Quotation of the Day…

by Don Boudreaux on November 1, 2011

in Complexity & Emergence, Growth, Innovation

… is from page 24 of Julian Simon’s profound 1996 book The Ultimate Resource 2:

[N]atural resources are not finite in any meaningful economic sense, mind-boggling though this assertion may be.  The stocks of them are not fixed but rather are expanding through human ingenuity.

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{ 98 comments }

Daniel Kuehn November 1, 2011 at 8:08 am

They are scarce in a meaningful economic sense, though, and there is no guarantee their expansion (which Simon is right to note) will keep pace with demand for them, which is also guaranteed to expand.

The pessimists unfortunately ignore one end of the Marshallian scissors, but the cornucopians ignore the other. As Brad DeLong explained, you can’t make price projections simply by noting that supply looks bright any more than you can make dour price projections by looking only at demand.

At the time you accused me of reading economists like Brad DeLong with “eagerness to excuse him or her from dumbshit error”. I’m still of the opinion that it’s not a “dumbshit error” for Brad to have responded to you that while supply will continue to innovate and expand, so will demand – and placing our expectations in either the pessimist or the cornucopian camp is dangerous.

Methinks1776 November 1, 2011 at 8:38 am

Well, if you let government obstruct every attempt of humans to innovate, then you can reliably place yourself in the pessimist camp. Of course, when the effects of that obstruction become apparent, DeWrong will call for more government interference and you will be his echo.

Daniel Kuehn November 1, 2011 at 8:51 am

You know the difference between your comments on here and mine? I’m actually making a criticism on the basis of predictions that Don has actually made in the past as to the course of resource prices. Any time, if Don says “actually now I agree with you Daniel – I don’t have any expectation one way or the other about resource prices, just like you and DeLong”, then I will say “great – I still think that, so we agree”. You have no good reason for thinking DeLong will call for more interference to “fix” a problem that was initially caused by obstruction, you have no good reason for thinking I would automatically endorse that, and even if I were to tell you I agree with you and that I wouldn’t endorse that you’d continue to tell me you know my mind better than I know my own. No government obstruction was even discussed here as the origin of my skepticism about persistent price declines, and no obstruction was offered by me as a solution. Doesn’t matter. Methinks knows all and is going to go off on her own tangent about how we love government so much.

And yet they still call out muirgeo as the troll here when you’re one of the biggest trolls of all. Muirgeo raves about corporations being behind everything and he insists he knows all your minds better than you know your own. You rave that government plotting is behind everything and insist that you know our minds better than we know our own. From the first day I commented here until today, I’ve never seen all that much difference between you and muirgeo.

Greg Webb November 1, 2011 at 9:32 am

Daniel, there is a huge difference between Methinks1776′s comments and muirgeo’s comments. Muirgeo’s comments are silly personal attacks, incoherent and illogical arguments, non sequiturs, straw man arguments, and prevarications. Methinks1776′s comments are thoughtful and supported by evidence that is both objective and verifiable. She is blunt and will give those who advocate for bigger government much grief. That you would lump them together reveals the animosity that you feel towards those who criticize your views.

Brad DeLong often argues for government intervention that stiffles innovation. It is reasonable to assume that he would do the same in situations involving natural resources. And, you do give the impression that you think that you support similar policies.

Julian Simon’s statement posted above is exactly right. Your comment makes a valid point though price projections were not really the issue.

Gil November 1, 2011 at 11:47 am

The difference with Methinks and muirgeo is that Methinks tows the party’s line.

Greg Webb November 1, 2011 at 12:33 pm

Nah, Gil! It’s big-government advocates like you and Muirgeo who tow the party line. You are useful idiots to the political class to which you can never hope to be accepted into.

Sam Grove November 1, 2011 at 1:31 pm

When did we stop TOE-ing the line?

Gil November 1, 2011 at 11:08 pm

In other words a lot commentors here use the standard argument fallacies but because they support Libertarianism no one cares.

Greg Webb November 1, 2011 at 11:20 pm

Gil said, “The difference with Methinks and muirgeo is that Methinks tows the party’s line.”

Thanks for proving that you’re as dumb about character and intellect as you are about basic economics.

Methinks1776 November 1, 2011 at 9:48 am

Ha ha ha! So, you’re unhappy with my comment? That’s quite a display of raw emotion.

Captain Irony, you claim I don’t know what you would say, but you’re certain you know what I will say and I’m the one who claims to know everyone’s mind? I think you need to switch to decaf.

That’s my prediction, pet. Based on past experience. Nothing more.

I did bring up one way (the main way) in which innovation has been frustrated in the past. I must not have realized that you’re the only one who can expand on ideas here. I guess that makes me a troll. After all, your definition of a troll is someone who doesn’t constantly stroke your ego as the smartest, most profound little boy in the world . That would be me.

Greg G November 1, 2011 at 10:11 am

Daniel

This isn’t really such a bad system. The inconsistencies that you are so good at pointing out are wildly popular on this blog. But they are also the reason that Austrian economics is so rarely found in nature far from a Koch funded institution (not that there’s anything wrong with that). This is one of those worth while tradeoffs.

Greg Webb November 1, 2011 at 12:36 pm

Greg G, thanks for towing the big-government party line. I know that anything more than a “Koch Brothers” personal attacks is well beyond your abilities of argumentation.

Greg G November 1, 2011 at 3:19 pm

GW

So is this comment of yours an argument or a personal attack?

Greg Webb November 1, 2011 at 4:46 pm

Greg G, it is merely a statement of fact. It would have been a personal attack if I had called you a mindless minion of George Soros.

House of Cards & Economic Freedom November 1, 2011 at 1:07 pm

From the first day I commented here until today, I’ve never seen all that much difference between you and muirgeo.

Which only goes to prove what we’ve always suspected: that you’re as dumb about character and intellect as you are about basic economics.

Greg G November 1, 2011 at 4:57 pm

GW

Who is it you think I personally attacked?

Greg Webb November 1, 2011 at 6:42 pm

Greg G, now you are being obtuse. Read your own post and let’s see if you can figure it out.

Greg G November 1, 2011 at 6:55 pm

GW

The “attack” was on the ideas of Austrian economics not on a particular person as in “personal.”

You guys are all about being rough and tumble debaters when you are dishing it out but you cry like babies when any criticism comes back.

Greg Webb November 1, 2011 at 7:51 pm

The problem Greg G is that your “criticism” of the Austrian School of Economics has been disingenuous at best and stupid at worst.

Your conclusory and false statements about the Austrian School of Economics are silly personal attacks on all who follow this blog. Your silly comment would be like an Austrian posting on Brad DeLong’s blog that Keynesians are witless fools funded by George Soros. And, tat is not a persuasive argument.

If you can’t make a persuasive argument, don’t say anything. If you can, then make one.

Personal attacks, whether on one person or many, simply says that you cannot advocate for, or defend, your views. And, that makes you a witless cry baby who simply wants big government to steal from the able to give to the unable, which is you if that is the best argument that you can make against the Austrian School of Economics.

Greg G November 1, 2011 at 8:07 pm

GW

That was quite a tantrum. Thank you for proving my point. Here is an idea that I hope is not too radical for a libertarian: You say what you want to say and I’ll say what I want to say.

Greg Webb November 1, 2011 at 8:10 pm

Greg G, run away little cry baby statist, run away! The big bad libertarian demands a persuasive argument from poor little defenseless statist.

Greg G November 1, 2011 at 8:16 pm

GW

Make all the demands you like. Now you are just boring me. Bye.

Greg Webb November 1, 2011 at 10:13 pm

LOL, Greg G! That is a new defensive for being unable to make a coherent argument. You’re “bored.”. Ha! Coward!

brotio November 2, 2011 at 12:49 am

Personal attacks, whether on one person or many, simply says that you cannot advocate for, or defend, your views.

Let me amend that a bit.

Relying solely on personal attacks, whether on one person or many, simply says that you cannot advocate for, or defend, your views.

I have no problem with people pointing out that Yasafi is a stupid Regressive who wouldn’t know his name if wasn’t embossed on his belt for him to see when he pulls his head out of his ass – and then destroying his argument.

Greg G November 2, 2011 at 7:52 am

Brotio

I did not claim, and do not believe, that there is anything improper about the Koch brothers funding institutions that promote their beliefs. I merely pointed out how essential those institutions, and that funding, are in keeping Austrian economics alive. That is not any kind of personal attack, individual or collective. It is an argument that this reflects on the ability of Austrian economics to survive in the battle of ideas without that kind of assistance.

And yes, I am aware that Soros spends a lot of money supporting his beliefs. I do not believe that Keynesian economics depends on Soros to anything like the extent that Austrian economics depends on the Kochs.

I was also rejecting the idea that if my arguments are not “persuasive” to GW then they are somehow inappropriate here. A huge percentage of the comments a see here are simply insults without arguments. I usually skip over them and ignore them. Anyone who thinks that I am doing that is free to skip over and ignore my comments.

Methinks1776 November 2, 2011 at 8:19 am

Right, Greg, it’s not so much a personal attack as it is an unsubstantiated assertion rooted in your vast ignorance of any school of economics. You can’t even do a passable job of defending Keynes.

You do more whining on this blog than anyone else. First you whine about Keynes not getting hid due in these parts, then that people dare to take exception to your passive aggressive interactions, then you assert that Austrians aren’t taken seriously (not that you would know, but you heard someone say that once) and libertarians suck in general.

Grow a pair or take some Midol, princess.

Greg G November 2, 2011 at 8:27 am

Methinks

I am not complaining. I am pointing out that I like this arrangement where your ideas are very popular within this blog but not very popular outside it.

That is more like dancing in the end zone than whining.

Methinks1776 November 2, 2011 at 8:35 am

The world would just not be the same without your pearls of wizdumb, Greg.

Greg Webb November 2, 2011 at 9:11 am

Greg G, Keynesianism has a broader appeal because it gives “credibility” to the old ideas the a few elite should rule the many and that politicians may “legitimately” use taxpayer money to payoff political cronies for votes and kickbacks in the form of campaign contributions. Of course, it’s popular. So are prostitutes. But, popularity is not a valid argument in favor of Keynesianism, princess.

Brotio, I agree to your modification of my previous comment regarding personal attacks. But, I wish one of these statists could make a valid argument in advocating big government instead of silly conclusory statements and personal attacks.

Greg G November 2, 2011 at 9:33 am

GW

I never argued that Keynesianism is right just because it is popular. I first raised the popularity issue simply as a way of putting Daniel’s frustration at how he is received on this blog into a larger perspective.

I do think that the popularity of Keynes with economic professionals (I am not one) has relevance to the evidence for it. There is an intellectual marketplace where ideas compete after all. My own view of why Keynesianism is broadly accepted is that Keynesian policies were followed from 1941 to around 1966 during a period of quite good economic results.

Greg Webb November 2, 2011 at 10:20 am

Greg G, you passive-aggressively implied that the Austrian School of Economics is wrong because it is not popular and only seems to you to be popular where the evil Koch Brothers have provided funding. That is nonsense.

It was fun to revise your argument into one against Keynesian “popularity”. But, the US economy did not do well from 1941 to 1946. That’s just stupid because a devasting war was killing millions and destroying vast amounts of property during that time. And, from 1946 to 1961, the US economy benefitted from its intact manufacturing base while the rest of the world rebuilt. From 1961 to 1966, the US economy benefitted from JFK’s tax cutting efforts. So when are you going to make that valid argument in favor of Keynesian economics?

Greg G November 2, 2011 at 10:40 am

GW

My point is not to deny that the war made most people worse off while it lasted. Nor is it to deny that the US was in much better shape than the rest of the world after WWII. My point is that from 1941 to 1966, U.S. fiscal policy was broadly counter-cyclical in a way that it has not been before or since. And that was a big part, certainly not all, of what facilitated the growth of the economy in that period. And that Keynes predicted that kind of fiscal policy would work that way ahead of time. That is why so many people find Keynes more convincing than you do.

Methinks1776 November 2, 2011 at 11:06 am

Except that you ignore that the much of the New Deal was dismantled after the war, removing a huge obstacle to industry. And that Keynes fell apart in the 1970′s. You’re not supposed to have high inflation coupled with high unemployment, remember?

Oh, and you forgot to mention to Greg Webb that tax cuts are technically part of the Keynesian stimulus portfolio. Or didn’t you know?

Dan H November 2, 2011 at 11:21 am

“That is why so many people find Keynes more convincing than you do.”

No. You find more Keynesians because from the first time the set foot in a Macro class as an undergrad, Keynesianism is taught as FACT, not theory.

You’ll find more Austrians that are reformed Keynesians than you will Keynesians that are reformed Austrians. That should tell you something.

Greg G November 2, 2011 at 12:25 pm

Dan H

“You’ll find more Austrians that are reformed Keynesians than you will Keynesians that are reformed Austrians. That should tell you something.”

Yes it should. It tells me two things. First, that the pool of Keynesians available for potential reform is vastly larger than the pool of Austrians available for anything.

Secondly, it tells me that Keynesians are more willing than Austrians to consider alternative viewpoints.

Greg G November 2, 2011 at 12:36 pm

Methinks

The economy came off the rails in the 70′s because policymakers had long since departed from the Keynesian prescription of a counter-cyclical fiscal policy. They had long been financing the Viet Nam War with ever increasing deficits in a time of full employment and that non-Keynesian bad habit came back to bite them.

Methinks1776 November 2, 2011 at 12:46 pm

Uh-huh. So, you missed the bit about the unemployment rate and inflation climbing simultaneously through the 70′s?

Greg Webb November 2, 2011 at 1:11 pm

Greg G, you referring to counter-cyclical fiscal policy, said, “And that was a big part, certainly not all, of what facilitated the growth of the economy in that period.”

No. What facilitated economic growth was FDR’s crazy anti-business rhetoric died with him. FDR brought business people into his administration during the war because he wanted to win it. He moved many of the leftist ideologues from power or into side jobs where they could not longer do any damage. President Truman did not re-empower those ideologues after the war and the anti-business rhetoric did not return. Private investment soared after the war, which lead to economic growth in the post-WW2 period. Keynesianism did not do it.

You also said, “And that Keynes predicted that kind of fiscal policy would work that way ahead of time.” Keynes’s theory was that people made spending decisions based upon their emotions and, in bad times, government could change their emotions through deficit spending. The idea was that, if people saw their betters in government spending, then they would realize that they were not hurt and private demand would increase and replace the government spending that was filling the aggregate demand gap.

But, that idea fails to see that people were really hurt economically by the boom and the bust cycle created by easy monetary policy. The cure is to stop anti-business rhetoric and allow prices (in this case housing prices) to fall to equilibrium based on current demand (without government incentives) and existing supply. All government activity has done is prolong the recession, increase the amount of government intervention which will lead to greater crony capitalism, and greatly increased the national debt.

Greg G November 2, 2011 at 1:22 pm

Methinks

Yes, we did have high unemployment and high inflation in the 70′s and that did serve to discredit Keynes in the public mind. That is a fair point. Of course all that also served to consolidate the idea that macro analysis was valid since that is what Friedman had used to predict those events. But that is an argument for a different thread.

My own view, is that Keynes was writing specifically for the conditions of his time – not for a time when there had been a long accumulation of debt during full employment. Of course he has himself at least partly to blame for that since he called his book “The General Theory” instead of “the Special Theory.”

Incidentally, this is one of the reasons that I am more skeptical than most self described Keynesians about the value of more stimulus for the sake of stimulus today. Keynes himself was always more concerned with inflation than most self described Keynesians that came later.

Greg Webb November 2, 2011 at 1:34 pm

Greg G, you said, “Incidentally, this is one of the reasons that I am more skeptical than most self described Keynesians about the value of more stimulus for the sake of stimulus today. ”

Many Keynesians were skeptical about government counter-cyclical fiscal policy during the Great Depression too. Then Secretary of the Treasury Henry Morgenthau in testifying before Congress in 1938 said, “We have tried spending money. We are spending more than we have ever spent before and it does not work … After eight years of this Administration we have just as much unemployment as when we started … And an enormous debt to boot!”

Greg G November 2, 2011 at 1:42 pm

GW

You want to fault Keynes for relying on psychological explanations but then substitute a psychological explanation of your own about the effect of rhetoric on business psychology.

I actually think that Minsky improves on Keynes quite a bit in explaining the business cycle. Minsky says that, during economic expansions, risky forms of financing are rewarded, which leads to an increase in riskier forms of financing until the credit bubble ends badly. A counter-cyclical fiscal policy would combat that by reducing monetary expansion during periods of economic growth.

I agree that housing prices need to come down and that we are prolonging the agony by slowing that process. But too rapid drop in housing prices could easily set off another round of failures at TBTF institutions and that could have any number of very bad effects, not the least of which could be increasing the federal deficit a lot more.

Greg Webb November 2, 2011 at 4:04 pm

Greg G, you said, “You want to fault Keynes for relying on psychological explanations but then substitute a psychological explanation of your own about the effect of rhetoric on business psychology.”

I did not fault Keynes for relying on psychological explanations. I criticized him for a false psychological explanation that says people will begin spending again IF they see their betters in government spending. That does not work as noted by former Secretary of the Treasury Henry Morgenthau. And, Keynes himself said that FDR was wrong for all his anti-business rhetoric.

You also said, “A counter-cyclical fiscal policy would combat that by reducing monetary expansion during periods of economic growth.”

Why not just control monetary policy and eliminate government-created incentives that cause the boom and bust cycle instead?

You said, “I agree that housing prices need to come down and that we are prolonging the agony by slowing that process.”

I agree!

You also said, “But too rapid drop in housing prices could easily set off another round of failures at TBTF institutions and that could have any number of very bad effects, not the least of which could be increasing the federal deficit a lot more.”

Those institutions are Not To Big To Fail. And, as Anna Schwartz wisely said, “Let them fail!” Capital then moves from the incompetent to the competent and the economy moves quickly from recession to growth again. A lot of political cronies get hurt, but that is unimportant. They, like Jon Corzine, should lose their investment because they took excessive risk when they should not have. Letting them fail allows the free market system to work. Taxpayer funded bail outs create more risk taking since these institutions essentially have a “Heads I win, tails the taxpayer loses” mentality.

Greg G November 2, 2011 at 6:59 pm

GW

Now that we have a Resolution Authority in place I agree that we should allow these big financial institutions to fail regardless of their size. I do think that, if that had happened in a disorderly way in 2008, resolving things with years of litigation, the results would have been catastrophic. The bondholders definitely need to take as big a haircut as necessary in these cases. But if nothing is done to protect more innocent counterparties, or if all TBTF go at once, results could still be catastrophic.

I think that a counter-cyclical fiscal policy is best because anything else will turn out to be pro-cyclical. If you “fear the boom and bust” you don’t want that. Trying for a balanced budget means you will cut when the economy is contracting and spend more when it is expanding, exaggerating the swings.

I don’t believe you can eliminate the boom and bust cycle through monetary policy although good policy can surely help. I think Minsky had it right about the cause of the business cycle. Even Friedman, the most famous monetarist ever, was oblivious to the housing bubble. And, yes, I know Austrians are not monetarists. Monetary policy will always be difficult because it is very hard to measure credit creation in the country and it is hard to measure how much money winds up overseas.

I think it is silly for you to say that Keynes claimed that the psychological effects of “see(ing) their betters in government spending” was what Keynes claimed made his theory work. That is a straw man. It was the economic effect of seeing actual dollars in their hands as a result of the multiplier effect that Keynes claimed would work. You don’t have to agree with that to realize it has nothing to do with any claim of people being inspired by “their betters in government.”

Greg Webb November 2, 2011 at 10:55 pm

Greg G, you said, “I do think that, if that had happened in a disorderly way in 2008, resolving things with years of litigation, the results would have been catastrophic.”

Nonsense. The courts have handled the orderly reorganizations and liquidations of all sorts of complex companies. Government bailouts are disorderly because they change the rules. Just ask how much happier are the creditors of Goldman Sachs rather than the creditors of Lehman Brothers. But, that change created chaos in the financial markets. In fact, the government’s actions clearly have had catastrophic results with years of uncertainty and chaos in the financial markets. The only certainty was that political cronies, like Goldman Sachs, got bailed out.

You said, “But if nothing is done to protect more innocent counterparties, or if all TBTF go at once, results could still be catastrophic.”

Counterparties are not innocent. They know who they are dealing with. The results are only catastrophic to political cronies, which is as it should be.

You said, “I think that a counter-cyclical fiscal policy is best…”.

Of course you do! The evidence that it did not work during the Great Depression based on Henry Morgenthau’s testimony does not matter. The evidence that drastically reduced government spending after WW II lead to economic growth in the late 1940s and 1950s does not matter. The evidence that politicians will run deficits in both good and bad economic times does not matter. The evidence never matters to those who advocate for government intervention through fiscal policy.

You said, “I don’t believe you can eliminate the boom and bust cycle through monetary policy although good policy can surely help.”

The business cycle can never be eliminated. But, stable monetary policy combined with the elimination of perverse incentives created by the government’s fiscal, tax, and regulatory policies will keep the normal business cycle from being lengthened into a boom and a bust like the most current one.

You said, “Monetary policy will always be difficult because it is very hard to measure credit creation in the country and it is hard to measure how much money winds up overseas.”

It is also very difficult to control willful and stupid politicians to ensure that countercyclical fiscal policy is properly and timely implemented. It is also very difficult to correctly calculate the multiplier effect of those fiscal policies. Relatively speaking, enforcing a relatively stable monetary policy is easier than implementing countercyclical fiscal policy.

You falsely claimed that I made a straw man argument. Your variation of “the animal spirits” is equally false. You claimed that “it was the economic effect of seeing actual dollars in their hands as a result of the multiplier effect that Keynes claimed would work.”. President Bush said the same thing with his tax rebate nonsense. Yet, it did not work just like deficit spending under FDR did not work and just like deficit spending under President Obama has not worked.

Keynesianism has failed every time it has been tried. But, to a Keynesian economist, when Plan A fails, run Plan A again!

Greg G November 3, 2011 at 7:44 am

GW

“Counterparties are not innocent. They know who they are dealing with. The results are only catastrophic to political cronies.”

And with this claim you put your finger on the chasm between the consensus view on this blog and the mood of the country in general. There were plenty of hard working innocent people who bought traditional insurance policies from AIG. Those people could not reasonably have been expected to know or understand the crazy things AIG was doing with CDS insurance. Even their CEO didn’t understand that.

No one disagrees that there are political cronies who should not be protected. I would have loved to see Goldman lose every penny they spent on CDS insurance. They really were in a position to know who they were dealing with and understand that the entity they were buying CDS from would not be able to pay if that became necessary. But to lump the average middle class purchaser of ordinary insurance in the same category, and say they should have known better than to deal with AIG, is simply crazy. This is a perfect example of why your ideas are not gaining more traction outside of this blog.

I often agree with the less paranoid criticisms of government that I see on this blog. But when you combine such a highly idealized (“There are no innocent counterparties.”) view of private transactions with an extremely cynical view of government, you begin to lose all touch with reality.

Greg Webb November 3, 2011 at 11:37 am

Greg G, you said, “There were plenty of hard working innocent people who bought traditional insurance policies from AIG” in arguing that counter-parties should have been bailed out with taxpayer money.

And with this claim you put your finger on the chasm between intelligent people across the nation who argued that government had no business bailing out anybody and leftist demagogues who were both witting and unwitting useful idiots to corrupt politicians and their political cronies.

You should learn something about the specifics of the examples you use as well as the bankruptcy code before you immediately jump to false conclusions. The counter-parties to AIG’s holding company, which was the entity selling the CDS, were big investment banks that should have known better. The normal insurance activities of AIG were handled by AIG subsidiaries so the “hard-working people” of which you speak were not counter-parties to the unit selling CDS.

A bankruptcy court would have sold off the profitable insurance subsidiaries to other companies that would have loved to buy them. The proceeds would have been used to pay off AIG creditors and counter-parties to the CDS. Thus, no “hard-working people” are harmed, and Goldman Sachs and other investment banks don’t get bailed out in a round about way by the federal government honoring those CDS.

And, that is the difference between you and me. My plan only punishes those who should have known better, allows other companies to benefit at the expense of AIG shareholders, and keeps the US taxpayer from having to bail out political cronies. Your plan, based on misguided guilt and emotion, results in political cronies getting bailed out by US taxpayers and corrupt politicians benefiting by pretending they rushed in to save the world from economic collapse. When there are billions of dollars are stake, always check your ego and emotions at the door for they will only cost the US taxpayers a lot of money.

You said, “I would have loved to see Goldman lose every penny they spent on CDS insurance.”

If this is really true, why not allow the bankruptcy courts and code to work as intended. Your intervention results in the theft of billions of taxpayer money by political cronies like Goldman Sachs.

You then foolishly criticized people who support free people and free markets to advocate for government intervention that results in bailing out political cronies and permits government officials to pretend like they did something useful. The only question is why. Are you a useful idiot who simply won’t take the time to learn or even to listen to the common people who at the time were appalled that AIG was being bailed out? Or are you a corrupt politician or government official or perhaps just another political crony? Don’s Quote of the Day seems particularly applicable to you as it is to all who support more government intervention: “[A]s usual he found it pleasant to give his imagination free rein, unhampered by experience.”

Greg G November 3, 2011 at 1:42 pm

GW

Right. And this all would have been litigated so quickly and efficiently that no innocent policyholders would have been hurt. It’s amazing how quickly and efficiently the government works when you want it to. When were these improvements made to our court system and insurance regulatory system.? And if the government really can do those things right, why shouldn’t we expect them to do some other things right?

Greg Webb November 3, 2011 at 3:16 pm

Greg G, you said, “Right. And this all would have been litigated so quickly and efficiently that no innocent policyholders would have been hurt.”

You should try to understand how the bankruptcy court process works rather than continuing to make silly arguments to support your heart-felt desire to support big-government politicians and their political cronies.

The court allows the existing subsidiary management to continue operating the subsidiaries legitimate insurance and other business functions while the subsidiaries are being marketed to other companies. The court appoints a supervisor to oversee subsidiary management during this process. No insurance policyholders are hurt because the subsidiary continues to operate as it did before, with all legitimate claims being make within the normal time frames.

You emotionally bleated that “It’s amazing how quickly and efficiently the government works when you want it to.”

No one disputes the abilities of the bankruptcy courts…except for useful idiots who believe corrupt politicians that use a “crisis” to funnel taxpayer money to bail out political cronies like Goldman Sachs. Why would anyone want a “new government program” to take over for the bankruptcy courts that have a proven track record of operating reasonably well. No one would…unless he wanted to help political cronies that would not get paid on their CDS if the bankruptcy code is used. And, the only way to circumvent the United States Bankruptcy Code was to create a new process.

You then asked, “When were these improvements made to our court system and insurance regulatory system?

The bankruptcy courts have had a long history and learned a lot over the years in actually reorganizing and liquidating companies.and the judges have gained lots of experience in doing so. But, that is not the question. The real question is why would anyone want to circumvent such an experienced and proven system for an untried and unproven system with government bureaucrats with no experience is such matters and subject to political influences? Why political cronies like Goldman Sachs would because it would not have gotten paid under the CDS if the bankruptcy code was applied.

You then, incorrectly, conclude that “and if the government really can do those things right, why shouldn’t we expect them to do some other things right?” As I previously said, the bankruptcy courts have a long history in reorganizing and liquidating companies and judges experienced in doing so. It took a lot of time in getting them up to speed, but now that they are why start all over again. It is inefficient and ineffective to keep starting from scratch with government services. And, the courts are a legitimate function of the federal government while taxpayer bailouts are not.

I reiterate my earlier question. Why would you want to deny logic and facts to continue advocating for taxpayer funded bailouts of political cronies by corrupt politicians rather than letting the legitimate and time-honored functions of government (i.e., the court system) to work? Either you are a corrupt politician, a political crony, or a “useful idiot” to them both. So, why spend you time and talent helping those crooks?

Daniel Kuehn November 1, 2011 at 8:53 am

Oh – and if Don chooses never to agree with me, I’m just going to think he’s wrong – not “the stupidest man alive” or “a Koch lackey”.

Methinks1776 November 1, 2011 at 9:56 am

Congratulations. Speaking of going of on random tangents (which you’re theoretically against but go off on all the time), what does that have to do with anything?.

House of Cards & Economic Freedom November 1, 2011 at 1:10 pm

f Don chooses never to agree with me, I’m just going to think he’s wrong

The sure sign of a dumbshit Keynesian: the criterion for judging the truth of someone else’s argument is “does he agree with me?”

GAAPrulesIFRSdrools November 1, 2011 at 10:05 am

(Formerly anotherphil)

Dewrong. Man that made me laugh. Of course combined with the snow, it reminded me of the Chinese restaurant scene in “A Christmas Story”.

Rich Berger November 1, 2011 at 8:47 am

You are an incredible sourpuss and you did a bait and switch on Simon’s obviously true statement. At any one point in time, most things are scarce (or else they would have no value). Simon’s point was obviously made in relation to the long run. Take that Peak Oilers!

Daniel Kuehn November 1, 2011 at 8:51 am

The statement is true and I said it was true. These bets are based on illogical extensions of that true statement, though.

Rich Berger November 1, 2011 at 10:05 am

Did Brad ever take Don’s bet?

Rich Berger November 1, 2011 at 11:16 am

Since you didn’t respond, I did some research and found that he did not take Don’s bet. So much for the courage of his convictions. Don also concluded that Brad DeLong is not a nice man, which should be obvious to anyone who spends a little time at his blog.

Daniel Kuehn November 1, 2011 at 3:16 pm

What do you mean “courage of his convictions”? Why would he bet on something he never believed was true????

Daniel Kuehn November 1, 2011 at 3:16 pm

Of course not. Don was under the impression Brad was making Ehrlich’s claim. Brad is an intelligent economist and obviously never made anything close to Ehrlich’s claim.

What Brad correctly pointed out is that Ehrlich and Simon both have massive blindspots with regard to the economics of natural resources: both of them were wrong.

Nikolai Luzhin, Eastern Promises November 2, 2011 at 5:10 am

read your blog

you are making a very bad mistake in your approach to economics and that is that people are taking positions because they believe them

that isn’t true.

From Hayek forward, what Libertarians (and conservatives) say is Code.

there is no search for intellectual honesty here. The port to be reached has already been decided upon. What is said is a means to and end, the saying being done by people who will say or do anything to reach that end

Rich Berger November 2, 2011 at 12:33 pm

Daniel-

Your response is lame, even by your standards. If you read the blog posts, you see that DeLong was calling Don “the stupidest man alive” for agreeing with a Tierney post that described a bet on oil prices that (ironically) Tierney had just won. DeLong cited a post from Jim Hamilton at Econbrowser, that was beside the point since it looked at physical output from various sources and did not address the important issue of price. Don reasonably responded to DeLong by proposing a Simon – Ehrlich style bet that the real prices of natural resources would decline over time. DeLong refused the bet and substitued a much more stringent one – that WTI crude would be less than $20 in real terms in 2031. Given that the price at the time was in the mid-80′s that was a sucker’s bet. DeLong wanted Don to bet that the real price would be less than 25% of the current price. What a p**sy!

DeLong ducked the reasonable wager – he lacked the courage of his invective, since calling them convictions would be giving them too much credit.

Instead of the facts, you blur the issue with your talk of “massive blindspots”. That wording gives you cover and totally misrepresents the issues involved.

The Other Eric November 1, 2011 at 10:14 am

In person Dan, you have GOT to be the most passive-aggressive person, ever.

Simon’s book goes on, after page 24, to also pick up the idea that resources, even when “becoming more scarce” over time, offer substantial models from which innovation can branch out. Eg. Oil puddles and pitch provided the basic material from which, years later, petroleum was distilled. That innovation led to industries and ills, but it led to innovation because it was exploited, experimented upon, and built on.

Energy, food, medicine, and more are not fixed but rather are expanding through human ingenuity. In some sense, which you will no doubt want to redefine and modify, scarcity only matters as it drives the pace of that innovation.

MeThinks76 makes the point that so many people run up against– Government intervention obstructs innovation even if it is meant to protect. It stifles progress while ‘designed’ to to be progressive.

Fred November 1, 2011 at 10:15 am

while supply will continue to innovate and expand, so will demand

As price goes up, substitution kicks in.
Next thing you know the cheaper substitute is used instead and there remains a supply of the finite natural resource.

Unless, as Methinks pointed out, government steps in to prevent exploration of the resource, ban the substitute, or toss some other monkey wrench into the economic machine.

dsylexic November 1, 2011 at 10:49 am

there are plenty of pessimists,but i dont see any cornucopian at all.julian simon was no cornucopian.

Randy November 1, 2011 at 10:52 am

Daniel,

There are now 7 billion people in the world – and growing. The challenge for those who want to rule the world is to avoid an outbreak of mass violence. If they exercise too little control, too much control, or the wrong type of control, the result will be mass violence.

Our current “leaders” are devoted to exercising too much control. It is a very human response. The challenges are many and must seem overwhelming. But the more they seek to control, the more isolated they become. They drive away those who could help, but who will not help while being treated like serfs.

So here’s the thing… I sense in you some willingness to listen as well as preach. The preaching, we don’t really need… and as you may have noticed, are quite tired of hearing. But perhaps you could teach your compatriots how to listen. That really might do some good.

Nikolai Luzhin, Eastern Promises November 2, 2011 at 5:12 am

Randy

Can we agree that if something or someone does rule the world that there will be outbreaks of mass violence, at best?

John Dewey November 1, 2011 at 11:32 am

Daniel: “there is no guarantee their expansion (which Simon is right to note) will keep pace with demand for them, which is also guaranteed to expand.”

I do not understand what you mean by this sentence, Daniel. If demand for any single resource grows faster than supply is growing, I would expect:

1. increased profits for suppliers will attract new suppliers and supply growth will increase;

2. increased prices will reduce demand;

3. technological changes will reduce demand;

4. substitute goods will be developed.

Those four reactions to a temporaty imbalance have and will continue to enable the supply of a specific natural resource to meet the demand for that resource. Do you doubt that will continue to happen? The only factor I have ever observed which has prevented supply and demand from balancing is government intervention.

Krishnan November 1, 2011 at 11:47 am

The pessimists have never proven to be right – and yet they continue with their “the sky is falling” – If anything, when demand increases, supplies increase even faster because there are those that seek to profit from the demand (assuming of course that GOVERNMENT allows such economic activities to occur) – We are watching this today with oil/gas – even as newer technologies are proven to recover ever more oil/gas to meet demand, GOVERNMENT does everything in it’s power to stop such (there is a mini lull because of Nov 2012).

Pessimists are indeed prone to project using current technologies and information – and optimists simply say “We do not know what will come to relieve us of any scarcity that may arise, but we humans have always innovated to make them less scarce” (assuming ofcourse that GOVERNMENT does not make that possible and they have, so many times)

Gil November 1, 2011 at 11:49 am

If natural resources aren’t finite in any meaningful sense then you folks should be willing to sell D. Kuehn bars of gold for $10 apiece.

Economiser November 1, 2011 at 11:54 am

You’re confusing availability and price.

I’m willing to sell D. Kuehn as many bars of gold as he wants. All I ask in return is the spot price of gold plus a commission.

Greg Webb November 1, 2011 at 12:38 pm

Gil, you really don’t understand anything beyond statist propaganda, do you?

Ken November 1, 2011 at 1:21 pm

Gil,

“[N]atural resources aren’t finite in any meaningful economic sense”

I noticed you missed a word, so fixed it for you.

Are you really this sloppy or are you just a hack?

Regards,
Ken

Gil November 1, 2011 at 11:12 pm

There’s a difference between there’s a huge of amount of oil in the ground and getting the huge amount of oil into refineries in an economic/profitable way. Hence people can run out of usable oil for all time and revert to horses and buggies while there still oil in them thar crust. It’s little different from saying a moon of Jupiter has seemlingly infinite hydrocarbons – it’s no good if you can’t economic extract it. In other words, natural resources are indeed finite in an economic sense – as reflected in their prices.

Ken November 1, 2011 at 11:39 pm

Gil,

Hence people can run out of usable oil for all time and revert to horses and buggies while there still oil in them thar crust.

This is the basic economics you don’t understand. Substitution and technology. I bet you don’t even know that the oil we get out of the ground was in fact a substitution caused by the first oil crisis, way back the mid -1840′s. I’ve been hearing since first grade about how the world would run out of oil, yet here we are over thirty years later and there are more oil reserves now than when I was in first grade. Technology and substitution made that happen.

The proof of the declining scarcity of oil, due to technology and substitution, is reflected in the price of oil. The price of a barrel of oil in 1980 was $102.26, adjusting for inflation. In 2010, the price of a barrel of oil was $73.44. In other words, the price for a barrel of oil declined by over 25%.

To make the point clear, which you don’t seem to understand, is human ingenuity can make finite raw materials infinite as economic resources.

Regards,
Ken

Dan J November 2, 2011 at 1:03 am

Natural resources are finite? Aren’t tree a natural resource ? As in the use of wood harvested? Yet, we can always grow more. Iron ore refined into steel, can wither away thru corrosion of rust or the handiwork of the salty seas and their microscopic life. But, much of it can be gathered and recycled. Not to mention, the ever evolving means of expanding usage of materials.

Gil November 2, 2011 at 4:31 am

What you don’t understand is the difference between potential resources and actual resources. People could plant more trees but if they haven’t then lumber won’t magically fall from the sky. Likewise if there’s umpteen oil at certain depth in the crust where there’s no economical way to extract it then it may well not exist. To say otherwise is akin to taking out a huge loan and presume you’ll eventually somehow get paid enough because scientists will create magical, futuristic, hyperproductive, highly-paid jobs.

John Dewey November 2, 2011 at 10:13 am

Gil: “People could plant more trees but if they haven’t then lumber won’t magically fall from the sky”

Actually, trees do grow from seeds which fall magically from the skiy. My father-in-law owns a tree plantation in East Texas. He has sections which were planted with fast-growing hybrids and sections planted by magically-falling native seeds. The trees in the magical section tend to withstand both freeze and drought periods better than do the fast-growing hybrids.

Ken November 2, 2011 at 11:35 am

Gil,

if there’s umpteen oil at certain depth in the crust where there’s no economical way to extract it then it may well not exist.

Do you ever take technology into account? As time goes on and as technology improves, more and more oil is found. Much of the oil we get today couldn’t be gotten just a decade ago.

That is primarily the reason you can’t be taken seriously. The other is that the world has been running out of oil for half a century now, according to people like you. Guess what? We’re no where near that. And we’ve made huge discoveries of natural gas that dwarfs the findings of oil, right here in the good ol’ US of A. Not to worry, though, you, Obama, and all the idiots like you and him are doing the best you can to keep that stuff in the ground. It’s like you want there to be an energy shortage or something.

To say otherwise is akin to taking out a huge loan and presume you’ll eventually somehow get paid enough because scientists will create magical, futuristic, hyperproductive, highly-paid jobs.

You mean like what has actually happened for the last 200 years?

Regards,
Ken

Sam Grove November 1, 2011 at 1:33 pm

I’m wondering, aside from showing off your mental prowess, what your purpose is here.

cmprostreet November 1, 2011 at 1:44 pm

“there is no guarantee their expansion (which Simon is right to note) will keep pace with demand for them, which is also guaranteed to expand.”

How is demand for natural resources is guaranteed to expand? And when will this increased demand allow me to sell all this whale oil?

House of Cards & Economic Freedom November 1, 2011 at 2:33 pm

They are scarce in a meaningful economic sense, though,

In the quote, Simon didn’t mention scarcity, a subjective term. He used the word finite, an objective term.

and there is no guarantee their expansion (which Simon is right to note) will keep pace with demand for them, which is also guaranteed to expand.

“Keep pace” is a meaningless phrase. It’s the very purpose of prices to make supply and demand “keep pace” with each other. If government interferes with the price mechanism, either demand will not keep pace with supply (a surplus), or supply will not keep pace with demand (a shortage).

The pessimists unfortunately ignore one end of the Marshallian scissors, but the cornucopians ignore the other.

In keeping with the scissors metaphor, by “end” you actually meant “blade”. Marshall thought of his metaphor as a compromise between subjective marginal utility (which provides the ultimate constraint on, and therefore determinant of, downward-sloping demand) and objective costs of production (which provide the ultimate constraint on, and therefore determinant of, upward-sloping supply). Where the downward-sloping subjective blade intersects the upward-sloping objective blade, the equilibrium price is set. That was his idea.

Nice. But wrong.

The downward-sloping, subjective, demand blade is not only an explicit picture of a demand schedule for good ( A ), but contains information in the form of an implicit picture of a cluster of demand schedules for goods “not-( A )” (substitutes like tea and cocoa, and ultimately, all the factors for producing tea and cocoa, and then the factors for producing those factors, etc.) The amount of coffee you purchase is not only influenced by the demand-schedule for coffee, but by the demand-schedules for all other goods competing for your purchases: the lower their prices are, the more you will tend to purchase them rather than coffee. Abstaining from purchasing coffee in order to purchase not-coffee will, of course, affect the price system in such a way as to determine how many resources are available for producing coffee. So the blade labeled “supply of coffee” is itself a product of a blade labeled “demand for everything else”; which means that, ultimately, both blades of the Marshallian scissors are demand, both are subjective, and both are determined by utility.

It was all said long ago: succinctly by Bohm-Bawerk (see “The Ultimate Standard of Value”); elegantly by Wicksteed (see “The Commonsense of Political Economy”).

The upshot is that the price of a natural resource (oil, for example) is not determined by the naive Marshallian model of a psychological demand for oil determined by subjective utility intersecting a physical supply of oil determined by its objective costs of production. The price will be determined by the subjective demand for oil in relation to the subjective demand for “not-oil”, i.e., the subjective demand for everything else available in the economy.

while supply will continue to innovate and expand, so will demand – and placing our expectations in either the pessimist or the cornucopian camp is dangerous.

True in a trivial sense only, as it’s a mere restatement of Say’s Law: supply and demand are, at bottom, the same thing, because the only thing you have to exchange for someone else’s supply of a good is your supply of a good; your supply is your demand.

Economic Freedom November 2, 2011 at 2:55 am

Gobbledygook.

Economic Freedom November 2, 2011 at 7:42 pm

I can’t read what you wrote, because it is repetitive, Revolutionary Communist Party USA foolishness,regurgitated by Lisa Fithian and Debra Sweet from the last demonstration. I’d consider sending you money to get you to stop trolling and spewing left-wing inanities on this classical-liberal blog. Please tell me how much you’d want and where to send the check.

rhhardin November 1, 2011 at 9:33 am

Every time the price doubles, half the remaining resource is supplied.

You don’t ever run out economically, but the resource is definitely finite.

What’s not considered is substitution.

vikingvista November 1, 2011 at 9:48 am

Been through this before. The entire observable universe is “finite”, but Simon makes clear in that sentence that he is defining “infinite” as “potentially always expanding” rather than in the mathematical sense of an infinite set, which can be mentally constructed only by abstracting away observables.

rhhardin November 1, 2011 at 9:55 am

Finite just means having a boundary.

The mathematical sense is more precise only in mathematics, but inapplicable elsewhere.

There are finite verbs and infinte verbs, for that matter, which refers to having a tense or not. (“Having,” for instance, does not. No definite time.)

Human life having infinite value refers to an inability to compute with it, not to a large amount.

One may be forgiven for thinking that resources are infinite though refers to an absence of quantity limit.

vikingvista November 1, 2011 at 9:34 pm

Yep. Ambiguity makes people argue past each other.

vikingvista November 1, 2011 at 11:50 pm

“Finite just means having a boundary.”

And the way Simon uses the term, it means that the boundary may grow indefinitely. Always finite, in one sense, but infinite, in Simon’s sense.

Will November 1, 2011 at 11:34 am

This reminds me of a very well written paper entitled “Lessons from the Lorax” by Michael Hammock, J. Wilson Mixon, Jr., Michael F. Patrono.

http://www.biblioteca.ufm.edu.gt/apee/pdf/999581.pdf

Gil November 1, 2011 at 11:44 am

To think had Elrich and Simon had a second go for another decade, double or nothing, Elrich would have cleaned up.

Ken November 1, 2011 at 12:00 pm

Gil,

Wrong.

Regards,
Ken

GAAPrulesIFRSdrools November 1, 2011 at 12:33 pm

It was Erlich, not Elrich.

Elrich sold fear, which is a commodity that proves all goods have unlimited wants.

Greg Webb November 1, 2011 at 12:40 pm

Gil, thanks for the conclusory statement, but as Ken wisely notes you are wrong. And, I might add that your are wrong again.

Bastiat Smith November 1, 2011 at 1:07 pm

Supply curves have a positive slope.

Sam Grove November 1, 2011 at 1:35 pm

Natural resources are free for the taking, it’s the taking that costs us.

Nikolai Luzhin, Eastern Promises November 2, 2011 at 5:32 am

Someone wrote above, “This is the basic economics you don’t understand. Substitution.” This is a wonderful admission that economics is not science and that what is written here reflects nothing more than bias.

To be a science, as shown by Einstein’s and all others attempt to “unify,” general relativity and quantum mechanics, ones set of laws must be closed. To close his set of laws, for example, Einstein went with a constant.

That technology may all for substitution shows that Economics is not unified, for there is no law of economics that will tell us the rate or frequency at which technology will all for substitution or if, for example, the rate of change increases or decreases or is regular or irregular, etc.(i.e, like Planck’s constant).

Natural resource scarcity is not a problem if one assumes a high “constant” for technological change. Natural resources are scarce if one is disinclined.

Libertarians and conservatives are both very dishonest and disingenuous on this subject. When it suits their purpose they see a high constant. However, on the subjects of pollution and climate change, they see a low constant, for such argues against strong laws against either pollution and climate change (the it will cost too much argument). If the constant is high (or can be manipulated), then gov’t should just adopt mandatory goals and let the chips fall as they may, leaving it to substitution to fix the problem.

In sum, as TROLL, again, that you for providing fresh evidence in my constant effort to expose that there is no Truth here

Dan H November 2, 2011 at 11:55 am

The fact of the matter is, there is when law that governs all of economics: The Law of Supply and Demand. As Bryan Caplan noted on his 40th birthday post, “Supply-and-demand solves countless mysteries of the world – everything from rent control to road congestion.”

It all comes back to supply and demand.

Will November 2, 2011 at 12:29 pm

I am confused. How is the discussion on climate change or pollution the same as whether natural resources are finite economically when it comes to this technological constant? Pollution and climate change if anything is a question of external costs and not whether scarce natural resources are finite economically. It is comparing apples and oranges. Believing in a high constant or low constant for one does not mean the argument requires the same conclusion for the other.

Also, this statement makes no sense economically. “Natural resource scarcity is not a problem if one assumes a high “constant” for technological change. Natural resources are scarce if one is disinclined.” Whether or not there is a high constant or low constant, natural resources, like all economic resources, are scarce. Economics is the study of allocating scarce resources. Even with a low constant, the fact that there is a finite supply of a scarce resource does not mean it will eventually run out as long as prices are allowed to move up and down freely. We will never run out of oil because assuming no technological advances there are still economic substitutes. After all, society moved with horse and buggy long before the car and by foot long before the domestication of horses. If the price of oil goes up high enough, the costs of horse and buggy will eventually be cheaper leaving the world with some amount of oil. Thankfully, technology will prevent us from returning to those days.

Ivan Georgiev November 2, 2011 at 8:58 pm

I do not have the time to read what the previous commenters have written. I am sorry. But I will say this: what is resource and what is the relative scarcity of this resource for the satisfaction of human wants is determined by the VALUING INDIVIDUAL. Obviously, since there is human action, resources must be in A RELATIVE SCARCITY TO HUMAN WANTS, otherwise there would be no acting, but rather humans would be able to achieve full want-satisfaction the moment they wished for something to better their situation.

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