Economics

The Third Lesson of Economics

Henry Hazlitt's insights were far more sophisticated than one modern critic thinks.

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Economics in Two Lessons: Why Markets Work So Well, and Why They Can Fail So Badly, by John Quiggin, Princeton University Press, 408 pages, $29.95

On the radio and in his writings for The Nation, Newsweek, The Wall Street Journal, and The New York Times, Henry Hazlitt was the voice for free market economics during the Great Depression and immediately afterward. He brought the ideas of such thinkers as Ludwig von Mises, Lionel Robbins, and F.A. Hayek to the public, using their work to explain the problems with central planning, the benefits of international trade, and the ways sound money and fiscal responsibility can counter economic volatility. 

Hazlitt's most famous book is Economics in One Lesson. John Quiggin, an economist at the University of Queensland in Australia, has now written Economics in Two Lessons. The second lesson, Quiggin tells us, is that markets suffer from external effects, monopoly power, underprovision of public goods, macroeconomic volatility, and inequality.

Quiggin's book is engaging and well-written, and it sums up as well as any work the economic arguments for activist government. But it would be more convincing if the author were a bit more up-to-date on what has happened in the discipline since 1980. Quiggin acknowledges the contributions of the Austrian, Chicago, and new institutional schools of economics. But he argues, mistakenly, that these have since been theoretically and empirically refuted.

The history of the government-vs.-the-market debate can be divided into three stages. The first imagines perfect markets and perfect government, then favors markets for solving economic problems. The second imagines imperfect markets and perfect government, then favors government intervention. The third imagines imperfect markets and imperfect government; it admits market failures are real but argues that we should nonetheless look to markets to fix them. Quiggin misidentifies Hazlitt with Stage 1, but he in fact offered an early version of Stage 3.

Quiggin's own presentation is pure Stage 2. Much of the book is spent showing that markets are not perfect and noting that many economists have made this point already. It frustrates him that Stage 1 must continually be refuted—in another book, he dubs its persistence "zombie economics." But to economists who have been through this debate and operate at Stage 3, Economics in Two Lessons is its own form of zombie economics.

Economics in One Lesson focused on the idea that sound economics considers not just a public policy's immediate, intended consequences but also its indirect, unintended consequences. Quiggin summarizes Hazlitt's message a little differently, as an argument that market prices fully reflect opportunity costs—that is, that the value of goods produced equals the value of the next best alternative use of the resources that went into them, resulting in perfect efficiency in exchange and production. Put simply, this would mean that the best of all possible worlds would be achieved through the market mechanism.

But Hazlitt understood that a market is never perfect, nor is it in equilibrium. The price system guides individuals to discover mutual gains from trade, prodding them to find the most valuable uses for scarce resources and thus moving the whole system into more efficient resource allocation. By ignoring those subtleties, Quiggin ends up collapsing Hazlitt's lesson to "markets work well when they work perfectly"—and when they don't work perfectly, Quiggin says, we need government to fix the problems.

A particularly critical issue, which Quiggin thinks the market is impotent to address, is climate change. Since no one owns the climate, prices cannot communicate important information about how much of an effect an economic endeavor is having. Without prices, economic actors cannot coordinate their plans in a way that incorporates information on climate change and then adapt and adjust accordingly. But as we'll see, Quiggin is arguing with a strawman.

Economics in Two Lessons mentions but doesn't really engage with public choice (which applies the theories and methods of economics to politics); law and economics (which applies economics to the analysis of law); property rights economics (the study of property as an underlying economic institution); and market-process economics (which sees the market order as being fundamentally about exchange and the institutions within which exchange takes place). These fields just aren't part of Quiggin's intellectual DNA, so instead he returns again and again to the high theory of 1950–1980.

The basic ideas behind these fields were part of the common knowledge of classical political economy. But the consensus that Hazlitt opposed, embodied in the work of the late Massachusetts Institute of Technology economist Paul Samuelson, ignored these traditions. After 1950, scholars such as Armen Alchian and Harold Demsetz had to rediscover property rights analysis, just as Ronald Coase had to press economists to understand how alternative legal arrangements impact economic performance and James Buchanan and Gordon Tullock had to explain how the political process within modern democracies operated. And while Joseph Schumpeter had long talked about the role of the entrepreneur as a necessary component of any explanation of the market process, the Samuelson-era model of perfect competition eliminated the analytical need for the entrepreneur. The market process's constant adaptation and adjustment to changing circumstances was therefore little more than an analytical pest to the economic theorist. Once these ideas are taken into account, the sort of market failure theory that Quiggin claims as the second lesson of economics becomes more complicated than he acknowledges to his readers.

This hobbles his discussion of several issues, including the aforementioned matter of climate change. Here he paints his opponents as practitioners of Stage 1 economics, then maintains that when those arguments fail they retreat to denial of the claims about climate science. But this is not the position taken by such economists as Thomas Schelling and William Nordhaus. They instead have looked at the adjustments and adaptations that occur as a consequence of climate change, both in terms of relative price changes that direct economic activity toward more efficient utilization of scarce resources and in terms of technological innovations that are both less costly and more ecologically friendly. They've also explored the dysfunctions that can follow when government decision making isn't checked by the discipline of the market—for example, the environmental degradation that afflicts many publicly managed common-pool resources.

Quiggin's failure to engage the lessons of Stage 3 economics also hobbles his analysis of antitrust. In his view, the law is guilty of tilting the economy toward monopoly rather than competition. But Stage 3 economists have shown that the paradigm that dominated antitrust and regulatory economics from about 1950 to 1980 was a poor guide to policy.

According to that approach, economic analysts could measure industry concentration and from that infer whether a company's pricing conduct would approximate that of a competitive firm or a firm with monopoly power. They could then make another inference about whether the industry's performance was optimal or suboptimal. If judged suboptimal, then government would step in as a corrective. 

But in The Antitrust Paradox (1978), Robert Bork famously argued that any effort to force-fit the economy into the textbook image of a perfectly competitive economy would have the same effect on industrial output as a few strategically placed nuclear bombs. Other Stage 3ers showed how businesses used antitrust to protect themselves from the rigors of competition, as opposed to ensuring a competitive environment. They also showed that entrepreneurial discovery and creativity are the main drivers of economic progress, forces overlooked in the old paradigm's static conception of the market.

In each topic they tackled, Stage 3 scholars have recognized that human beings are imperfect and that we interact with each other in an imperfect world mediated by imperfect institutions. We must deal with bumbling bureaucrats as well as erring entrepreneurs. That requires institutions that provide feedback and stimulation—that direct and redirect our efforts, so we can act less erroneously than previously. The second lesson of economics, understood correctly, isn't really that markets fail; it's that institutions matter.

Institutions matter because they structure the incentives that economic decision makers face, and institutions transmit the information that actors must process to negotiate the environments they find themselves interacting within. It is institutions that determine how we pursue productive specialization and whether we will be able to realize peaceful social cooperation through mutually beneficial exchange. The second lesson thus leads naturally to the third lesson of economics—that it requires a comparative institutional analysis of market and nonmarket decision making.

For the economists who informed Hazlitt and who have worked in his tradition since then, markets are never perfect. They are always in a process of becoming, and that process is where we see the constant adaptation and adjustments that coordinate economic activities over time. Hayek called this complex coordination through the market a marvel. Quiggin's book misses the marvel, and he sees solutions only through the concerted effort of governmental authority. It is he, not those who follow in the footsteps of Henry Hazlitt, who cut the lesson off too early.

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  1. Your argument ends with a reference to the role of institutions. I wish you had given some examples or explanations of how these “ determine how we pursue productive specialization and whether we will be able to realize peaceful social cooperation through mutually beneficial exchange.”

    1. about 23% of the US economy is made up of government goods and services. there would be not much of an economy in place like California and Texas were it not for defense spending. F35 in Texas, about a billion a year or the internet in Cali, invented and funded by DoD to the tune of about $1T over the years. Fracking is the sole source of the economy in North Dakota, invented by DoE. How about basic research which is the back bone of Pharma. Amazon thrived from a no sales tax regime nation wide.
      The interstate highway system made interstate commerce.

      the auto bailout and the bank bailouts? monetary finagling set the stage for a stock market with P/E unrelated to the fundamental balance sheets.

      we haven’t been a capitalist society since WW2.

      this is a stupid article a priori.

      1. The premise of your argument is that government spending is money that wouldn’t be spent otherwise. Thing is, every dollar that government adds to the economy must first be taken away. Government is a zero-sum game. If that money was never taken away from the people, then it could have been used to create wealth. It is a net loss, not gain, for the economy.

        1. Government is a negative sum game. Not only are all those tax dollars stolen, but people have to spend more money just to comply with conflicting taxation policies and try to stay out of jail.

        2. Government is a zero-sum game

          I’ll bet you $22 trillion that you don’t actually believe that.

          Yes – that $22 trillion in public debt is a theft from the future. But it is incurred precisely because it is seen as ‘free’. Where that being spent now distorts all the stuff that you yourself can benefit from – without paying for it – and the cost is paid by someone else in future.

          1. I didn’t forget the debt. I was trying to make a point without getting overly complicated.

            1. The federal government has always been in debt throughout the history of the USA, except for a brief time under president Andrew Jackson, when all federal debt was paid off and there was an actual surplus. We entered a severe economic depression two years later. Since we live in a credit based economy, I am not very concerned about public debt being theft from the future – as long as the economy continues to grow over time and living standards hold up. The federal government is a currency issuer, while we are currency users. The risk to the federal debt is inflation, not solvency. The federal government does a lot of stuff badly – stuff that should be turned over to the private sector. I wish small government conservatives and Libertarians would put more energy in to cutting down the size of government from the perspectives of letting the private sector handle more – rather than whine about the federal debt burden our grandchildren will face.

      2. Your statist credentials are showing.

        Amazon thrived from no taxes? Amazon thrived because Jeff Bezos found a market failure and fixed it. Government didn’t create Amazon.

        Interstate commerce existed long before government built a few roads. I didn’t realize government built the Oregon Trail or found the Donner Pass route.

        If government had goods or services that people wanted, they wouldn’t have to steal taxes and put people in jail for not buying their goods and services.

        Oil was in use for millenia before government got involved, and John D Rockefeller did more to brighten poor people’s lives than any government. Sure helped wean people off killing whales too. His reward was government interference in one of the most efficient markets there ever was.

        Fuck off, slave apologist.

        1. Amazon thrived from no taxes? Amazon thrived because Jeff Bezos found a market failure and fixed it.

          Which market failure was that, exactly? Online retailing is literally indistinguishable from catalog retailing that existed for a century and a half before the worldwide web created an easier network to use than the mail system.

          Oh, and the worldwide web? The hyperlinked system of websites running over the packet switched network of networks called the Internet? Created by government for the military. Incubated by the government for defense and academics. And then subsidized by government.

          You pathetic fucking assholes are absolutely addicted to government – particularly central banking – but you like to pretend that your favorite flavor is somehow different than the icky plebeian variety.

          Fuck off, slaver apologist.

          1. If online retailing were literally indistinguishable from catalog retailing, Amazon would be as dead as Sears, Roebuck and Montgomery Wards. Strike 1.

            The Internet was created by DARPA, yes, but had been in the works for some time. The military no more created the Internet than it created rockets. Strike two.

            The World Wide Web was created by Tim Berners Lee at CERN, not by or for the military, and was merely the next obvious step after Gopher and other linked sites. I used many of them myself and heard many discussions about hyperlinking years before the WWW was developed. You are conflating the two, and they are distinct; or perhaps it is more accurate to say they are different layers. Strike three, you’re out, bzzzzt, and no thanks for playing so poorly.

            Fuck off, ill-informed ignoraramus.

          2. Oh, and the worldwide web? The hyperlinked system of websites running over the packet switched network of networks called the Internet? Created by government for the military. Incubated by the government for defense and academics. And then subsidized by government.

            In fact, ARPANET was never used commercially, and packet switching was invented multiple times independently. The Internet only started taking off once the telecom sector got privatized and deregulated and government got out of the way.

            Online retailing is literally indistinguishable from catalog retailing that existed for a century and a half before the worldwide web created an easier network to use than the mail system.

            Amazon is so much more than just “catalog retailing”.

            You pathetic fucking assholes are absolutely addicted to government – particularly central banking – but you like to pretend that your favorite flavor is somehow different than the icky plebeian variety.

            Central banking is probably the worst interference of governments in markets; it’s the antithesis of free markets and the epitome of crony capitalism in the US.

            Fuck off, slaver apologist.

            Take your own advice. ignorant slaver apologist.

          3. If Amazon is so indistinguishable:

            1. Go read a book.
            2. Go make your own.

      3. “Amazon thrived from a no sales tax regime nation wide.”
        Amazon paid plenty of taxes.

        What Amazon didn’t do, originally, was submit to the vagaries of multiple states demanding that Amazon, which was not present in their states, work as an unpaid tax collector for those states.

        All those states had “use taxes”, which their citizens were/are legally responsible for paying when they import items into the state. It doesn’t matter if they drive to the next state to buy something then drive home with it or order something on Amazon. Neither Amazon nor the store in the other state were required to collect for and remit taxes to the buyer’s home state.

        Until the Supreme court screwed up this decision (overturning Quill) the states were just mad that no one paid the use taxes they owed and wanted to force Amazon and others to do it for them.

        Now that it’s screwed up by SCOTUS, one has to wonder: if a state can force a company located 1000 miles away with zero physical presence to be a tax collector (and carry the tax liabilities), what else can a state force a company (or an individual?) in other states to do? Maybe Florida can start demanding a portion of income taxes for everyone who vacations there–forcing employers in other states to withhold Florida income taxes?

  2. Markets aren’t perfect. Therefore, we need a living, active government, especially where externalities exist, which is everywhere. QED.

    It’s not hard to get if you’re willing to embrace the complexity of life, people.

    1. Yes, more coercion please.

      1. But for many (most?) humans, coercion is not really necessary. They eagerly seek strong leaders and institutions, and voluntarily conform to policies and programs. Simply put, they like being told what to do. And, of course, there are plenty of people also eager to tell others what to do.

        Humans who consistently have the inclination to manage their own affairs, and also resist urges to manage the affairs of others, are in a distinct minority. What to call them…

        1. “Political tags – such as royalist, communist, democrat, populist, fascist, liberal, conservative, and so forth – are never basic criteria. The human race divides politically into those who want people to be controlled and those who have no such desire. The former are idealists acting from highest motives for the greatest good of the greatest number. The latter are surly curmudgeons, suspicious and lacking in altruism. But they are more comfortable neighbors than the other sort.“
          -Heinlein

          1. Altruism is such an interesting point of comparison. Government fails unless 100.00% of the population is equally altruistic right from the start; it only takes one selfish rascal to take advantage of everyone else, violently, and sour everyone else on altruism.

            Markets turn the most curmudgeonly rascals into cooperative participants, no matter how unwillingly. The few psychopaths who do not cooperate are soon ignored or weeded out when they turn violent.

    2. Markets aren’t perfect. Therefore, we need a living, active government, especially where externalities exist, which is everywhere. QED.

      (1) Governments aren’t perfect either; in fact, they are composed of the same greedy actors as businesses, but unchecked by personal financial responsibility for the consequences of their choices.

      (2) Externalities only exist because of governments in the first place; the larger you make government intervention in markets, the more externalities there will be. In a fully libertarian free market system, there are no externalities at all.

      (3) It isn’t the job of government to maximize some economic criteria, it’s the job of government to protect liberty.

      1. Externalities only exist because of governments in the first place

        I have to congratulate you, this is perhaps the single most idiotic idea ever posited. Economists going back to fucking Adam Smith (hint hint he wrote more than one book, try reading Theory of Moral Sentiments some time) have acknowledged market externalities. They aren’t created by government, they are created by the overlapping and antagonistic interest of market actors at an individual level compared to polities as a group. Your ancap wet dreams are not reality and never will be. As long as any two people decide to identify themselves as a family, tribe, town, nation or superpower then externalities will exist.

        1. I have to congratulate you, this is perhaps the single most idiotic idea ever posited.

          Well, give it some thought and you may figure it out. Your understanding of economics seems a bit hazy, not just in this regard.

          Your ancap wet dreams are not reality and never will be.

          I simply pointed out where externalities come from. You can’t have externalities unless there is something outside the market. I’m sorry if you misunderstand a statement of fact for advocacy of any particular system. But, again, the problem here is your poor communications skills, not mine.

          1. I get what you’re going for, but the absence of government doesn’t automatically expand the market to omnipresence. Air pollution is a good example of an externality, so I’ll use that: the absence of a coercive state does not immediately provide a method for property owners (or just everyone who breathes) to receive compensation for the damages wrought by a heavily polluting factory. While some sort of takings suit could probably go through arbitration for each instance, it’s a hell of a coordination problem, so the more likely and better solution is some kind of air council to which property owners lease their air rights, and then this entity negotiates with would-be polluters and sets terms, compensation, etc.

            The point of the example is that the absence of a state is the state of nature until a market is established. To reference the good point in the article above, the institutions matter.

            1. Sure it does. Think about all sorts of private organizations that serve collective needs. Ex. the oft-despise HOAs (typically for being poorly run and having petty rules, not for existing in the first place) get roads paved and trash picked up. If a couple hundred people can organize at this level, why do you suppose that more cannot?

    3. Markets thrive off imperfections; filling gaps and fixing imperfections is what makes markets work. The only place markets could fail is a perfectly static society where no one died or got sick or retired or took time off to have children; where weather and climate were mild and unchanging; where there were no tornadoes or hurricanes or earthquakes or other natural disasters; where no one ever had a new idea.

      1. Broken windows fallacy.

  3. What’s with all this theoretical nonsense about various combinations of perfect v/s imperfect Government Almighty v/s markets!??! Now that a PERFECT Dear Leader-Fuhrer is here to lead us to The Way, what does ANY of it matter, any more?!?

    Ye unbelievers… I know ye lurk out there, amongst us… HEARKEN ye here unto!

    Quotes from The Dear Leader, AKA The Donald in the “Anti Gravity” column in August 2017 “Scientific American” magazine follow:
    “I have great genes and all that stuff, which I’m a believer in”,
    “God helped me by giving me a certain brain”,
    “I have a very, very high aptitude”,
    “Maybe it’s just something you have. You know, you have the winning gene.”

    https://www.washingtonpost.com/news/the-fix/wp/2016/10/04/17-issues-that-donald-trump-knows-better-than-anyone-else-according-to-donald-trump/
    Trump:
    “I know more about renewables than any human being on Earth.”
    “I understand social media. I understand the power of Twitter. I understand the power of Facebook maybe better than almost anybody, based on my results, right?”
    “Nobody knows more about debt. I’m like the king. I love debt.”
    “”I understand money better than anybody.”
    “I think nobody knows the system better than I do.”
    “I know more about contributions than anybody.”
    “Nobody knows more about trade than me.”
    “Nobody knows jobs like I do! ”
    “Nobody in the history of this country has ever known so much about infrastructure as Donald Trump.”
    “There’s nobody bigger or better at the military than I am.”
    “I know more about ISIS [the Islamic State militant group] than the generals do. Believe me.”
    “There is nobody who understands the horror of nuclear more than me.”
    “Because nobody knows the system better than me. I know the H1B. I know the H2B. Nobody knows it better than me.”

    Set aside your unbeliefs, and REJOICE, my brethren, sistern, cisterns, and cysts!!!!

    1. Ye unbelievers… I know ye lurk out there, amongst us… HEARKEN ye here unto!

      Note how none of the quotes you give actually go on to recommending central planning or economic intervention?

      Now that a PERFECT Dear Leader-Fuhrer is here to lead us to The Way, what does ANY of it matter, any more?!?

      Trump is probably the most free-market oriented president we have had in decades and represents the kind of person fascists and socialists hate. Yet, you mock him with terms that apply to communist and fascist dictators.

      You’re an ignorant fool, and ignorant fools like you are going to be responsible for when we get an actual socialist or fascist as president; they are chomping at the bit both in the Democratic and Republican party.

      1. https://www.axios.com/us-china-trade-war-global-economic-growth-slowdown-imf-80cbfd73-2798-4594-9604-24ed42f0e2c1.html

        Trump’s trade war has reversed the world’s growth story in 2 years

        “The latest: On Tuesday, the IMF said it expects global growth to slow to the weakest pace since the 2008 global financial crisis, noting the decline would be a significant drop from its 2017-18 levels.”

        Under the Trumptatorship (which preens itself on its moral superiority over peons like me; the protectionist Trumptatorship, being superior, makes my economic choices for me), the world’s economy is entering a tailspin!

        “…most free-market oriented president we have had in decades…” is utter and total horseshit! Even Obama didn’t willy-nilly start trade wars everywhere!

        1. (1) Trump’s trade sanctions against China are a legitimate exercise of his powers under WTC rules, the US Constitution, and US law. Referring to that as a “dictatorship” is absurd.

          (2) Trump’s trade sanctions are not “protectionism”; protectionism would require placing tariffs on goods imported from anywhere, not just a single country.

          (3) Global growth is slowing because of excessive government spending, fiscal policies, and debt. Tariffs on China at most play a minor role.

          (4) You live at the teat of the US government; that’s why the US government gets to make choices for you.

          1. (1) Trump’s trade sanctions against China are a legitimate exercise of his powers under WTC rules, the US Constitution, and US law. Referring to that as a “dictatorship” is absurd.

            Utter horseshit as usual from you! US Constitution gives budgetary (including tariffs and other taxes) powers to Congress. It is only because Congress lacks balls (and a spine) that the Trumptatorship is taking this over! The Trumptatorship also takes money allocated for the military and builds walls with it instead! And these kinds of things include, warmaking powers have un-Constitutionally shifted to the POTUS as well. The Republic is becoming an Evil Empire, and the office of POTUS is becoming the office of Emperor. We have crossed the Rubicon! THAT is why the term “Trumptatorship” is apt!

            1. Utter horseshit as usual from you! US Constitution gives budgetary (including tariffs and other taxes) powers to Congress. It is only because Congress lacks balls (and a spine) that the Trumptatorship is taking this over!

              Congress delegated this authority to the executive branch and lots of presidents have exercised it. That’s because you can’t have effective trade negotiations without having a carrot and a stick.

              The Trumptatorship also takes money allocated for the military and builds walls with it instead! And these kinds of things include, warmaking powers have un-Constitutionally shifted to the POTUS as well. The Republic is becoming an Evil Empire, and the office of POTUS is becoming the office of Emperor. We have crossed the Rubicon! THAT is why the term “Trumptatorship” is apt!

              Go look at some of the crap presidents have pulled throughout the 20th century. Go look at what Obama alone did. To blame Trump for executive overreach with an infantile insult like “Trumptatorship” just documents your complete ignorance of US history.

              Furthermore, bad as executive overreach has been, it is nothing compared to the unconstitutional expansion of federal powers by Congress, aided by SCOTUS. If the federal government still operated within the constitutionally defined bounds, executive overreach simply wouldn’t matter at all.

              1. Oh, and don’t forget, very topically lately, Congress allocates American tax dollars to aid Ukraine, per Congress’s powers. Trump holds it (the aid money) hostage to Ukraine doing Trump’s will, to aid Trump’s re-election efforts! Now, when did Congress authorize THIS kind of hanky-panky?!?!

                The rest of your crap is whataboutism… What has Trump done to ROLL BACK the Imperial Presidency? Nothing!!! He has only tried to grow it as much as possible, make it WORSE, not better, as much as he can get away with!

                1. Oh, and don’t forget, very topically lately, Congress allocates American tax dollars to aid Ukraine, per Congress’s powers. Trump holds it (the aid money) hostage to Ukraine doing Trump’s will, to aid Trump’s re-election efforts!

                  He didn’t “hold it hostage to aid Trump’s re-election efforts”, he held it hostage subject to anti-corrupt efforts in Ukraine.

                  Now, when did Congress authorize THIS kind of hanky-panky?!?!

                  Presidents generally can delay foreign aid.

                  The rest of your crap is whataboutism…

                  You said:

                  The Republic is becoming an Evil Empire, and the office of POTUS is becoming the office of Emperor. We have crossed the Rubicon! THAT is why the term “Trumptatorship” is apt!

                  In actual fact, the Republic has been an Evil Empire since WWII; Obama was much more of an evil emperor than Trump when you look at the global imperial wars he engaged in. (Perhaps you’re a little shaky on the meaning of “emperor” and “empire”?)

                  What has Trump done to ROLL BACK the Imperial Presidency? Nothing!!!

                  Trump has rolled back the power of the executive by repealing lots of regulations. He has rolled back Obama’s misuse of executive power in areas such as “civil rights” and immigration. And he has been far more restrained in terms of foreign use of the US military.

                  That doesn’t make Trump a perfect president, or a libertarian president. But it shows that you are a victim of TDS when you claim that “We have crossed the Rubicon! THAT is why the term “Trumptatorship” is apt!” We crossed the Rubicon decades ago; unlike his predecessors, Trump at least hasn’t moved forward towards an imperial presidency and arguably moved back a little by restoring a bit of lawfulness.

                  1. It is true that Trump has rolled back regs a wee tad… He does deserve credit for that.

                    HOWEVER, even AFTER these roll-backs, I ***STILL*** need permission to blow on a cheap plastic flute!!! We have a LOOONG ways left to go!

                    To find precise details on what NOT to do, to avoid the flute police, please see http://www.churchofsqrls.com/DONT_DO_THIS/ … This has been a pubic service, courtesy of the Church of SQRLS!

                    1. So, according to you, because Trump didn’t abolish every silly regulation in his first term, he’s a dictator and a socialist/fascist and the worst president ever. Got it.

  4. I consider myself a Panglossian, I’ve have always tended to believe the market is pretty damn perfect, the fact that it doesn’t always work the way you want it to or intend it to is no reflection on the market. The world we live in is not perfect by anybody’s standards, but it’s the world you wind up with when everybody tries to do the best they can with what they’ve got. You get this spontaneous order which is less than ideal for any one person, but it’s the best you’re going to get when everybody has a different idea of what’s ideal. Government “fixes” problems by making everybody pull in the same direction and it looks like it’s more efficient than everybody pulling in different directions, but only if you ignore the fact that a lot of people didn’t want to go in that direction.

  5. “only if you ignore the fact that a lot of people didn’t want to go in that direction.”

    Bingo.
    To update Barney Frank’s quote: “Government is simply the name we give to the things 50% plus 1 of us choose to do together.”

    1. And force the 50% minus 1 to comply with.

  6. As I see it argument in favor of markets over government is that when market actors fuck up they feel the consequences, while when government actors fuck up they double down with more force.
    When someone in business has a lousy idea they lose money. They get immediate feedback, and respond to it because they have something to lose.
    When someone in government has a lousy idea they lose nothing. Blinded by their intentions, they blame others for their failure and try harder with more coercion and real threats of violence.

    To me and other market supporters this is obvious and simple. We understand that through voluntary cooperation we are happier and wealthier. Perfect? No. But better than the alternative.

    Whereas government worshipers feel that we can achieve utopia through coercion, force, violence and death.

    1. I have also noticed that government worshipers scoff at the concept of voluntary cooperation. They will argue that because we need basic necessities to survive, and because we must work in order to acquire these things, that we are slaves to our employers and to the providers of these necessities.
      They would rather these things be provided by people backed up by men with guns who kill without guilt or consequence.
      Voluntary cooperation is slavery, and coercion is freedom.

      1. To statists or tribalists of all kinds, manifest in governments, churches, central planning committees, etc., “cooperation” is too fundamental to consider why the subjects conform. Why risk dissension by even pondering voluntary choice? If anything, these systems suppress choice in the name of righteous, holy collective ideals. Non-compliance is thus heresy, and punished accordingly.

        1. Those systems do not use violence. Government does. I fail to see how you have refuted my point.

          1. Not trying to refute your point. I agree that statists, by definition, dismiss voluntary cooperation.

            But you are very wrong about only government using violence. Religions have inspired or at least provided cover for immeasurable bloodshed. And even your friendly neighborhood HOA can lead to armed confrontations with authorities.

            1. Religions have resulted in bloodshed when church and state are one. That’s why you see it in the Middle East and medieval Europe, but not here in the U.S.

              1. Well, not since the Mormon War.

      2. Both comments by sarcastic are right on the money. Several ways to respond to the article.

        First, yes, “market failure” exists. But the failure is not a flaw in the system, it is a feature. The constant weeding out of failed business models, clearing the way for other people to try to build a better mousetrap, is how the overall economy improves itself.

        Government sees a problem, or at least a “want”, and says “this is how we’re going to address this problem.” And they stick with that plan through thick and thin, doubling the budgets, or making tweaks to the rules, never wanting to admit that government might not know best.

        Meanwhile, in the free market, there might be 100 different people trying to meet the same need. They might try different approaches, or think they’re better at doing the same approaches. And most of them might fail, but 1 or 2 probably won’t. The result is that the want is fulfilled. The problem is fixed. those who failed, in invested in the failures, is going to have to learn a lesson and move on. Nothing ventured nothing gained.

        The “failure”, as perceived by the progressives, is that that 1 guy who figured out the wining solution might become a billionaire. And they don’t think it’s “fair” that some people have so much more than others. Their own envy is the only failure there. Poor people today live like kings a couple of centuries ago. Better. Electricity, running water, air-conditioning, cars, cell phones, antibiotics. We’re a science fiction novel as far as our ancestors were concerned.

        Second, failure, to the extent it exists in the market, is the exception, not the rule. In government, failure is the rule and success is the exception. You can count on one hand the number of government programs that have succeeded in accomplishing their goals – ever in history.

        Outside of winning the occasional war, everything the government is involved in now is a mess. Education, health care, welfare, the drug war. NASA has had a few nice accomplishments, amongst some horrible failures. But Elon Musk is kicking their ass right now.

        Third is climate change. Here’s the dirty truth that no one is talking about. If it weren’t for government, we might not even be facing a climate crisis right now. If, back in the 1970s government hadn’t strangled the American nuclear power industry in its crib, we might be getting 80% of our power from clean nuclear power right now, like the French and the Swedes.

        Us – the worlds worst polluter according to the progs, could be emiting HALF as much carbon or less if it hadn’t been for government. And they are STILL standing in the way of nuclear despite their belief that the world will end in 12 years, when it is the only realistic solution. A small investment in basic science underlying some of the new nuclear technologies could solve the problem. Solar, wind, tree planting – none of these has any realistic chance of putting a dent in the problem.

        LFTRS (pronounced Lifters) – Liquid Fueled Thorium Reactors – are the solution. the new reactors are 10X safer than the old models. Which were already safe. More people die falling off of roofs while installing solar panels than have died in the history of nuclear power plants.

        Long live market failures!

    2. Unless those in business cozy up to the government. Then their mistakes have the backing of government.

      1. Sarcasmic, Earth Skeptic, Nunya, I see all of your above points… Butt here is my butt-hurt counter-point!

        Scienfoology Song… GAWD = Government Almighty’s Wrath Delivers

        Government loves me, This I know,
        For the Government tells me so,
        Little ones to GAWD belong,
        We are weak, but GAWD is strong!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        My Nannies tell me so!

        GAWD does love me, yes indeed,
        Keeps me safe, and gives me feed,
        Shelters me from bad drugs and weed,
        And gives me all that I might need!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        My Nannies tell me so!

        DEA, CIA, KGB,
        Our protectors, they will be,
        FBI, TSA, and FDA,
        With us, astride us, in every way!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        My Nannies tell me so!

        1. Do you have anything more substantive than infantile chants and mockery?

          1. What did your comment contribute?

            If you feel the need to point out how infantile his chants and mockery are, that seems proof enough they weren’t quite as infantile as you believe.

            1. I’m sorry, let me spell it out for you.

              With people like SQRLSY One and you claiming to advocate for libertarianism, it’s no wonder that it is failing to catch on with more people.

              So, the question is: are you deliberately trying to sabotage libertarianism, or are you simply foolish enough to think that your infantile behavior is actually advancing the cause of liberty?

              Give it some thought and let people know which it is!

              1. And with moralist nanny mindfucks like YOU advocating for libertarianism … wait a sec, how can a moralist nanny mindfuck control freak advocate for libertarianism?

                Something here compute does not.

                1. And with moralist nanny mindfucks like YOU advocating for libertarianism … wait a sec, how can a moralist nanny mindfuck control freak advocate for libertarianism?

                  I’m neither a “moralist” nor a “nanny”. I couldn’t care less what you do with your life or money. I do care what you do with my life and my money.

                  And I’m not even arguing much for libertarianism right now, I’m merely advocating against creeping socialism, because if the US turns into a socialist country due to losers like you, any advocacy of libertarianism will be pointless.

                  1. You apparently have no sense of humor and wish people with one to stop annoying you with their mere existence. How do you escape being a moralist nanny with that attitude?

                    1. I do have a sense of humor, it’s just a bit more adult than yours apparently.

    3. As I see it argument in favor of markets over government is that when market actors fuck up they feel the consequences, while when government actors fuck up they double down with more force.
      When someone in business has a lousy idea they lose money. They get immediate feedback, and respond to it because they have something to lose.

      Exactly! Like Comcast. Or Facebook. Or Google. Or Twitter. Or Chase Bank. These companies are tirelessly, relentlessly, and constantly responding to market feedback, savagely competing in a fierce market environment to try to gain and retain customers. They have absolutely no coercive power or privilege because the market is completely free from information asymmetry or imbalanced bargaining power. Unlike some loathsome government tyrant who only has to face a democratic election every 2-6 years, these companies with greater market capitalization than most US states must cherish every single customer and EARN every single transaction in a cutthroat free market. The ONLY place for government in this type of system is to create trillions of dollars in new debt issued to a handful of banking institutions in order to maintain adequate liquidity for the utterly untainted free market to function, and secondarily to ensure that these companies are not overrun by plebeian activists suing them into oblivion for trivial and nonsensical things like wrongful death, breach of contract or libel.

      1. Because those are the only companies that exist on the whole damned planet.

        The exception proves the rule, fuckwit.

  7. The debate starts from the wrong assumption that politics should impose an economic system that maximizes output, growth, or total wealth. Free market economics isn’t about maximizing output, growth, or total wealth; free market economics is about liberty and rights. The fact that it also delivers pretty good economic results is a bonus.

    The reason you can’t win the utilitarian argument is that, while free markets deliver excellent average results, “average” is only one of many possible utilitarian criteria. For example, people might use “inequality” or “maximizing the minimum income” as criteria. Free markets can’t optimize all criteria that central planners and ideologues may find desirable. So if you make utilitarian arguments, people can always come up with a way of justifying government interference in markets.

    1. Then you need to point out to them that while the market does fail sometimes, so does government. Most of the time in fact. Utopia is not an option.

      We spend over $1 TRILLION a year on government anti-poverty programs. There are over 180 different programs that give money to people for being poor. So why are the streets of Los Angeles lined with homeless people? We have housing programs, food programs, health care programs, job programs, mental health programs. Why are all those people sleeping on the street? Isn’t that a government failure?

      To which they will respond, “We need more money!”. After 50 years of the War on Poverty being added, on top of the New Deal, poverty rates are virtually unchanged since LBJ. Apparently they are just on the cusp of figuring it out, and one more funding increase will finally fix it.

      1. Then you need to point out to them that while the market does fail sometimes, so does government. Most of the time in fact. Utopia is not an option.

        If you argue about who fails more, you have already lost the argument to progressives because you have accepted a utilitarian basis for a government choice of economic system.

        The actual justification for free markets is not that they work better than other systems (although they do that too), it’s that any other system involves coercion and theft. The only economic system compatible with liberty and enlightenment values is the free market system. That’s the one and only justification for the free market system.

        1. The only economic system compatible with liberty and enlightenment values is the free market system.

          Amen to that! You can’t trust some socialist nanny state system. You need a completely unencumbered free market with a strong central bank, limited liability, tort reform, and bankruptcy protection. The type of system you can ONLY get in the total absence of any bloated Big Government.

          1. Central banking is one of the biggest encumbrances to free markets in existence.

            1. Right.. lol… Kind of seemed like a counterpoint with the examples. Limited Liability – Bankruptcy Protection – Central Banking…. Um, isn’t all those generated by Big Gov? Perhaps if the word Insurance was used instead; Liability insurance, Bankruptcy insurance…

              Keep up the excellent posts NOYB2 – they’re totally enlightening.

  8. Markets can’t fix climate change? Thank God that the government forced everyone to buy those Prius cars. And forced Elon to create the Tesla. Seeing that nuclear is the only sustainable path forward, we need government to come in and force those companies that refuse to build those plants into the correct course of action. Of course, government will have to first remove government’s regulations. When they do we’ll uphold that as the power of government to get stuff done.

  9. Prior to the Industrial Revolution, that natural default state of life was misery and poverty. It was markets that brought forth steam engines, textile factories, railroads, cars, airplanes, the telegraph, telephone radio, TV, and internet. Markets created the wealth that lifted billions out of poverty and misery, and in just two or three centuries.

    What was government doing during this time? Mao’s government murdered 60 million people. Stalin’s government murdered 40 million people. Hitler’s government murdered 10 million people. A million died in the US to replace government-approved slavery with government-mandated Jim Crow segregation, lynching, and more poverty. 100 years later, government mandated reverse racism and kept bigotry alive. In addition, the war on drugs and other contraband created now forms of slavery under new legal justifications.

    Yet government fanbois want to talk about market failures.

    1. It was markets that brought forth steam engines, textile factories, railroads, cars, airplanes, the telegraph, telephone radio, TV, and internet.

      Fuck yeah! There was literally no government of any kind in the 1700s when the steam engine was created, let alone when radio and packet switched networking were invented in the 20th century. Can you even imagine what kind of a disaster it would have been if some Big Government bureaucrats were in charge of regulating radio spectrum? Or if military goons had invented decentralized packet switched networking as some kind of post-apocalyptic communications system? We’re lucky that the market gave us all of those things without the corrupting influence of Big Government being involved in any way.

      1. You ought to read Jesse Walker’s Rebels on the Air for some enlightening history of the early unregulated days of radio, and how government interfered and mucked up a spontaneously organized spectrum allocation system at the behest of cronies.

        Or perhaps learn a little about how James Watt got a silly patent and blocked steam engine progress so much in Britain that the first steam ship was developed in the US.

        All those inventions I mentioned were developed by private individuals, not the government. I nowhere implied or said that government prevents innovation. How you read that into it is a mystery to me.

        How you can even think that is a cogent thought for a self-proclaimed libertarian is also a mystery.

      2. There was literally no government of any kind in the 1700s when the steam engine was created, let alone when radio and packet switched networking were invented in the 20th century

        There was; but it was markets that “brought forth steam engines, textile factories, railroads, cars, airplanes, the telegraph, telephone radio, TV, and internet”, in spite of governments, not because of them. Look up “Samuel Langley” and his attempt at flight to see what a laughable failure government investment was.

        We’re lucky that the market gave us all of those things without the corrupting influence of Big Government being involved in any way.

        Actually, we are unlucky that Big Government corrupted and hindered these inventions as much as it did; we lost decades of progress to its interference.

  10. But what about morality?

    For millennia, people have formalized moral values and developed institutions to enforce these. Independence and dissension are usually not encouraged, and often punished.

    And for most people, everything has a moral dimension. Issues like inequality and climate change are not economic or technical challenges, but moral failures. And people of a certain mind set then demand an institution to take charge and lead us to a righteous future. Since most of these same people also dismiss traditional religion, their new moral system can only be embodied in government.

    Markets are thus not just imperfect but are immoral. Challenges to and of the centralized moral institution are heresy. There can be no compromise.

    1. Issues like inequality and climate change are not economic or technical challenges, but moral failures.

      I don’t see how “inequality” is a moral failure. What’s the morality behind forcing similar outcomes for dissimilar contributions to society? Climate change isn’t really a moral issue either, but again a failure of government.

      But what about morality? … Markets are thus not just imperfect but are immoral.

      Quite the opposite: a free market system is the only moral system of economics, since all others necessarily involve theft or coercion.

      Whether markets are imperfect or not is irrelevant; but it turns out that markets are actually not just more moral, but also economically more beneficial to the vast majority of people compared to all alternatives.

      1. a free market system is the only moral system of economics, since all others necessarily involve theft or coercion.

        Exactly this. Everyone brings up ridiculous examples like “Oh but what if one company owned over 85% of the market share in a given industry and had economic leverage that made it impossible for competitors to enter the field and started ignoring or abusing their customers”. As if such a thing could ever happen when all transactions are voluntary! Not to mention, if you have a problem with a company like that all you have to do is start your own company and out-compete them. People act like there’s vendor lock or non-compete agreements or exclusivity agreements or other cockamamie nonsense like that.

        1. Classic letting the perfect be the enemy of the good fuckwittery from you.

        2. Absolutely. Only fools would think that the examples you give a problems in a system of free market economics, or that they represent theft or coercion. But there are apparently lots of fools that believe that, aren’t there, James?

  11. “They instead have looked at the adjustments and adaptations that occur as a consequence of climate change, both in terms of relative price changes that direct economic activity toward more efficient utilization of scarce resources and in terms of technological innovations that are both less costly and more ecologically friendly. They’ve also explored the dysfunctions that can follow when government decision making isn’t checked by the discipline of the market—for example, the environmental degradation that afflicts many publicly managed common-pool resources.”

    I can think of two excellent examples of each.

    1) Subsidence in Tokyo

    Sea levels may not have risen three feet in ten years before, but between 1960 and 1970, the average sea level in Tokyo dropped about three feet (relative to the ocean) due to subsidence.

    https://www.researchgate.net/figure/Land-subsidence-and-groundwater-levels-in-the-Tokyo-area-Japan-modified-after-Kaneko_fig7_283771445

    No, it was not a disaster, Tokyo was not abandoned, and, in fact, the Japanese economic miracle happened amid the subsidence. Actually, it might be better to say that Tokyo was not a flood driven disaster because of Japan’s economic miracle.

    If our economy is to withstand rising sea levels like that, we better hope our economy is unregulated and adaptable like Tokyo’s was in the 1960s and 1970s.

    2) The volume of tourists is destroying Yosemite.

    If you want to bring millions of tourists in to destroy an amazing ecosystem, by all means “protect” it by declaring it a national park. Suddenly millions of people from all over the world will flood there, and infrastructure will be built up all around it to serve that flood of tourists. If things keep going as they are, Yosemite will never again be like it was when I was a kid. If you want to save it, sell it Disney. They’ll take care of it like they own the place–if they own the place.

    1. the average sea level in Tokyo dropped about three feet

      “Subsidence” means that the land is dropping, not that the sea level is dropping. Furthermore, it has dropped by more than 4 meters (i.e., about 12 ft).

      1. That’s the point.

        Land along the coast in the middle of a giant city dropping three feet over ten years is very much like the ocean rising three feet. I can’t think of a better proxy for rising sea levels on a city.

        Over a longer period, land has dropped an average of 15 feet in Tokyo, and there was no dramatic, post-apocalyptic Tokyo with water rushing up past its skyscrapers.

        They didn’t just adapt to the change in sea level. They thrived.

        1. Land along the coast in the middle of a giant city dropping three feet over ten years is very much like the ocean rising three feet. I can’t think of a better proxy for rising sea levels on a city.

          Re-read what you said: the average sea level in Tokyo dropped about three feet (relative to the ocean) due to subsidence.

          Presumably, you meant “land level”.

          1. The land that was at sea level before was at three feet below sea level ten years later.

            According to my link above, over the course of several decades, where sea level had been before dropped five meters–more than 15 feet.

            If you want to know what happens with rising sea levels, it makes a lot of sense to look at places where the land at sea level has dropped three feet over the course of ten years or 15 feet over several decades.

            Hope this clears things up. Color me unalarmed.

            1. I agree with what you seem to be trying to say. But what you actually said is that “the average sea level in Tokyo dropped about three feet”. Re-read that again.

  12. You expect sensible economics from a Marxist? Seriously?

  13. it would be more convincing if the author were a bit more up-to-date on what has happened in the discipline since 1980.

    That assertion would be more convincing if ANYONE – and I mean A-NEE-ONE – in that discipline had come forward in say – 2008 to posit an alternative market-friendly course of action to a fucking bank bailout.

    28 years was more than enough time to understand all the very obvious long-understood problems that led to that – a money system based entirely on bank-debt, subsidies for the creation of bank-debt in one sector of the economy (homeownership) at the expense of all other sectors and with the consequence of perpetual asset bubbles which benefit only the cronyist and/or already comfortable, etcetcetc.

    More than enough time to have seen the problems coming – to have seen the crisis unfold and recognize how best to structure a resolution so the market could deal with it – and put the solutions in place when the crisis became critical.

    Instead – your discipline did nothing. Understands nothing. Wrote a new big lie orthodoxy that blamed the entire thing on poor people who have no fucking economic OR political power. STILL understands nothing – and can now write an entire article ignoring the whole thing. My grandmother died of Alzheimers and I swear she had a better memory and more lucidity at the end than your discipline does.

    Even the author of that book – in a previous work Zombie Economics – pinpoints that 2008 crisis as the demonstration of the utter failure of your discipline – a bunch of dead irrelevant ideas walking around. And in response – you cite the phrase ‘zombie economics’ without mentioning 2008 AT ALL. Not around that phrase. Not around anything else. Talk about a complete lack of self-awareness.

    I’m not sure I really believe in the particulars of the post-2008 criticism – whether Quiggin or Heller in Gridlock Economy or others. Any ‘school’ or approach that existed in any scale before 2008 is also in all likelihood part of the problem not the solution.

    But what is certain is that criticism is more than deserved. Hell – lampposts with rope are probably deserved. And continued lack of self-awareness is exactly at the root of populist criticisms of ‘elites’ – one large group of whom are precisely the globalist neoliberals who imbibe your orthodoxies with their oatmeal every morning.

    1. That assertion would be more convincing if ANYONE – and I mean A-NEE-ONE – in that discipline had come forward in say – 2008 to posit an alternative market-friendly course of action to a fucking bank bailout.

      Dude… Market solution means letting the market work. That doesn’t mean someone directs the optimal solution. Market solution means no central planner. You want to substitute a “market” planner for a government one. You can’t wrap your head around the concept of a solution without someone telling people what to do. You’re like a a creationist who can’t imagine life being so complex without intelligent design. You can’t imagine an economy, which is incredibly complex, without some godlike overseer directing it all.

      1. Dude… Market solution means letting the market work. That doesn’t mean someone directs the optimal solution. Market solution means no central planner.

        FINALLY somebody who gets it! Market solutions exist in a vacuum and are not encumbered by Marxist abstractions like ‘society’ or ‘class’. In a free market system with a strong central bank, working courts, and legal immunities and privileges for joint-stock companies, there is no need for some god-like central planner to direct things!

      2. Market solution means letting the market work.

        I repeat – there was not ONE significant economist – of any stripe who said shit. Not one who stood up – on Sept 16 2008 when the Reserve Primary Fund ‘broke the buck’ and turned everything into ‘Oh fuck’ – and said Hey don’t worry. No need to panic and do something rash. The market will create a new form of money by the time you wake up tomorrow morning. I have no idea how, these things are complex, but you can be certain that’s already happening as we speak. Cuz market. Have faith. That’s what you’re saying is the solution – right?

        Well guess what – no one else on the planet who actually knows anything and is willing to speak in public – agrees with you. Because that was the absolute moment for someone to speak. To PREVENT govt from intervening. A few hours later, the Fed took over AIG (bailing out Goldman), day after that $1NAV is guaranteed, and everything after is pretty much automatic/predictable.

        Hell six months later – Mont Pelerin Society – probably THE gathering place for all those who agree with you re market – has a special meeting in NYC specifically re the crisis – including with a presentation by the author of this article. The online papers from that meeting give new meaning to oblivious and clueless and living in fantasy land.

        They are all just as oblivious to the next financial crisis – and to whatever is happening in the repo market as we speak.

        1. Hell – I’ll bet if you ask market ideologues – now – what they would have liked to have said on Sep 16 2008 to prevent TARP/etc, they would STILL be clueless. With 11 years of hindsight and time to think about it – knowledge that the intervention happened – knowledge of the decade plus of subsidized interest rates and asset bubbles and market distortions.

          It’s why they avoid the topic like the plague. Because getting bailed out – well that’s ok you see. It’s the other guy getting bailed out that’s the problem. It’s Marxism

          1. What was the greatest government intervention in the economy? Yep. The Great Depression. What made it great? It was the first time the government aggressively tried to “fix” things. There were booms and busts before, but they always sorted themselves out. Resources that were misallocated were put to better use. People who made bad investments lost.
            When the government gets involved it chooses winners and losers based upon politics. Thing is, those misallocated resources still need to get sorted out. Government prevents that, prolonging the painful process, resulting in something “Great.”
            Seriously. It wasn’t the case that government intervention prevented something worse. No it prolonged it.
            If government intervention worked then someone could point out a recession with government involvement that ended quickly. Plenty sans government meddling ended quickly.

            Capitalism means profit and loss. Loss sucks. Government sells the idea that you can have your profits without loss. Have your cake and eat it too. Life doesn’t work that way.

            Let markets work.

            1. I see you can’t even answer a SPECIFIC question. I don’t give a shit about diverting to the Great Depression. Or whether Helen of Troy was a slut. Or whether Macchu Picchu is an overpriced tourist trap.

              What would YOU have said on Sep 16 2008 with RPF breaking the buck (ie the instantaneous elimination of the commercial paper market) to PREVENT govt intervention?

              You do understand the consequences right? No more paychecks. No withdrawing anything you think you might have in the bank. Banks might not honor checks you write either. No more paying suppliers – so in a week or two or three no more food at the supermarket or gas at the gas station. Which also means all contracts everywhere for everything will cease to be enforceable. A market/pricing system without MONEY as the medium of exchange.

              NOT the time for fucking platitudes. And if all you can offer is platitudes, then why would you be surprised you are ignored?

              1. And BTW – I’m not advocating govt intervention and never have re TARP so don’t even head over to that strawman.

                I am saying that those who claim to advocate for markets sure as hell never show up at the exact moments when that is what is needed. And are perpetually mouthing off when it is completely irrelevant. Like some drunken braggart lout who goes AWOL when the fighting starts.

              2. After the fact, I read plenty of columns showing were authors had predicted bad consequences of previous decisions. All the specific predictions boiled down to the same standard rule of thumb: government fucks things up.

                Go read up on the 1907 panic, how it was caused by fixes for the previous panic, and the chain goes back to and before the US Civil War.

                Go do some reading, period, for pete’s sake! Your ignorance would embarrass any normal person. Your whiny pleas for specific answers, when a single answer suffices — leave markets alone — is just petty.

                1. Cool. More diversions – to 1907 and 1920. Can I get a reference back to the 30 Years War too?

                  This is stunning. After more than a decade, you anti-gummint goobers still can’t comprehend the real issue in 2008. You can’t see what is actually important cuz you require that everything you see confirms your biases. Other than that silly ‘requirement’, you don’t have the knowledge of how markets actually function and of what stuff is actually important to the functioning of markets. Some of which is provided by govt.

                  The issue was framed back then as – We’ve got to bail out the banks cuz otherwise the US dollar as a currency (a medium of exchange) will fail. Which is, in the existing system, true. The US dollar is not really pure fiat. It is ‘backed’ by the cash flow of bank lending. A debt-based currency. No loans outstanding – no dollars exist. Banks disappear – dollars disappear.

                  Rather than separate the two concepts – ‘US dollar’ and ‘banking system’ – to reframe the problem, you all just choose to jerk your knee. Reframe that problem as – How do we preserve the US dollar as a currency (medium of exchange) WHEN the banks go down – and real options can pop up that do not require the govt to bail out banks.

                  I was on a different msg board then. We came up with a workable idea within roughly a week or two – before the TARP legislation passed tho obviously we weren’t privy to the non-public stuff that was happening. For the US govt to act to preserve ITS CURRENCY – but let the banking/Wall St system crash and burn. That is not govt ‘bailing out the market’. It is govt ensuring a market can function even when private actors fail. Providing the actual valuable service that is the core of a ‘currency’.

                  Some of us had been active with the RP campaign that year. We all saw the problem coming as did others on that board. Unlike RP though – we weren’t attached to the silly monopolistic unicorn of ‘the only money is gold’. RP and the Austrians demonstrated their uselessness that month. RP is still now basically just a moronic gold bug with nothing valuable to offer at those moments when people need to hear workable ideas/alternatives.

                  1. Are you asking for a detailed master plan for how the free market is supposed to bail out the government when it fucks everything up and is in the verge of fucking it up beyond all recognition?

                    1. Not at all. I’m asking for the specific alternative you would have uttered on 9/16/2008 when the crisis went into stampeding panic mode. The last moment when ‘alternatives’ could have been chosen with a semblance of rationality rather than mere panic. And yes – I’m ok with ‘do nothing’ as an alternative as long as you are able to help avert that panic as well. IOW – Let’s do nothing and if shit happens well FYTW is NOT an actual alternative.

                      Our alternative then was:
                      1. copy the Giro draft model (to avoid overdrafts) and debit cards to a PO Bank here with post offices as the distribution outlet.
                      2. all deposits are short-term T-Bills only and no interest paid on deposits. This was not a ‘bank’ – merely a ‘checking’ type transactions system.
                      3. no upper limit on account size cuz there is no FDIC liability risk when the only asset is T-bills.
                      4. we didn’t really get to how the settlements would work
                      5. immediately hire 10,000+ bankruptcy judges so that those courts don’t get clogged and cause collateral damage merely cuz clogged adjudicating dollar-denominated claims.

                      It solved the two immediate issues then and could have been barebones implemented in about a week. People were panicking into T-bills (overnight interest rate went below zero in a matter of minutes) and out of all commercial paper (overnight interest rate went from 2% to 8% in a matter of hours). Which meant every payroll account was at risk of being frozen and paychecks bouncing by the end of that week.

                      The only thing we were intending to ‘save’ was the ‘US dollar’ as a medium of exchange. That ‘US dollar’ is a government creation – and it therefore belongs to all of us as common property underlying ‘the market’. It is in fact a step away from letting private banks decide how the ‘US dollar’ is managed via the Federal Reserve.

                      But because RP and Austrians are so knee-jerk ‘anti-gummint’, the very notion of saving the only existing medium of exchange at the time is anathema. So they said nothing except the same sort of FYTW that they/you say now. That their notions – like yours – were really a sort of petulant überrationalist nihilism/fatalism was not what I had thought even a month before.

                    2. BTW- The reason I am obsessing about that date is because neoclassical economics (including Austrian) is built on the assumption that man is a rational animal. Not homo economicus but simply rational. Without that assumption, there is no reason to believe markets can function. Here’s Mises in Human Action – Human action is necessarily always rational.

                      That’s the closest date I can see in that entire crisis where that assumption came closest to falling apart. It didn’t – but not because of anything the market did but because of what govt did. So if you advocate market – the burden is on you – at that moment – to sell ‘faith’ in rationality. Otherwise – victory goes to govt by default. Govt knows how to deal with the irrational/panicky/instinctive – the animal side in us.

            2. The post-WWI 1920 depression started just as badly as the 1929 one, but luckily Woodrow Wilson was incapacitated by his stroke and all his lap dogs kept it quiet for fear of besmirching his image, or something stupid, and never got a chance to do much about the depression except fight the normal post-war inflation. Go to http://www.economics-charts.com/cpi/cpi-1800-2005.html or google for “inflation 1800-2000” and look at how that’s where things started going south. Every US war inflated prices, and prices went back to the pre-war normal afterwards, except after WW I.

              There’s even a book on the 1920 depression and why it didn’t spiral out of control.

              1. “There’s even a book on the 1920 depression and why it didn’t spiral out of control.”

                A very good one indeed:
                “The Forgotten Depression: 1921: The Crash That Cured Itself” James Grant

    2. >That assertion would be more convincing if ANYONE – and I mean A-NEE-ONE – in that discipline had come forward in say – 2008 to posit an alternative market-friendly course of action to a fucking bank bailout.

      Well, a whole bunch of economics did. Reason even reported on it.

      1. I wasn’t on this site then. I have looked thru the archives – noticed you were here then.

        The first story I see with the tag ‘Capital Markets’ (which seems to have become the go-to general tag for this) is The Great Bailout Brouhaha – 9/25/2008

        So it appears Reason’s coverage started only when Paulson/etc are getting ready to present the TARP bailout legislation to Congress. So the entire year-and-a-half of watching the crisis part of this slowly unfold – nothing. I have no idea what they may have written about the housing bubble before that. But the comments certainly seem to indicate that few here were paying much attention so have nothing of value to say. eg a common meme among the comments was ‘I’m still getting junk mail offering credit cards. Therefore, there’s no ‘credit freeze’ (apparently the media had latched onto that phrase by then).

        Of the ‘experts’ who are being asked – How Bad is the Current Market Situation – One mentioned the payments risk (which had already been ‘bailed out’ by 9/25 and that was the exact problem I’ve asked people to say how they would addressed it then); Yves Smith I know understood what was happening but she has now gone over to MMT on her blog; a third mentions short-term credit markets; – but basically this was a massive ‘I have no clue what’s happening but I’ll opine on something anyway’. There is no sense among any of them (except obviously later Yves Smith) that money itself does not have to be tied in with banking. So they’ve all already drunk the koolaid – that banks are the thing to focus on.

        I can see why people who did actually understand the problem then and hated every single opiner then went down the bitcoin rabbithole (the whitepaper for that came out a month later). But of course that’s not really a solution for anything since cuz it was never really intended to be a medium of exchange but a store of value. Fact it raises a question – who IS Satoshi Nakamoto?

  14. One of the reasons economists tend to be trapped in its earliest interpretations is that it’s maybe the only modern discipline in which the central premises of its founders remain more or less intact.

    Never mind Marx’s and Freud’s basic observations being largely discredited. Newton has been largely undone by quantum mechanics and relativity. Darwin didn’t know about genetic drift–because genes hadn’t been discovered yet, and yet genetic drift is probably as big or bigger force in evolution.

    Adam Smith is standing there going strong–and yet he’s still the academy’s unwanted step child.

    In order to graduate to variations on Smith’s themes, you need to understand and accept his basic observations first. In other words, one of the reasons economics discussions are so often limited to the Adam Smith level observations is because people still haven’t accepted them yet. When it comes to economics, people who are supposed to be better informed are still effectively at the level of those who were defending evolution in the Scopes trial.

    Until you understand and accept specialization and exchange, what else is there to talk about? It’s at the center of evolution, too. If you can’t get past the six-day creation, it’s no wonder if we’re stuck talking about some really basic stuff.

    1. “. . . still effectively at the level of those who were defending evolution [creationism] in the Scopes trial.”

      Fixed!

      I type too fast sometimes.

    2. Newton has been largely undone by quantum mechanics and relativity. Darwin didn’t know about genetic drift–because genes hadn’t been discovered yet, and yet genetic drift is probably as big or bigger force in evolution.

      Undone — discredited — my ass! For almost all ordinary uses, Newton is still correct. Genetic drift is a minor tweak to the theory of evolution.

      1. Yeah, he’s still used by engineers everywhere . . .

        But it’s a lie, and they know it’s a lie.

        Newton’s description of gravity is a noble lie that’s still in use because it works well enough for the purposes of engineering.

        Meanwhile, Einstein told us where to look if we wanted to see massless photons being impacted by the gravity of the sun–and when we looked where he told us to look, we saw that he was right. That was a hundred years ago!

        Whatever is happening that makes gravity work, it may be happening to the space between the objects rather, but we’ve still never even observed a graviton. I’d compare this to religion, except it would need to be compared to a religion where everyone in the field already knows that Newton’s laws are an optical illusion. Newton is like the Church of the Subgenius of sciences.

        No, gravity doesn’t work the way Newton says at the quantum level, no gravity doesn’t work the way Newton says at the cosmological level, but between those extremes, we really should use Newton when we’re designing the steel structures of our skyscrapers–even though we’ve never even seen a graviton, in a lab or anywhere else!

        If fundamentalist Christians knew about this, they’d have a field day.

        https://www.youtube.com/watch?v=Zgk8UdV7GQ0

        1. “If fundamentalist Christians knew about this, they’d have a field day.”

          If you’ve never seen a graviton, how do you know that gravity isn’t really just the will of God?

          “In the beginning God created the heavens and the earth.

          And the earth was without form and void, and the Spirit of God moved on the face of the darkness.

          And God said, “Let there be light”, and there was light.”

          —-Genesis 1:1

          You say your Spaghetti Monster of a graviton is really a cousin of your favorite boson when you rub her just right–but until you produce a Spaghetti Monster, isn’t the burden of proof on you?

          That’s what it looks like when a fundamentalist Christian has a field day.

          1. It’s scary how right you are. There was no possible way that Darwin could have known about heredity or anticipated concepts like genes, especially when he was being stifled and silenced by backward religious fundamentalists like Gregor Mendel on a daily basis.

            1. I suspect you misunderstood what I was saying.

              Darwin is famous for his observations about survival of the fittest. Survival of the Fittest is half the story of evolution–at most. Genetic drift is–at least–the other half of the story, and genetic drift probably contributes more to evolution than survival of the fittest. If there were no such thing as survival of the fittest, we would still evolve by way of genetic drift.

              https://en.wikipedia.org/wiki/Genetic_drift

              Darwin didn’t know anything about genetic drift or the way genetic drift works and neither did Mendel. The reason neither of them knew about genetic drift was because DNA and its structure wasn’t discovered until the 1950s. If Darwin or Mendel had known about allele frequency before anyone had discovered allele structure, that might have been evidence of the supernatural!

              1. Just as an interesting question… Jesus told us 2 K + years ago that we should trust in the powers of forgiveness… Now in recent years, mathematical and computers “game theory” games and human psychological games SHOW that at least SOME forgiveness is ESSENTIAL in breaking out of endless rounds of negativity in “tit for tat” simulation games! In the real world, accidentally stepping on another “player’s” toes (noise in the system, misunderstandings) will otherwise result in endless negatively iterated rounds of “tit for tat”, AKA “endless cycles of violence”! Forgiveness breaks out of it!

                https://plus.maths.org/content/mathematical-mysteries-survival-nicest
                Mathematical mysteries: Survival of the nicest?
                By
                Helen Joyce

                Jesus saw it WAAAY before we saw it, at least somewhat “scientifically”. Does that prove that Jesus was “supernatural”? Just food for thought…

                1. In Tolstoy’s later years, he became an ascetic, living as a hermit, praying, reading the bible, etc. He wrote a book during this period called, The Kingdom of God is within You. In it, he makes the case that although Jesus’ admonition to turn the other cheek has been interpreted in various ways so as not to be suicidal or stupid, what if Jesus meant exactly what he said when he told us to turn the other cheek? What would the world be like?

                  In the book, Tolstoy made a reference to the current state of affairs in India at the time, and an Indian newspaper editor in South Africa wrote a letter to him asking Tolstoy to explain more about what his ideas might mean for India. After printing Tolstoy’s letters, that newspaper editor went back to India and proceeded to chase the most powerful military force in the world at the time out of his country without an army or arms.

                  https://en.wikipedia.org/wiki/A_Letter_to_a_Hindu

                  Yeah, Jesus has some really good ideas that have proven to be great ideas cross culturally and throughout history. The best evidence for Christianity isn’t in Genesis. It’s in The Sermon on the Mount.

                  1. Agreed and Thanks! I will read your Wiki link carefully…

              2. ^ Ken good stuff.

              3. Actually, you don’t need to know about DNA to figure out survival of the fittest, OR genetic drift. You just have to have figured out that there’s SOMETHING in the organism that carries the design for it, and isn’t perfectly transmitted. You don’t need to know what it is, or how it works.

                Once you understand that, survival of the fittest falls right out. Genetic drift is a bit more complicated, needs some understanding of the way statistics work, too.

                Survival of the fittest is one of those ultra-general principles that isn’t dependent on the details, it’s hard to imagine a universe where it didn’t apply, once you understand the real basis of it.

                1. Yes, in order to know how about genetic drift, and how it impacts evolution, you need to understand structure.

                  “1968 marked a turning point in Kimura’s career. In that year he introduced the neutral theory of molecular evolution, the idea that, at the molecular level, the large majority of genetic change is neutral with respect to natural selection—making genetic drift a primary factor in evolution.[9]”

                  https://en.wikipedia.org/wiki/Motoo_Kimura

                  Notice, we’re talking about something that happens that is in important ways independent of Darwin’s natural selection or survival of the fittest. That’s the point. Survival of the fittest isn’t driving the bus.

                  If scientists were as famous with lay people as they are influential in their fields, Kimura might be more famous than Darwin.

                  Darwin’s observations were ingenious, but they were limited by the knowledge that was available to him at the time. Many of Darwin’s observations have survived subsequent discoveries, but the importance of those observations on our understanding of evolution has diminished with further discoveries.

    3. Not true. Quantum mechanics applies to the microverse, relativity applies tot he macroverse, and Newtonian physics still applies to everything in between. It’s why Newtonian physics still works from the microscopic to the orbital. It only breaks down when you get to the atomic level or stellar level. And relativity doesn’t replace Newtonian physics, it builds upon it.

      1. Gravity should work the same way in all three places. Our ability to understand why it seems to work differently within different frames is because we don’t understand it well enough yet. In fact, we can observe stars moving closer to the sun in the corona of an eclipse. We can experience the cosmological variant that defies Newtonian gravity within our own Newtonian space at sea level. The reason gravity works in three different ways, depending on how you look at it, is because we don’t really understand what unifies them. It’s not three different forces. It’s just three different perspectives all limited by our lack of understanding.

  15. Hazlitt was a nice guy (met him a couple times), but Economics in One Lesson was a total misnomer. He agreed and said it was the publisher’s choice. Even then it’s just overdone repetition of Bastiat’s broken windows fallacy in a zillion variant — as Hazlitt himself said in the intro.

  16. Perhaps the best reason to use markets rather than government planning isn’t that markets are prefect but rather because they’re less imperfect than government planning. Meanwhile, the real benefits of markets are often qualitative (but real). There is simply no way government planning can account for the qualitative tastes of 350 million people as well as each of those 350 million individuals can account for their own qualitative preferences for themselves when they participate in markets. This becomes especially true when we’re making tough choices.

    When I’m 75 years old, I don’t want government bureaucrats making qualitative choices for me about whether replacing my hip is worth the cost to Medicare, when I could get around in a wheel chair well enough with lower costs to the taxpayer. I might come to the same conclusion on cost/benefit analysis if I were paying for it out of pocket, but I want to make that choice myself. Other people might decide being able to walk is worth it–even if they only live for another five years. Why should 350 million people all be subject to the same qualitative preferences of the same government bureaucrats–when each and every one of them could make the tough choices for themselves with markets?

    Oh, and as a reminder, anyone who claims to have the intellectual authority necessary to make qualitative judgement for other people is a buffoon. Even the people with room temperature IQs have PhDs in their own qualitative preferences. My dog doesn’t like bleu cheese.

    Also, I keep bringing up the Perfect Solution fallacy, which is a real thing, and I think that lies at the heart of the argument here. Because there is no perfect solution to a problem and some of the problem would still exist even if the best market solution were implemented, that doesn’t mean the best solution shouldn’t be implemented to address as much of the problem as possible. Markets are the best solution vis a vis government planning, and the fact that there are still some problems despite the implementation of markets doesn’t change that fact one bit.

    1. “Even the people with room temperature IQs have PhDs in their own qualitative preferences. My dog doesn’t like bleu cheese.”

      Excellent lines!!! I am SOOOO going to have to steal that!

    2. The market is isn’t perfect because the market is comprised of flawed and imperfect human beings. The idea that a government comprised of these same flawed and imperfect human beings can solve the problems of an imperfect market is superstitious and cultist claptrap.

      As Mises and Hayek showed, not even the “perfect” computer can replace the imperfect market, because the “perfect” computer does not have local knowledge. The perfect set of data to perfectly calculate the exact prices for a given grocer at 9:56am does not apply to any other grocer, let alone that same grocer at 6:18pm.

      Then you have the problem with the economists in the government cult making outlandish claims. Such as the market “clearing”. Which when you think about is not an equilibrium but a horrible dystopia. Imagine a grocer where the shelves cleared instantly and so were eternally empty. Inventory is not a flaw, not an imperfection. That economists in the government cult view inventory as an evil is profoundly disturbing. Scientology levels of disturbing.

  17. The arguments (including the ‘two lessons’ bullshit) is not hard to understand from axiomatic principals:
    1) In any free exchange between to agents, the wealth of mankind increases by some amount. If, as a kid, you mowed lawns, you traded your time for the money you valued more and your customer traded the money for the time s/he valued more. You both ended up with more ‘wealth’, period.
    2) When the government imposes taxes, that is not true; there is no free exchange. The party taxed ended up minus wealth, and absent some proven showing of that mythical ‘multiplier’, there is nothing to show anyone ended up better off.

  18. I admit I went to one of those nudie places once.

    Sat down with a drink on the beach. White sand, blue water, no worries. Relaxed for the first time in years.

    Guy sits down. We talk basking in the sun. Our wives chatting on the shore.

    He is an economist. Talked a little about work. Asks me “have you read Marx?”

    Thought for a minute. Said “yes. I think it is these wicker chairs”

    Boom chi

  19. Free markets are not perfect, therefore… GOVERNMENT! Because as we all know government is perfect and can solve every problem!

    Any imperfection in the world caused by imperfect and flawed human beings can be SOLVED by the application of a government comprised of these same imperfect and flawed human beings.

    Because of top men. Top. Men.

  20. “Someone just told me that there are, like, laws of economics? Someone should warn us about them, like.”–Alexandria Ocasio-Cortez

  21. “A particularly critical issue, which Quiggin thinks the market is impotent to address, is climate change.”

    It’s absolutely flooring how the world has embraced alarm over the weather changing… I swear; there must be some underground brainwashing/human manipulation experiment going on or something. At least they started it with a point as “global warming” but since records shows that’s not true now it just “changing” as it has been doing for as long as history has been recorded.

    Next up — “A particularly critical issue, which Quiggin thinks the market is impotent to address, is how to stop the sun from rising in the morning.”

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