Yes We Can Spend

Damon W. Root | December 22, 2008

Jim Powell, the author of FDR's Folly, Wilson's War, and several other great works of popular history, had a sharp op-ed in yesterday's Washington Times arguing that President-elect Barack Obama should stimulate the economy via across-the-board tax cuts, not with the wasteful, New Deal-style spending we're more likely to get:

The president-elect has a great deal of history to instruct him here. Mr. Obama's hero, Franklin D. Roosevelt, tried to spend America out of the Great Depression with infrastructure projects, and they were a costly disappointment; unemployment averaged 17 percent during the height of the New Deal, from 1933 to 1940. Consider the Tennessee Valley Authority, one of FDR's most ambitious projects: In the decades since TVA dams began operating, states with TVA-subsidized electricity like Tennessee have lagged behind non-subsidized Southern states like Georgia in economic growth and average incomes.

[..]

Discussion about economic stimulus tends to be dominated by the question of how much money will be spent, but the effectiveness of spending decisions is even more important. The United States was a comparatively poor country two hundred years ago, but it became wealthy because decisions about allocating resources were made mainly by private individuals with strong incentives to make the most of what they had. Similarly, in recent decades the expansion of private decision-making has enabled hundreds of millions throughout Asia to emerge from poverty. Cutting taxes returns resources to private individuals, who are best placed to make the most effective spending decisions.

Whole thing here. reason's interview with Powell here. My review of Powell's FDR's Folly here.

Comments

|12.22.08 @ 6:29PM|#

Broad tax cuts intended to stimulate the economy in the face of a bad economy were tried in 2001 and 2006.

They failed.

As it turns out, paying off credit card debt and buying Japanese electronics don't have much of a stimulatory effect. Who knew?

No Name Guy|12.22.08 @ 6:31PM|#

Can't let those little people figure out how to spend (or save, or invest) their own money. Sugar Daddy Obama and his lefti buddies like Joe know better than you.

Kolohe|12.22.08 @ 6:34PM|#

There's definitely a prop 8 joke associated with that cartoon somehow.

The Angry Optimist|12.22.08 @ 6:36PM|#

They failed.

Yes, I suppose if you or anyone thought that those tax cuts alone were intended to "save the economy", then yes, they "failed" in that endeavor.

That does not make tax cuts a bad thing; if anything, there are data that indicate that the 2001 and 2006 tax cuts warded off worse disasters.

|12.22.08 @ 6:37PM|#

Cutting taxes returns resources to private individuals, who are best placed to make the most effective spending decisions.

It is even more important than that -- even from a Keynesian perspective.

A recession is nothing but the capital of the economy allocated to producing things that consumers don't want. Recovery doesn't happen until capital is reallocated to fulfill the actual demands of actual people.

Even if you buy the argument that demand-side spending is required to pull an economy out of recession, leaving the money in private hands means that the demand exhibited by the spending is close to what people actually want to see produced. The demand will entice capital to reallocate to long lasting economically useful ends.

Putting the money in government hands to spend means almost exactly the opposite, and it is fundamentally counterproductive to economic recovery.

|12.22.08 @ 6:41PM|#

Facts are facts, Kolohe. We tried it your way, and it didn't work.

I'm sorry if it makes you feel bad when someone makes that observations, but it's that whole "reality" thing I'm into.

You do realize that writing a comment like that, in response to mine, is a statement that you'd prefer to see the economy is the crapper for longer, and more people to suffer because of it, for some ideological hobby horse, right?

That's pretty fucked up.

Fidus Achates|12.22.08 @ 6:41PM|#

Hit & Run posters like to point to 1937 and scream "Failure" to those who would spend their way out of the current recession. One problem, in 1936-7, FDR took the advice of those who claimed that limiting spending and cutting taxes would boost the economy. They were wrong. You can't have it both ways. You can't point to the one year that FDR cut taxes and limited his spending, which precipitated a severe recession, and say, "See cutting taxes worked." Please, lay off the economics (the last 8 years proves you're wrong about anything dealing with the economy, or am I wrong about the number of ideologues in positions of power who could only say two words about the economy, "Cut taxes") and stick to writing about the drug war, the Iraq war, the 2nd Amendment, the Constitution.

|12.22.08 @ 6:41PM|#

If the government cut the tax rate to zero, and borrowed the difference, would you expect that to stimulate the economy? What matters is the total amount sucked out of the private economy and put into the government economy. Tax cuts just rearrange the burden from taxpayers to borrowers. The net effect of tax cuts without spending cuts must be zero--no effect.

Kolohe|12.22.08 @ 6:44PM|#

In the decades since TVA dams began operating, states with TVA-subsidized electricity like Tennessee have lagged behind non-subsidized Southern states like Georgia in economic growth and average incomes.

This is rather an overly simplistic analysis. Not to mention the fact that Georgia and Tenessee are acutally bitching over where their border is because both want more water that is stored by the TVA to allieviate a multi year drought.

I am surprised that Georgia has grown faster than TN since the end of WW2. Nonetheless, the two biggest factors (more so than TVA retardation) is Atlanta Hartfield airport (a great deal of which was paid for, I think, by federal monies) and the cold war military industrial complex - Martin Marrieta (back when it was a few different companies), the Trident submarine base, Fort Stewart, Fort Gordon etc. (Not that TN didn't have it's share with Oakridge and Millington, still, they couldn't compete with Sam Nunn and his predecessors)

|12.22.08 @ 6:46PM|#

Oops, sorry, I meant NNG.

TAO,

Yes, I suppose if you or anyone thought that those tax cuts alone were intended to "save the economy", then yes, they "failed" in that endeavor. You mean like the President, Vice President, Senate Republicans, House Republicans, and RNC? All of whom stated that the tax cuts would save the economy?

That does not make tax cuts a bad thing; It makes them the wrong tool for the job of stimulating the economy, which is the use to which Powell is proposing to put them.

if anything, there are data that indicate that the 2001 and 2006 tax cuts warded off worse disasters.

The 2001 recession was no less deep or short than that of the early 1990s, which was met with tax INCREASES. The tax cuts in 2006 immediately preceded the worst economic crisis since the Great Depression. But the "it would have been even worse" argument is one that can never be disproven, and as a result, people who really want to believe in it can go on doing so forever.

MikeP,

A recession is nothing but the capital of the economy allocated to producing things that consumers don't want. No, it's not. A recession is an absolute decline in the amount of capital being allocated in the economy, period. Often, they begin with excess capacity leading to reductions in investment, but that certainly isn't what happened this time.

Kolohe|12.22.08 @ 6:47PM|#

@joe 6:41

What?

|12.22.08 @ 6:49PM|#

Hit & Run posters like to point to 1937 and scream "Failure" to those who would spend their way out of the current recession. One problem, in 1936-7, FDR took the advice of those who claimed that limiting spending and cutting taxes would boost the economy.

Good point. You write things like unemployment averaged 17 percent during the height of the New Deal, from 1933 to 1940 when you don't want to talk about changes that happened between 1933 and 1940, and their consequences to the economy; and when you most certainly don't want to start talking about what happened in 1940, and how it effected the economy.

|12.22.08 @ 6:49PM|#

Again, Kolohe, my apologies.

Kolohe|12.22.08 @ 6:52PM|#

no problemo. it's rare that we're on the same side; blue on blue is inevitable.

One more thing about Powell's statement.

Subsidized electricity? In my Georgia?

It's more likely than you think.

|12.22.08 @ 7:10PM|#

A recession is an absolute decline in the amount of capital being allocated in the economy, period. Often, they begin with excess capacity leading to reductions in investment, but that certainly isn't what happened this time.

Lots of empty houses want to have a word with you, joe.

Furthermore, the excessive securitization of capital was in itself a capital allocation (metacapital allocation, if you will) that was wasteful and not in the end what people actually wanted, especially when the leveraging started to unwind.

SIV|12.22.08 @ 7:12PM|#

Kolohe,

That SEPA is off of COE dams, just sort of a byproduct.TVA sells power in GA and has a few dams here too.

Joe-nomics|12.22.08 @ 7:13PM|#

Borrow! Spend! Regulate!

Borrow! Spend! Regulate!

Borrow! Spend! Regulate!

Soon we'll have an economy like that of the mid-70s!

Joe-nomics|12.22.08 @ 7:14PM|#

And TAX!

TAX! TAX! TAX! Especially the "wealthy"!

BDB|12.22.08 @ 7:17PM|#

Kolohe--

Don't forget the invention of air conditioning. That did wonders for places like Georgia.

Elemenope|12.22.08 @ 7:18PM|#

That does not make tax cuts a bad thing; if anything, there are data that indicate that the 2001 and 2006 tax cuts warded off worse disasters.

It's nearly as fun a game as the one where the guy says: "If the New Deal programs didn't exist, the Great Depression would have been even worse!!!"

Truth is those data sets are so gunked with confounding factors, it really is left up to individual ideological preferences to "interpret" them.

|12.22.08 @ 7:19PM|#

I don't disagree, MikeP, with the observation that excess capacity -> less investment in adding capacity -> rising unemployment. That's the classic business cycle.

But a recession itself is a decline in total economic activity.

You wrote Recovery doesn't happen until capital is reallocated to fulfill the actual demands of actual people. I read this as a statement that that capital continues to be misallocated throughout the recession, and then shifts from worse investments to better ones - but that's not the case. During a recession, the same amount of capital isn't being "misallocated." It's not being allocated at all. It goes away - that's what makes the economy recessionary.

Which is what stimulus is all about. Look at 1940-1945. People didn't want bullets and planes instead of pork and record albums, and yet the spending on that unwanted stuff - spending that would not have been there at all without the government - brought back rising GDPs. At the end of the war, with the GDP strong from war spending, it was a relatively trivial matter to shift that spending from the war effort to the civillian economy. As opposed to before the military stimulus, when there simply wasn't spending going on to keep the economy going.

|12.22.08 @ 7:21PM|#

Soon we'll have an economy like that of the mid-70s!

We're going to have an economy much worse than the mid-70s, if we aren't already in one right now, and it comes on the heels of eight years of tax cutting and hostility to regulation.

If the economy in 2009 is as strong as that in 1976, I'll turn cartwheels.

Worse. Argument. Ever. I wouldn't put a real name on that crap, either.

|12.22.08 @ 7:22PM|#

Broad tax cuts intended to stimulate the economy in the face of a bad economy were tried in 2001 and 2006.

They failed.

Bad economics aside, this statement also reeks of disingenuity. The tax cuts of 2001 were offset by massive deficit spending in 2002, 2003, 2004, 2005 AND 2006. The tax cuts would not have changed the fact that inflation was in the double digits (unless you are naive enough to believe the government's cooked numbers).

The 2001 recession was no less deep or short than that of the early 1990s, which was met with tax INCREASES.

The 1988 recession was prolonged by the tax increases of G.H.W. Bush. The recovery later was actually a boom generated by the Fed that lead to the dot.com fiasco of 2000. Exactly where you get the idea that ROBBING people of their well-earned cash somehow "benefits" the economy is beyond me. Perhaps you could explain it with SOUND theory instead of looking for correlations.

The tax cuts in 2006 immediately preceded the worst economic crisis since the Great Depression.

A clear case of the post hoc, ergo propter hoc fallacy.

BDB|12.22.08 @ 7:25PM|#

Uh, there wasn't a recession in 1988. Nineteen Eighty-Eight was still a boom year. It didn't start until 1990.

BDB|12.22.08 @ 7:26PM|#

Part of an economic boom that was started by tax cuts, BTW.

|12.22.08 @ 7:30PM|#

Bad economics aside Yes, let's just assume your conclusion. It must be true that tax cuts are the way to save the economy, because tax cuts are the way to save the economy. Therefore, it's bad economics to disagree.

The tax cuts of 2001 were offset by massive deficit spending in 2002, 2003, 2004, 2005 AND 2006.

That's a terrific argument for tax cuts as stimulus in 2008, as long as you don't think we'd be engaged in deficit spending.

The 1988 recession didn't exist. The economy did not go into recession in 1988. It went into recession two years later.

The recovery later was actually a boom generated by the Fed that lead to the dot.com fiasco of 2000. Even with the economic slowdown brought about by the dot com bust, the boom of the 1990s was a huge net gain in prosperity for the United States economy.

Exactly where you get the idea that ROBBING people of their well-earned cash This is why libertarians are so lousy at economy analysis - they're so burdened with their Randian ideological baggage that they don't allow themselves to engage in reality-based economic analysis.

A clear case of the post hoc, ergo propter hoc fallacy. No, an accurate and irrefutable observation about events.

Insanity is doing the same thing over and over and expecting different results. I know, let's mail out $1300 rebate checks this time. That'll totally work.

|12.22.08 @ 7:31PM|#

Uh, there wasn't a recession in 1988.

Don't you love being talked down to by people who can't get their basic facts right, but just know how much smarter they are than you?

|12.22.08 @ 7:31PM|#

During a recession, the same amount of capital isn't being "misallocated." It's not being allocated at all. It goes away - that's what makes the economy recessionary.

In general, allocations of capital are long term. Capital doesn't "go away" during a recession. What makes the economy recessionary is that the prior allocations of capital aren't producing anything of value. Plants are shut down because no one wants what they produce. Human capital is unemployed because no one wants what their skills can produce. Houses are vacant because no one wants to pay their building costs.

Look at 1940-1945. People didn't want bullets and planes instead of pork and record albums, and yet the spending on that unwanted stuff - spending that would not have been there at all without the government - brought back rising GDPs.

Rising GDP, but not rising household consumption. Nonetheless, I do agree that the capital allocation demanded by a thousand generals with a singular goal is much easier to meet than the capital allocation of a hundred million households with varying goals, and that this certainty brought capital in from the sidelines where it had sat during the uncontrolled New Deal experimentation.

|12.22.08 @ 7:32PM|#

Joe, stop doing economic analysis if you do not have an idea of what you're talking about.

I read this as a statement that that capital continues to be misallocated throughout the recession, and then shifts from worse investments to better ones - but that's not the case. During a recession, the same amount of capital isn't being "misallocated." It's not being allocated at all. It goes away - that's what makes the economy recessionary.

No, Joe, this is false. In a recession, bad investments are being LIQUIDATED. This means that capital flows from bad investment towards good investment. WHILE this happens, economic activity SLOWS down (of course).

A recession becomes PROLONGED if the government steps in trying to "prime the pump" and prop up the failing companies, because it SLOWS DOWN the inevitable flow of capital from bad to good investment.

Which is what stimulus is all about.

The stimulus is about taking what little GOOD capital still exists and throwing it into a hole. That's the best analogy to describe the results.

Look at 1940-1945. People didn't want bullets and planes instead of pork and record albums, and yet the spending on that unwanted stuff - spending that would not have been there at all without the government - brought back rising GDPs.

Pop open those champagne bottles! GDP is up!

Joe, baby, GDP is a cooked and misleading metric. It adds government spending which is NOT productive as if it were productive, and of course during a war, government spending will pad up the GDP numbers. But GDP does NOT give the true state of an economy, which is how WEALTHY people become. People that cannot buy goods are NOT wealthy, they are POOR, independently of how much Federal Reserve Notes they can gather.


At the end of the war, with the GDP strong from war spending, it was a relatively trivial matter to shift that spending from the war effort to the civillian economy.

You're jesting. The amount of time it took to retool for consumer goods actually PROLONGED the Great Depression by a full TWO YEARS after the end of WWII, if you take government spending out of the equation. Please, leave your buddy Keynes at the door.

As opposed to before the military stimulus, when there simply wasn't spending going on to keep the economy going.

Economies are not kept going by spending, they are kept going by production. You can have lots of Federal Reserve Notes in your wallet, but if there are no goods, it will not matter your willingness to spend.

|12.22.08 @ 7:32PM|#

BTW, a post hoc fallacy is as follows:

A happened before B. Therefore, A caused B.

If you can find the part where I said the tax cuts of 2001 and 2006 caused anything to happen, I'll give you a sloppy joe kiss.

BDB|12.22.08 @ 7:36PM|#

Just how big will our federal debt be after the end of this "stimulus", joe? This will be ON TOP OF the Iraq War, entitlements, and the bailout. A

Also probably on top of the Carpocalypse Bailout that is to come, unless it becomes part of the "stimulus".

I know, why don't we just borrow money form Chinese banks and drop it out of helicopters in the downtowns of randomly selected American cities? Because that is what this is.

BDB|12.22.08 @ 7:37PM|#

Oh, and after that, your grandchildren get to pay it back. Even though though we're not sure it will work.

|12.22.08 @ 7:37PM|#

Yes, let's just assume your conclusion. It must be true that tax cuts are the way to save the economy, because tax cuts are the way to save the economy. Therefore, it's bad economics to disagree.

Don't get me going with bad logic, Joe. Read my post and let me know WHERE do I assume my "conclusion" that tax cuts are the way to save an economy.



ME: Exactly where you get the idea that ROBBING people of their well-earned cash

JOE: This is why libertarians are so lousy at economy analysis - they're so burdened with their Randian ideological baggage that they don't allow themselves to engage in reality-based economic analysis.

Joe, you did NOT answer my question. What's so Randian about thinking that taking money at gunpoint is stealing?

Insanity is doing the same thing over and over and expecting different results. I know, let's mail out $1300 rebate checks this time. That'll totally work.

Totally? No, it won't, because people still get shafted through inflation. Do not PRETEND even for a MINUTE that I advocate only one simplistic solution to this problem. You might have figured out where I stand. My argument is that you assume tax cuts do not work because the economy did not seem to recover thanks to them, a clear case of post hoc reasoning.

BDB|12.22.08 @ 7:39PM|#

"Joe, you did NOT answer my question. What's so Randian about thinking that taking money at gunpoint is stealing?"

Oh good God this is going to turn into a massive sidetrack of nothing.

|12.22.08 @ 7:39PM|#

MikeP,

In general, allocations of capital are long term. Capital doesn't "go away" during a recession. What makes the economy recessionary is that the prior allocations of capital aren't producing anything of value. They also lose their value, or some of it. What was purchased for $100 is now worth $60 or $80 - particularly in the area of capital investment.

Not all of it, of course. There is still capital that is being stuffed into mattresses, but there is also a decline in the sum total of capital.

As for the additional capital brought in from the sidelines, I agree with you. That's why we don't do economic central planning during ordinary times - because taking the individual decision-making you discuss out of the capital allocation process comes at a cost.

|12.22.08 @ 7:40PM|#

If you can find the part where I said the tax cuts of 2001 and 2006 caused anything to happen, I'll give you a sloppy joe kiss.

Pucker up.

The tax cuts in 2006 immediately preceded the worst economic crisis since the Great Depression.

SIV|12.22.08 @ 7:46PM|#

and that this certainty brought capital in from the sidelines where it had sat during the uncontrolled New Deal experimentation.

Where are these mysterious "sidelines"?
Are they near Scrooge McDuck's Money Bin?

|12.22.08 @ 7:48PM|#

Joe, stop doing economic analysis if you do not have an idea of what you're talking about.

I'm sorry, Francisco, it's a bad habit I picked up during the recession of 1988. Heh.

Please, talk down to me some more.

In a recession, bad investments are being LIQUIDATED. This means that capital flows from bad investment towards good investment.

Economies are not kept going by spending, they are kept going by production. As that government spending was going towards production, you are being pointless pedantic.
Bzzzt. During a recession, much of the capital that was formerly flowing into investment is lost. It's gone. Actual economic value is lost. I can't believe you would presume to lecture me about economics, and not realize that wealth is lost during a recession.

The stimulus is about taking what little GOOD capital still exists Actually, most stimuluses - in fact, every single one since the 1930s - have been largely funded by deficit spending. So, no, it is not about taking capital that exists at all. It's about creating new capital.

...and throwing it into a hole. More with assuming your conclusions. We know that public spending is "a hole" because...well, because public spending is a hole. All of those hundreds of thousands of man-hours economists have spent looking at how much of a multiplier effect different types of spending have in the economy were wasted. The answer in all cases is ZERO. Francisco hath spoken.

People that cannot buy goods are NOT wealthy, they are POOR, independently of how much Federal Reserve Notes they can gather. If this were the case, we would have seen a deep recession in 1946, as the "phony" increase in GDP "cooked" by government spending vanished, never to be seen again. Of course, that's not the case. There actually was wealth being created by that higher GDP throughout the war years, GDP which remained strong after the war as the spending, actual spending which existed, were shifted to different things.

The amount of time it took to retool for consumer goods actually PROLONGED the Great Depression by a full TWO YEARS after the end of WWII, if you take government spending out of the equation. Uh, yeah, if we ignore a large chunk of the economy, the economy looks smaller. Brilliant analysis.

Whether you think that the government spent money on were good, or not, doesn't matter. It's still spending, it's still part of the economy, and the people on the receiving end of that spending could still buy stuff with their paychecks.

|12.22.08 @ 7:52PM|#

BDB,

Just how big will our federal debt be after the end of this "stimulus", joe?

Probably not at large as it would be if we went into a full depression, with the effects on revenues it would have.

The national debt is a long-term problem, and one we will never be able to solve without a strong economy.

Because that is what this is. No, that's what a tax cut would be. Public works spending is targeted towards projects whose payments will accrue to the American economy. As opposed to paying down credit card debt and buying stuff from Sony, which doesn't put nearly as much money circulating through the economy.

|12.22.08 @ 7:53PM|#

The 1988 recession didn't exist. The economy did not go into recession in 1988. It went into recession two years later.

Oh, boy, another one that believes the MSM. Of course "everybody" knows the recession started in 1990, no? Except that the GPI (if we use that metric as a standard, just to be on the same page) took A PLUNGE in 1988, right after the S&L fiasco of the 1980s made its mark after the bailouts. So the recession actually started in 1988. The lowest point was reached in 1991, but the plunge really began in 1988.

BDB|12.22.08 @ 7:55PM|#

joe | December 22, 2008, 7:52pm | #

Because that is what this is. No, that's what a tax cut would be. Public works spending is targeted towards projects whose payments will accrue to the American economy.

Like a new water park ride for Odessa, TX? Or that renovation to a Senior Center in Hopewell, NJ? Is that "public works"? Because that's what the Congrescritters are going to do with the money and call it "stimulus" or "infrastructure", when it's just plain old pork.

|12.22.08 @ 7:55PM|#

Joe, you did NOT answer my question.

That, Francisco, is because I'm not interested in spelunking your weirdo ideology, but in discussion the real-world effects of different economic policies.

All your sobbing over ROBBERY does is draw attention to how uncomfortable you are with the hard stuff.

My argument is that you assume tax cuts do not work because the economy did not seem to recover thanks to them, a clear case of post hoc reasoning. That is not what the post hoc fallacy is. I've done nothing more than note that the predicted outcomes did not materialize.

|12.22.08 @ 7:57PM|#

joe,

You appear to be focusing on financial capital. My main focus is on material capital. The usual reason financial capital declines in value is that the material capital the financial capital is a claim on becomes less productive than anticipated -- that is, people don't want its product. The current recession has the added problem that no one can tell what the value is of the material capital that much metacapital has a claim on.

|12.22.08 @ 7:57PM|#

Francisco,

The tax cuts in 2006 immediately preceded the worst economic crisis since the Great Depression.

FAIL. There is not a single word about causation in that statement.

You've pointed out the "post hoc" - after this - part, but there's not "ergo property hoc" part. I didn't make any "ergo propter hoc" argument. I didn't argue that anything caused anything.

But nice try!

|12.22.08 @ 8:01PM|#

BDB,

Like a new water park ride for Odessa, TX? Or that renovation to a Senior Center in Hopewell, NJ? Is that "public works"? Yes. Every single dollar of every one of those construction projects is going to go into our economy.

We're talking about stimulus - spending that puts money into the economy during a time that there is a lack of such spending from the private side. You're saying that those dollars won't produce things that add value. Maybe, maybe not. Obviously, some projects will set the stage for future growth more than others - but then, a lot of those projects would have to be done at some point anyway, and time-shifting the investment to when a capital infusion is really needed is a good thing all by itself. I'd also be careful about taking too cramped a view of what sets the stage for stronger future growth. Not everything needs to be extra industrial and transport capacity.

BDB|12.22.08 @ 8:04PM|#

Oh, boy.

Remember the money appropriated by Ted Stevens to fund the construction of the Ted Stevens Center for the Study of Ted Stevens? We're going to get stuff that is even more ridiculous than that now that they can call it "infrastructure". It's going to be a huge Christmas tree of pork.

BDB|12.22.08 @ 8:05PM|#

What IS the difference between "infrastructure" and/or "public works" and pork to you, joe?

|12.22.08 @ 8:05PM|#

Mike P @ 7:57.

That's a good point. I am looking at financial capital, because ultimately, you need to have financial capital to create material capital.

I understand that the idled factories don't disappear - that "investment" is still there, and loses none (actually, it loses some from disrepair, but over the course of a single economic cycle, that's minor) of its material value.

But the decline in financial capital is real, and meaningful, and prevents those idled factories from being put to productive use.

EJM|12.22.08 @ 8:09PM|#

Of course "everybody" knows the recession started in 1990, no? Except that the GPI (if we use that metric as a standard, just to be on the same page) took A PLUNGE in 1988, right after the S&L fiasco of the 1980s made its mark after the bailouts. So the recession actually started in 1988. The lowest point was reached in 1991, but the plunge really began in 1988.

For those playing at home, "GPI" refers to "Genuine Progress Indicator". Yes, I had to look it up myself.

|12.22.08 @ 8:09PM|#

BDB,

Pork creates little or no additional value, over the long term, beyond the construction spending itself. Infrastructure either creates value, or makes it easier for others to create value.

I'm more willing to put up with pork now, when the economy is in need of stimulus, than in economic good times.

Which is not to say that we shouldn't pay any attention to long-term investments, just that we've got higher priorities than budget discipline right now.

|12.22.08 @ 8:12PM|#

The difference between GPI and GDP is that GPI measures how much is being spent on what some people decide is worthwhile, while GDP measures all economic activity.

Don't get me wrong - there is a place for GPI, and GDP misses a lot that is important.

But as 1946 shows us, you can shift spending from "bad stuff" to "good stuff" relatively easily. It isn't actually a measure of how strong the economy is.

Hey, BDB: that water park is going to totally spike GPI. People love those things! ;-)

BDB|12.22.08 @ 8:12PM|#

I'd also like to know if you think Obama's "middle class" tax rebate is a good idea since people are (guess what?) going to spend it on DVD players and Nintendo Wiis.

BDB|12.22.08 @ 8:14PM|#

"we've got higher priorities than budget discipline right now."

We've been told that since, well, since 1933.

|12.22.08 @ 8:14PM|#

Tax cuts are by themselves insufficient for economic growth. You need spending cuts along with them, or the shortfall will be made up with borrowing and inflating.

The Laffer Curve does indeed exist, but we have no way of knowing if we are ahead or behind the peak. Using the curve as an excuse not to cut spending is the great Republican folly. That they are at least half right on the issue (the Dems want to raise taxes and spending both) is small consolation during these economic times.

Give me all the tax cuts you can find, but couple them with equal spending cuts. Tax cuts are secondary to the goal of smaller government.

|12.22.08 @ 8:18PM|#

joe,

I think you have everything exactly backwards.

Financial capital is a claim on material capital. That claim can be leveraged to produce more material capital, but if you don't know what material capital to provide because you don't know what people want to consume, no amount of financial capital will be beneficial.

But the decline in financial capital is real, and meaningful, and prevents those idled factories from being put to productive use.

It is the fact that the material capital does not have a present-day productive use that makes the financial capital claims on it decrease in value. Ginning up more financial capital (i.e., blindly printing or borrowing money) in order to spend it on one-time investments won't fix the underlying economic problem.

BDB|12.22.08 @ 8:18PM|#

Joe, I wouldn't trumpet 1946 as economic good times. There was a nasty post-war recession that nearly killed Truman (that's why the Republicans picked up Congress in 1946).

MNG|12.22.08 @ 8:21PM|#

"In a recession, bad investments are being LIQUIDATED. This means that capital flows from bad investment towards good investment. WHILE this happens, economic activity SLOWS down (of course)."

Hey, the Market will take care of everything so please sit back and wait for it to work its magic.

MNG|12.22.08 @ 8:22PM|#

"The Laffer Curve does indeed exist"

Like the Great Pumpkin?

|12.22.08 @ 8:24PM|#

As that government spending was going towards production, you are being pointless pedantic.

Joe, production of unwanted goods is WASTED production, is destruction of wealth, not wealth itself. The government could also raise the GDP metric by paying people to open and fill holes in the ground, and certainly would have been less costly in lives.

During a recession, much of the capital that was formerly flowing into investment is lost. It's gone.

You're confusing capital with *money*. The assets, tools, machinery, land, all of those are capital. If the investment was a waste, the next phase is LIQUIDATION, where that capital is purchased by banks and collectors and sold or reinvested.

And, you did say that capital is totally lost in a recession. That is false.

Actual economic value is lost. I can't believe you would presume to lecture me about economics, and not realize that wealth is lost during a recession.

Wealth IS lost, but you did not say that. You said "capital is not allocated at all". That is FALSE. In a recession, capital IS reallocated, towards more useful investments, taken over by more efficient entrepreneurs.

And I don't pretend to lecture you on economics, since I do not have time to do that. I am merely showing your utter lack of knowledge and many bad assumptions about economics.

All of those hundreds of thousands of man-hours economists have spent looking at how much of a multiplier effect different types of spending have in the economy were wasted. The answer in all cases is ZERO. Francisco hath spoken.

Your puerile sarcasm notwithstanding, Joe, the fact that a FEW things the government does end up being useful (at least for some), most government spending ends up being wasted for an economic REASON: because the market was not asking for such investments, and because of the calculation problem. Government officials do not allocate spending according to market needs (through the price system) but for political reasons. This means that, even if a government makes the most beautiful interstate highway in the world, there is no way of knowing if the materials and labor were used in the most efficient (i.e. less costly) way, or even if the PLACEMENT was efficient. Just because something is conjured into existence does not mean it was done in the most rational way.

Actually, most stimuluses - in fact, every single one since the 1930s - have been largely funded by deficit spending. So, no, it is not about taking capital that exists at all. It's about creating new capital.

Oh, well, then, in that case, any time I go over my limit in my credit cards, I am creating capital!

Joe, see, that is why I recommend to you: learn about economics, first, before making a fool of yourself. Deficit spending does NOT generate new capital. Only S-A-V-I-N-G-S create capital. What Deficit spending does is simply to borrow from future private production in order to spend it now, but that borrowing crowds out the private need for capital from lending institutions. There is NO capital created, only capital being TAKEN.

If this were the case, we would have seen a deep recession in 1946, as the "phony" increase in GDP "cooked" by government spending vanished, never to be seen again.
Of course, that's not the case. There actually was wealth being created by that higher GDP throughout the war years, GDP which remained strong after the war as the spending, actual spending which existed, were shifted to different things.

There was no wealth created in the war years, Joe; that's a myth. The retooling and recovery process of 1946-1948 took two years, and its dynamic growth is seen in the GDP numbers of those years but have nothing to do with government spending. As a matter of fact, the big economic jump of 1946-1948 (when the USA was getting our of the Great Depression was due to the fact that government spending DROPPED to become negative, as the government was selling assets. The recovery thus started after the government STOPPED spending, not the other way around. See: http://books.google.com/books?id=UPiXyaMLe1AC&pg=PA104&lpg=PA104&dq=GDP+1946-1948&source=web&ots=xE0Es5uIuz&sig=vqwMKxdgGRzSH3HMYFdRjLDOKQ8&hl=en&sa=X&oi=book_result&resnum=5&ct=result#PPA104,M1

Uh, yeah, if we ignore a large chunk of the economy, the economy looks smaller. Brilliant analysis.

The government does not produce anything, Joe. If you take it into account as a "producer", you make a mistake of biasing your metric. Government can only spend money, like any consumer, but economic activity is and should be measured by its productive capacity, not by how much money gets spend.

Whether you think that the government spent money on were good, or not, doesn't matter. It's still spending, it's still part of the economy, and the people on the receiving end of that spending could still buy stuff with their paychecks.

You again make the mistake of equating "spending" with economic activity. Spending is the end process of economic activity, but the activity itself is production. Having a big spender does not give you a picture of the productive capability of a region or country, for two reasons: one, the government does NOT produce anything, and two, because the government controls the measuring stick - i.e. the money supply. You can show stupendous growth by spending trillions of tokens, but if the token is worthless, then the metric is worthless as well.

|12.22.08 @ 8:26PM|#

|12.22.08 @ 8:27PM|#

BDB,

Would you be as worried about the long-term fiscal effects of a similarly-sized tax cut?

If the government bough people as many wide-screen Japanese TVs as we would buy ourselves with the tax cuts, would that be pork? Would it do more or less for long-term economic growth?

I think Obama's middle-class tax rebate was a good idea on its own terms, for the ordinary economic times in which it was proposed. It was not proposed as a stimulus effort, but to make the tax code fairer and help out people who could use the dough.

We've been told that since, well, since 1933. We weren't told that in 1993-2001. We were all deficit hawks, remember?

And that "nasty post-war recession" was a hell of a lot better than the Great Depression. I'm not pointing to 1946 as the Golden Age, but pointing out that the economy was considerably better after the war than before it - that is, it got considerably better during a period that government was pumping in "financial capital" in order to produce the "material capital" that no individuals on their own would have bought AND was also siphoning up private sector financial capital at rates that we'd never put up with today. I'm doing this to refute the notion that the "misallocation" of financial capital towards government-mandated stuff - as stimulatory spending is being described - did, in fact, cause the economy to grow, which refutes some arguments made above.

BDB|12.22.08 @ 8:29PM|#

"Would you be as worried about the long-term fiscal effects of a similarly-sized tax cut?"

Without spending cuts? Why yes. Yes I would, I think the long term effects would be very bad.

BDB|12.22.08 @ 8:33PM|#

In fact sometimes I think spending increases with tax cuts is a greater evil because it fools people into thinking they can have their cake (tax cuts) and eat it, too (spending on their favorite program) when it just can't work like that for very long.

MNG|12.22.08 @ 8:34PM|#

Francisco
I'm confused. Are you saying national GDP did not go up during WWII?

|12.22.08 @ 8:34PM|#

Hey, the Market will take care of everything so please sit back and wait for it to work its magic.

If there is not a free market, the "magic" will take more time. But, rest assured: economic laws are just as unbreakable as physical laws, no matter how much Il Duce calls for "economic justice".

Elemenope|12.22.08 @ 8:37PM|#

In fact sometimes I think spending increases with tax cuts is a greater evil because it fools people into thinking they can have their cake (tax cuts) and eat it, too (spending on their favorite program) when it just can't work like that for very long.

I've been singing that song a long, long time.

|12.22.08 @ 8:37PM|#

Francisco
I'm confused. Are you saying national GDP did not go up during WWII?

Of course it did, but that is because of government spending, not because the nation was producing things that people wanted. This is why the GDP is a phony metric - it is like using a teenager's spending habits as a measure of a family's productivity or income.

Elemenope|12.22.08 @ 8:38PM|#

But, rest assured: economic laws are just as unbreakable as physical laws...

Just in case anyone was curious, this is the precise point at which Libertarianism becomes a religion.

MNG|12.22.08 @ 8:40PM|#

One thing does seem apparent to this non-PhD economics guy; some libertarians seem to suggest that things like government spending and raising taxes will just have these disasterous consequences, but there are clearly historical periods following such moves where the economy did quite well. They often argue that these things HAVE to have these bad effects because THAT'S JUST how economics works. And many of these same folks passionately advocate some things, like less government spending, taxing or regulation by saying that plain deduction from certain axioms tell us that these things are bound to have good economic effects. And plainly these things have often been followed by the opposite effects.

Now I guess that all of these are just spurious events, that in every case some other factors foul it up so the axioms are not proven correct. But I also guess it could be the case that these axioms or schools of thoughts have some working out to do. It would not be the first time that what was "demonstrated" on graph paper based on what seemed to be "self evident" axioms did not turn out to be empirically correct.

BDB|12.22.08 @ 8:41PM|#

MNG--

More often than not higher taxes and higher spending are bad, and have done bad things to the economy.

MNG|12.22.08 @ 8:42PM|#

LMNOP

Wow, that was something, wasn't it!

MNG|12.22.08 @ 8:43PM|#

Oh no BDB, these are unbreakable laws of reality we're talking about! If you think there are ANY time periods they have not proven true then you just have not been looking hard enough for confounding variables!

MNG|12.22.08 @ 8:50PM|#

During WWII unemployment fell, right? And it stayed down after.

GDP went up and kept climbing. Incomes went up.

What was the problem again?

|12.22.08 @ 8:50PM|#

Joe, production of unwanted goods is WASTED production, is destruction of wealth, not wealth itself.

The superior economic performance of 1946, compared to 1939, definitively proves you wrong. You cannot even claim that it wasn't the war stimulus that did it, but rather private capital and investment, because private capital and investment were be strictly restrained as the economy grew.

You're confusing capital with *money*. The assets, tools, machinery, land, all of those are capital. No, I am counting money as one variety of capital - as pretty much everyone outside of a strange little ideological cul-de-sac have always done.

All of your arguments amount to the same thing, Francisco - economic activity that you don't like for ideological reasons isn't actually economic activity.

Well, it is.

If the investment was a waste, the next phase is LIQUIDATION, where that capital is purchased by banks and collectors and sold or reinvested for less than they were originally purchased for, which means their economic value has decreased. (Economic value is what is agreed upon by a buyer and seller, remember?) When this happens on a large scale, the sum total of economic value has decreased.

You said "capital is not allocated at all". Actually, what I wrote was During a recession, the same amount of capital isn't being "misallocated." It's not being allocated at all. It goes away - that's what makes the economy recessionary.

THE SAME AMOUNT. Rather an important bit, no? If you quote me, try not to excise so much that you distort my meaning. Nobody's interesting in watching you flail at a straw man.

And I don't pretend to lecture you on economics, since I do not have time to do that. I am merely showing your utter lack of knowledge and many bad assumptions about economics. Which you can only do by mistating my points, inventing silly-assed metrics that nobody uses, and creating straw men. Impressive.

Just because something is conjured into existence does not mean it was done in the most rational way. Just because something creates wealth less efficiently than it might have in a perfect world does not mean that it did not create wealth, or even that it did not create wealth in excess of its cost. The instrate highway system has manifestly produced returns far in excess of its actual cost, even if in some utopian world it might have been built differently and produced even greater returns.

Oh, well, then, in that case, any time I go over my limit in my credit cards, I am creating capital! It depends on what you spend it on; another straw man you need to hide behind, I see. Oh, BTW, I made that statement in response to your assertion that the money being spent on stimulus packages was being taken out of the economy, and would otherwise have been spent on more-stimulatory things.. I see you've dropped that pretense. Good move.

There was no wealth created in the war years, Joe; that's a myth. If you and the other saucer people have your own language, fine. Limit yourself to talking with each other. I'm not interested in watching you define away inconvenient facts with semantic games.

The government does not produce anything, Joe. Again, your silly semantic games don't interest me. The infrastructure built by the WPA and the P-51s built in Detroit existed. The wealth that paid for them was originally created by the government via deficit spending, and cost the public nothing initially. It took zero zip nada nothing out of the economy at the time it was being spent. Certainly, that wealth had to be paid back via taxation, but the additional wealth created and circulated throughout the economy more than paid for those costs down the road, and the benefits were reaped when they were actually needed.

You again make the mistake of equating "spending" with economic activity. No, once again, the spending bought things. It produced things. P-51s. Sidewalks. Murals. Production went up during the period of big government spending, and set the stage for more production down the line. That you wish to ignore the existence of these material things, and assign them zero value, for ideological reasons doesn't change the irrefutable fact that the government spending didn't go into a hole, but produced real, concrete products.

concerned observer|12.22.08 @ 8:52PM|#

That's right, let's have more tax cuts for the rich! That's just what everyone needs! What's good for Bill Gates and Paris Hilton is good for America! Don't worry about the little people, they'll be fine. In fact, they'll be richer than if we gave them assistance. And we'll get more tax revenues!

|12.22.08 @ 8:53PM|#

Just in case anyone was curious, this is the precise point at which Libertarianism becomes a religion.

Quite a religion, too. A Catholic priest's invocations can only make certain material goods turn into a different material good, but Francisco's can make billions of dollars worth of material goods vanish entirely.

|12.22.08 @ 8:56PM|#

In fact sometimes I think spending increases with tax cuts is a greater evil because it fools people into thinking they can have their cake (tax cuts) and eat it, too (spending on their favorite program) when it just can't work like that for very long.

You're absolutely CORRECT. You cannot have tax cuts AND deficit spending, because you end up with the same problem: borrowing against future productivity, which impoverishes the population by taking good capital away from productive activity and throwing it away.

BTW, in case Joe insists: Most of government spending is NOT in infrastructure or other things like that. It actually goes towards payroll and mandatory spending (i.e. giving money away) which is non productive.

|12.22.08 @ 8:57PM|#

MNG | December 22, 2008, 8:40pm | #

One thing does seem apparent to this non-PhD economics guy; some libertarians seem to suggest that things like government spending and raising taxes will just have these disasterous consequences, but there are clearly historical periods following such moves where the economy did quite well. They often argue that these things HAVE to have these bad effects because THAT'S JUST how economics works. And many of these same folks passionately advocate some things, like less government spending, taxing or regulation by saying that plain deduction from certain axioms tell us that these things are bound to have good economic effects. And plainly these things have often been followed by the opposite effects.

My theory is that libertarians are absolutely, unerringly correct about economic policy, but that God hates libertarians, and intervenes in history to make them look bad.

How else do you explain the productivity gains from the internet just happening to hit immediately after the Largest Tax Increase in American History? We were so totally going to have soup lines!

You guys really need to stop writing those anti-religion books and inviting Christopher Hitchens to your holiday parties. And lose the Festivus Poles.

concerned observer|12.22.08 @ 8:58PM|#

@FT-Your little libertarian experiment the last 8 years destroyed the economy. So back off, shut up, sit down, and hope no one notices you assholes and does what they should.

MNG|12.22.08 @ 8:59PM|#

Doesn't ROBBERY result in REALLOCATION and if the robber puts it in a bank it produces S-A-V-I-N-G-S?

I mean c'mon people!

BDB|12.22.08 @ 8:59PM|#

If you want to start into the religion thing, I got a question for joe and MNG. Actually, a few:

1)Is it ever a good time to have a big, broad based across the board tax cut?

2)Is it ever a good idea to cut government spending, or a bad idea to raise it?

MNG|12.22.08 @ 9:00PM|#

"It actually goes towards payroll and mandatory spending (i.e. giving money away) which is non productive"

Because the people to whom the money is given eat it on the spot. DUH!

|12.22.08 @ 9:01PM|#

BTW, in case Joe insists: Most of government spending is NOT in infrastructure or other things like that. It actually goes towards payroll and mandatory spending (i.e. giving money away) which is non productive.

Right, but we're talking about stimulus spending on infrastructure here.

Obviously, paying cops and soldiers and jaw-droppingly handsome urban planners doesn't create wealth - though it makes it easier for private parties to create wealth, or prevents wealth from being destroyed. Whether any particular government program is worth its cost, in the sense of greasing the skids like that - needs to be determined on a case-by-case basis.

MNG|12.22.08 @ 9:01PM|#

BDB
yes and yes

|12.22.08 @ 9:02PM|#

Because the people to whom the money is given eat it on the spot. DUH!

Actually, that's a good caveat. It does circulate through the economy and is productive. The issue is whether it is less productive than it would otherwise have been.

Some of us think this is a question that needs to be studied with real world data. Others are happy to define their conclusion.

MNG|12.22.08 @ 9:05PM|#

joe the original producers will be the most productive with that money, they are living in a cave with their soul mate rediscovering electricy and the word "Ego"

concerned observer|12.22.08 @ 9:06PM|#

It's funny to watch the libertards freak out as their little facade world collapses around them. So they withdraw from reality.So I'll just say it again: Go curl up in a corner and shut up! If you want to keep believing that if we had just let business run a little more wild everything would bve fine, go aheasd believing it, but leave the rest of the world out of it, before it becomes necessary to call the men in white coats.

MNG|12.22.08 @ 9:08PM|#

concerned observer
Look, I think hard core libertarians can be silly and all, but it does strike me as a bit rude to tell them to repeatedly shut up on what is, after all, a libertarian site...

concerned observer|12.22.08 @ 9:09PM|#

@MNG-So is it wrong to tell them to stop making asses of themselves and do something besides bitch about the government?

concerned observer|12.22.08 @ 9:09PM|#

Shut up! Just everyone shut up! I HATE MY LIFE!

MNG|12.22.08 @ 9:11PM|#

BDB
I actually think a ton of government spending is wasteful. There is no profit motive to discipline the spending. I do think the market does not address some things and we have to address those things through the often wasteful government. Mises says this in his book Bureaucracy.

I will say that as an empirical matter sometimes the government does do some things well and the market does some things terribly. But I would rather leave something to the market unless it really looked like it was not going to do the job.

So I'd be for some cutting of government and for some tax cuts quite often.

will|12.22.08 @ 9:12PM|#

"As opposed to paying down credit card debt and buying stuff from Sony, which doesn't put nearly as much money circulating through the economy."
Those damn tightwads! Refusing to accumulate debt and buy American-made goods! Sickening!

|12.22.08 @ 9:13PM|#

BDB,

We should keep taxes as low as we can afford to. What we can afford is based on how much revenue we need for the stuff we want the government to do. When we find ourselves with more revenues than we need, we should cut taxes.

It's a good idea to cut government spending when the marginal benefit we achieve from spending above some baseline is lower than the dollars being spent above that baseline.

Both of these answers rely upon calculating what we, society, wants. It's tough to do that. We can only fix that number to a certain degree of accuracy, because it is inherently an imprecise concept.

Was that what you were looking for? Or were you looking more specifically at spending at taxation levels that maximize GDP?

concerned observer|12.22.08 @ 9:13PM|#

@MNG-Don't bother talking to them. They have to have it all or nothing.

MNG|12.22.08 @ 9:13PM|#

Hey libertarians have a great deal of good things to say along with a few wrong and silly ones. I subscribe to Reason for, well, a reason...

The market is not magical and mystical, but it is pretty amazing at times. So some libertarians worship it in a strange manner; I'll take Libertopia over Conservatopia any day of the week.

|12.22.08 @ 9:15PM|#

MNG | December 22, 2008, 9:05pm | #

joe the original producers will be the most productive with that money, they are living in a cave with their soul mate rediscovering electricy and the word "Ego"

Am I allowed to define "productive" in a manner that excludes any government spending from being productive? Because, if so, I can totally answer that question lickity split.

EJM|12.22.08 @ 9:16PM|#

You guys really need to stop writing those anti-religion books and inviting Christopher Hitchens to your holiday parties.

Maybe they should invite Hitchens--and Chris Hedges.

concerned observer|12.22.08 @ 9:18PM|#

So MNG when have libetarians suggested anything that wasn't batshit insane and thoughtless? I'm just wondering.

|12.22.08 @ 9:19PM|#

will,

If you can find the part where I said there was anything bad about buying TVs or paying down debt, you too can have a big, sloppy joe kiss.

But, you see, I didn't. I didn't say those things weren't GOOD, just that they weren't terribly stimulatory to our economy.

You might remember the concept of stimulating the economy. It's the subject of the post? Guy named Powell? Said that tax cuts are a more efficient way to STIMULATE THE ECONOMY?

You know, the idea my comment was written in response to?

concerned observer|12.22.08 @ 9:20PM|#

As for libertopia over consevatopia, that's kind of like choosing between a kick in the ass and getting hit by a car.

BDB|12.22.08 @ 9:21PM|#

I asked because it seems like a lot of modern day liberals ALWAYS will be opposed to broad based, across the board tax cuts because they benefit "the rich" or are "unfair". Ex., Obama's answer about capital gains taxes. Yes, he said, I will raise them even if it would hurt the economy, because that would be "fair". You want to talk about a religion? That's a religion, "if the rich get money, it's bad bad BAD always BAD and "unfair"!"

The older school liberals (ex., Kennedy and Johnson) didn't think this way so much. They gave us some broad-based tax cuts that were, dare I say, supply-side in the early and mid 60s and helped the economy as a result. Even though those tax cuts benefited mostly (at least at first) the rich.

concerned observer|12.22.08 @ 9:21PM|#

joe if you haven't noticed that libertarians just want to bitch about how the government keepst them down and how they could all be rich if only TEH GUBMINT would stand aside by now, I have to wonder.

|12.22.08 @ 9:22PM|#

concerned observer,

I find libertarian ideas to be valuable in terms of pointing out the weaknesses and pitfalls of liberal ideas.

Once, when I was an city planner, the city owned a little vacant lot in a neighborhood with a parking shortage. Originally, the idea was for the city to maintain ownership and rent out the spaces. I proposed that we turn the parking lot into a condominium, and sell each space to interested neighbors.

The objection was raised that the city wouldn't be able to ensure that the lot was kept up well. I replied with a very libertarian observation - that the owners had a big financial interest in keeping the lot in good condition, a bigger one than the city itself had.

My proposal carried.

concerned observer|12.22.08 @ 9:23PM|#

@BDB-What the hell are you talking about? We didn't get into the supply-side mess until the '80s.

BDB|12.22.08 @ 9:24PM|#

CO, Kennedy and Johnson both gave us big tax cuts in the early 60s. As big as Reagan's. They did a lot of good for the economy in the 1960s.

concerned observer|12.22.08 @ 9:24PM|#

@joe-That's not a libertarian idea, that's common sense. Libertarianism is defined b y opposition to common sense.

|12.22.08 @ 9:24PM|#

BDB,

Al Gore proposed a $600 billion income tax cut in 2000.

concerned observer|12.22.08 @ 9:24PM|#

@BDB-Can you give a link, or are you just bullshitting?

|12.22.08 @ 9:25PM|#

You're just being a dick now, c.o.

|12.22.08 @ 9:27PM|#

It couldn't have been that "common," or the Chairman of the Zoning Board of Appeals wouldn't have needed to be convinced.

concerned observer|12.22.08 @ 9:27PM|#

@joe-Explain, with examples from my posts, how I'm being "a dick".

concerned observer|12.22.08 @ 9:29PM|#

I hate my life!AAAAAIIIIIIIIII!

Elemenope|12.22.08 @ 9:30PM|#

Both of these answers rely upon calculating what we, society, wants.

On a grammatical level, this sentence wounded me deeply.

Otherwise, decent point.

BDB|12.22.08 @ 9:31PM|#

Joe, it was a "targeted tax cut" for "working families", I mean the Kennedy/Johnson/Reagan type tax cut where all rates are cut.

The "targeted tax cuts for working families" are the kinds of tax cuts where they money gets blown on Nintendo Wiis. Or since this was 2000, Nintendo 64s or what have you.

|12.22.08 @ 9:33PM|#

i>The superior economic performance of 1946, compared to 1939, definitively proves you wrong.

What "superior" economic performance? There was a spike during 1946 due to retooling and investment, but consumer goods were still hard to come by. However, that year was certainly better than 1939, for many.

You cannot even claim that it wasn't the war stimulus that did it, but rather private capital and investment, because private capital and investment were be [sic] strictly restrained as the economy grew.

But you make a wrong assumption, Joe. The war "stimulus" was not a stimulus at all, especially when capital goods were taken for war production. The markets of that era were TERRIBLY depressed all through 1945, after the end of the war, so ANY investment compared to the reduction in spending from the government would seem like a formidable spike in productivity. The fact is that the economy recovered because the government stopped spending in warfare, releasing capital, raw materials and savings towards investment.

You make the mistake of seeing things as if government pushed the economy. Rather, the government RELEASED economic activity from its chains, which is an entirely DIFFERENT thing.

No, I am counting money as one variety of capital - as pretty much everyone outside of a strange little ideological cul-de-sac have always done.

One does not gather that from your comments, Joe. It reads like your concept of capital is cash.


All of your arguments amount to the same thing, Francisco - economic activity that you don't like for ideological reasons isn't actually economic activity.

It is not due to ideology only, Joe. Better get a grip.

If the investment was a waste, the next phase is LIQUIDATION, where that capital is purchased by banks and collectors and sold or reinvested for less than they were originally purchased for, which means their economic value has decreased. (Economic value is what is agreed upon by a buyer and seller, remember?) When this happens on a large scale, the sum total of economic value has decreased.

This contradicts the following:

Actually, what I wrote was During a recession, the same amount of capital isn't being "misallocated." It's not being allocated at all. It goes away - that's what makes the economy recessionary.

Your disingenuity goes on here: THE SAME AMOUNT. Rather an important bit, no?

That is not what you said. There is nothing on your comments about "same amount". You said "it goes away".


Just because something creates wealth less efficiently than it might have in a perfect world does not mean that it did not create wealth, or even that it did not create wealth in excess of its cost.

How would one know that it did, Joe? That is the counterargument. Unless there is a need addressed by a market, there is no way to GAUGE the amount of wealth generated. Again, you think that just because something is made by government, it MUST have generated wealth. You cannot gauge that without a price system.


The Interstate Highway system has manifestly produced returns far in excess of its actual cost, even if in some utopian world it might have been built differently and produced even greater returns.

The issue is that you cannot KNOW that, if you do not have a benchmark. You ASSUME such because you see the amount of cars zipping along it, but how much more wealth could have been created if done under a market system, you cannot possibly know.

It depends on what you spend it on; another straw man you need to hide behind, I see.

Joe, you just said that DEFICIT spending creates wealth! You DO know what deficit means, don't you? How is my comment a strawman, if it is a logical conclusion of your statement?

I made that statement in response to your assertion that the money being spent on stimulus packages was being taken out of the economy, and would otherwise have been spent on *more-stimulatory* things.. I see you've dropped that pretense. Good move.

Well, there is no pretense in that argument. I explained why deficit spending IS taking money out of the economy. Whether you call it a "more-stimulatory" anything or not is immaterial.

If you and the other saucer people have your own language, fine. Limit yourself to talking with each other. I'm not interested in watching you define away inconvenient facts with semantic games.

Ok, that is total intellectual dishonesty. Inconvenient facts? What are you talking about?

The infrastructure built by the WPA and the P-51s built in Detroit existed. The wealth that paid for them was originally created by the government via deficit spending, and cost the public nothing initially. It took zero zip nada nothing out of the economy at the time it was being spent. Certainly, that wealth had to be paid back via taxation, but the additional wealth created and circulated throughout the economy more than paid for those costs down the road, and the benefits were reaped when they were actually needed.

Economics 101, little Joe: Broken Window fallacy.

First, who told you ANYTHING built by the WPA or those P-51s were, a) Needed, b) wanted by anyone (except the War Department in the case of the p-51s)? What the WPA (Works Progress Administration) did was to take badly needed capital AND labor away from the market to produce things that nobody can say were really needed. The P-51s may be great airplanes, but people did not really WANT them - they wanted food, clothes, cars and energy, which were in very short supply during the war years.

No, once again, the spending bought things.
It produced things. P-51s. Sidewalks. Murals. Production went up during the period of big government spending, and set the stage for more production down the line. That you wish to ignore the existence of these material things, and assign them zero value, for ideological reasons doesn't change the irrefutable fact that the government spending didn't go into a hole, but produced real, concrete products.

For ideological reasons . . . Ok, two things: One, there is nothing ideological about the fact that taking capital from productive endeavors to apply it to things by fiat is NOT a productive process. It is a zero-sum game, you end up, at BEST, with the same capital. Just because the thief uses the product of his thievery to buy a marble statue does not make the marble statue any more valuable than what the victim LOST.

Second, you fall for the Broken Window fallacy with such easiness it almost makes me pity you. Again, just because the government conjured these things does not mean the whole economy gained something, if that something was not even required in the first place! You may think that, because the government built a few things here and there that "may" be considered useful, that there was a net gain in wealth. Have you considered the other projects that entrepreneurs or private citizens may had to postpone because of being crowded out for capital?

Have you considered the effect of that spending by the government on raw materials, machinery and labor? Do you think that such does not have consequences? Since the government can have almost "limitless" financial resources (be it through taxation or money printing), it will crowd out other productive enterprises from labor, materials and capital goods, because of the unanticipated demand for them. It *may* stimulate a few economic actors, but only by making the rest worse off.

concerned observer|12.22.08 @ 9:36PM|#

Congrats to FT for 100 lines of steaming bullshit.

|12.22.08 @ 9:38PM|#

My theory is that libertarians are absolutely, unerringly correct about economic policy, but that God hates libertarians, and intervenes in history to make them look bad.

Actually, free marketers have been proven RIGHT.

How else do you explain the productivity gains from the internet just happening to hit immediately after the Largest Tax Increase in American History?

Post hoc reasoning.

|12.22.08 @ 9:40PM|#

That wasn't a stimulus package, BDB. The economy was stimulated just fine at that point. That was a tax cut based on managing a surplus.

Just how targeted can $600 billion be?

That was a big, across the board tax cut.

They made it a little more progressive - that's fine with me. Again, that wasn't a stimulus package. You think Keynes would cut taxes in the mid-to-late 1990s?

You know when it's a good time to cut taxes? When you're not facing big structural deficits immediately on the heels of a period of big tax cuts and greatly increased spending.

concerned observer|12.22.08 @ 9:41PM|#

FT-I'm concerned about your detachment from reality. Are you sure you're not having visions? Just remember, the voices aren't your friends.

|12.22.08 @ 9:41PM|#

Doesn't ROBBERY result in REALLOCATION and if the robber puts it in a bank it produces S-A-V-I-N-G-S?

I mean c'mon people!

Hey, dimwit . . . Would YOU feel better if the thief that robs you blind saves the money in a bank?

Do you understand what PRODUCTIVE activity means, at all? A thief is NOT productive. If he takes your money, he took part of the wealth you created and traded for money - he destroyed YOUR wealth. Understand: it is people's choice what turns the wheels of the economy, and if you chose your money to be spent ELSEWHERE, and yet a thief takes it, then the thief has taken your choices as well.

Google The Broken Window Fallacy, to illustrate yourself.

|12.22.08 @ 9:43PM|#

FT-I'm concerned about your detachment from reality. Are you sure you're not having visions? Just remember, the voices aren't your friends.

Thank you for the constructive comment - coming from such a rational and sage person, it means a lot.

concerned observer|12.22.08 @ 9:43PM|#

Of course, if I believed in God (Judeo-Christian or otherwise), I guess I could believe he hated libertarians.

concerned observer|12.22.08 @ 9:44PM|#

FT-I'm serious. You probably should consider help. I know some good psychiatrists, but they're probably in the wrong region of the country...

Warty|12.22.08 @ 9:50PM|#

If joe tells you you're being a dick, you should stop and consider that you just might be being a dick. The man knows everything there is to know about dicks.

...Fuck it, I'm not gonna even try to make that sound right.

concerned observer|12.22.08 @ 9:52PM|#

I'm not posting anymore. The Great Spoof is over. Good-bye.

|12.22.08 @ 9:53PM|#

This comment drew my attention:

Joe:
We should keep taxes as low as we can afford to. What we can afford is based on how much revenue we need for the stuff we want the government to do. When we find ourselves with more revenues than we need, we should cut taxes.

It is fascinating in different levels, first of all in the mysticism of the "We" person, as if Joe meant everybody and him (like in an anthill, or the Borg collective.)

Obviously, there is no "we". What Joe means is that the government bureaucrats will decide how much taxes THEY can afford to cut or raise, since they live off these taxes. He just tends to obfuscate this by stating that people all make the choice collectively. This is an example of intellectual dishonesty.

Warty|12.22.08 @ 9:55PM|#

Ha! co IS Edward!


FT - check your sarcasm detector.

BDB|12.22.08 @ 9:56PM|#

What? I thought CO was Lefiti?

|12.22.08 @ 9:56PM|#

FT-I'm serious. You probably should consider help. I know some good psychiatrists, but they're probably in the wrong region of the country...

Oh, I am being serious as well - THANK YOU for such sage advise. I am sure you are quite acquainted with a great number of psychiatrists and I am sure you know which ones to recommend. I should take it into the consideration it rightfully deserves. Again, you have my thanks.

|12.22.08 @ 9:57PM|#

FT - check your sarcasm detector.

Moi?

Warty|12.22.08 @ 10:00PM|#

BDB - back in the ancient times of early 2008, there was an especially annoying troll named "Edward" who would spew insults at Ron Paul and repeatedly claim that he'd never post again. He's also Lefiti, I think.

The Angry Optimist|12.22.08 @ 10:03PM|#

watching joe get clobbered is fun in its own way, but it makes me sad that there will be no time where joe goes "hey, you're right...I learned something today..."

Warty|12.22.08 @ 10:04PM|#

FT - maybe MNG wasn't joking with that comment about the robbers investing their money. Maybe my sarcasm detector is set too high. I don't know what to believe anymore...

|12.22.08 @ 10:22PM|#

It is important to know one thing so as to understand the root of Joe's misunderstanding of government spending.

We *spend* (meaning, each of us) because we first endeavored in productive activities which we traded. Each of us CREATED something. My labor was productive because it helped create goods, or it helped create services other people wanted. I traded my labor for money so that I could spend it on the result of someone else's endeavors.

Government does NOT produce things, because nobody trades with the government for goods or services. Rather, the government simply makes their goods and services MANDATORY, making us having to CHOOSE to use them regardless of each of our opportunity costs. This means that, whatever the government chooses to make, it does not follow that just because it does, everybody wants it. Even when it comes to privately made goods, people have different tastes and expectations.

It is because of this concept - trade - that goods and services from the government cannot add value to the economy, because there is no way to GAUGE such value. The market does this through the profit-loss test, but the government does not operate by the same rules. If the government creates goods using more materials and labor than what a private company would even consider using, it would not matter since the government can always OFFSET the cost by either taking it from us by taxation or by inflation.

Joe believes that government spends like people do: that it makes money and thus can spend money. Except that Joe either ignores the fact that people MAKE the wealth before they spend it, or he chooses to ignore this fact. Government does NOT create wealth - it simply TAKES wealth by gunpoint or by inflation, and uses it for other means. Joe believes that, even if this were true, you still get something of value. This is called the Broken Window Fallacy

http://bastiat.org/en/twisatwins.html#broken_window

My argument is that, notwithstanding my own political views, by sheer logic and economic theory, government cannot create wealth if it has to take wealth in order to create things. By the same token, a thief would create wealth by the simple action of investing the money he took, but in the best possible case, the net wealth would be zero, since the victim was made worse off by the loss.

|12.22.08 @ 10:30PM|#

Francisco,

What "superior" economic performance?

Unemployment in the United States was 17.2% in 1939. It was 2% in 1945.

There was not a spike of economic activity in 1946. The American economy was much larger than it had been seven years before. There wasn't a large body of pent-up capital ready to rescue the economy in 1939. The economy, the industrial capacity and construction activity and consumer goods production that drove economic growth in the post-war ear, would not have been there without the war effort.

It's not a coincidence that this productive capacity wasn't put to use before the war, and was available as an economic driver after it. It's not a coincidence that no one was investing in putting that to use in 1939, and suddenly it was in high demand in 1945.

The fact is that the economy recovered because the government stopped spending in warfare, releasing capital, raw materials and savings towards investment...and therefore, there was spending that was available. As opposed to 1939.

One does not gather that from your comments, Joe. It reads like your concept of capital is cash.

OK. I'm glad we cleared that up. I did say "some."

Look, you seem to be unclear on the point here: You wrote that capital is merely "reallocated" during a recession. I replied that During a recession, the same amount of capital isn't being "misallocated." It's not being allocated at all. It goes away - that's what makes the economy recessionary.

The same amount of capital isn't there. There's less capital in the economy - some of it disappears. The pie gets smaller, is what I'm saying. It's not just a reallocation of existing capital - "the same amount" of capital isn't in the system. There is now a different, lesser amount. Capice?

How would one know that it did, Joe? That is the counterargument. Unless there is a need addressed by a market, there is no way to GAUGE the amount of wealth generated...The issue is that you cannot KNOW that, if you do not have a benchmark. It's a common mistake I see among a certain variety of amateur economists, they they fall for this error: what is most real is what is most easily measured.

Obviously, public goods can't be measured by profitability. You have to measure them indirectly, and actual working economists are frequently called on to discuss how to measure such things - precisely because it's hard.

Joe, you just said that DEFICIT spending creates wealth! You DO know what deficit means, don't you?

You know, standing there with your mouth hanging open isn't quite as impressive as you might thing while you are typing it.

Yes, deficit spending can be a net economic gain, depending on what it is spent on. A public project is going to be worth something, and it could well be worth it to finance it with deficit spending. It produces something of value that might or might not be worth more than the amount of public debt it creates.

More relevantly, deficit spending may be necessary and beneficial even if it only time-shifts some investment, in order to deal with the pain of a recession. Again, we're getting into how to define value that isn't market-value.

You seem to love the idea that there are no forms of human knowledge beyond analysis of market behavior, the way you insist that it's utterly impossible to value something. How convenient.

Oh, btw, my string of never meeting someone who used the phrase "Economics 101" who wasn't a blithering idiot continues unabated.

I explained why deficit spending IS taking money out of the economy. No, you asserted it. Once again, your special "Francisco" definitions of economic terms, where part of the economy doesn't actually exist.

First, who told you ANYTHING built by the WPA or those P-51s were, a) Needed, b) wanted by anyone (except the War Department in the case of the p-51s)? So, your theory here is that none of the projects built by the WPA, nor the war related spending, actually generated economic activity? That because it wasn't sold (perhaps at malls? Buy your sidewalk, when maybe someone else on your street will have one?) that we can just assume it to have zero economic value. This, of course, is bullcrap.

The P-51s may be great airplanes, but people did not really WANT them I think you're wrong. I think the people living and working in this country wanted very, very much for our military to have the weaponry and material to fight World War Two. I think you have abandoned all connection to understanding things outside an ideology of presumed, reductionist knowledge of economics. Which is a very common thing, I find.

BTW, you don't even understand the Broken Window Fallacy well enough to use it. I would have to be arguing that the effect of both the depression itself and the New Deal (or World War Two and our war spending) represented an economic gain in order for the broken window fallacy to apply. No one is proposing that breaking more windows, fighting more wars, or going into more recessions is a good idea in order to spend money on glaziers, public works, or a two-war military.

We're the guy whose window got broken, deciding it we're going to fix it.

Have you considered the other projects that entrepreneurs or private citizens may had to postpone because of being crowded out for capital?

Deficit capital? That's what we're talking about here. Printing money to release into the markets like that is not a reliable way to stimulate the economy, or to improve the odds that the spending will be a long-term boon.

Have you considered the effect of that spending by the government on raw materials, machinery and labor? But this is the point - it's stimulatory spending during a period when there are temporary vast excesses of labor, machinery, and raw materials. I understand your point perfectly here - I've often wondered about engineers in California, and whether there's a way to make defense spending more counter-cyclical - but we're talking about taking up labor and capacity as a stimulus method during a recession.

|12.22.08 @ 10:30PM|#

Oh, and Francisco?

DEMAND KURV!

|12.22.08 @ 10:32PM|#

Did anyone else find this absolutely hilarious?


"Actually, free marketers have been proven RIGHT.

How else do you explain the productivity gains from the internet just happening to hit immediately after the Largest Tax Increase in American History?

Post hoc reasoning."

LOL!

We've been proven right! What? POST HOC REASONING!

That's awesome!

MNG|12.22.08 @ 10:36PM|#

What if the thief takes the money and invests it in something more productive than what the victim was going to spend it on?

|12.22.08 @ 10:37PM|#

The saddest part, Francisco, is that you don't even understand that there is a difference between the field of economics and your ideology.

Intellectually, you are most similar to a Scientologist.

an ideology of presumed, reductionist knowledge of economics

Oh, hi, TAO, is that you?

MNG|12.22.08 @ 10:40PM|#

As I said upthread, during the WWII stimulus GDP rose, unemployment fell and incomes rose.

What in the world was wrong with all that, that no "wealth" was created?

|12.22.08 @ 10:42PM|#

MNG,

That wealth is politically incorrect.

All of those earning more than during the Depression were robbers. Or something.

|12.22.08 @ 10:50PM|#

So, we can't know whether anything the government spent between 1933 and 1945 produced any value...

but we should just assume that the labor, raw materials, and machinery that was used would otherwise have been put to more productive use...

despite the fact that it was largely idle, hugely below capacity, before the war.

The Angry Optimist|12.22.08 @ 10:51PM|#

The war didn't serve to more efficiently revive or allocate capital. The war served to feed thousands of unemployed males into the meat grinder and artificially lower unemployment rates.

|12.22.08 @ 11:33PM|#

Spending gobs of public money that was not remotely covered by current tax revenues was tried, and it failed.

joe is right: instead, we should spend gobs of public money that has no hope of ever being covered by *any* tax revenues, today or at any point in the future.

DOUBLE DOWN, BITCHES!!!

Kolohe|12.22.08 @ 11:35PM|#

But as 1946 shows us, you can shift spending from "bad stuff" to "good stuff" relatively easily. It isn't actually a measure of how strong the economy is.

Whoah there. This transition was not smooth at all. There were close to if not actual riots as wage and price controls were lifted. The midterm elections in '46 were a bloodbath for the Democrats, Truman's approval rating was in the 30's. The downturn just barely got mitigated enough to allow Truman a narrow victory in '48.

Kolohe|12.22.08 @ 11:36PM|#

and i see now that was already covered.

Elemenope|12.22.08 @ 11:39PM|#

What if the thief takes the money and invests it in something more productive than what the victim was going to spend it on?

Where worship of economic efficiency and worship of absolute economic freedom rub together and generate so much friction that it causes a California wild fire.

Remember, only YOU can prevent ideological wild fires!

Kolohe|12.22.08 @ 11:42PM|#

During WWII unemployment fell, right? And it stayed down after.

GDP went up and kept climbing. Incomes went up.

What was the problem again?

To sum up what I was longwinded about the other day: Sui Generis.

|12.22.08 @ 11:45PM|#

I'd rather have my money taken by the robber. At least he wouldn't arrogantly pretend that he was going to invest it better than I would have, and keep hounding me for new loot every two weeks until the day I die.

The problem is ideology, I.e. Ideas, especially libertarian ideas. Therefore we should outlaw these ideas.

Nigel Watt|12.22.08 @ 11:52PM|#

Before reading this thread, I wasn't aware that including CAPITAL letters made my ARGUMENTS stronger.

Seriously though, the government is going to do exactly what it will do, and none of us can say shit about it. If you agree with me that government is bad, party with me as the shit hits the fan.

Elemenope|12.23.08 @ 12:08AM|#

To sum up what I was longwinded about the other day: Sui Generis.

But there can be no such thing to a person like Francisco who *insists* that the laws of economics are as regular and inflexible as the laws of physics.

Anomalies SHALL NOT BE TOLERATED!!

Elemenope|12.23.08 @ 12:17AM|#

Before reading this thread, I wasn't aware that including CAPITAL letters made my ARGUMENTS stronger.

The medium is the message.

Kolohe|12.23.08 @ 12:20AM|#

You know, I don't disagree with this proposition:

"the laws of economics are as regular and inflexible as the laws of physics."

It just that we are at best, in the Newton era of understanding. And like any complex system, chaos makes long term accurate and *pinpoint* predictions impossible. In the same way that even understanding the physics, it impossible to predict was the weather will be in Baltimore on Feb 6, 2009. Lower your precision, change your time frame and/or expand your scale, and some predictions become practical if still stochastic.

The other thing I believe is that any collection of human beings exhibits 'economic' behavior. The decisions, however, cannot always be quantized with a monetary price.

Kolohe|12.23.08 @ 12:23AM|#

'Quantified' not 'quantized'.

Elemenope|12.23.08 @ 12:45AM|#

Kolohe --

My problem with conceptualizing economics as a law of nature (or having some equally strong, objective guarantor) is that the agents of the system are pretty damn variable. It's not like particle physics where you have a certain number of elementary particles and *everything* is explained as interactions between those completely fungible parts (i.e. every electron is exactly like every other electron).

Human behavior, including economic behavior, is weird and wild, and while it can over the aggregate be regularized *somewhat*, the conditions that will cause pathological results are far less extreme than, say, a gravitational singularity does to relativity.

|12.23.08 @ 12:55AM|#

Well, to borrow a particularly apt analogy, if we're going into debt, we might as well slash taxes like OJ slashes significant others.

|12.23.08 @ 2:38AM|#

Unemployment in the United States was 17.2% in 1939. It was 2% in 1945.

Joe, in 1945 the US had not finished demobilizing the armed forces. OF COURSE you would have "full" employment when a big part of your potential labor is sitting idle overseas. There is no trick to it.


There was not a spike of economic activity in 1946. [There was, Joe. See: http://books.google.com/books?id=UPiXyaMLe1AC&pg=PA104&lpg=PA104&dq=GDP+1946-1948&source=web&ots=xE1vjZuIxy&sig=HCE6nDeNR-jVzypiqOcgut7kQKY&hl=en&sa=X&oi=book_result&resnum=4&ct=result] The American economy was much larger than it had been seven years before.

The WAS a spike in 1946 onwards because of a shift in production of goods, Joe. The GDP of the 40s shows the fallacy of using government spending as productivity, when in fact there is no way to know the productive output of an economy outside market prices. As far as ANYBODY knows, the government was not in the business of selling M4A3 tanks or P47H planes to customers.

There wasn't a large body of pent-up capital ready to rescue the economy in 1939.

Of course there was, but because it was being consumed away by the government through its New Deal schemes, it was not available for productive endeavors.

The economy, the industrial capacity and construction activity and consumer goods production that drove economic growth in the post-war [era], would not have been there without the war effort.

Assuming that is the case, it does not explain how, when other countries also had high war output, their economies did not had the same surge as the USA - mainly, France, the UK, Russia (which had an even higher centralized economy than the US).

The reason is because there were still S-A-V-I-N-G-S in the US financial system to start investment in goods manufacture, whereas the other countries had spent all their savings and were running ruinous deficits.

The question is not why did the US got back its growth in 1946 onwards but why it did not before 1939? The war effort had allocated labor and capital to manufacture weapons, but the capacity did not appear as if by magic - there had to be capital to do so, first. Just because the government throws money, it does not follow factories will appear as if by magic.

It's not a coincidence that this productive capacity wasn't put to use before the war, and was available as an economic driver after it.

Of course it is not a coincidence. It was by design, Joe. The New Deal did not stifle economic growth without a reason.

It's not a coincidence that no one was investing in putting that to use in 1939, and suddenly it was in high demand in 1945.

Again, you're right: it is not a coincidence ONCE you factor in the restrictive policies of the New Deal.

The fact is that the economy recovered because the government stopped spending in warfare, releasing capital, raw materials and savings towards investment...and therefore, there was spending that was available[,] [a]s opposed to 1939.

Not SPENDING, Joe! Investment, but not spending. You do not get "spending" if you do not generate goods.


Look, you seem to be unclear on the point here: You wrote that capital is merely "reallocated" during a recession. I replied that During a recession, the same amount of capital isn't being "misallocated." It's not being allocated at all. It goes away - that's what makes the economy recessionary. The same amount of capital isn't there. There's less capital in the economy - some of it disappears. The pie gets smaller, is what I'm saying. It's not just a reallocation of existing capital - "the same amount" of capital isn't in the system. There is now a different, lesser amount. Capice?

No, sorry, but you either misapplied the "at all" or you're simply backpedaling.


It's a common mistake I see among a certain variety of amateur economists, they they fall for this error: what is most real is what is most easily measured.

Measured how?


Obviously, public goods can't be measured by profitability [Why not?]. You have to measure them indirectly [Why?], and actual working economists are frequently called on to discuss how to measure such things - precisely because it's hard [Or maybe because it is impossible in lieu of market valuation or The Calculation Problem].

"Actual" economists, as in statist? Anyway, this is a big crock. Do the economists value the item by themselves, after the fact, or by taking surveys? Because what I have seen many times is that these economists do not do more than make guesses on how to value a "public" investment (which is why most public projects end up being over budget almost always.)

Yes, deficit spending can be a net economic gain, depending on what it is spent on. A public project is going to be worth something, and it could well be worth it to finance it with deficit spending.

Oh, but since it is HARD to measure it, I guess we will need those smart economists to tell us after the fact, when the money is already spent.

It produces something of value that might or might not be worth more than the amount of public debt it creates.

How can one now?

More relevantly, deficit spending may be necessary and beneficial even if it only time-shifts some investment, in order to deal with the pain of a recession. Again, we're getting into how to define value that isn't market-value.

Yes, we are. Like trying to define something that does not exist.


You seem to love the idea that there are no forms of human knowledge beyond analysis of market behavior, the way you insist that it's utterly impossible to value something. How convenient.

Why did you bring up this red herring? What does it have to do with anything? First, you argue that valuing a public project is hard, and now, you attack my argument by bringing up this ridiculous assertion that has nothing to do with what I have said. I never said it is impossible to value anything. What I have said is that it is impossible to know the value of a project that is created by political fiat, since you cannot know outside a price system if it was a rational use of resources or not.

Oh, btw, my string of never meeting someone who used the phrase "Economics 101" who wasn't a blithering idiot continues unabated.

Well, I am the exception - I use the term because you have no idea of what you're talking about.


ME: I explained why deficit spending IS taking money out of the economy.

Joe: No, you asserted it.[Oh, ok, so I asserted when i explained it] Once again, your special "Francisco" definitions of economic terms, where part of the economy doesn't actually exist.

Joe, you believe spending more than what you make is NOT taking resources from somewhere?


So, your theory here is that none of the projects built by the WPA, nor the war related spending, actually generated economic activity?

No, my contention is that nobody wanted them. Opening holes and closing them is an economic activity, and just as productive as those made by the WPA or building warplanes.

That because it wasn't sold (perhaps at malls? Buy your sidewalk, when maybe someone else on your street will have one?) that we can just assume it to have zero economic value. This, of course, is bullcrap.

If you believe so. Where I come from, building lots of things that are not sold is called Waste of Resources.


ME: The P-51s may be great airplanes, but people did not really WANT them.

Joe: I think you're wrong. I think the people living and working in this country wanted very, very much for our military to have the weaponry and material to fight World War Two.

I am pretty sure people in the 40s had little choice, but knowing people, my guess is that they would much rather have food, clothing and other basic necessities than having to build tanks and planes.

I think you have abandoned all connection to understanding things outside an ideology of presumed, reductionist knowledge of economics. Which is a very common thing, I find.

Is that your way of arguing, Joe, by accusing people of being "reductionist"?

BTW, you don't even understand the Broken Window Fallacy well enough to use it. [Really? I did not know one USED the fallacy, one tried to AVOID it] I would have to be arguing that the effect of both the depression itself and the New Deal (or World War Two and our war spending) represented an economic gain in order for the broken window fallacy to apply.

of course you would argue it. You simply stand the concept of "Fallacy" on its head.

We're the guy whose window got broken, deciding it we're going to fix it.

By apparently breaking even more . . .

|12.23.08 @ 2:44AM|#

But there can be no such thing to a person like Francisco who *insists* that the laws of economics are as regular and inflexible as the laws of physics.

I don't insist. It is a reality: The law of marginal utility, the law of supply and demand, the law of comparative advantage - trying to change these always leads to unintended consequences. If government fixes prices, you will have shortages. If government imposes or prohibits the use of a good, black markets will appear. What these laws will NOT do is give you QUANTITATIVE results because people do not decide things based on a continuous curve but in discrete steps. The results will be QUALITATIVE.

|12.23.08 @ 2:50AM|#

My problem with conceptualizing economics as a law of nature is that the agents of the system are pretty damn variable.

That is inconsequential. The decisions will be variable so as to make the system chaotic, but the decisions themselves will follow certain rational and logical steps that are regular. People HAVE to decide between differently valued options.

It's not like particle physics where you have a certain number of elementary particles and *everything* is explained as interactions between those completely fungible parts

No, but there is the example of Evolution - there is no denying that Natural Selection *IS* a Law, but it will NOT give you certainty that a three headed dragon WILL evolve in, let us say, one million years from now. It's the same with the Laws of Economics - they will NOT tell you which decision people will make, but they will tell you HOW they make that decision, and give a reason WHY. Knowing this, one can see why government intervention is just as damaging for economic activity as it would be for the evolutionary process.

Elemenope|12.23.08 @ 4:32AM|#

It's the same with the Laws of Economics - they will NOT tell you which decision people will make, but they will tell you HOW they make that decision, and give a reason WHY.

Please don't tell me that you are hanging your hat on the idea that people are perfectly logical minimaxing agents.

Please. Because that would really lend new, um, depth to all your Econ 101 quips.

|12.23.08 @ 4:42AM|#

I guess I'm not much of an economic libertarian, but it seems to me that guys like Powell have only one idea -- tax cuts -- and they drag it out and shake it in public whatever the situation. I get the impression if you asked Powell how to make a pie, he would say "cut taxes."

Elemenope|12.23.08 @ 4:44AM|#

p.s. if Economics were such a hard science with such self-evident laws, why do many economists disagree with...well, each other, what is to be considered a law, and pretty much everything you've posted here today?

ref|12.23.08 @ 5:50AM|#

Team Torres 120 Team Anti-Economics 0

If this were a boxing match Team Anti-Economics would have been slugged out in the first twelve seconds and then sustained a non stop twelve round beating. It was really that bad. You are in no condition joe, LMNOP, CO and cohorts. The only maneuver you had was to put your hands up, and pointlessly cry 'ideology! ideology!' every ten seconds when you did not understand a even the most elementary point Torres made with a jab.

At least your egos are impervious, but that comes from sheer audacity, not integrity.

|12.23.08 @ 7:57AM|#

The war didn't serve to more efficiently revive or allocate capital. The war served to feed thousands of unemployed males into the meat grinder and artificially lower unemployment rates.

Actually, it did both.

Spending gobs of public money that was not remotely covered by current tax revenues was tried, and it failed.

Just as long as make sure not to compare the economy in the 40s to that in the 30s, that's a perfectly fine statement. Any exposure to actual real-world data, on the other hand, is fatal.

Kolohe,

This transition was not smooth at all. The politics aside, the fact that there were resources and investment for people to agitate over, as opposed to in the 1930s, demonstrates that economic activity did, in fact, increase.

At least he wouldn't arrogantly pretend that he was going to invest it better than I would have, and keep hounding me for new loot every two weeks until the day I die.

If you have this intense emotional reaction to the concept of taxation and public goods, it's not surprising that the pragmatic effects would be less important to you. That doesn't change objective reality.

|12.23.08 @ 7:58AM|#

"the laws of economics are as regular and inflexible as the laws of physics."

I like this statement.

A certain juvenile understanding of the laws of physics will lead one to conclude that heavier than air flight is not possible. Hey, moron, you need to take Physics 101!

Meanwhile, the adults will continue to discuss how the make the airplane fly.

Matt Damon|12.23.08 @ 8:16AM|#

DEMAND KURV!!!

mng - there is a laffer curve. it describes the relationship between tax revenue (T) and income tax rate (t). what the ekon 79 crowd thinks is that any reduction in t increases T.)
tax cuts can stimulate, but they don't necessarily raise Tax revenue.

forget who estimated the t max using a cobb douglas production function. it was around 70% marginal rate. and tmax != t optimal, of course.

*pours a grape nehi and settles back. this is just the cutest argument*

|12.23.08 @ 8:41AM|#

Joe, in 1945 the US had not finished demobilizing the armed forces. OF COURSE you would have "full" employment when a big part of your potential labor is sitting idle overseas. There is no trick to it.

Yes, that is HOW full employment and a massive expansion of production was achieved. You were formerly arguing that it didn't.

The WAS a spike in 1946 onwards because of a shift in production of goods, Joe. One much less significant than the spike after 1940. That, and not 1946, is when the trend line begins to change.

Nobody is claiming that a war production economy is more efficient than a regular economy, just more efficient than a depression economy. Once we were out of the depression, of course it was more efficient, and promoted more growth, to return to a normal economy, but the question is about what to do during a depression.

Of course there was, but because it was being consumed away by the government through its New Deal schemes, it was not available for productive endeavors. That must explain why the economy sunk like a stone in 1937, when Roosevelt listened to people like you and cut spending and taxes in an effort to stimulate private investment. The government got out of the way, and the result was a deep recession, because there simply wasn't the capital and desire for new investment. Once again, your ideology runs up against objective economic history.

Investment, but not spending. You do not get "spending" if you do not generate goods. War industries generation billions of dollars of goods, whether your ideology encourages you to ignore them or not.

No, sorry, but you either misapplied the "at all" or you're simply backpedaling. Honest question, Francisco: is English your second language? You seem to be having a lot of trouble with a fairly obvious concept, and I think it's because your tangled up in the language.

Or maybe because it is impossible in lieu of market valuation or The Calculation Problem. Once again, actual economists who are more interested in understanding objective reality than formulating arguments for their politics disagree with you. They respond to this problem with creativity and constantly-refined techniques - as opposed to people like you, who prefer ignorance, and declare that doing what you don't want to do is impossible.

"Actual" economists, as in statist? No, Francisco, actual economists who have education, training, and experience in the field of economics, and the application of its principles for economic analysis. How incredibly telling that you assume such people must be your ideological opposites. Congratulations, you're finally right about something. They usually are.

What I have said is that it is impossible to know the value of a project that is created by political fiat, since you cannot know outside a price system if it was a rational use of resources or not. Which is precisely the position I attributed to you - that it is impossible to know the value of things not sold in the market. It's a silly position, and I don't blame you for being embarrassed to be tagged with it. That's why you shouldn't argue it.

Joe, you believe spending more than what you make is NOT taking resources from somewhere? No, I believe it is possible to invest those resources in an economically efficient manner, and thereby generate more wealth than needs to be repaid. This is a fairly simple point, and someone who needs it explained to him isn't really in a position to lecture anybody about economics.

Opening holes and closing them is an economic activity, and just as productive as those made by the WPA or building warplanes. Really? A road that makes it easier to get to work has absolutely no value? What an idiotic statement. No, wait - what a religious statement.

BTW, your earlier statement about the government running a temporary surplus by selling excess goods at the end of the war completely refutes this faith-based assertion. Obviously, they had some value.

Where I come from, building lots of things that are not sold is called Waste of Resources. Hence, my reference to the Saucer People. In this world, sales value is only one form of value.

I am pretty sure people in the 40s had little choice, but knowing people, my guess is that they would much rather have food, clothing and other basic necessities than having to build tanks and planes. That's because you are an economic reductionist, who has difficulty imagining anyone in any terms other than Rational Economic Man. As a mater of fact, Roosevelt consistently won landslide after landslide against isolationist Republican candidates.

Think about what you just said: that faced with the circumstances that existed after Pearl Harbor, people in the United States didn't really want the government to spend money on war production. It takes an awful of willful ignorance to believe that.

Is that your way of arguing, Joe, by accusing people of being "reductionist"?

No, I made my arguments. That was just some commentary about the particular nature of your delusion.

Really? I did not know one USED the fallacy, one tried to AVOID it Once again, I think your poor grasp of English is coming into play. One uses an example or concept like that in an argument to make a point, as you did earlier. This is such a blindingly obvious bit of knowledge that I can only conclude it's a language problem.

of course you would argue it. So, the fact that I didn't can simply be dismissed by saying that of course I did.

By apparently breaking even more . . . When the shop keeper fixes his broken window, he isn't breaking more. That spending on repairs isn't lowering his total net value, nor making it more difficult for him to make money in the future. Once the window is broken, it is economically rational to spend the money to fix it.

As I said, you don't seem to understand the Broken Window Fallacy very well.

I don't insist. It is a reality: The law of marginal utility, the law of supply and demand, the law of comparative advantage - trying to change these always leads to unintended consequences. Nobody tries to change the Law of Gravity when they built an airplane. In fact, they use a more advanced understanding of that and other physical laws than those declaring that summon the Law of Gravity to explain why airplanes can't fly.

Just as people like Nobel Lauriate Paul Krugman and Paul Volcker use a more advanced understanding of the laws of economics than yours when they support stimulus spending during a recession.

|12.23.08 @ 8:45AM|#

"ref" can't see any difference between what LMNOP argued on this thread and what Concerned Observer wrote. They all just sort of look like the same thing to him.

I sure am going to be up all night worrying about what he thinks.

MNG|12.23.08 @ 8:45AM|#

"Team Anti-Economics"

I love this kind of thing. Walk over to your nearest Economics department at your local university, or peruse the academic journals (ah-ah, AEI and Cato "journals" don't count!) and you'll see that far from being "anti-Economics" joe, me and LMNOP are probably closer to what the current field of economics looks like. Classical economics theory of the type FT is tossing around has been significantly qualified and modified as of late and the Austrian School is certainly not the consensus in economic thought today.

Here some interesting developments in current economics that present some challenges to the:

http://en.wikipedia.org/wiki/Behavioral_economics

(Reason had a great article on the challenge many behavioral economic findings presents to the more classical view embraced by many libertarians recently)

And here is another one:
http://en.wikipedia.org/wiki/Institutional_economics

Anti-economics. Hilarious.

MNG|12.23.08 @ 8:48AM|#

Matt Damon
I am so jealous over you and Sarah Silverman.

MNG|12.23.08 @ 8:53AM|#

Argh, preview, preview!

"Here are some interesting developments in current economics that present some challenges to the orthodox libertarian understanding of economics"


But seriously. As I said upthread FT throughout the 40's, throughout, we have rising GDP, rising incomes and falling (and staying low) unemployment. What in the world was the problem with that?

Turtles|12.23.08 @ 9:26AM|#

Unbelievable. The above posters who think "Raise taxes, grow economy."

|12.23.08 @ 9:33AM|#

throughout the 40's, throughout, we have rising GDP, rising incomes and falling (and staying low) unemployment. What in the world was the problem with that?

You're still hung up on this?

The problem was that the greater production was for things that didn't actually increase desired consumption. GDP is simply an imperfect metric of what people actually want out of an economy.

It is certainly a second best solution to create war materiel to send overseas to destroy rather than not create war materiel and be conquered. But war economies do not put food on the table or cars in the garage. GDP was up during the war, yet household consumption continued at depression-era levels.

will|12.23.08 @ 9:43AM|#

Since World War II has obviously shown everyone except the evil libertarian capitalists that war can be good for the economy, I suggest that President Obama declare war on Iran. The spending on that should surely pump some cash into the economy.

Gilbert Martin|12.23.08 @ 9:54AM|#

"The United States was a comparatively poor country two hundred years ago, but it became wealthy because decisions about allocating resources were made mainly by private individuals with strong incentives to make the most of what they had"

Of course.

Cutting taxes allows those who have aleady been proven to be more productive and/or smart about allocating capital to further do so while government tax and redistribution schemes puts money into the hands of the incompetement sponge leech and parasite class that is the natural constituency of the liberal Democrats who favor such things.

Tax cuts rewards success (or rather refrains from punishing it - since keeping your own money is not really a "reward" - it was yours to begin with), while tax and spend policies punish success and rewards failure.

MNG|12.23.08 @ 10:10AM|#

"But war economies do not put food on the table or cars in the garage. GDP was up during the war, yet household consumption continued at depression-era levels."

Where do you get that from? Personal consumption expenditures increased every year of the 1940's.

http://www.economics-charts.com/gdp/gdp-1929-2004.html

But given what I had already said, that incomes rose and unemployment fell one could have figured that out without stats (income rose but people couldn't put as much food on the table? wtf?)

The Angry Optimist|12.23.08 @ 10:17AM|#

you'll see that far from being "anti-Economics" joe, me and LMNOP

Oh, yeah, YOU. That's adorable. Don't flatter yourself.

|12.23.08 @ 10:25AM|#

MikeP,

GDP was up during the war, yet household consumption continued at depression-era levels.

As a matter of fact, the war economy significantly reduced hunger and poverty, compared to the depression economy.

Certainly, the GDP growth under the war economy didn't provide as many things that people wanted for their own lives DURING THE WAR ITSELF. However, that GDP level was turned towards normal consumer spending when the war ended. While this increase in GDP was not sufficient to provide the benefits of a strong economy to people, it was a necessary condition, and one that did not exist prior to the massive war stimulus.

So no, the war economy was not the end state that we wanted, but that level of stimulus was a necessary corrective to achieve the normal, growing economy that eluded us in the 30s.

|12.23.08 @ 10:28AM|#

Since World War II has obviously shown everyone except the evil libertarian capitalists that government spending during a recession can be good for the economy, I suggest that President Obama undertake a massive stimulusd program. The spending on that should surely pump some cash into the economy.

There, will, I fixed that for you. Is that straw in your hair?

|12.23.08 @ 10:29AM|#

It's cold and dark in here, and we may die.

|12.23.08 @ 10:32AM|#

Personal consumption expenditures increased every year of the 1940's.

This belief rests on a weak foundation. It fails to take sufficiently into account the understatement of actual wartime inflation by the official price indexes, the deterioration of quality and disappearance from the market of many consumer goods, the full effect of the nonprice rationing of many widely consumed items, and the additional transactions costs borne and other sacrifices made by consumers to get the goods that were available. When one corrects the data to provide a more defensible measure of what happened to real consumer well-being during the war, one finds that it declined.

Very apropos, Professor Higgs.

|12.23.08 @ 10:36AM|#

As a matter of fact, the war economy significantly reduced hunger and poverty, compared to the depression economy.

That may in fact be true. By producing full employment, a war economy or a ditch-digging economy can be an effective albeit expensive redistribution scheme. That may, depending on how you discount utilities, actually raise total household well-being. But it doesn't, as you well know, raise total household wealth.

VM|12.23.08 @ 10:36AM|#

hier are some research papers on taxation and growth.

in case anyone is interested in some research on the matter.

MNG|12.23.08 @ 10:42AM|#

TAO
Yeah, and you're quite the economic genius.

Take this gem upthread:

"The war served to feed thousands of unemployed males into the meat grinder and artificially lower unemployment rates."

That would make the rise in aggregate GDP and spending even that much more impressive wouldn't it (less working men, but boy were those guys spending and producing more overall!).

MNG|12.23.08 @ 10:46AM|#

So to recap:

During a time of massive state spending and intervention in the economy:
1. unemployment fell dramatically
2. incomes rose
3. gdp rose
4. consumption spending rose

And all of this, of course, was not supposed to happen given the theories hugged tightly by hard core libertarians.

So stamp your feet and maybe it will all go away.

Gotta go prime the economy via consumption via holiday gift buying, but you guys go ahead and keep trying to wish those figures away...

(Has anybody mentioned Smoot-Hawley yet?)

The Angry Optimist|12.23.08 @ 11:00AM|#

So to recap:

MNG's just going to make shit up he doesn't back with numbers. Mmmmkay.

|12.23.08 @ 11:13AM|#

I just looked through the thread for any numbers you proved, TAO.

Didn't see any.

Nice beam you got there. Ever think of having it removed?

ref|12.23.08 @ 11:21AM|#

Gotta go prime the economy via consumption via holiday gift buying, but you guys go ahead and keep trying to wish those figures away...

and we are not the ones making the argument that you can spend before there is something produced to be spent on which is the essence of what you punch drunk (after an epic loss) Team Anti-Economics are arguing.


I love this kind of thing. Walk over to your nearest Economics department at your local university, or peruse the academic journals (ah-ah, AEI and Cato "journals" don't count!) and you'll see that far from being "anti-Economics" joe, me and LMNOP are probably closer to what the current field of economics looks like. Classical economics theory of the type FT is tossing around has been significantly qualified and modified as of late and the Austrian School is certainly not the consensus in economic thought today.


No serious school of economics refutes the contribution of this man
on the microeconomic level, however, the modern Austrian School is the only school whose macro economic model is consistent with what is understood as the foundations of economics. There is reason for this: the other schools of thought are strongly affected by political considerations.

Obviously when someone like Joe wont even acknowledge that government spending begins with a transfer from product already created you have a fundamental flaw in your analysis. No, you are not the grown up as anyone who has read you over the years can assuredly attest.

ref|12.23.08 @ 11:33AM|#

BTW, MNG don't sell yourself short. You
picked a bad bet in this bunch but clearly you are a libertarian whether you admit it to yourself just yet. Took me years to do so as well.

VM|12.23.08 @ 11:36AM|#

huh?

ref|12.23.08 @ 12:15PM|#

UCLA economists Harold L. Cole and Lee E. Ohanian write, ""Real gross domestic product per adult, which was 39 percent below trend at the trough of the Depression in 1933, remained 27 percent below trend in 1939 . . .


Similarly, private hours worked were 27 percent below trend in 1933 and remained 21 percent below trend in 1939."

Mistakes made by both Hoover and FDR in their early experiments to prevent
prices from falling accumalated over the decade of the 30's that resulted in the second dip later in the decade. Both administrations created cartels in the industries designed to control production so prices would rise (hello Chapman!) in the mistaken belief that inflation could create economic growth. Of course, unemployment stayed high through out the period (17.2 percent in 1939) due to these assinine policies.

It didn't help that in the mid 30's strikes flared up on a massive level,
from "14 million strike days in 1936 to 28 million a year later."

As far as cranking out the monetary policy, the Fed more than doubled the amount of monies in the economy from 1929 to 1939, yet "Per capita GDP was lower in 1939 than in 1929 ($847 vs. $857)".

So if you are looking for a culprit and you find that FDR reversing course from 'good' spending and cartelization of the economy to 'bad'
deficit reduction as an explanation for the double dip, you are barking up the wrong tree, and you are ignoring the accumulative effect of earlier policies.

ref|12.23.08 @ 12:20PM|#

Here some interesting developments in current economics that present some challenges to the:

http://en.wikipedia.org/wiki/Behavioral_economics


Recent studies in behavioral economics show that the tendency of New Dealers to wing it as they were going along and reverse course without any predictable pattern gravely wounded investor confidence during this entire period of time. That should be the lesson Obama takes from the Great Depression.

|12.23.08 @ 12:39PM|#

the modern Austrian School is the only school whose macro economic model is consistent with what is understood as the foundations of economics. There is reason for this: the other schools of thought are strongly affected by political considerations.

Thank you for letting us know right away that it is safe to ignore you.

Everyone - except Autrians! - allow political considerations to influence their understanding of economics.

Austrian economists are to economics what global warming deniers are to climatology: beloved by ideologues, giggled at by everyone else who practices in the field.

|12.23.08 @ 12:40PM|#

Obviously when someone like Joe wont even acknowledge that government spending begins with a transfer from product already created...

Don't let the fact that I did no such thing interrupt your efforts to pat yourself on the back.

ref|12.23.08 @ 1:30PM|#

Thank you for letting us know right away that it is safe to ignore you.

And you are doing such a great job of it too! Who is this 'us'? You are not the Team Leader of Hit'n'Run, you are a punching bag, who despite being incapable of reasoning beyond copying and pasting the current editorial page of the New York Times (where else could you have learned that double dip nonsense) keeps flailing away desperately at those of us who have actually taken the time to study economics at length.

The Administration that most positively represents the policies that you advocate was the Nixon Administration. I know, you and your brethren CO and LMNOP would like to ignore this fact, but it happens to be true.

Don't let the fact that I did no such thing interrupt your efforts to pat yourself on the back.

No, I would not aspect you to understand how your entire house of cards falls if the underlying assumption is shown to not only be false but an elementary level fallacy.

Far, from being a cult, the Austrian economist are ahead of the curb, and your dearly beloved 'consensus' is catching up with us though the powers of be will listen to neither anymore than they will listen to environmentalist organizations when they point out biofuels are not a net environmental gain (reason over largese? Neveah!, the cry in Washington).

That is right, ahead of the curve, and if you listened to the Austrian oriented money managers like Jim Rogers instead of wasting your time with the New York Times editorial page, you could have saved you own mother a pretty penny or two.

ref|12.23.08 @ 1:33PM|#

Far, from being a cult, the Austrian economist are ahead of the curb, and your dearly beloved 'consensus' is catching up with us though the powers of be will listen to neither anymore than they will listen to environmentalist organizations when they point out biofuels are not a net environmental gain (reason over largese? Neveah!, the cry in Washington).

Far, from being a cult, the Austrian economist are ahead of the curve, and your dearly beloved 'consensus' is catching up with us though the powers that be will listen to neither of us anymore than they will listen to environmentalist organizations when they point out biofuels are not a net environmental gain (reason over largese? Neveah!, the cry in Washington).

Egosumabbas|12.23.08 @ 1:50PM|#

Hey everybody, I have a secret to let you in on. Joe is a troll! No seriously, he is. On one thread I asked him point-blank why he posts here. His answer? He is here merely to butt heads. He is not here to debate in the sense that the two parties will come to a new truth or understanding. He never admits he is wrong about certain things, so that cannot be. Well, if he's stubborn, is there an ideology he is defending? Nope. He admitted he has no ideology. He comes here to flail his arms about and yell at people.

Gilbert Martin|12.23.08 @ 1:55PM|#

"Austrian economists are to economics what global warming deniers are to climatology"

That would make them 100% correct about economics, then.

VM|12.23.08 @ 2:03PM|#

really????

this is one of the stranger "conversations" hier...

ref|12.23.08 @ 2:13PM|#

Egosumabbas | December 23, 2008, 1:50pm | #
Hey everybody, I have a secret to let you in on. Joe is a troll! No seriously, he is. On one thread I asked him point-blank why he posts here. His answer? He is here merely to butt heads. He is not here to debate in the sense that the two parties will come to a new truth or understanding. He never admits he is wrong about certain things, so that cannot be. Well, if he's stubborn, is there an ideology he is defending? Nope. He admitted he has no ideology. He comes here to flail his arms about and yell at people.

I know, but every time Joe sputters and crashes and ends an argument by telling me, 'Fuck you!', well, this devil grows a new horn.

I doubt he will take the bait this time, his persona today is 'above it all.'

Kolohe|12.23.08 @ 2:26PM|#

To recap why WW2 is a piss-poor analogy with modern times.

WW2 involved raising the public debt level of the US from 40% of the GDP in 1940 to 110% of the GDP by 1945. Just prior to all the crap that went down in Sept, the public debt was 5.5 trillion or about 45% of the GDP. 110% of today's GDP is roughly 14 trillion. So to do the equivalent of WW2 spending today would be about 8 trillion dollars.* (There is also the side issue that a portion of the debt was able to be accrued at low interest rates through war bond drives and the like)

WW2 involved directly employing 12 million men and subjecting them to military discipline at a wage ($50 bucks for a private, $100 dollars a month for a more senior solider or for the elite troops) that in 2008 dollars amounts to about $600-$1200. In context, a boot camp E-1 these days receives $1300 in base pay. The cultural significance of 12 million people subject to military discipline who if they survived the war, would never again have 'a bad day' I say is vital for the post war productivity growth.

Last, the immediate WW2 period presented a USA that possessed a majority of the world's industrial output. Wages (and taxes) could be high when there was no competition

So to sum up, it is certainly possible to jump start the economy by doubling the debt held by the public. The differences between today and the fifties will make it difficult if not impossible to pay it back.

*this analysis cuts out multiplier effects which have an estimate from either 1.0 to 3.0, but the quantification of multiplier effects are at the core of the debate between the krugman/delong wing and the cowen/mankiw wing so it is possible that spending only needs to be 2.5 trillion. but who knows?

Kolohe|12.23.08 @ 2:28PM|#

One more thing. to adjust for population, the equivalent sized army today to what we had in '45 would be about 25 million people.

MNG|12.23.08 @ 2:36PM|#

"MNG's just going to make shit up he doesn't back with numbers. Mmmmkay."

Sigh. It's not like this was that far upthread. TAO, you know you can use your mouse to "scroll up" don't you?

"MNG | December 23, 2008, 10:10am | #

"But war economies do not put food on the table or cars in the garage. GDP was up during the war, yet household consumption continued at depression-era levels."

Where do you get that from? Personal consumption expenditures increased every year of the 1940's.

http://www.economics-charts.com/gdp/gdp-1929-2004.htm"

So I gave the personal consumption numbers and the gdp numbers are there too (of course not even FT was disputing them, he just claimed they were not a very good measure).

And your goofy argument above assumed the unemployment findings I mentioned. But here are the rates nonethless.
http://www.infoplease.com/ipa/A0104719.html

Here's your income numbers if you want them:
http://www.e-
archives.ky.gov/pubs/Economic_Dev/2005desk/IncomeKYUSHistoric.pdf


TAO, you're arguing even worse lately. Did you bomb your finals? Should have studied harder on those adhesion contracts ;)

|12.23.08 @ 2:44PM|#

Oh, good, another thread about how terrible I am.

"I'm NOT a paranoid schizophrenic; I'm AHEAD OF THE CURVE! The 95% of economists who think I'm full of crap, including the most recent winner of the Nobel Prize in Economics, just need to take Ekon 101."

Tosser.

|12.23.08 @ 2:50PM|#

BTW, the fact that you couldn't find anything to back your assertion Obviously when someone like Joe wont even acknowledge that government spending begins with a transfer from product already created... really sticks out like a sore thumb.

Oh, um, er *flips through note cards* uhh *dammit, there's a prepared rebuttal in here somewhere* uh um...well, it's the "underlyinig assumption." Yeah, that's the ticket.

BTW, it's adorable how you can recall everything I've written on threads stretching back years like that. "His attitude today..." The comment about my mother's IRA? I couldn't remember anything you write from one thread to another.

|12.23.08 @ 3:30PM|#

MNG,

So I gave the personal consumption numbers...

Did you miss what I quoted Robert Higgs saying about those?

Personal consumption expenditures increased every year of the 1940's.

This belief rests on a weak foundation. It fails to take sufficiently into account the understatement of actual wartime inflation by the official price indexes, the deterioration of quality and disappearance from the market of many consumer goods, the full effect of the nonprice rationing of many widely consumed items, and the additional transactions costs borne and other sacrifices made by consumers to get the goods that were available. When one corrects the data to provide a more defensible measure of what happened to real consumer well-being during the war, one finds that it declined.

"Were you able to pick up any meat?"

"No. We're out of ration coupons. But I did pick up more potatoes!"

"Great! That'll make our personal consumption numbers look just fine."

ref|12.23.08 @ 3:48PM|#

BTW, the fact that you couldn't find anything to back your assertion Obviously when someone like Joe wont even acknowledge that government spending begins with a transfer from product already created... really sticks out like a sore thumb.

You really don't understand that? You are not just being obnoxious and faking it? I'm not going to go through the trouble of explaining the bond market to you. I guess it isn't something they include in SimCity when you are playing Urban Developer, but really, there is no excuse.

Your argument (I mean Krugman's since you are just copying and pasting) for stimulus is based on a presumption that you don't have to count the opportunity costs of the borrowing that is committed in the first place.

BTW, it's adorable how you can recall everything I've written on threads stretching back years like that. "His attitude today..." The comment about my mother's IRA? I couldn't remember anything you write from one thread to another.

BTW, toots, for me it is about the id, not the ego. I've given you plenty of heartburn, I don't care if you knock it back with Tums or not.

Elemenope|12.23.08 @ 4:06PM|#

ref,

It is entirely justified to make fun of your reading comprehension, as the positions that joe, MNG, and I staked out are quite different *from each other*, and none of us are anything approaching CO.

I was simply asserting that economic "laws" are treated with a certain degree of religiosity, and that the assertion that it is at all akin to science is one that would make any good Popperian laugh so hard blood would shoot out their nose.

My position is, like BDB's, that on balance the presumption is that market will be superior in providing goods than government, and that for any particular good it is *more likely than not* that a private product will outperform a public one. The exceptions to this rule have to do with many things, each of which are departures from the "orthodox" model.

Silly little things like irrational actor models, and externalities, and asymmetric information amongst market actors, and so forth. The stuff that economists have been writing about *for the better part of a century*.

And arrogating oneself the position of referee is obnoxious and childish, if nothing else.

|12.23.08 @ 4:12PM|#

You really don't understand that?

No, I understand it just fine.

The problem is, you attributed it to me, and I never wrote anything remotely comparable to it.

Your argument (I mean Krugman's since you are just copying and pasting) for stimulus is based on a presumption that you don't have to count the opportunity costs of the borrowing that is committed in the first place.

No, that's pretty obviously not my argument, since I wrote Yes, deficit spending can be a net economic gain, depending on what it is spent on. A public project is going to be worth something, and it could well be worth it to finance it with deficit spending. It produces something of value that might or might not be worth more than the amount of public debt it creates.

More relevantly, deficit spending may be necessary and beneficial even if it only time-shifts some investment, in order to deal with the pain of a recession.

There, I bolded the parts that refute your assertion that I don't realize deficit spending has to be paid back.

Of course public borrowing has to be paid back, and of course it costs money to do so. When calculating if that cost is worth it, you have to consider the value of what the public gets for its investment.

C'mon, I'm not speaking Greek here. This is really not a terribly complicated point I made.

|12.23.08 @ 4:14PM|#

Seriously, Paul Krugman just won the Nobel Prize in Economics.

If you don't think it occured to him that public borrowing needs to be paid back, it's probably not Krugman who's missing something.

ref|12.23.08 @ 4:17PM|#

And arrogating oneself the position of referee is obnoxious and childish, if nothing else.

I did so because this has not been one of your better performances. Your mantra of 'empericism' has been exactly that, a mantra, without really explicating any further than that, and frankly, in this thread you came across as lazy.

I provided the link to Menger for a reason, as a dig at the false claim that Austrian theory is neoclassical when it is a refutation of neoclassical argument. I hoped you would have caught on to that because Torres obviously has gotten tired of explaining this in his own way.

So, yes, this one time, you deserve to be put in the same category as CO and dishonest Joe.

|12.23.08 @ 4:20PM|#

It is entirely justified to make fun of your reading comprehension, as the positions that joe, MNG, and I staked out are quite different *from each other*, and none of us are anything approaching CO.

That's because Ekonomiks poseurs like ref are only capable of judging a statement about economic policy and history by how closely it tracks with his ideology.

If you agree with the 90-95% of credentialed economists who think the Austrian school is full of baloney, you are anti-economics!

ref|12.23.08 @ 4:20PM|#

joe | December 23, 2008, 4:14pm | #
Seriously, Paul Krugman just won the Nobel Prize in Economics.

If you don't think it occured to him that public borrowing needs to be paid back, it's probably not Krugman who's missing something.

Not missing anything, this school of thought, the hardcore religious Keynesians, really does believe you can roll it over into perpetuity. If Krugman believes otherwise, it is funny he has never let on by showing how debt will eventually get paid down. But he won the Nobel Prize, never mind the details!

|12.23.08 @ 4:21PM|#

...and of course, like all fanatic radicals, he divides the world into the Elect, and everyone else.

|12.23.08 @ 4:23PM|#

Wait wait wait.

Not missing anything, this school of thought, the hardcore religious Keynesians, really does believe you can roll it over into perpetuity.

You're presuming to lecture people about economics, and you think that Keynesians believe in perpetual deficits? Regardless of conditions, you think that Keynesians want to keep running deficits, in good times and bad, and never pay them back?

Seriously?

LoL.

ref|12.23.08 @ 4:26PM|#

joe | December 23, 2008, 4:20pm | #
It is entirely justified to make fun of your reading comprehension, as the positions that joe, MNG, and I staked out are quite different *from each other*, and none of us are anything approaching CO.

That's because Ekonomiks poseurs like ref are only capable of judging a statement about economic policy and history by how closely it tracks with his ideology.

If you agree with the 90-95% of credentialed economists who think the Austrian school is full of baloney, you are anti-economics!

Of course our resident imbecile Dishonest Joe just pulled that out his ass like everything else he says that isn't copied and pasted from the ass tuggings of the NYT.

It is a false appeal to authority given it does not reflect the 'consensus' in the least, but what joe imagines they think.
That's because Ekonomiks poseurs like ref are only capable of judging a statement about economic policy and history by how closely it tracks with his ideology.


He dishonestly asserts this after I did a full refutation of his double dipshit with links and facts that are easy to find.

You are way to easy, Joe

|12.23.08 @ 4:27PM|#

This is the mark of the religious fanatic:

he doesn't understand, or want to understand, what the nonbelievers actually think.

All he needs to know is that they're infidels, and he can conclude that their beliefs are the inversion of his own.

The world consists of believers, and non-believers. What do non-believers believe? The opposite of what believers believer. Make sure you don't listen to them or know what they're saying, or you might be corrupted yourself!

|12.23.08 @ 4:28PM|#

It is a false appeal to authority given it does not reflect the 'consensus' in the least, but what joe imagines they think.

Oh, right. Austrian school "economists" are actually held in high esteem by the rest of the profession. How silly of me.

|12.23.08 @ 4:32PM|#

Wow, you're almost as obsessed with the New York Times as you are with me.

Of course everything I say is "copied from the New York Times." Let's follow the logic.

Ekonomiks poseur hates the New York Times.

Ekonomiks poseur hates joe.

Ergo, joe loves the New York Times.

Fanatic, fringe-cult logic. You're in the cult, or you're part of the massive conspiracy to mislead the world.


For the record, the NYT is a pale, overpriced attempt to mimic the Boston Globe.

Elemenope|12.23.08 @ 4:33PM|#

I provided the link to Menger for a reason, as a dig at the false claim that Austrian theory is neoclassical when it is a refutation of neoclassical argument. I hoped you would have caught on to that because Torres obviously has gotten tired of explaining this in his own way.

So, yes, this one time, you deserve to be put in the same category as CO and dishonest Joe.

Wow, this is bordering on idiotic. At what point *in this entire thread* (no, how about make that *in the entire time I've commented on this site*) did I *ever* compare Austrian with neo-classical economics or assert they were similar?

Ever?

Bueller?

ref|12.23.08 @ 4:43PM|#

as a dig at the false claim that Austrian theory is neoclassical when it is a refutation of neoclassical argument.

You know what, that could have been worded better, and wrongly makes assertion where implication a better discriptor. However, in your arguments with Torres' Austrian view the counter claims you made were better suited to a refutation of the neo-classical model than Austrian.

Austrian theory begins with human action as will full behavior and avoids the neo-classical line of thought that leads to models that ignore subjective behavior or what behavioral economist might call in this call incentives.

Could you lean over and wipe the slobber from Joe's face, he is getting maniacal over there. Fun to watch though.

|12.23.08 @ 5:02PM|#

OK, fine, you didn't actually argue that, but it's was your implication. You know, sort of a presumption. Or an underlying assumption. Yeah, that's it - the argument I'm actually ready to respond to (unlike what you actually wrote, which I just didn't follow at all) is all sort of underlyiningly presumptionish in what you wrote. So I'm gonna talk about that.

The cultist knows what Dear Leader told him to say to the infidels, and just picks among the six or seven arguments at his disposal. He only reads enough of what you write to figure out which of the subjects he's prepared to talk about is closest.

Internets Celebrity|12.23.08 @ 5:06PM|#

BTW, it's adorable how you can recall everything I've written on threads stretching back years like that.

He's the biggest celebrity in the WORLD...but is he ready to LEAD?

Elemenope|12.23.08 @ 5:26PM|#

You know what, that could have been worded better, and wrongly makes assertion where implication a better descriptor. However, in your arguments with Torres' Austrian view the counter claims you made were better suited to a refutation of the neo-classical model than Austrian.

No, I was responding to a specific assertion of Torres', that observed behavior can give you the etiology of action for given economic agents. Praxaeology specifically argues *against* the notion that etiology of economic action can be modeled effectively.

Not my fault if he's a *bad* Austrian.

As far as it goes, Austrian school economics has the "least" ability to claim itself as a science, because it consists entirely of post hoc analysis and cannot make predictions.

It may not seem fair to make fun of someone both because they are a proponent of a school of thought and then simultaneously make fun because they are a *poor* exemplar of that school, but them's the breaks. Personally I wouldn't have commented at all, except that Torres was being insufferably arrogant on top of being a doof.

MNG|12.23.08 @ 5:28PM|#

MikeP

"If one uses the [Milton] Friedman-Schwartz price index to deflate personal consumption spending per capita"

Well, nothing controversial about that move! Case closed I guess ;)

MNG|12.23.08 @ 5:31PM|#

"Although it is somewhat obscure in contemporary economics, and despite the fact that few academic economists are followers, the Austrian School has an unbroken tradition dating back to the late-19th century"

http://en.wikipedia.org/wiki/Austrian_School

ref|12.23.08 @ 5:45PM|#

fer | December 23, 2008, 5:02pm | #
OK, fine, you didn't actually argue that, but it's was your implication. You know, sort of a presumption. Or an underlying assumption. Yeah, that's it - the argument I'm actually ready to respond to (unlike what you actually wrote, which I just didn't follow at all) is all sort of underlyiningly presumptionish in what you wrote. So I'm gonna talk about that.

The cultist knows what Dear Leader told him to say to the infidels, and just picks among the six or seven arguments at his disposal. He only reads enough of what you write to figure out which of the subjects he's prepared to talk about is closest.

Thesis statement:

Elemenope | December 22, 2008, 8:38pm | #
But, rest assured: economic laws are just as unbreakable as physical laws...

Just in case anyone was curious, this is the precise point at which Libertarianism becomes a religion.

Witty assertion: Elemenope | December 22, 2008, 11:39pm | #
What if the thief takes the money and invests it in something more productive than what the victim was going to spend it on?

Where worship of economic efficiency and worship of absolute economic freedom rub together and generate so much friction that it causes a California wild fire.

Remember, only YOU can prevent ideological wild fires!

Truly enjoyed it, but it is a mantra, an appeal to a higher authority of 'empiricism' without explaining the relevance to Austrian
theory.

Elemenope | December 23, 2008, 12:08am | #
To sum up what I was longwinded about the other day: Sui Generis.

But there can be no such thing to a person like Francisco who *insists* that the laws of economics are as regular and inflexible as the laws of physics.

Anomalies SHALL NOT BE TOLERATED!!

Again an assertion critical to Austrian Theory without really engaging that theory, but pretending to be speaking from a more 'emperical' foundation.

Hmm, and you called me arrogant?

Elemenope | December 23, 2008, 12:45am | #
Kolohe --

My problem with conceptualizing economics as a law of nature (or having some equally strong, objective guarantor) is that the agents of the system are pretty damn variable. It's not like particle physics where you have a certain number of elementary particles and *everything* is explained as interactions between those completely fungible parts (i.e. every electron is exactly like every other electron).

Human behavior, including economic behavior, is weird and wild, and while it can over the aggregate be regularized *somewhat*, the conditions that will cause pathological results are far less extreme than, say, a gravitational singularity does to relativity.

That would be a somewhat valid argument, if we are talking about Keynesian School where, savings is dismissed as 'leakage' in the flow (to answer Joe's irrelevant question above, yes, Keynesians really believe paying down debts is a negative in the 'flow' of things).

However, in this context, it is lazy mental masturbation, an attitude not an argument.

It goes on, gets worse at times, would not have bothered as you are aware of what you wrote, but dishonest joe is a weasel, so for his benefit we have this digression.

ref|12.23.08 @ 5:51PM|#

You know what, that could have been worded better, and wrongly makes assertion where implication a better descriptor. However, in your arguments with Torres' Austrian view the counter claims you made were better suited to a refutation of the neo-classical model than Austrian.

No, I was responding to a specific assertion of Torres', that observed behavior can give you the etiology of action for given economic agents. Praxaeology specifically argues *against* the notion that etiology of economic action can be modeled effectively.

Not my fault if he's a *bad* Austrian.

As far as it goes, Austrian school economics has the "least" ability to claim itself as a science, because it consists entirely of post hoc analysis and cannot make predictions.

It may not seem fair to make fun of someone both because they are a proponent of a school of thought and then simultaneously make fun because they are a *poor* exemplar of that school, but them's the breaks. Personally I wouldn't have commented at all, except that Torres was being insufferably arrogant on top of being a doof.

Now, that's the stretching of the noggin that often make your posts enjoyable reading! I'll have to look back over that section to see how it applies to what Torres wrote though.

ref|12.23.08 @ 6:10PM|#

gotta to go, but just to elaborate on what you said, or if joe comes to you looking for a source to prove your remarks on Austrian economics, here is a good source.

From our present perspective, it might begin to appear as if the principles
underlying both sorts of economic methodology might possess some grain of
truth. For Austrian economics might be conceived not as an alternative to the
economics of model-building and prediction but as a preliminary activity of
establishing this missing connection to ground-level economic realities.

Of course, they also believe the nature of social sciences puts extreme limitations on the predictive power of any of them, not just Austrian Theory.

Egosumabbas|12.23.08 @ 6:17PM|#

"As far as it goes, Austrian school economics has the "least" ability to claim itself as a science, because it consists entirely of post hoc analysis and cannot make predictions."

Funny, how all the Austrians have been predicting that the housing bubble would collapse while everybody else was still plowing into unbuilt Miami condos with Other People's Money. They also predicted that gold would go up in value compared to other assets. What was everybody else predicting?

Egosumabbas|12.23.08 @ 6:21PM|#

Also, the Austrians correctly predicted that the multiple bailouts wouldn't do diddly shit to improve the economy, and may delay the recovery significantly. The former has already been proven, and I assume the latter will be proven correct as well.

But go ahead and keep telling me how all the other schools of economics are able to make amazing predictions because they claim to be "scientific".

Fresno Bob|12.23.08 @ 6:50PM|#

I'm late to the party here, and certainly haven't read all the comments, but...

The only thing WWII "stimulated" was wholesale death and destruction. It left the industrialized world's manufacturing capacity completely decimated. Well, except for the US that is. Our manufacturing capacity was very much intact. But that had nothing to do with our post war recovery, nothing at all. It was all the war "stimulus"

Elemenope|12.23.08 @ 6:55PM|#

But go ahead and keep telling me how all the other schools of economics are able to make amazing predictions because they claim to be "scientific".

No school of economics is "scientific".

See what I did there?

BTW, if a physicist tomorrow predicts that gas prices will go up, and it does, we do not attribute this insight to physics. People make predictions *all the time* that do not follow directly from any theory they may espouse.

ref|12.23.08 @ 8:39PM|#

Egosumabbas, what LMNOP is stating is actually a critical grounding of the Austrian tradition in their opposition to several schools of thought that believed the human condition could be scientifically managed if we used rigorous modern maths to figure out how humans will always behave in a given situation.

That piece I link above quote Hayek: Compare Hayek's remark to the effct that 'it is probably no exaggeration to say that every important advance in
economic theory during the last hundred years was a further step in the consistent application of subjectivity. That the
objects of economic activity cannot be defined in objective terms but only with reference to a human purpose goes
without saying'

Of course, I also believe it helps to have an accurate understanding of what is happening in an economy, and that informs the Jim Rogers of the world to a greater extent to make the right choices (like shorting the stock market Nov 07) at the right time when the herd of joes taking dictation from the NYT are going in the other direction.

ref|12.23.08 @ 8:59PM|#

No, that's pretty obviously not my argument, since I wrote Yes, deficit spending can be a net economic gain, depending on what it is spent on. A public project is going to be worth something, and it could well be worth it to finance it with deficit spending. It produces something of value that might or might not be worth more than the amount of public debt it creates.

More relevantly, deficit spending may be necessary and beneficial even if it only time-shifts some investment, in order to deal with the pain of a recession.

There, I bolded the parts that refute your assertion that I don't realize deficit spending has to be paid back.

Of course public borrowing has to be paid back, and of course it costs money to do so. When calculating if that cost is worth it, you have to consider the value of what the public gets for its investment.

C'mon, I'm not speaking Greek here. This is really not a terribly complicated point I made.

Amazing how you completely miss the boat on the meaning of opportunity costs which is the heart of the argument you are quoting from me
there. This proposal of yours undermines current savings which have the benefit of paying down debts (which you don't get, always causes a decline in consumption, so anytime this occurs you will always recommend the policies that undermine it though you think this can be carefully rationed during an upturn with the right technocrats using the right levers, it isn't so), and increasing net worth which increases the choices that individuals who save have at their disposal to invest in the best way they see fit. This is how prosperity is produced. Instead of just running to stand still in the inflationary spiral you and the guy you cut and paste from, Krugman, recommend, the people create real wealth.

You might as well be speaking Greek since you have so little understanding of economics.

Elemenope|12.23.08 @ 9:16PM|#

FWIW, the Austrian apprehension at attempting to claim the status of a "science" is one of its strengths.

VM|12.24.08 @ 7:26AM|#

"You might as well be speaking Greek since you have so little understanding of economics."

um. as someone here who does have a little knowledge of econ, um... just gotta say wow. just wow.

|12.24.08 @ 9:08AM|#

Funny, how all the Austrians have been predicting that the housing bubble would collapse while everybody else was still plowing into unbuilt Miami condos with Other People's Money.

Oh, bullshit. Everybody - except this administration, seemingly - was predicting the housing bubble would pop for exactly as long as the Austrians. The Austrians just happened to shift their annual prediction of imminent financial disaster to the housing bubble - and did so at about the same time that everybody across the spectrum was talking about the housing bubble.

And, of course, it wasn't the cheap-money-inflated housing bubble that actually sent the economy into this deep recession, but the MBSs that turned the popping bubble into a cascade of failures throughout the financial system. Funny how it wasn't the Austrian ideologues, but rather the regulator pragmatists, who saw the danger in those.

Austrians have predicted nine of the last four recession.

|12.24.08 @ 9:10AM|#

I love the theory Fresno Bob articulates: the American economy recovered so strongly after World War Two because the economies of our major trading partners were all devastated by war.

Sure, that makes sense. Let's bomb Europe and Japan into the stone age, and then we'll get rich on exports.

|12.24.08 @ 9:15AM|#

Egosumabbas, what LMNOP is stating is actually a critical grounding of the Austrian tradition in their opposition to several schools of thought that believed the human condition could be scientifically managed if we used rigorous modern maths to figure out how humans will always behave in a given situation.

Did somebody say something about defining others' beliefs in terms of the opposite of your own, without regards to their own internal logic?

Instead of just running to stand still in the inflationary spiral you and the guy you cut and paste from, Krugman, recommend, the people create real wealth.

You know, like they were in the 1930s. Um, what?

Somebody who talks about the need to avoid inflation during a depression really doesn't need to be lecturing other people about how little they understand economics. Maybe if you use the worse "paste" and "Krugman" a few more times, though, the fact that you can't account for deflation, because you are an intellectual one-trick pony whose self-imposed limitation lead him to think every question has the same answer won't be so obvious.

|12.24.08 @ 9:19AM|#

You can't possibly know anything about economics, VM: you don't agree with "ref."

What I've learned from this thread: Francisco Torres' arguments look really, really strong, as long as you are already passionately devoted to believing his position is right, and driven to profane fury at the very existence of counter-arguments.

|12.24.08 @ 9:22AM|#

Amazing how you completely miss the boat on the meaning of opportunity costs which is the heart of the argument you are quoting from me there.?

Yes, Lord knows the statement about the need to pay back doesn't demonstrate any knowledge that resources will be diverted to where they would otherwise have gone. Um, what?

Like I said, you have six or seven prepared arguments, and you use them inappropriately, because you make a point of not understanding anything anyone else has to say beyond comparing it to your prepared notes.

ref |12.24.08 @ 3:26PM|#

Whew, what a meaningless steaming pile of shit you let off there Joe. Not surprising though.


Oh, bullshit. Everybody - except this administration, seemingly - was predicting the housing bubble would pop for exactly as long as the Austrians. The Austrians just happened to shift their annual prediction of imminent financial disaster to the housing bubble - and did so at about the same time that everybody across the spectrum was talking about the housing bubble.


You could only come to this conclusion by not actually reading any source material. To the extent that Roubini has erred in his forcast, the mainstream economist criticism looks an awful lot like an Austrian School position.

BTW, it is befitting that the only creativity you ever show on this board is through lying.

VM | December 24, 2008, 7:26am | #
"You might as well be speaking Greek since you have so little understanding of economics."

um. as someone here who does have a little knowledge of econ, um... just gotta say wow. just wow.

If you have anything else besides an attitude borrowed from pop culture to express, speak up.

joe | December 24, 2008, 9:15am | #
Egosumabbas, what LMNOP is stating is actually a critical grounding of the Austrian tradition in their opposition to several schools of thought that believed the human condition could be scientifically managed if we used rigorous modern maths to figure out how humans will always behave in a given situation.

Did somebody say something about defining others' beliefs in terms of the opposite of your own, without regards to their own internal logic?


I would be surprised if LMNOP didn't catch what was being referred to here, but this is far above your pay grade, and Krugman and NYT, or (LoL)The Boston Globe doesn't reference it so you wont have any means of throwing a few economics related phrases around to counter it.

Somebody who talks about the need to avoid inflation during a depression really doesn't need to be lecturing other people about how little they understand economics.

Gee, you must think Bernanke is some kind of genius, or else you are just a cypher who doesn't know what he is saying. The school of thought you parrot is far more concerned with a little deflation, than I am with a little inflation, I assure you. Bottom line, when the economy gets back on track and prices start going up, I would rather have a baseline price based on the supply of monies than one that will be doubled in the next year
where my purchasing power will be negatively affected.


Yes, Lord knows the statement about the need to pay back doesn't demonstrate any knowledge that resources will be diverted to where they would otherwise have gone. Um, what?


Once more, you are not getting it.

whatjoesaid|12.24.08 @ 9:41PM|#

And, of course, it wasn't the cheap-money-inflated housing bubble that actually sent the economy into this deep recession

Laughing my ASS off, I almost missed it!

whatjoesaid|12.24.08 @ 9:45PM|#

And, of course, it wasn't the cheap-money-inflated housing bubble that actually sent the economy into this deep recession

Oh, God, that is still so funny. Who is the fringe boy, now? That has always been joe, but still, he is capable of some howlers when he miss places the script.

whatjoesaid|12.24.08 @ 9:48PM|#

And, of course, it wasn't the cheap-money-inflated housing bubble that actually sent the economy into this deep recession

That's 'misplaces' above, of course. Luaghing so hard at joe's stupidity, I'm getting my hands are shaky.

whatjoesaid|12.24.08 @ 10:58PM|#

Okay, I have my breath back. This time in full because it is easy to miss this one, and poor, dumb joe wont have a clue what is so damn funny about this unless it is pointed out (he likely thinks it is another matter entirely but I directed my little puppet that way until I got my breath back):


And, of course, it wasn't the cheap-money-inflated housing bubble that actually sent the economy into this deep recession, but the MBSs that turned the popping bubble into a cascade of failures throughout the financial system. Funny how it wasn't the Austrian ideologues, but rather the regulator pragmatists, who saw the danger in those.


According to the arch-sage joe, who has commented on the Austrian School at length, and given the sage, knowledgeable opinion at length that the Austrian School economist are a fringe group of ideologues, that, according to joe, this school of thought has nothing to say about banks being leveraged at a 50 to 1 ratio with the use of modern financial instruments. He has read the literature of Austrian oriented economist, financial gurus and the like, and this subject has never come up. Never.

What is the Austrian School most known for? I'll give befuddled joe a hint, a critical regard of a little matter with the initials, FRB. The first word being 'fractional', the second word being 'reserve', and the third word being 'banking'. So, according to joe, the Austrian School has nothing to say about a matter very similar, the misapplication of material ownership used in leveraging modern financial instruments, and according to joe, the Austrians have never warned anyone of the problems inherent in the current Wall Street set up. Bravo joe, bravo.

(BTW, you can't really completely parse out the housing bubble from MBSs(mortgage backed securities) now can you, you dumbass?)