Reason.tv: From Poverty to Prosperity—Arnold Kling, Nick Schulz, & Economics 2.0

Reason.tv's Nick Gillespie talks with economist Arnold Kling and journalist Nick Schulz about their new book, From Poverty to Prosperity (Encounter), which charts the fantastic increase in overall wealth despite recent economic troubles.

Taking a longer view that stretches back decades and even centuries, Kling and Schulz argue that we've entered the era of Economics 2.0, in which the key issue is innovation, transformation, and growth, not the divvying up of existing goods and services.

Schulz, the editor of the The American, and Kling, author also of the new Unchecked and Unbalanced, worry about a politics that is dangerously out of synch with the way the economy actually works.

Approximately 10 minutes. Shot by Dan Hayes and Meredith Bragg; edited by Bragg.

For downloadable versions, go to Reason.tv.

Comments

[crayon]

FIRST, BITCHES!!!

[Jordan]

HURRR DURRR DURRRR!!!

[Mainer]

"HURRR DURRR DURRRR!!!"

What the hell is that supposed to mean, and why does someone post it in all the recent threads?

More importantly STFU unless you have something useful to say.

Please.

[eb]

its making fun or crayon who always does that

[SugarFree]

Telling people to STFU if they don't have something useful to say is something useful to say?

Noted.

[Brandybuck]

Politicians aren't the only ones out of synch. The general public is clueless when it comes the economics. Even a lot of so-called "austro-libertarians" are fairly ignorant. It's like they've read a polemic by Rothbard, and now consider themselves experts.

[Paul Krugman]

You guys should be interviewing REAL economists; ones with Nobel Prizes, not these ignoramuses.

[Paul Krugman]

Oh, Crayon... you misspelled "fist".

[P Brooks]

More importantly STFU unless you have something useful to say.

You're new here, I see.

Observe (quietly) and learn.

[P Brooks]

Credit where credit is due: "please" was a nice touch.

[crayon]

I, for one, find this generally aggressively discourteous behavior to be a symptom of the intellectual decay that's gnawing at the heart of the libertarian establishment.

The posts from those pretending to be me are nothing but vulgarities written by idiots, full of troll bait and fury, signifying nothing.

Tsk, tsk, indeed.

[crayon]

I don't know who the impostor in the previous post is, but this the first time I have posted on the thread.

Please stop impersonating me.

[crayon]

One time, when I had diarrhea, I told my mommy how icky it was and she told me that everything that comes out of me is candy sweet.

I LOVE YOU MOMMY!

[crayon]

I AM SPARTACUS CRAYON!

[Morris]

From Paul Krugman's column in the Times today (For "conservatives" read "addled libertarians," and for "salary," read "donations."

"Talk to conservatives about the financial crisis and you enter an alternative, bizarro universe in which government bureaucrats, not greedy bankers, caused the meltdown. It's a universe in which government-sponsored lending agencies triggered the crisis, even though private lenders actually made the vast majority of subprime loans. It's a universe in which regulators coerced bankers into making loans to unqualified borrowers, even though only one of the top 25 subprime lenders was subject to the regulations in question.

Oh, and conservatives simply ignore the catastrophe in commercial real estate: in their universe the only bad loans were those made to poor people and members of minority groups, because bad loans to developers of shopping malls and office towers don't fit the narrative.

In part, the prevalence of this narrative reflects the principle enunciated by Upton Sinclair: 'It is difficult to get a man to understand something when his salary depends on his not understanding it.'"

[John Thacker]

From Paul Krugman's column in the Times today

come excellent examples of strawman arguments. For example, while "private lenders actually made the vast majority of subprime loans," Fannie Mae and Freddie Mac bought most of the securitized loans. Their portfolios have always consisted of more loans that they bought than they originated.

If they were willing to buy any idiotic loans that any idiotic lender made, then of course that would make the crisis work. Thanks for illustrating how mendacious and misleading Krugman is, Morris. He does indeed ignore anything that doesn't fit his narrative.

[Morris]

Anything that doesn't conform to your libertarian catechism is a straw man argument, you fanatic fuck.

[Tim]

What an intelligent response! Morris is a genius everyone! Paul Krugman said so!

What Krugman neglects to mention is the role played by the Federal Reserve keeping interest rates too low which encourages asset bubbles, and then implicitly promising to bail out the banks should their loans go belly up. Don't forget that Fannie and Freddie weren't exactly private companies. Greenspan was right that companies will police themselves, if markets are competitive and they bear the costs of their actions.

The banks were given cheap money from the fed, and encouraged to invest it in housing; good loans and bad. It wasn't just loans to poor people, it was things like the mortgage tax deduction too which makes home ownership preferable to renting on the margin. The only thing of worth one can glean from Krugman's reproduction of standard left wing talking points is that yes it is true that housing policy alone didn't cause the recession, and Republicans are either too stupid to realize it or too much in love with the Fed to criticize it.

That's where the straw man comes in, at least when criticizing libertarians, by focusing on only one of many narrow criticisms of government policy and then claiming that that argument is all there is so by knocking it down we can call critics deniers and dismiss anything else they say.

Let's look at another gem from Krugman, posted after 9/11. http://www.interesting-people......00140.html

"the driving force behind the economic slowdown has been a
plunge in business investment. Now, all of a sudden, we need some
new office buildings. As I've already indicated, the destruction
isn't big compared with the economy, but rebuilding will generate
at least some increase in business spending."

That's Krugman confirming his belief in the broken window fallacy by actually saying that the economy is better off with buildings being destroyed and then rebuilt than having both those buildings and a big pile of money. Which economy is better off? The one with the WTC and a pile of cash, or the economy that has to spend the entire pile of cash just to replace the assets lost in the WTC's destruction. Well we're in a recession again maybe we should tear down some buildings and build them up again with stimulus dollars because hey, it will create jobs and stimulate some misleading Keynesian aggregates.

I can hardly consider anyone an honest and true economist that buys into the broken window fallacy. I also question what kind of "regulations" Krugman wants, I read in the WSJ that companies could have covered their losses if they had double their capital requirements, why not just do that and call it a day? If you're "too big to fail" you have to keep more money in reserve than some company we can just let go under. Likely because the bureaucrats and politicians want to create a complex system they can use to promote their irrelevant (to sound financial markets) social projects and pay off special interest groups. As the GSEs show it is much easier to run entitlement programs using the same kind of off balance sheet entities government whines about business using than actually pass a middle class entitlement to a suburban home with a white picket fence.

[crayon]

"The banks were given cheap money from the fed, and encouraged to invest it in housing; good loans and bad. It wasn't just loans to poor people, it was things like the mortgage tax deduction too which makes home ownership preferable to renting on the margin."

And did anyone force the banks to take the "cheap money" from the fed?

Were they held at gunpoint and forced to invest it in housing?

It was the short-sighted greed of banks that caused the crisis, not any incentives from the Federal Government.

[Tim]

So the government can encourage all manner of irresponsibility and not be at fault? Wonderful, so instead of reining in government irresponsibility we should chastise the banks for responding rationally to government incentives. Even better, the banks are expected not just to not take advantage of cheap money stupidly pumped out by the government, but to sit idly in direct contradiction to government's efforts to make them do the opposite. Finally, the banks are expected to know the optimal level of housing investment and act accordingly; somehow discovering it outside of a competitive market with individuals bearing the costs and benefits of their actions. How exactly do banks learn that?

The price system is a method of communicating knowledge about cost and availability of goods and services, when this system is mucked with it effectively gives actors in the market bad information, making many investments seem better than they really were. Apparently the banks are expected to have access to some special knowledge that will tell them these investments won't work while the price mechanism staring at them right in their face says go go go! Prices and profits aren't just random events for the devious to exploit, they are signals that tell people what other people want them to do and are willing to pay for.

Leftists readily admit this when they want to tax smoking or pollution, but the left is never logically consistent, they just shift their feet whenever they find a different line of logic useful. For example, its great to know now that government had zero responsibility for reducing smoking and pollution; it was just that one day big tobacco and heavy industry decided to be responsible. Right? So we don't need government at all to fight pollution, because their incentives don't matter. This poor argument might even hold for pollution, because pollution generally is obviously harmful; however people don't cough and small amphibians don't die in the presence of a credit default swap.

One of the major selling points of capitalism made since Adam Smith is that it serves the people's interests despite individual greed, because competition causes the interests of the consumer and the producer to align. So even if you could build up a case against the bankers, you can't build one up against the free market system after government actively misaligned the incentives; because the poor incentives are not inherent in the system as with pollution but artificially created.

[crayon]

The banks are free to do whatever they want to do and they choose shortsighted greed over longterm prosperity.

I don't see how that is the Government's fault.

[Rob]

One of the speakers at a recent Mises forum called Krugman a "quantum economist". That is to say, that you cannot understand him and his position at the same time. 🙂

[abercrombie milano]

My only point is that if you take the Bible straight, as I'm sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won't get the full deal by just doing regular skill english reading for those books. In other words, there's more to the books of the Bible than most will ever grasp. I'm not concerned that Mr. Crumb will go to hell or anything crazy like that! It's just that he, like many types of religionists, seems to take it literally, take it straight.

[nike shox]

is good