Archive for the ‘Austrian Economics’ Category

Candidate Romney = Rise of the Libertarians

January 31, 2012 2 comments

A lot of people have been talking about what will they do if Mitt Romney is nominated for the GOP Presidential Candidate. I’m not alone in thinking that the GOP establishment is desperately trying to prop up Mitt as their establishment candidate. The establishment GOP media is pushing Mitt and attacking Newt. They have their various reasons, mostly citing “electability,” for pushing Romney but that won’t help Mitt if he should become the nominee.

The level of negative attacks coming from Mitt Romney’s campaign is turning people off. How else can you explain almost a $10 million ad blitz from Team Mitt (with 80% being attack ads) and losing independents nationally (his Raison d’être)? Mitt seriously lacks any Tea Party support as well. The establishment has been openly hostile to the Tea Party, wanting the votes but not the criticism. Rubio is a perfect example, elected by the Tea Party only to shun the Tea Party (TP Caucus and SOPA?)  and put himself in Mitt’s camp. Mitt probably think that since Liberals think Tea Partiers are all racists, he better stay away so as to not be guilty by association.

So what does that mean for the Libertarian party?

I would argue that many of the Tea Partiers are libertarian minded voters. I’d challenge anyone to find huge level of disagrement with Tea Party fiscal policy (since there is no central figure for the TP, Wiki is the best source)  and CATO’s fiscal policy. Many Tea Partiers are endorsing Ron Paul, an Austrian economic style libertarian. There would be no room for a Paul in a Romney administration, every knows it. So where will all that support go? Dr. Paul has said he will not run as a third party candidate, I believe him.

I think a lot of people that cannot stomach the notion of voting for Romney will instead vote for the Libertarian party candidate, most likely Gov. Gary Johnson. I know a lot of Paulites like Johnson. I like Johnson and I know a lot of Tea Partiers do too. Looking at Gov. Johnson’s fiscal policy aims, they mesh with the Tea Party.

If the GOP primary keeps going like it’s going, with Mitt Romney poisoning the well in his Pyrrhic quest for the nomination, I see the Libertarian Party growing. As Soros said, “There’s not much difference between Obama and Romney.” Where will the people go if faces with two of the same?

Update: Like Mana from heaven comes this great link from Legal Insurrection: The Conversation With a Florida Tea Partier That Should Scare Every Republican

“I see a Romney nomination causing Tea Partiers like me to tune out. We are already disheartened by the congressional leadership. Romney will be the final nail in the coffin. He is completely uninspiring, and is everything we have been working so hard to defeat within the GOP,” Rebecca said. “Don’t even get me started on that Bain Capital picture. Ugh. There is no way he can win. And I don’t want to have to defend him while he tries.”

“I will be voting this Tuesday. I will make it fit into my schedule. I feel like my vote matters right now,” Rebecca said. “But can you see how I might not make it a priority if I feel like either my vote doesn’t matter, or if I don’t feel like the candidate I’m voting for will be much different then what we have? Can you see how life may take precedence over casting an uninspired vote? I can’t be alone in this thought process, and if enough people feel this way (and I think they will) it will be catastrophic for Romney and really very bad down-ticket as well.”

This is exactly the way a lot of people are feeling. It reinforces my point that a Romney nomination will cause a lot of people to just not vote Romney. They won’t vote Obama either, but Romney will be as much of a uniter for the GOP as Obama has been nationally.

Parallels to the 2008 Democratic primary? You betcha! Remember the PUMAs? Remember how they caved and enough HRC dems held their nose to vote for Obama? That turned out great didn’t it? There is little difference between the GOP establishment and Democratic establishment. Do we cave in this time as well, for another empty suit?


Romney is a Keynesian

January 27, 2012 Leave a comment

I posted this on a Legal Insurrection thread but thought I’d post it here as well.

Newt can’t say it but everyone else should be saying it. Romney is not a Reagan Republican, he is a Bush Republican. Romney is a progressive, he like all progressives believe that Govt (if run by the right people aka himself) will bring a better society. His tell is when he talks about Regulations. He talks about “smart regulations” like all progressives do. Romney says that the free market needs regulations, which show how good a Keynesian he really is just like Bush.

Govt doesn’t create jobs. It can only give the right environment so that markets can create jobs. I’ve heard Newt talk about that, I’ve never heard Romney say anything like that. Romneynomics = Bushonomics = Obamanomics = Keynesian clap trap that caused this whole mess…the idea that our betters are the ones that should make the decisions. Newt at least is taking the good parts of Paul (Fed, economics (Reagan was an Austrian)) and leaving the bad parts of Paul. Romney would never touch the Fed.

I’m posting this on my Xoom so Ill add some links and videos to add some evidence for me claims later.

Politicians will always try to have it both ways.

December 10, 2010 2 comments

“If we recklessly cut taxes for the wealthiest 2 percent, then Obamanomics will look an awful lot like Reaganomics,” Jackson said in a statement.

Jesse Jackson Jr. (D-Ill.) said this to appease his base. That should be obvious. So what happens when the tax extension starts to produce some growth, unsustainable but still some growth. Well he’ll just say it was because all that reckless spending of course, the good Keynesian answer.

This is the problem with economics in general. There is no controlled experiment. The Keynesian approach has been tried and failed to produce any significant results. The CBO’s most recent report says:

  • They raised real (inflation-adjusted) gross domestic product by between 1.4 percent and 4.1 percent,
  • Lowered the unemployment rate by between 0.8 percentage points and 2.0 percentage points,
  • Increased the number of people employed by between 1.4 million and 3.6 million, and
  • Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 5.2 million compared with what would have occurred otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers)

No doubt the Keynesians will say told ya so….of course they won’t read the rest of the post that tells the limitations.

Those reports, however, do not provide a comprehensive estimate of the law’s impact on U.S. employment, which could be higher or lower than the number of FTE jobs reported, for several reasons (in addition to any issues concerning the quality of the reports’ data):

  • Some of the jobs included in the reports might have existed even without the stimulus package, with employees working on the same activities or other activities.
  • The reports cover employers that received ARRA funding directly and those employers’ immediate subcontractors (the so-called primary and secondary recipients of ARRA funding) but not lower-level subcontractors.
  • The reports do not attempt to measure the number of jobs that were created or retained indirectly as a result of recipients’ increased income, and the increased income of their employees, which could boost demand for other products and services as they spent their paychecks.
  • The recipients’ reports cover only certain ARRA appropriations, which encompass about one-fifth of the total either spent by the government or conveyed through tax reductions in ARRA; the reports do not measure the effects of other provisions of the stimulus package, such as tax cuts and transfer payments (including unemployment insurance payments) to individual people.

Consequently, estimating the law’s overall effects on employment requires a more comprehensive analysis than the recipients’ reports provide.

Hmmm I wonder if they are using the same models that failed to keep unemployment under 9% with the Stimulus. You know the reason for the Stimulus in the first place?

So now, Obama is going to cave into a non-sustainable tax extension that will produce some growth. Companies will at least know what their tax rates for the next two years and they will plan accordingly. Showing that Higgs’ Regime Uncertainty has some merit. If the economy grows it will be because of investment not consumption.

All that won’t matter to politicians like Jackson Jr. They will pick and choose what ever explanation fits better to their a priori ideals. They want the stimulus to work, it gives them a reason to spend money on things that no sane person would spend money on like Trains to Nowhere. It gives them reason to give out pork to the people who fund their campaigns. Both parties do it, Jackson Jr.  and Bush both really want/wanted stimulus to work.

The reason politicians can get away with all these shenanigans is because economists will never be able to prove one theory over the other. The economy is far too complex for even the most sophisticated mathematical model. With modern economist obsession with math, which I don’t see changing anytime soon. The state of modern economics is much the same as the state of politics, they’ll all just pick and choose which explanation fits their priors better. A Liberal economist will choose the Keynesian answer, because it fits their ideology better. A Conservative will pick a supply-side or monetarist answer and hopefully Independents will pick more of an Austrian answer.

It will be interesting to see that when grow and unemployment start to pick up, as companies start to invest again, what stories differing ideological camps choose to tell.

Obama’s Tax Deal

December 9, 2010 3 comments

Democrats are in revolt over Obama cutting a deal on the Bush Tax Cuts.

First let’s head off the notion of that Bush’s Tax Cuts were stimulative. They weren’t. In order for tax cuts to be stimulative, they have to be permanent, which Bush never intended. The Tax cuts were designed to make it look like Bush and Congress were doing something, while in reality, they were just kicking the can to the next poor bastard in office, Obama in this case. The can in this case being the Deficit and long-term tax policy.

There are really two kinds of people, when it comes to taxes. Type I: Those that pay attention to their income and tax rates and try to maximize income and minimize taxes. These people care about deductions, employ accountants and financial advisers, etc. These people typically employ the use of trusts to by-pass the death tax. These people watch the Market and regularly change their asset allocations on their 401k or personal IRAs. From my experience these are mainly independents and Republicans, with some of the Ultra Wealthy Democrats thrown in (Kennedys, Kerry, etc)

Then there are those that don’t think about taxes until April, Type II. They only think about getting that refund check, and care little about taxes in general. They typically don’t save. If they do have a 401k, I doubt that they thought much about it since they initially started it. Since they don’t save, they rarely have much to leave their kids. These are by large Democrats or good little Keynesians that continuously consume and rarely save.

Bush’s tax cuts were mainly stimulative for the latter category. Since they don’t pay much attention to taxes or government spending in general, they see a short-term lowering of taxes as an excuse to spend that extra money on frivolous stuff. That leads to a greater GDP via consumption but it’s not a sustainable growth. Much like the Housing Bubble, it must come to an end, hence the sunset provision in the Bush Tax deal.

When taxes do go back to their previous rates, Type IIs, don’t have that extra cash to spend, but no doubt they still have some extra debt that they might not have had if the tax “cuts” hadn’t been implemented. Why? Because for the last 8 years they have been thinking the tax cuts were, for their purposes, permanent. They didn’t account for the long-term, because they never do. So TVs, cars, other durable goods, going out to eat, movie theaters, etc will all suffer from the lack of type II consumer spending. That is what the real danger of not extending the tax cuts. It will cause a double dip, but the negative growth will be relatively small, I think.

Type I’s knew about all this. They knew that the tax rates were going to go back up. They pulled back investment and spending 2 years ago, after the financial shock of 2008. It makes perfect sense if you think about it. The banks over extend themselves. You as a big company, see this and then see the massive amount of government intervention that goes along with it. You see the new regulations coming down the pipeline and start to wonder what’s going to happen. In short you pull back on investment, the real cause of this recession and do a wait and see approach. As Bush’s tax “cuts” sunset date comes closer, you might do a little early bird spending, to take advantage of the cheaper tax rates, giving the illusion of growth, ala Cash for Clunkers. Overall your hesitant. You don’t know what the Government is going to do, especially with Obama waffling on everything the last year.

This lays out a second case for extending the tax cuts. To give some certainty to companies again. It’s not just big multinationals that are hesitant, but also smaller companies as well.

This post is already too long for my liking but to end I just want to point out that, only through investment can we get sustained economic growth. Long term performance is based on saving not spending. We see the devastation in our economy based on the insane notion that spending is what makes an economy grow. It’s a myth that all Keynesian, including Bush (Yes, we was a Keynesian) employ.

The only way for tax cuts to cause a sustainable growth is if they are permanent, making Type II’s assumptions correct. It also makes Type Is continue their investment, instead of opting for a wait and see approach as sunset provisions start to come into effect. In short Keynesian’s get it all wrong, and Austrians don’t get enough credit.

What’s the world comming to, Sweden no longer the liberal paradice?

September 21, 2010 4 comments

Sweden has long been the example many Leftists have used to “prove” that their policy proposals will work. Never mind a large Government sector that feeds itself off of “Evil” Oil. Or a population make up that is one of the most uniform in any nation in the world. Those can’t possible have any effect, or at least that’s how the Leftists used to say.

I say used to because that’s all changing now. The global economic crisis messed up those Swedes more than it did anyone in the US. They did something that most Keynesian economists would call irrational. They elected a Center-Right coalition government. For not one, but now two terms.

Sweden’s ruling center-right coalition won re-election Sunday, marking a historic moment as a non-socialist government was elected to a second term for the first time in the country’s political history.

The ruling conservative coalition, which came into power in 2006, imposed a string of austerity measures and managed to turn Sweden’s economy into one of the strongest in Europe, with an expected growth of 4.5 percent this year. The crisis management appears to have impacted many voters.

“I think the economy is the key issue,” said one man at a Stockholm polling station. “I think Sweden has done very well for the last few years during the global financial crisis, and I hope the government will stay on.”

Growth in the absence of Government spending? This kind of news makes Liberals and Keynesians heads spin. They can’t handle it. No doubt you won’t be hearing about Sweden anytime soon.

This is why I love Google!

July 19, 2010 2 comments

Have I said how much I love Google lately? This picture shows why.

Krugman meet Hazlitt

Economics in One Lesson is a book by Henry Hazlitt, a self-educated libertarian economist.

Hazlitt wrote for a who’s who of American journals and newspapers; The Wall Street Journal, Newsweek (back before they turned into a Democratic Party propaganda machine), and Krugman’s own The New York Times. Ah if only Hazlitt were writing for the Gray Lady now, instead of Krugman!

The best part about an ad for Hazlitt’s Economics in One Lesson (EiOL) on Krugman’s NYT article is that EiOL is a hallmark of Austrian Economics. It’s pretty much required reading for anyone interested in Austrian economics. By the way you can get EiOL for free as pdf here.

Another irony is that Hazlitt wrote a line by line refutation of Keynes’ General Theory, titled The Failure of the New Economics. (Link is to a free pdf version.) As we know Keynes is the Krugman as Bacon is to the perfect cheeseburger, inseparable! John Chamberlain, editor of the Freeman, notes:

Mr. Hazlitt takes up the General Theory line by line and paragraph by paragraph, discovering scores of errors on almost every page. Not only does he kill Keynes; he cuts the corpse up into little pieces and stamps each little piece into the earth. The performance is awe-inspiring, masterly, irrefutable — and a little grisly. At times one almost feels sorry for the victim. But, since Keynesian doctrines have created so much misery in the world, any sympathy is misplaced. Hazlitt’s job had to be done.

Who at Google did this? Maybe the Machines are conscious and have a sense of humor. I don’t know.

At least this goes to show everyone that I do read Krugman. I feel dirty afterward but I still keep an open mind and I’m willing to read from those, whose views I fundamentally disagree. How often do you think Liberals do the same?

Wednesday is Hayek Day

June 30, 2010 2 comments

Hayek is one of my favorite dead people. If given the wish to talk to a dead person, Hayek would be right on the top.

Road to Serfdom is still in the Amazon top 10 (#8 down from 7 yesterday).

Russ Roberts, the host of Econtalk, recently had Bryan Caplan on the podcast talking about Hayek and the Road to Serfdom.

Also Dr. Roberts has an op-ed in the Wall Street Journal; Why Friedrich Hayek is Making a Comeback. (That should take you to the un-gated version.)

Dr. Roberts gives four ideas by Hayek that matter as much today as in the past.

First, he and fellow Austrian School economists such as Ludwig Von Mises argued that the economy is more complicated than the simple Keynesian story. Boosting aggregate demand by keeping school teachers employed will do little to help the construction workers and manufacturing workers who have borne the brunt of the current downturn. If those school teachers aren’t buying more houses, construction workers are still going to take a while to find work.

Most Keynesians think aggregate demand as some lump of amorphous blob, D. It’s inherent in the equation they use to model the economy. Dr. Roberts notes that the Austrian school, which is also making a big comeback, says that is the wrong way to think about the economy.

Second, Hayek highlighted the Fed’s role in the business cycle. Former Fed Chairman Alan Greenspan’s artificially low rates of 2002-2004 played a crucial role in inflating the housing bubble and distorting other investment decisions. Current monetary policy postpones the adjustments needed to heal the housing market.

This alludes to the structure of production that is fundamentally different from both Keynesians and Monetarists. This is probably the most popular notion of Austrian economics, End the Fed. Austrians think of the Fed as a central planner. They try to centrally plan the money supply, which is very very complicated. Since men are men and imperfect they make mistakes. When the people making the mistakes are the central planners, their mistakes affect everyone! Where in a pure market economy, they will only screw themselves. Also inherent in the end the Fed debates is the economic calculation problem, which Mises and Hayek showed that central planning is doomed to fail. No one has been able to successfully challenge Hayek and Mises on the economic calculation problem yet, and I doubt anyone ever will.

Third, as Hayek contended in “The Road to Serfdom,” political freedom and economic freedom are inextricably intertwined. In a centrally planned economy, the state inevitably infringes on what we do, what we enjoy, and where we live. When the state has the final say on the economy, the political opposition needs the permission of the state to act, speak and write. Economic control becomes political control.

Even when the state tries to steer only part of the economy in the name of the “public good,” the power of the state corrupts those who wield that power. Hayek pointed out that powerful bureaucracies don’t attract angels—they attract people who enjoy running the lives of others. They tend to take care of their friends before taking care of others. And they find increasing that power attractive. Crony capitalism shouldn’t be confused with the real thing.

Here Dr. Roberts brings up that Hayek was the original Public Choice economist (Okay not the original but one of the first to really write about it.) It’s something that Keynesians don’t ever want to talk about, that Government can mess things up even worse than it already does. Since Government spending is dictated from the Top-down, someone has to make a choice as to who or what gets the money. Since Keynes says that any spending is good, government officials can just as well choose their friends or donors rather than someone more competent, this is what crony capitalism is all about.

The fourth timely idea of Hayek’s is that order can emerge not just from the top down but from the bottom up.

Hayek isn’t the first to talk about emergence, but he did a lot of work on it. Emergence is about letting a thousand flowers bloom, then picking the ones that are the best. The market is inherently an emergent phenomenon. No one is in charge of the market, it’s full of thousand upon thousands of people doing for their own self-interest, rational or not. Some are going to fail, actually most are. Some are going to do bad things, but not all. The ones that succeed do so by either providing for what others demand (voluntary service) or do things better than the other guy (Apples dominance in the phone market, but Androids is trying to challenge that.) Markets depend on competition. When Government stifles competition through asinine rules, regulations or outright favoritism. everyone suffers from what could have been.

Hayek understood that the opposite of top-down collectivism was not selfishness and egotism. A free modern society is all about cooperation. We join with others to produce the goods and services we enjoy, all without top-down direction. The same is true in every sphere of activity that makes life meaningful—when we sing and when we dance, when we play and when we pray. Leaving us free to join with others as we see fit—in our work and in our play—is the road to true and lasting prosperity. Hayek gave us that map.

Despite the caricatures of his critics, Hayek never said that totalitarianism was the inevitable result of expanding government’s role in the economy. He simply warned us of the possibility and the costs of heading in that direction. We should heed his warning. I don’t know if we’re on the road to serfdom, but wherever we’re headed, Hayek would certainly counsel us to turn around.

We have heeded the warning before, back when the economic planning inherent in Keynesian economics brought us the Stagflation of the 70’s. Markets were liberalized, regulations were liberalized and the economy boomed. That can only happen when people are free to make their own choice, rather than some bureaucrat deciding for them. As noted above, more personal freedom means more economic freedom.

I hope Hayek doesn’t just make a comeback. I hope the entire Austrian School; Schumpeter, Mises and Hayek are here to stay!