect. How soon does business investment result in an increase in the capacity for growth? And, I question the statistics on which he relies. For example, how are are upgrades from XP to Windows 7, which are incredibly productive, counted. With so much value being added by software?

Beyond that, the article is really chicken and egg and begs the question, with more investment what would growth have been? IOW, there is no there, there.

Dallas Weaver October 26, 2011 at 4:12 pm

The concept of “net business investment ” may be a bit mushy. How does it include innovation, intellectual capital, management “art”, etc? All these factors have become far more important since 1900 in creating or producing new value. In 1900, building steel mills was important, but in 2000+ designing an easy to use i-phone is an intangible investment with no real hardware and may not be counted as a business investment and depreciated. I doubt if Steve Jobs and in innovative staffs salaries were classified as a business investment, capitalized and depreciated.

Likewise the concepts of book value are also now a bit strange.

Dave October 26, 2011 at 5:47 pm

I can’t believe Don’s letter to the editor was this short on such a ridiculous op ed. He could probably write a letter per day for the rest of the year just tearing apart this one column…

SmoledMan October 26, 2011 at 6:26 pm

Don’t bother trying to explain the business cycle to idiots. They think businesses just sprouted magically from nothing along with consumers.

jorod October 26, 2011 at 9:38 pm

The socialists don’t understand that savings/investment is the consumption that keeps on giving.

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