Libertarian History/Philosophy

When Liberals Misread Bastiat

Slate's Matt Yglesias furnishes the latest example of "vulgar liberalism."

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It's always good to see Frédéric Bastiat discussed outside of libertarian circles, because even when his views are misstated, the mere mention of his name might prompt curious readers to check him out for themselves. That can't hurt!

So thank you, Matthew Yglesias, who wrote last week in Slate:

Bastiat's alleged broken windows fallacy involves simply assuming that there's no such thing as genuinely idle resources or an "output gap." In that context, yes, it's a vibrant intuitive depiction of crowding out. But this doesn't counter any Keynesian or monetarist points about the viability of stimulus during a recession induced by nominal shocks, it involves assuming that no such recessions can occur even though they plainly do. In defense of Bastiat, at the time he was writing the modern industrial business cycle was a very new thing and the vast majority of economic ups and downs were caused by things like bad weather which—as you can see in the corn futures market today—is indeed a decisive consideration in an agricultural economy. But that's no excuse for people sitting around in 2012 to be pounding the table with an old book that's non-responsive to modern issues professing to be baffled why people don't find it more persuasive. [Emphasis in original.]

Yglesias asserts that Bastiat merely made certain assumptions about the operation of markets, but Yglesias does not demonstrate that this is the case—and couldn't. Was Bastiat unfamiliar with J. B. Say? Lord Keynes and his fans may think he refuted Say's Law of Markets, but, tellingly, they had to misstate the law first. It's not that "supply creates its own demand," but rather that supply is demand. One produces a good either to consume it oneself or, more commonly, to trade it for another good. Demand and supply are two sides of the same, well, coin—which reminds me to add that Say's Law holds not just in a barter economy but a monetary one also—a freed one, that is, unlike the corporate state we all occupy.

Time Structure

True, someone might sell a good and not spend the money received. But this would lead to idleness only if the economy did not consist in a time structure of production coordinated by interest rates. In other words, money not spent is saved and available for investment (that is, payments for producer goods and labor, which will be spent on consumer goods) at stages remote from the consumer-goods level; that is, long-term investment in production for future consumption. (As Austrian macroeconomist Roger Garrison says, people save for something.)

Given our insatiable demand for goods, in a freed market a general glut couldn't happen; if prices were free to fluctuate in response to changed conditions or entrepreneurial error, the price of goods plentiful relative to demand would fall, while the price of goods deficient relative to demand would rise. Entrepreneurs would then adjust their plans, but since change is the rule, the market would never reach a state of rest. Say's Law is about a (free) process through time, not general equilibrium.

Can Yglesias really be serious when he writes that Bastiat's position "involves assuming that no such recessions can occur even though they plainly do"? It is Yglesias who assumes what must be proved: namely, that the business cycle is a natural feature of the free market, rather than the consequence of government's corporatist meddling with money, banking, and interest rates.

Vulgar Liberalism

Yglesias furnishes the latest example of "vulgar liberalism," as Kevin Carson calls it. This is the attribution of the evils of corporatism—big-business power, recessions, long-term structural unemployment, exploitation of labor, and more—to its antithesis, the freed market. Keynesians look around, see unemployment and idle resources, and conclude (often encouraged by libertarians) that since the "free market" let this happen and doesn't seem to be doing anything about it, government stimulus is in order.

That's like walking into a movie in the middle, thinking you understand the plot. There are certainly idle labor and idle resources today. But that mere observation says nothing about why they are idle. Ludwig von Mises and F. A. Hayek, bolstered by the anatomists of corporatism, provided an explanation. Critics are welcome to rebut it, but they shouldn't pretend it doesn't exist.

Business Cycle

As the Austrian economists explain, central-bank inflationary policies that artificially depress interest rates encourage longer-term production activities that wouldn't have been undertaken otherwise, given the level of real saving. When the boom ends, the malinvestment of labor and resources is revealed. Labor, equipment, and land that had been attracted to production inconsistent with true consumer demand must now be rearranged. The misshapen economy must be permitted to assume a more appropriate shape. But that takes entrepreneurial risk, time, and money (savings). If the correction is to occur quickly and with minimum hardship, the government must get out of the way. In particular, it must not keep interest rates artificially low (discouraging saving) or create uncertainty about the future regulatory and tax regimes. The world is uncertain enough; to the extent government increases uncertainty about regulation and taxation, investors will be encouraged to run in place and not make grand new commitments. This prevents the needed effort to align labor and resources with what consumers want (or will want in the future).

Government spending may stimulate the use idle resources, but that's not good enough. We don't want just any use of recourses—they're scarce, after all. We want uses that consumers would approve of. Politicians, whose decisions face no market test, are clueless in that regard.

So, contra Yglesias, when a fan of Bastiat's sees the broken-window fallacy in government "stimulus" spending, she is on the firmest of ground. Every dime the government spends—whether acquired through taxation or borrowing—is a dime that someone in the private economy won't be spending. If people are not spending already—which is not the case these days—we must look to the earlier government interventions that brought about that condition—and then repeal those anti-market corporatist policies, regulations, and taxes.

This colum originally appeared in The Freeman. 

NEXT: Live From Ron Paul Fest in Tampa, Paul Delegates Sound Off on GOP, Romney, Obama

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  1. Math is such a brutal mistress to sad pirate.

  2. Every dime the government spends?whether acquired through taxation or borrowing?is a dime that someone in the private economy won’t be spending.

    I am right that Yglesias is acknowledging this fact, but is contending that since that someone in the private economy isn’t spending that dime immediately, the government must do it for them? If you won’t go out and find a shovel-ready project, your leaders will? Petulance makes the world go around?

    Bastiat’s Broken Window Fallacy, like Ezra Klein’s Constitution, was written so long ago that it really no longer applies, I suppose.

    1. Yglesias assumes that all spending is equal. So, the government giving away a few million to say solandra or the UAW is exactly the same as someone creating a successful business with it. He also assumes that there is no boundary to how much people will save or how low prices will go in a bad economy. Prices won’t go to zero. The economy won’t contract to nothing. Eventually prices will get so cheap that even those evil millionaires and bankers hoarding cash that Yglesias is so worried about will start buying. Keynesians never get that.

      1. Yglesias assumes that all spending is equal.

        That’s really the underlying premise that justifies Keynesian spending. And the fallacy of the neutrality of money justifies that premise.

        1. In a frictionless vacuum, it shouldn’t matter who spends money or provides a service, the government or private industry. The system should work either way.

          In the real world, however, there is a little thing called incentive (friction in my example) which not only allows the product be produced for the customer, BUT ALSO INSISTS that it be done efficiently. Government produced goods and services have no incentive to be carried out efficiently because there is no profit motive. And that, boys and girls, in a nutshell, is the difference between the government and private industry.

          1. That, plus the fact that there is often no demand for the product the government insists on producing (Chevy Volt cough cough).

          2. Remember we are talking about the frictionless vacuum that is Yglesias’ head.

          3. More than that, the statement “Every dime the government spends…is a dime that someone in the private economy won’t be spending” assumes that paying taxes is frictionless. In reality, the taxpayer has to take the time to pay it (or hire someone else), meaning the dime may actually cost him something like 12 cents. Then, of course, the government is also not frictionless. It takes in the dime and after overhead etc., spends maybe eight cents. So the private economy ends up losing 12 cents, so that the government can spend eight cents.

            1. I don’t think this is completely accurate. Frictional money loss isn’t the same as frictional energy loss – the money is still usable and it’s lost through spending it on something. To a person who thinks spending is the be all and end all of economic health, the friction of government spending is a bonus.

              1. Except that Keynesians and liberals tend to think that a (say) $500 million government program “costs” $500 million, which they assume was frictionlessly extracted from rich people who would have misspent it anyway. By ignoring government overhead and the time and money it costs the taxpayers, they don’t realize that the private economy is actually out $750 million.

                (I am using rough numbers, and would appreciate hard numbers on what paying taxes actually costs and how much the government spends on overhead.)

                1. Put it this way. Let’s give them the Golden Gate Bridge for the sake of argument. I want progressives to understand the extent of government failure in their own terms.

                  The authorized bond for the Golden Gate Bridge cost 35 million dollars. That is roughly 650 million in current monies. For the amount that the Democratic stimulus cost us, we could have bought 1500 Golden Gate Bridges. How many of anything did the non public sector get out of it? Oh, some house in South Dakota got insulation in their attics.

                  Whoopy fucking shit deal.

                  I want to see a photo gallery of the houses of the union bosses and public officials who really got that loot.

              2. I don’t think this is completely accurate. Frictional money loss isn’t the same as frictional energy loss – the money is still usable and it’s lost through spending it on something.

                Sure, but it’s going to lower priority desires at best.

                In the example of taxes, some fraction is used to pay accountants, that would otherwise not be paid and another fraction is used to lower tax liability by shifting spending to a less desired usage.

                On the spending side, no on voluntarily consumes the product of government bureaucrats, so all of that overhead spending is wasted.

                1. No question. The correction was a very minor one, almost a nitpick.

            2. Frictioned money i think is real but not the whole story.

              Even if we had frictionless money there would still be a problem.

              Price informs producers and sellers and consumers about what to buy and what is useful.

              The Soviet Union set the price of tubs by weight. So what did the manufactures do? They made the heaviest bath tubs they could.

              It was a complete waste of money and resources. Money and resources that could be doing somehting else.

      2. Well-put. They talk about stimulus “priming” the economy like a bunch of engines, while ignoring that most of the engines they’re dumping fuel into has a massive vacuum leak.

    2. That’s exactly what he’s saying. If the glazier won’t hire a window breaker, then by God we’ll take his money and do it ourselves.

      1. and by the same logic, we should hire back the drunken oil vessel captain of the single hulled tanker, because by god we don’t want otter scrubbers out of work 🙂

    3. I’m surprised to see the brain-dead left even acknowledge the broken-window fallacy’s existence. This could actually be seen as a positive step–a visible crack in the flawed fundament of church of Keynesian multipliers.

      1. a visible crack in the flawed fundament

        ::snicker::

      2. According to Yglesias it’s the “alleged broken windows fallacy.”

  3. http://chicago.cbslocal.com/20…..bama-home/

    Good thing those Chicago gun laws are keeping the city safe.

    1. John, this is clearly a plant from “The Onion.” Such tragey is unpossible because it is OUTLAWED in Rahm Emanuel’s Paradise Found. Duh!

    2. Oh, Chicago just needs to adopt county wide immigration enforcement, to keep all the illegal weapons out. Then the little authoritarian paradise will thrive.

  4. Neil Armstrong Dead at 82

    8.25.12 3:50 pm

    404
    The webpage cannot be found.

    So no obit for the First Man To Walk On The Moon?

    1. Look up “Neil Young” instead.

      1. Neil Young is still alive?

        1. NBC put out an obit for astronaut Neil Young yesterday. At least we still have his crewmate Steven “Buzz” Stills.

          1. I thought NBC was the best source for facts?

    2. I don’t get all the gushing over Armstrong. It’s not like he personally built the Saturn V rocket and the moon lander himself or even had any significant role in the building of those things. He was chosen by a government edict to be the first person to walk on the moon. We should be no more in awe of his personal greatness than we are in awe of a hereditary monarch.

      1. Cenotaph, you have no idea what you are talking bout. I should have posted this to josh corning last night but I was too drunk/tired. You make it sound like the government just pulled a name out of a hat and sent that individual to be the first to walk on the moon. BULLSHIT! Do you know how many “best of the best” tests Armstrong passed to earn that position?

        Military Pilot Training Selection- A very selective process. Selection based on college grades and performance during commissioning process. About 1 in 10 are selected depending on need at the time.

        Pilot Training- A washout rate of 30-50%. It was 40% when I went through. And then, again depending on the needs, 10-30% earned a fighter (as far as I know, astronauts were only selected from the fighter track at Flight Test). In my class of 20, 3 fighters were given out.

        Follow-on training (RTU)- Another threat of elimination. 10-50% washout rate (airframe specific). F-15 RTU generally washes out 30% ish.

        Test Pilot School selection- Maybe one in 500-1000 pilots are selected to TPS. Only the best sticks with the biggest brains get a shot.

        TPS- A yearlong haze of constant flying and engineering courses. Guys average about 4 hours of sleep a night for a year. If they graduate, they earn an accredited masters degree in engineering and are considered qualified to test military aircraft.

        (cont)

        1. Astronaut selection- Maybe one in a hundred Test Pilots are selected to become Astronauts, and when Neil went through the process was brutal, both from a selection standpoint and from a training standpoint. Early Astronauts regularly worked 16-20 hour days training for their missions.

          And before you say, “Great all that training and then the computer flies the mission.” Don’t.

          What most people DON’T know was the engineers and the computers botched the first landing. There was an on-board emergency that caused them to overshoot the landing zone. Neil took control manually, with only seconds to sort it out and flew the ship to a suitable location for the landing. He set it down with 25 seconds of fuel left. Go back and listen to him on the tape. So fucking cool on the radio, you’d think he was on a Sunday drive. Without him, and him alone, America’s first attempt at a landing would have been a colossal failure.

          THAT IS A FUCKING HERO!

          So to you and JC from last night:

          Fuck off and die in a fire.

          1. Actually Armstrong was just selected to be the commander of Apollo 11. When that choice was made there was no guarantee that it would be the landing mission. If things had gone wrong the landing could have been pushed back to 12, 13 or 14. There was no on board emergency. The computer alarms just went off because it was overloaded with data.

            1. You are correct about the light. It didn’t cause him to take control manually. The original landing site was bad.

              It happened so late in the landing phase it would have been called a failure had they not landed.

        2. There are people who can do those things in every generation. There are people like that in our military and other walks of life walking the earth right now. Hell, Buzz Aldrin and Michael Collins did all those same things, and they won’t be lionized when they die.

          If Neil Armstrong had never been born, chances are that the moon landing still happens on the same day at the same time. It just would have been a different person.

          1. I never said there weren’t. ANY ASTRONAUT could have done it. Maybe one in 10 million. You made it sound like any shitbag in line at a soup kitchen could have done it.

            If Columbus hadn’t bumped into North America, someone else would have. Same can be said for any endeavor. Point is it was Neil FUCKING Armstrong and we honor him as the first, and those like him who could have been first.

            1. No kidding. Even the Soviets, who wanted everyone to be an anonymous cog in the machine, adored Yuri Gagarin.

              1. I don’t think we should model our adoration decisions on what the Soviets did, considering some of the other figures they adored.

            2. Now, now, you are all making good points, but it should be pointed out that the original plan was that Aldrin would be first out the door of the lander, and Armstrong pulled rank to make sure he got the glory….

              1. Got a citation on that?

                From what I’ve read, the only person who EVER thought that Buzz was to be first out the door was Buzz. The way I remember the story was Buzz brought it up and the chief of flight ops made the call that the mission commander would have the honors.

                I did get the impression that Buzz has had sour grapes about it for a long time.

                1. Wikipedia says: “According to different NASA accounts, he had originally been proposed as the first to step onto the Moon’s surface, but due to the physical positioning of the astronauts inside the compact lunar landing module, it was easier for the commander, Neil Armstrong, to be the first to exit the spacecraft.” So maybe it wasn’t a rank-pulling thing as I heard many years ago.

                  Bonus trivia: Aldrin’s wife’s maiden name was Moon.

            3. If Columbus hadn’t bumped into North America, someone else would have.

              Not on October 12, 1492. Probably not for a long time afterward, possibly centuries, as no one else in Europe was trying to do what he was doing.

              It’s also a poor analogy since Columbus spent years lobbying monarchs to finance his westward journey, while Neil Armstrong had nothing to do with the decision to send men to the moon. He just showed up at the right time.

              1. Dude, I don’t think you have any idea about what an Astronaut does/did (particularly the early Astronauts).

                They were involved in the development process from the start. They are the folks who tell the engineers how the system interfaces with the pilots. Why do you think they all come from engineering backgrounds?

                Lobbying? Lobbying?

                Half their job was public relations and speaking engagements . No bucks no Buck…

                Tell you what, go do a little reading on the subject and come back when you’re better educated. Then you may comment away.

            4. I never said there weren’t. ANY ASTRONAUT could have done it.

              You said he was “a (expletive) hero”. Is every astronaut a (expletive) hero?

              1. Yes.

  5. OK, we get it, Matt. Anything over 100 years old is icky and doesn’t apply to the modern world. I’m glad we can ignore the Law of Gravity finally – how liberating that is!

    1. We could always ignore the law of gravity, since that involved icky math.

  6. Eliminate all Federal regulations on corporations including the EPA, Labor Laws, Federal Income Tax for corporations, the constitution, etc.

    Let each state, if they choose to, setup laws.

    Perhaps corps would move to states with No EPA and high corp taxes.
    Perhaps corps would move to states with no corp taxes but strong labor laws.

    Or as libertarians would like, there can exists free market states with absolutely not laws at all for corporations except perhaps fraud.

    I say it is worth a try. We are already setup with 50 different jurisdictions. Let STATE LAWS trump FEDERAL Laws.

    1. That is actually not just a horrible idea. You still need to police the states under the negative commerce clause. But no state, not even the evil Texas, is going to totally repeal their environmental laws. And states can sue each other for cross border pollution. So it wouldn’t be the free for all one might think.

      1. Today, can the US sue Mexico for cross border pollution?

        I say let the states make up their own laws.

        Speaking of Texas, Tom Delay’s political career began from the fact that he was pissed off that the EPA would not allow him to dump chemicals from his pesticide business.
        I’m saying let the sates make laws to their liking and remove the fed laws governing corporations…including the commerce clause, federal income tax, labor laws, etc.

        1. You have to keep the commerce clause or you lose the national market. That would be economic suicide.

          1. WHY would we lose the national market?

            Canada sells goods to mexico. USA buys goods from Guatemala.

            Why have interstate laws at all? A company in Georgia can sell peanuts to NY citizens or corporations. New York companies can sell whatever it sells to Texas citizens.

            And, in a free market, companies that don’t do honest business would go out of business…right?

            1. For all the problems the constitution has, its still better than the articles of confederation.

              If you want 50 separate nations, your suggestion is fine. With we are a union of sovereign states, then the commerce clause, as originally written, is a good idea.

              1. It is your opinion and mine that the articles of confederation are bad.

                There were many many confederate americans that died to support it.

                I think we should have never fought the civil war and just let the Confederate states become a separate nation and not lost so many lives and caused so much destruction.

                Those places that would find it unethical to have slavery could boycott the confederate nation as was done to South Africa.

                1. You are not very smart, are you?

                  1. well she’s right about the civil war.

                2. Your history is backwards. The Confederacy started the Civil War by attacking Union forts without provocation.

                  1. That, or they took back territory the Union had occupied without permission. If they were to have their secession work, they had no choice but to protect their territorial integrity. Lincoln’s strategy was to deny the legitimacy of the secession from the beginning, which meant maintaining Federal presence where possible.

                    1. SC’s legislature consented to sell the land of Ft Sumter to the US decades before, consent for which was required by the Constitution. That it was convenient for them to reneg on that deal in 1861 is not a justification for their treachery.

                    2. “SC’s legislature consented to sell the land of Ft Sumter to the US decades before, consent for which was required by the Constitution. That it was convenient for them to reneg on that deal in 1861 is not a justification for their treachery.”

                      Yet somehow, it was perfectly acceptable to terrorize and burn British forts on (at the time) British property 90 years prior.

                    3. Except no one is claiming that the British started the Revolutionary War.

                    4. “Except no one is claiming that the British started the Revolutionary War.”

                      Even if they did, so what? Your line of logic would suggest that GBR has a legitimate claim to maintain control of American soil.

                    5. They absolutely had a legitimate claim on American soil while the Revolution was ongoing. They gave up that claim in the Treaty of Paris though, so no, they don’t have a legitimate claim now.

                    6. Even if the fact of the sale is true, the geography would have rendered the deal moot. Ft. Sumter is on an island surrounded by South Carolina proper. If you look it up, I think you’ll find that the real casus belli was the entrance of Union ships into CSA water to resupply the fort after being warned not to.

                      Do you think we owe the British repayment for all the Crown property the USA assumed control over after 1776? It’s completely unreasonable to think that a seceding government should allow a military presence of the parent country to remain in its territory. That sort of expropriation is part of the normal turnover when these things happen. You can quibble about the legitimacy of the secession, but the South Carolinians were simply following precedent.

                    7. So if Castro attacked Guantanamo Bay in 1962 you would have been totally OK with that, and opposed any attempts by the US to resist, since it’s totally surrounded by Cuban territory and Cuba didn’t like us anymore.

                    8. Gitmo’s an even worse example, since the base is there as a result of a lease we set up with the pre-revolutionary government that continues over the objection of the current regime.

                      Do you think you would be within your rights to set up a minefield around your apartment to keep the landlord out?

                  2. They also claimed US territory.

                    The confederacy was an imperial power set out on conquest. Not some poor boys seeking independence from the big bad union.

                    If the confederacy was left to stand it would have come to war anyway.

                3. The Articles of Confederation was the original constitution where the Federal gov was too weak and it had to be changed to the one we have now. The confederacy had a constitution like our current one, with the unsupportable condition that slavery must never be abolished.

                  I would not recommend either the Articles or Confederation or the Confederacy’s constitution, but they are not the same thing.

                  1. I’m glad that , finally, someone brought this up :

            2. The commerce clause is to prevent state governments from charging tariffs on goods from other states.

              1. Then why doesn’t it just say that?

                1. It DOES say that: [The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes

                  At the time, “regulate” meant “make regular,” not “make up a bunch of labyrinthine rules.” That means New York can’t charge a tariff on goods from Virginia, Virginia can’t impose special taxes on goods from France, etc.

                  1. Even assuming that the word meant that and only that, isn’t the meaning of “make regular” itself somewhat broader than just preventing tariffs? Another part of the Constitution expressly forbids states from imposing their own tariffs on foreign imports, it doesn’t say “make foreign commerce regular.” So I don’t see how they’re synonymous.

                  2. If “regulate” means “eliminate tariffs” and nothing else, why is it being applied to foreign commerce too, which has historically been subject to tariffs?

                    1. Because the Feds have the power to do what they will with trade from other countries, not the states. So it doesn’t matter if France sends a boat load of cheese to the port in Boston or the port in New York, the Feds impose tariffs or taxes or what have you, not the states. To the states, foreign trade is “regular.”

                    2. Can anyone tell me what was so bad about the Articles of Confederation. In school they told me that there was *gasp* no centralized authority or taxation power!!!111 This was presented as self-evidently something that you had to have or else you weren’t serious.

                      Is there anything bad that a libertarian would think is bad about the government under the Articles? I mean I read The Probability Broach, but what actually were the negative aspects of the Articles?

                    3. Is Wikipedia blocked on your computer or something? They have a whole article on the issue. You don’t think the Founders met in Philadelphia just because they wanted to sample the cheesesteak, do you?

                      A major, major problem at the time was that the US was in no position to resist a foreign invasion with only the militia system (which the states could always refuse to participate in under AoC), and the British and French were always threatening to do just that.

                    4. You mean the militia system that won us our independence? And performed just fine during the War of 1812?

                      Again, the reasoning I hear for the centralized Constitution is that we needed a big government with taxation power because…well….damn it you have to have one. If you don’t have one, you’re not serious. Or something.

                    5. We would have become just like Europe in a few years, with the states becoming like small countries and some ganging up on others, or using foreign powers to triangulate against enemy states.

                      I wouldn’t say that back then they were all on board with a big central gov’t–I think Hamilton was closest. They wanted to combine the pros of a large country with the pros of a small country, hence the federal to take care of broader concerns and the state and local gov’ts to address everyday concerns. They didn’t have federal departments of education or things that people would handle on the local level, and therefore people would have more say in what happened day-to-day.

                      And they didn’t have things like the income tax initially.

                      I wish we could as a country revisit those ideas instead of thinking a large federal gov’t can take care of everything. We started off on the wrong foot, with slavery and such, but this time around that isn’t on the menu, and instead we can actually have everyone on board as a free man (woman). IMAO we are in a much better position for liberty going forward, provided people could get it through their skulls that we aren’t promoting going back to the damn antebellum South.

                    6. The biggest problem was that there was rampant protectionism amongst the several states. They were throwing up tariffs and inhibiting free trade every which way, and it was stifling the economy. That was the big reason that the commerce clause came into being.

                      There’s a reason that most of the people who came together to write the constitution were businessmen.

                    7. See that’s a fair complaint. But I have to say, I think free trade, like all good ideas, is best spread through persuasion and reason. I am always cautious to endorse force to impose the good on others. Yes, it may be better in the long run, but the imposition of force has its own enormous downsides.

                      I don’t know if the Constitution really counts as force in a moral sense, what with the ratification and all. I just don’t know if the growth we’ve seen in the State is really worth having the commerce clause. Hell, just the rationalization of the commerce clause to impose Obamacare, the New Deal, and everything in between has caused irreparable harm to liberty.

                      Don’t you think free trade agreements would have emerged in time if the Articles had remained in force until say 1800?

                    8. Hard to say; maybe, maybe not. It’s just as much or more likely it would have started an early civil war. The tariffs started a trade war, and it came close to devolving into a shooting war in a couple of cases.

                    9. I just don’t know if the growth we’ve seen in the State is really worth having the commerce clause. Hell, just the rationalization of the commerce clause to impose Obamacare, the New Deal, and everything in between has caused irreparable harm to liberty.

                      This problem wasn’t really caused by the commerce clause, but by the statists who twisted it in order to suit their own ends. Any fair reading of the commerce clause in context with the history leading up to it would show that it was never intended to be used as it is today. It was there to promote free markets, not to strangle them.

          2. Not necessarily.

            There’s no global commerce clause but global trade has been consistently growing for centuries with a pause during the Great Depression and WWII.

            1. Sure. But the world would be a lot richer if there was.

              1. If the analogue of Congress in that world constitution was anything like the UN, I don’t think so. The Dormant Commerce Clause doesn’t prevent all restrictions on commerce, only those that Congress doesn’t pass.

  7. Liberalism is its own curse, the end. The left doesn’t understand how the world actually works, and do not want to, but they want power and money nevertheless. This is a recipe for catastrophe.

    1. of course, the left understands. You mistake ignorance for evil. The left is absolutely aware that its approach can never work because even its members can see that it never has.

      Liberalism is also about emotion in terms of how it is sold, and when the sales pitch rests on taking from some evil filthy rich guy in order to give to you, there are plenty willing to buy that.

      1. The left is not a monolithic bloc. It is composed of a mixture of cynical power players, wide-eyed idealists who don’t know any better, single-issue voters who don’t give a damn about the basic principles of the philosophy, and many other kinds of people.

  8. David Gregory is concerntrolling the shit out of the Republicans right now.

    “Oh, IF ONLY there were sane, responsible Republicans running the show. Like Jeb Bush and John McCain, instead of radical grannymurdering bomb-throwers like Paul Ryan. I- I- I HAZ A SAAAAAAAD!”

    1. Liberals love dead Republicans who are no longer a threat to win elections. Reagan was a crazy stupid old man intent on starting world war III until he left office. Then he was a reasonable Republican.

      1. Dead people are very convenient since they don’t correct your interpretation of their ideas.

      2. When did McCain and Jeb die?

        1. John McCain is still alive?

          And Jeb isn’t running for anything so is harmless.

      3. Indeed. Ike was dangerous boob at the time, and now is a model moderate Republican. Goldwater was extremely dangerous radical, but not now. And remember how Bush 41 was going to institute a fascist New World Order? Now he’s the good Bush, as opposed to his war-mongering son. Soon we will hear how Bush 43 and Cheney weren’t really that bad, compared to those dangerous radicals Romney and Ryan.

        It cracks me up how to see the Democrats try to paint Romney as some sort of fiery conservative radical, when he’s actually a rather anodyne, establishment Republican. It’s as if the GOP were demonizing Sam Nunn as a Communist.

        1. Republicans do the same thing with Clinton and Carter when it suits their purposes. And Dems don’t always praise Reagan either; Obama was just ripping trickledown economics the other day. Basically they’re just saying that while they disagree with Reagan the current GOP is even worse.

          1. I have never ever seen Republicans praise Jimmy Carter.

            There’s a big difference between praising Clinton for signing welfare reform, for example, and pretending that the Republicans of yesteryear were somehow squishy moderates or RINOs. One is praising someone for specific policy decisions, and the other is creating a rich fantasy world in which your dead adversaries support you from beyond the grave.

            The idea that Reagan in particular would have supported a single damn thing that Obama has done is laughable. Almost as laughable as them pretending Barry Goldwater is a Republican they would have voted for, considering their main line of attack against him in 1964 was that he would literally kill your children.

  9. So thank you, Matthew Yglesias, who wrote last week in Slate:

    . . . Bastiat’s alleged broken windows fallacy involves simply assuming that there’s no such thing as genuinely idle resources or an “output gap.” In that context, yes, it’s a vibrant intuitive depiction of crowding out.

    OMG

    The fucking moron doesn’t even understand the 1 page parable he’s critiquing.

    1. It has nothing to do with crowding out. It has to do with wasting resources. It doesn’t matter if the government breaks the windows. He is just appallingly stupid.

      1. Exactly, it’s about stock and flows.

        Wealth is an accumulation of stock, destroying stocks (wealth) in a vain attempt to increase flow(activity) leaves you poorer.

        Is that really so hard to understand.

        1. Well, it’s not like he actually read any Bastiat. He’s so smart he can critique ideas based on just comments he’s read using his feelings.

      2. Otherwise why not pay welfare recipients to go out and break windows?

  10. True, someone might sell a good and not spend the money received.

    Which is only an issue with a hard commodity based money, and even then it’s not really a problem. With a debt based money supply, thanx progressives, the claim vanishes completely.

  11. Keynesians look around, see unemployment and idle resources, and conclude (often encouraged by libertarians) that since the “free market” let this happen and doesn’t seem to be doing anything about it, government stimulus is in order.

    WTF

    Is this clown completely clueless or a fucking liar?

    1. The average person on the street sees libertarians defending corporations against Big Government, which they do quite often, and concludes that libertarians favor corporatism.

      1. “The average person on the street sees libertarians defending corporations against Big Government, which they do quite often, and concludes that libertarians favor corporatism.”

        Yeah, no. Sorry. You’re full of shit.

    2. It makes sense if you read the relevant link.

  12. Tedious predictable bullshit

    Obama’s first term has coincided with a strategy of massive resistance on the part of his Republican opposition in the House, and a record number of filibuster threats in the Senate. It would be nice if this were merely a reaction to Obama’s politics or his policies?if this resistance truly were, as it is generally described, merely one more sign of our growing “polarization” as a nation. But the greatest abiding challenge to Obama’s national political standing has always rested on the existential fact that if he had a son, he’d look like Trayvon Martin. As a candidate, Barack Obama understood this.

    Face it America, you just hate him because he’s black. Stop fooling yourself.

    1. America is so afraid of a black President that it gave a black candidate 51% of the vote and control of both houses of Congress.

      1. Let me tell u something my friend John, not all whites voted for Obama.

        And I would argue that most of the white that did vote for him did it out of the drunk’n stupor they were in after GWB fucked this country.

        If we did not have Iraq war or if we did not have the credit crisis, OBAMA would had Never been elected.

        1. Whites voted for obama for two reasons. They wanted to punish the Republicans and they wanted to prove they were not racist by voting for a black President.

          Blacks voted for Obama in record numbers because he was black.

          1. So did a lot of whites.

        2. … I think you missed John’s point. Obama didn’t get elected because America hates black people. He got elected because America is stupid.

          1. In hindsight, McCain was the better candidate not because he is republican, but because he is white. And American is not ready for a black president.

            1. Wow. I forgot how retarded you are.

              McCain probably would’ve been just as bad as Obama… although I kinda doubt it. I don’t think McCain would change his opinion daily to meet polling demand.

              1. Wow. I forgot how retarded you are.

                As did I. But up above she verified it by thinking the Articles of Confederation have something to do with the CSA.

                1. lol

                  i didn’t think anyone caught that one…I expected so many more comments.

                  1. Most of us caught it, thought you were dumb, and then laughed at robc’s rebuke.

                  2. And I suspect you would have gotten more comments if most people here didn’t see the words “Alice Bowie” and automatically scroll past whatever retardation you posted.

        3. If we did not have Iraq war or if we did not have the credit crisis, OBAMA would had Never been elected.

          True,

          Completely unqualified candidates only get elected with extreme circumstances.

          1. Did u vote for McCain VG?

            1. Nope.

              McCain repulsed me.

    2. No conservatives or republicans or white people hate obama for being black.

      That is just paranoia on the side of he liberals.

      They only hate obama for his policies like Obamacare in which no republican would ever dream up or implement.

      1. Of course the party out of power never hates the incumbent President. I mean it is not like liberals hated Bush or Republicans hated Clinton. Really, the Republican hate of a sitting President is just something new.

        1. That’s right, the left only hated Bush because he was white, but they CLAIMED it was because of his policies.

    3. It’s amazing that the GOP was threatening filibusters when they only had 40 senators for Obama’s first two years.

      In addition, can you imagine someone saying that if George W. Bush had a son, he’d look like Michael Phelps? That would be a laughable statement. Because Phelps doesn’t look anything like Bush besides being white, just as Obama looks nothing like Trayvon’s parents. Isn’t it supposed to be racist to suppose that all black people look alike?

    4. His son would look like Trayvon Martin only if he had a son with a black woman. I he had a son with a white woman, like his mother, his son would look like Jimmy Smits.

  13. http://dailycaller.com/2012/08…..with-meta/

    Mickey Kaus points out that the media is no longer even embarrassed to track the official Obama campaign line.

  14. “Given our insatiable demand for goods, in a freed market a general glut couldn’t happen;”

    I have to disagree with this. Even in a totally free market there can be a short term glut of products. If for example I manufacture a new product because Business Analytics of Big Data determined that there were be a demand for it. Not only that but a huge demand for it. However this is a new product but my marketing people assure me that the product will sell big time and the Business Analytics of the Big Data surrounding this product suggest that I build x million of them and price them at x dollars per unit.

    My Marketing people go on to assure me that this product will see like hotcakes because it is better than the latest “i” product from Apple. So I got out and build that x million start a marketing campaign to sell them at price x. My manufacturing people love it because they will achieve efficiency of scale by building such a huge quantity. However, the person in charge of writing the algorithm used in the Business Analytics of the Big Data made a mistake in writing their their algorithm and as a result the suggested demand for the product at x price was wrong. It totally overstated the demand at that price.

    cont.

  15. So the x million products are built and shipped to distributors who in turn ship them to retailers. Some are even shipped directly to retailers. The marketing campaign is in full mode and we are optimistic that people will buy all these millions of the our new great product at the price suggested by the Business Analytics of the Big Data.

    However little known to our corporate spies Apple had been simultaneously working on a similar product in secret. Not sure how Apple could work on a new product in secret but let assume they manage to do it. Anyway their new product hits the retailers just when our new competing product does. Unfortunately our new product is a Microsoft smartphone and you guessed it Apples new product is the latest and greatest version of the iPhone version iPhone v1776.

    Well we can all can see what happens here. The new version of the iPhone sells like hotcakes on a cold winter morning, Apple’s stock price goes to 10,000 and we are left with a glut of the latest Microsoft Smartphone at retailers, at distributors in our warehouses at Microsoft. So what to do as there is now a big glut of this latest Microsoft smartphone on the market?

    cont

  16. We quickly get all our brainy people together after first firing the idiot who wrote the bad Business Analytics Big Data algorithm and our corporate spies who failed to find out about the Apple iPhone 1776 before it was actually on the market. We decide to lower the price to remove the temporary glut. We figure how can we go wrong. We have millions of these new and great Microsoft smartphones out there and why would people want to help us remove the glut in inventory if we lower the price?

    The question is what price to lower it to to remove the glut? Well, we fired our one Business Analystics Big Data programmer so we must now go out and hire another one and hope that they can write a good algorithm telling us what price to lower all these millions of new Microsoft smartphones sitting in inventory. We finally get the price and flood the market with these new Microsoft smartphones at $19.95 each without a new contract required. So what does Apple do. They also lower the price of their iPhone 1776 and decided as an incentive to give away a years free subscription to Apple TV.

    cont

  17. In the meantime the holiday season has passed and people have spent their money. Many have also purchased the latest iPhone 1776 and iPad mini v 210. So they have no money for another smartphone or even dumb phone. In the meantime Microsft’s price of $19.95 for the smartphone is not moving the product very fast. So Microsoft lowers the product to $9.95. But just as they do word hits the street that there is a big problem with the Microsoft smartphone. It is programmed to automatically donate $50 to Bill and Melissa Gates endowment fund for the preservation of rare and endangered species in Afghanistan.

    Now Microsoft is really up the proverbial creek without a paddle with regard to their new smartphone. Finally they say the heck with it and just decide to give them away for free. It takes about 2 years but the glut of the new new Microsoft smartphone is finally removed from the market.

    1. Dear Mike:

      Your theoretical phone bullshit is just that: bullshit. A “glut” from one company is different than a general glut as it’s commonly understood.

      Now, apply the theory to farmland: Say I decide to grow corn, and -everyone- else decides to use their farmland for corn too. We’ve all decided to grow so much corn that nobody has planted soy or wheat. Now, come harvest time, the price of corn is so low (supply) that nobody can make any money off of their crop, because they’ve misallocated resources.

      Now the problem comes when the government buys the corn at an artificially high price that makes me think “Man, I made a killing off that corn this year. I should grow corn again next year.”

      Meanwhile, nobody has bread, and consumers are paying far too high a price for corn, cornmeal, meat, and everything else associated with corn. All because the government thought it could “help.”

      Anyways, it’s the best way I know to explain it. Gluts only happen because the government promotes them; they’re pretty much impossible in a free market, because people find a better way to utilize resources.

      1. I don’t know – I could see them happening with commodities that have long procurement times, like crops. Say corn has a high demand one year because people like corn. All the farmers see the killing the corn farmer made that year on the high price, so they all independently decide to plant corn this year. At harvest, there is more corn than the market – which still likes corn – can buy. The result is excess corn, because the price signal lagged the decision to overproduce.

        Right?

        1. There wont be excess corn, the price will just drop really really low.

          1. Surely there is a point where the market simply can’t – or won’t – absorb any more of a product at any price. People can only eat so much food per day, and any product has storage costs associated with it. Perhaps this point is very hard to reach practically, but a theoretical objection to the idea seems unfounded.

            1. Surely there is a point where the market simply can’t – or won’t – absorb any more of a product at any price.

              I’ll give you this – in theory. Practically though, only one instance comes to mind: Zimbabwe Dollar.

          2. not to mention that commodity farmers can use futures to hedge against such eventualities, etc.

      2. Gluts only happen because the government promotes them; they’re pretty much impossible in a free market, because people find a better way to utilize resources.

        Entrepreneurs miscalculate all the time because their only human afterall. Combining that with human herd instincts results in localized bubbles (gluts?). It’s just an aspect of human behavior.

        Government intervention does increase the size and scope of bubbles, but does not in and of itself cause them.

        So the choice isn’t one of a perfect free economy versus a horrible managed economy but one of a better freed economy versus and worse managed one.

        1. Right – when resources are misallocated, as must always happen (because we -are- human), individuals acting in a free market act to correct their mistake before it gets worse for them individually. Government doesn’t have to respond to the same pressures individuals do, so it doesn’t (and absolutely cannot) see when resources are being misallocated.

    2. There is a price that clears the market. Failing to find that price isnt equal to a glut.

    3. Mike,
      Are you saying that sometimes businesses make mistaken predictions?

  18. http://content.usatoday.com/co…..Do4_KDdeSo

    Charlie Crist reduced to chasing ambulances.

    1. He came out and endorsed Obama today.

      http://www.politico.com/blogs/…..33215.html

      But he would have made a great senator – GOP Establishment.

      1. A total disgrace of a human being.

  19. Maybe I have some language problems here, but the broken-windows fallacy would hold even with “idle resources” – the point is that the existing unbroken window is a resource and that you should do your accounting properly. If by destroying the window/resource one then employs other resources to induce labor (maybe idle) to fix it, one should account for the opportunity cost of those resources. The Yglesias argument only works if the opportunity cost of the other resources – say food to feed glaziers – is zero – and importantly – that there is nothing else whatsoever that window-repairers could do with those resources and we have actively to employ them in replacing windows in order to get the most out of those resources – that is, we could not employ them making new windows or simply could have just given the money to them.

    The argument that there could be significant “non-convexities” in the economic “system” – due to “idle resources” – does not lead one to advocate breaking windows. It might suggest a larger entity (mafia don, warlord, king) could undertake projects that employ resources in ways that individual subjects would not have the incentive to do. But breaking windows to make projects is stupid. So regardless of the ability of the king to take advantage of non-convexities and resolve systemic coordination problems via tax-funded projects, Yglesias is simply wrong using Bastiat and his windows-fallacy point as a foil to puff up keynesianism.

    1. The basic calculation problem with the Keynesian set up is the spending they want to extract and use else where where they imagine it to be put to better use is not being taken out of the previous productivity baseline where ‘factories were at maximum capacity’, but at the current one, where productivity has slowed down. Thus, adding to the misery.

  20. No this is not an Onion article. It is a real NYT article by a man with clear self image issues.

    With expanding reproductive choices, we can expect to see more women choose to reproduce without men entirely. Fortunately, the data for children raised by only females is encouraging. As the Princeton sociologist Sara S. McLanahan has shown, poverty is what hurts children, not the number or gender of parents.

    That’s good, since women are both necessary and sufficient for reproduction, and men are neither. From the production of the first cell (egg) to the development of the fetus and the birth and breast-feeding of the child, fathers can be absent. They can be at work, at home, in prison or at war, living or dead. ?

    Meanwhile women live longer, are healthier and are far less likely to commit a violent offense. If men were cars, who would buy the model that doesn’t last as long, is given to lethal incidents and ends up impounded more often?

    http://pjmedia.com/lifestyle/2…..you-idiot/

    1. But for the fact that sexual reproduction was arguably critical to the rise of the human species and for the fact that the risk-taking proclivities of the male (and female, but at lower rates) are arguably what gets us pretty much anything worthwhile above bare survival, sure he’s right.

      1. Which, for the slow, is to say that he’s completely wrong since his understanding of the complex systems of humanity and nature is fatally flawed.

    2. That’s good, since women are both necessary and sufficient for reproduction, and men are neither.

      I’m sorry but when did this happen? When did fertilization become possible without the sperm’s involvement?

      Wow, the levels of stupid in that NYT snippet are mind-numbing. It’s as though liberals did not inflict enough harm on society by making black fathers irrelevant with the War on Poverty, they now want to extend that to men of all colors.

      1. Well, a woman’s body -knows- when it’s legitimate sperm or rape sperm…

        Too soon?

        1. No.

          Without divulging what I promised not to, the Akin run isn’t as sure as it seems. And that’s all I’ll say.

      2. It is not as if. That is what they want to do. Single women depend on the government rather than husbands. Liberals love single women for that reason.

        1. the dependency agenda is pretty much all-encompassing. The ridiculous ‘war on women’ meme did not invent itself.

      3. Technically you could extract the genome from one egg and fertilize another egg with it, I guess. I don’t know if we’re able to artificially reproduce the fertilization process though.

        1. You know, that sounds a -lot- harder than fucking. Hell, drunk money included, I bet good ole’ fashioned fucking is still cheaper.

        2. And technically, most women would rather just have a husband. People like this guy and his feminist masters really are freaks.

          1. John, I am familiar with the theory that the state wants dependent single mothers; but, don’t you think it takes an especially sick fuck to actually -want- to suck the government’s ass for their own sustenance rather than assume some responsibility for themselves?

            I just can’t understand how people cross from being a human to being a parasite. It feels -terrible- relying on everyone else for your own existence; I know, because I grew up the child of a single welfare mom. I can’t imagine anyone -WANTING- that lifestyle over actually providing for their self.

            1. I don’t get it either anon. It is horrible to be dependent on the government. You are always one bureaucratic fuck up away from being in big trouble. It is a really sick mentality. And it also a mentality that shows a complete lack of self confidence and self respect. But 18 years of public education telling you that the world is a sexist horrible place that prevents you from succeeding will do that I guess.

            2. folks don’t necessarily want to be leeches; it is the result of a process. Look how long it took for single motherhood rates in the black community to skyrocket. Even during Jim Crow, black fathers were a reality; they worked, their kids stayed in line, and so forth.

              Trace the modern feminist movement to its roots. In grand terms, it’s not that long a time period, about a generation or so to become rooted.

              Govt benefits are presented to folks in tough situations as a temporary hand up, except there is no such thing as ‘temporary’ in govt. The benefits are just enough to stay above water and any self-started moves toward reducing those benefits are actually painful, at least at first. It’s like the crack dealer – you get the first taste, you like it and want more, and when you figure it’s a bad choice and you want to get off, there are nasty withdrawals to deal with.

            3. but, don’t you think it takes an especially sick fuck to actually -want- to suck the government’s ass for their own sustenance rather than assume some responsibility for themselves?

              I don’t know about sick but it’s definitely a sign of immaturity.

              Progressives are and want to be infants to their government-god parents.

              They’ve regressed passed the point of adolescence, which combines rebelliousness with dependency.

          2. I didn’t say it was preferable or easier. Just that it might be or is possible, depending on the state of technology.

        3. We’ve been able to do it for non-human animals for a while. Other than the ethical quandaries, there’s no reason to think it’s impossible for humans.

          It is far more difficult and expensive than artificial insemination, so it’s not actually used in agricultural practice. If you really wanted to get rid of the “problems” caused by men in society, you would probably take Jonathan Swift’s advice and just have a few hundred of them penned up to harvest sperm from while the actual society was exclusively female.

          1. That’s interesting. I knew that simple cloning worked similarly, but I didn’t know we could artificially create a zygote from two female gametes.

            1. I believe they “scoop out” the contents of one egg and implant the other’s contents. So the offspring would have only the DNA of the donor, basically creating an identical twin, (except much much younger)

    3. Life imitates Twilight Zone.

    4. If men were cars, who would buy the model that doesn’t last as long, is given to lethal incidents and ends up impounded more often?

      That would be fine with me, as long as I were genuinely left alone. But I know better than to think that I would be left alone. No, I’ll still be expected to fork over a big chunk of my wages even though I haven’t fathered any rug rats.

    5. “As the Princeton sociologist Sara S. McLanahan has shown, poverty is what hurts children, not the number or gender of parents.”

      Good thing single parenting and poverty are in no way related

      1. They aren’t if there’s a govt. which ensures “economic justice” by “lowering the gap between rich and poor”.

      2. Correlation is not causation. The point is that efforts to cut down on single parenting itself are not addressing the actual problem.

        1. I think it’s pretty obvious that families with one parent, on average, will make less money than families with two parents

  21. Is it just my imagination, or is Charlie Crist completely untethered from reality?

  22. That’s like walking into a movie in the middle, thinking you understand the plot.

    YGLESIAS, YOU’RE OUT OF YOUR ELEMENT!!!

  23. Deep.

  24. It’s Sunday…that means it’s time for Reason to stop attacking team red and resume attacking team blue! Coming next weekend….Ryan’s neocon medicare plan!

  25. A “general glut couldn’t happen?”

    Are you not aware, Sir, that private bankers sometime have an interest to meddle with interest rates. I know, it’s only been a week, perhaps I won’t use Barclay’s and others fixing LIBOR and EURIBOR as an example.

    If the government was out of the interest rate setting business, private enterprise would move into the rate setting business, as they often try to do already.

    There’s been more than one war ended because the private bankers decided that the spigot was dry. In 1557, France and Spain signed the treaty of Cateu-Cambresis because both sides had to default on their loans to the Fuggers, and other, bankers.

    It’s been 500 years and we are still using their name for the most ubiquitous slur, even if most people don’t know that’s the reason we say it.

    You folks are so incredibly on the wrong side of this that it makes you appear pre-Renaissance.

    1. That’s correct, a general glut couldn’t happen. As Say also said, “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another.” So while gluts can happen in specific markets, they do not occur economy-wide. I’m not sure what you think the rest of your post says.

      1. This is clearly not correct, by the arguments already presented. The government meddling with interest rates causes booms and busts, right? Peter Schiff makes the same argument.

        Fine, I would never argue that couldn’t happen.

        But private bankers will do the same thing when they have the reigns, and, further, they have done so, as the historical record plainly shows. And, further, centuries later we still blame those private bankers.

        I brought up a war between Europe’s greatest powers of their day, Bourbon France and Hapsburg Spain, and the war they were fighting against each other, where private bankers, like the Fuggers (to Spain) forced both sides to the bargaining table. They both defaulted on their loans. That’s just one example, of course, of private banking influence over public policy.

        The Rothschilds are accused of doing the same thing to later European monarchs, but that might just be the ramblings of loony anti-Semites.

        I then pointed out the name Fuggers has come down to us, through history, as Fuckers. Those fucking rich Fuggers fucking fugged us, and good.

        So, the proof that a general glut can happen is that Fed easy money can cause one, and, if in private banking hands, private banking easy money can cause one, too.

        And I started by pointing out that private companies manipulating interest rates (LIBOR and EURIBOR) has been happening for most of the last 7 years.

        1. You’re talking about cases several centuries ago, where private bankers were given monopoly power by European monarchs and became de facto central banks.

          Interest rate manipulation would not be possible in a competitive free market banking environment.

          1. Let me help you along your way, to show you a more modern example.

            As I’ve mentioned twice before, private banker interest rate rigging has been going on for most of the last 8 years.

            Private bankers were rigging interest rates for their own interests. And in which direction did the private bankers rig interest rates? That’s right, they lowered rates. Easy money! Egads!

            And the Rothschilds were started around the same time the US became a country, so, calling it “several centuries” is a bit of a stretch. The Japanese did go to the Rothschilds for loans to prosecute the 1904-1905 Russo-Japanese war, which certainly isn’t “several centuries” ago.

            1. As I’ve mentioned twice before, private banker interest rate rigging has been going on for most of the last 8 years.

              Private bankers were rigging interest rates for their own interests. And in which direction did the private bankers rig interest rates? That’s right, they lowered rates. Easy money! Egads!

              Sure, in a highly managed environment, including open and presumptive guarantees for their own success.

              The last eighty, let alone eight, year have been anything but a free market in the financial sector for G8 countries, or even the entire world.

              1. That’s not even close to true.

                In any environment in which there are banks there will be an incentive for them to rig rates.

                Any conceivable environment.

                And, not surprisingly, in many different environments they have done so.

    2. You’re missing the entire point. A central bank sets interest rates at arbitrary levels. A private bank (in a free market) has to face consequences if they meddle with interest rates in a bad way

      I’m not even sure what you think you’re France-Spain war example proves. So, private bankers stopped lending money to two countries fighting an idiotic war. What’s your point?

      1. You’re missing the entire point. A central bank sets interest rates at arbitrary levels. A private bank (in a free market) has to face consequences if they meddle with interest rates in a bad way

        Private firms were rigging rates, easing credit, for the last bunch of years. If it is actually happening that private firms do it, secretly, in a semi-free market, why do you think it wouldn’t in a freer market? The government is going after Barclay’s, but the market isn’t punishing them.

        To be fair, it does appear, if Margin Call(2011) is what was really happening inside Lehman Brothers (my old employer, 2001-2002), the market did punish them. Apparently, they decided that they had a ton of worthless junk on their books, they decided to sell it all to their customers. Some buyers were asked to pay 100s of millions of dollars for a good that the seller believed was worthless. Those customers didn’t come back. I’m not saying the market never punishes.

        1. Why wouldn’t they? Because there are a ton of incentives in this “semi-free” market that wouldn’t exist in a free market. Easing credit is easy to do when there’s a central bank lending you money out of thin air, or when you know the government is most likely going to bail you out if you fail

          1. Sorry, Calidissident, I’m not buying what you are selling.

            Private banks will rig interest rates because it will always be in their interest to do so.

            They will always be in a position to benefit from a chance in rates, either higher or lower.

            And history is replete with examples of exactly that.

            1. Private banks will rig interest rates because it will always be in their interest to do so.

              Rigging is an absurd concept in a competitive free market.

              Is Apple rigging the cost of Macs?
              Or are they charging whatever they want and gaining or losing sales based on their own performance and that of their competitors.

              Why would the situation be any different with banks in a competitive free market?

              1. ^^THIS

              2. Because banks are EVULLLLLLLL!!!1!!!!11!!one!

              3. Rigging is an absurd concept in a competitive free market.

                This is false because there will always be an incentive to create a cartel.

                And, because there are always barriers to entry in a free market when it comes to big industries, like automobile manufacturing, computer manufacturing, or banking; it’s not like you can start a corner bank and have slightly higher interest rates and get all the checking business there is. The world doesn’t work that way. Why would auto-manufacturers enter a cartel and rig prices in a free market? Because they can, because they will get more profit if they do, and because no one can stop them.

                You should read some Adam Smith. He discusses the cartel instinct at length. He asserts that businessmen can’t get together for dinner without the public getting screwed.

                And if there are any courses on game theory and microeconomics, I think that would help you, too.

                1. Cartels don’t last unless they have government creating barriers to market entry.

                  In your example, even with tons of government intervention, it is possible to create new banks, I know people that have done so.

  26. Weren’t there plenty of crashes and depressions in the 19th century, before we had a federal reserve, and back before the feds had any control over interest rates? So how was government responsible for business cycles back then? What am I missing?

      1. Um, thanks, but I don’t have time for a 1:26 video today. A brief summary would be greatly appreciated.

        1. You want to understand economics, it takes time. It doesn’t happen in one day.

          1. How about in a minute and twenty-six seconds?

        2. Very briefly, there were booms and busts before they fed, but they were very short. After the fed, we still have booms and busts, now with bigger bubbles and longer depressions.

          1. Exactly.

            A free market in credit will result in temporary and localized bubbles that self correct, while government management results in larger and longer bubbles and corrections.

            Krugman had a completely dishonest defense of the Fed several months ago where he “proved” that the money supply was more stable under the Fed, by ignoring inflation, the 30s depression and the current depression and then comparing the average post war recession to the worst pre-fed depression.

            The funny thing was that any honest reading of his supporting chart cleary showed the exact opposite of what he was claiming.

            1. Here’s the Krugman post I was talking about.

              http://krugman.blogs.nytimes.c…..ed-panics/

          2. Thank you. And I meant to say the video was 1:26:00.

          3. NOTE: The Long Depression occurred before the Fed, and while we were on the Gold Standard, and, as its name implies, was the longest depression America ever had.

            I mean, that fact tends to make statements like this ” there were booms and busts before they fed, but they were very short. ” seem, um, false.

            1. http://wiki.mises.org/wiki/Long_Depression

              Some economic historians have complained about the “great depression” that is supposed to have struck the United States in the panic of 1873 and lasted for an unprecedented six years, until 1879. Much of this stagnation is supposed to have been caused by a monetary contraction leading to the resumption of specie payments in 1879. However, this “depression” saw an extraordinarily large expansion of industry, of railroads, of physical output, of net national product, and real per capita income. As Friedman and Schwartz admit, the decade from 1869 to 1879 saw a 3-percent-per annum increase in money national product, an outstanding real national product growth of 6.8 percent per year in this period, and a phenomenal rise of 4.5 percent per year in real product per capita. Even the alleged “monetary contraction” never took place, the money supply increasing by 2.7 percent per year in this period. From 1873 through 1878, before another spurt of monetary expansion, the total supply of bank money rose from $1.964 billion to $2.221 billion?a rise of 13.1 percent or 2.6 percent per year. In short, a modest but definite rise, and scarcely a contraction.[1]

              cont.

              1. The myth was brought about by misinterpretation of the fact that prices in general fell sharply during the entire period. Indeed they fell from the end of the Civil War until 1879. Friedman and Schwartz estimated that prices in general fell from 1869 to 1879 by 3.8 percent per annum. In the natural course of events, when government and the banking system do not increase the money supply very rapidly, free-market capitalism will result in an increase of production and economic growth so great as to swamp the increase of money supply. Prices will fall, and the consequences will be not depression or stagnation, but prosperity (since costs are falling, too) economic growth, and the spread of the increased living standard to all the consumers. The analogous “great depression” in England in this period was also a myth for the same reasons.[2]

                1. Although per-capita nominal income declined very gradually from 1873 to 1879, that decline was more than offset by a gradual increase over the course of the next 17 years. Finally and most significantly, real per-capita income either stayed approximately constant (1873-1880; 1883-1885) or rose (1881-1882; 1886-1896), so that the average consumer appears to have been considerably better off at the end of the ‘depression’ than before. Studies of other countries where prices also tumbled, including the US, Germany, France, and Italy, reported more markedly positive trends in both nominal and real per-capita income figures. Profits generally were also not adversely affected by deflation, although they declined (particularly in Britain) in industries that were struggling against superior, foreign competition.

                  1. There are some really deceptive uses of dates before 1873, blending them in to get more useful numbers, and that’s clearly a type of fraud.

                    Do not attempt such an obvious fraud. Not with me.

                    1. IOW, you threw the Long Depression out there thinking it would stick, but you didn’t know fuckall about it.

                    2. There are some really deceptive uses of dates before 1873, blending them in to get more useful numbers, and that’s clearly a type of fraud.

                      Specify which deceptive uses of dates you’re referring to.

                      Usually when someone claims something is “obvious” it’s actually false.

                    3. There are two data points in the material I quoted above that reference pre-1873, one is Friedman and Schwartz on the drop in price levels that they begin in ’69. Since dropping prices in this time period is central to the inflationist argument, I don’t think it is something that the would want to dispute as a material fact that the price level decline continued into the period of time of the Long Depression. The other concerns the 3-percent-per annum increase in money national product quoted in the same data set of materials beginning in 1869. Neither would help this JoshSN pissy little argument.

            2. As Killazontherun has pointed out, the Long Depression is largely a myth, and there were government interventions (monetary policy during the civil war, railroad subsidies, etc) that affected whatever downturn there actually was

              1. Sure were a lot of people out of work, just because of a myth.

                1. Sure were a lot of people out of work, just because of a myth.

                  Really? Killaz takes you to the woodshed, and this is the weak sauce you bring?

                  You got treated like it was your first day in prison, take a lesson from it.

                  1. Number guy, his over-lengthy quoting of a Mises.org web page is hardly going to convince me that the Long Depression didn’t actually happen.

                    It would be like me believing angels exist, just because the Bible says so.

                    1. It would be like me believing angels exist, just because the Bible says so.

                      Yeah, history is full of things that didn’t happen. Like Hitler killing all those jews! Never happened, just like believing in angels.

                      Oh, and North Korea is a Democratic Republic. Because its name says so, duh!

                    2. It would be like me believing angels exist, just because the Bible says so.

                      IOW no amount of evidence will disrupt your belief.

                    3. JoshSN| 8.26.12 @ 8:32PM |#
                      “It would be like me believing angels exist, just because the Bible says so.”

                      Or it would be like you believing the strawman you posted, just because you ain’t real bright.
                      Do I win?

                    4. Holy shit that is some grade A stupid.

                      What a complete and abject failure you must feel like.

                2. I don’t have the link handy, but I remember reading an article with quotes from the New York Times basically stating that even mainstream economists were accepting that the Long Depression was largely mythical. The late 1800’s was one of the greatest economic expansions in human history, not the longest downturn

            3. The Long Depression occurred before the Fed, and while we were on the Gold Standard, and, as its name implies, was the longest depression America ever had.

              Bullshit.

              The so called long depression coincides with the largest increase in living standards in American history and the rise of America to world power status.

              1. Fine. Name one mainstream economist, conservatives like Hubbard and Mankiw count, which say the Long Depression didn’t happen.

                Not a monetarist.

                1. I am getting a big chuckle reading more about the Long Depression.

                  Here.

                  Let’s see: preceded by the Germany going on the gold standard, heavy deregulation, started in Austria…

                  The Long Depression is a personal affront to everything you hold dear! It’s proof that the gold standard, deregulation and Austrian economics are worthless! Well, to be fair, who knows what Austrians were in charge back then, not I.

                  But it is still pretty comical.

      2. Cool, thanks for the link!

    1. Weren’t there plenty of crashes and depressions in the 19th century, before we had a federal reserve, and back before the feds had any control over interest rates?

      Control of the printing press began shortly after the Revolutionary War. Issuance of credit, during. Murray Rothbard narrates five disastrous attempts (for the American economy) between then and 1912 to create a central bank in The Mystery of Banking.

  27. How do you answer to that?

    http://www.slate.com/articles/…..heory.html

  28. n inconsistent with true consumer demand must now be rearranged. The misshapen economy must be http://maxsale2012.overblog.com/ permitted to assume a more appropriate shape. But that takes entrepreneurial risk, time, and money (savings). If the correction is to occur quickly and with minimum hardship, the government must get out of the way. In particular, it must not keep interest rates artificially low (discouraging saving) or create uncer

  29. Can Yglesias really be serious when he writes that Bastiat’s position “involves assuming that no such recessions can occur even though they plainly do”? It is Yglesias who assumes what must be proved: namely, that the business cycle is a natural feature of the free market, rather than the consequence of government’s corporatist meddling with money, banking, and interest rates.

  30. Well, Bastiat’s broken window doesn’t apply in our case, but Keynes doesn’t either. Neither apply in a fiscal/monetary system where hundreds of billions are borrowed and spent when the economy is vibrant, and a few trillions are borrowed and spent when the economy is tanking. There is no economic theory which has debt addiction at its fundamental core. The “Yes or No” of a low mixed barbiturate to treat a hardcore heroin addict isn’t much of a question. What we have is an IV of 70% pure dripping in 24/7 and isn’t doing much good. Of course Bastiat’s philosophy of what happens when people can vote themselves plunder from the treasury IS at the root of our fiscal/monetary situation.

  31. “That’s like walking into a movie in the middle, thinking you understand the plot”

    …and then start shouting loudly about what you think ought to happen next, thereby destroying the value of the movie to everyone else who paid to enjoy it.

    Statists perpetually cause problems by violent economic intervention and then pretend to compassionately “solve” those problems with more violent economic intervention. They are the proverbial mystical medieval doctors, armed with talismans, eye of newt, leeches, and blades for bloodletting, and worse yet, their ineffective, expensive, and deadly “care” is mandatory under pain of imprisonment.

    These modern economic alchemists are corrupt hacks, ignoring the beneficial effects of free trade, and ignoring the ill effects of their incompetent interventions. They push hack theories of zero-sum trade, demand-based trade, debt-funded stimulus, interest price fixing, and legalized counterfeiting by the Fed.

    It is time we reject the Marxist and Keynesian alchemists as a failed cult of thieves. We must reject them not only politically, but socially. Their ideas and any work they do that suffers from theri bad ideas must be criticized, discredited, and marginalized.

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