Archive for the ‘Hayek’ Category

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.

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.

Krugman out smarted by his commenters.

August 3, 2010 9 comments

This article at American Thinker is wonderful. It’s like Christmas came early!

For six months, they made Krugman’s blog one of the more informative and interesting places to hear economics debated. In part, this was because they gave Krugman a serious run. Their posts were long, near the 5,000-character limit set by the New York Times. They were reasoned. They were knowledgeable. They carried citations to economic science literature that one might expect in a Ph.D. dissertation.
And so their rebuttals were often decisive.
For example, when Krugman a month ago drew one of his famous “trend lines” based on a single point, a blogger named rjh immediately responded, “These trend lines you are drawing all over the place. Pardon my French, they are complete garbage.” And nearly half of Krugman’s commenters joined to point out that Krugman was arguing junk. Krugman was forced to make two defensive replies; both were immediately refuted.
Responding to Krugman’s praise for the high taxes in Europe and his repeated denial that tax cuts might stimulate an economy enough to make up for revenues lost, a European posting under his initials jg pointed out that the low Reagan-Clinton tax rates made “being an entrepreneur interesting again. All those internet startups like eBay, Amazon or Netscape would probably never have been created if it weren’t possible for the inventors to get rich.” This anti-progressive notion that the “evil rich” might actually create growth if they were not taxed — on his “personal” blog, no less — must have made Paul spit up his morning coffee.
I don’t comment on Krugman on his blog because my comment have barely made it past the censors. I’m quite happy to see this level of criticism get past the censors, so much so that Krugman has to specifically address his commentor’s criticisms.
Things then got still worse. When Krugman repeated his claim that Bush’s tax cuts had “caused” the deficit and damaged the economy, commenters first taught Krugman how to count. They then cited two papers by the Romers showing that tax cuts help economies. Christina Romer is, of course, the chief economic advisor to President Obama.
When Krugman repeated one of his “debt is good” posts, posters linked to the economic science from Reinhardt and Rogoff showing that high debt is inimical to economic recovery.
Occasionally, Krugman attempted a reply. For example, he dissembled that Reinhardt and Rogoff had “highlighted” a single postwar American experience, which he dismissed as “spurious.” The commenters did not let him get away with it. Within 24 hours, Sean had pointed out that Reinhardt and Rogoff had found similar effects of debt in six countries on three continents over four decades, including Canada, Japan, Greece, and Belgium. Krugman then struggled to find something “spurious” about each of these. Sean‘s rebuttal showed that Krugman was refusing to meet any burden of proof. Still worse, Samuel showed that Krugman’s reasoning, if applied generally, would forever insulate Krugman’s ideology from any refutation of any kind.
…Which is perhaps what Paul Krugman wants, but it is not economic science.
Anyone that doesn’t drink from the Krugman Kool Aid Keg, knows that what Krugman produces isn’t science. It’s political propaganda. It’s propaganda of the worst kind, the kind wrapped in the rhetoric of science, but holds itself unaccountable from any form of refutation. Hayek had a word for it, Scientism.
I also found it interesting that Krugman has never even bothered to read any literature on Public Choice. It isn’t surprising. He’d have to admit that his Big Government policy proscriptions would cause more harm than good.
Krugman’s blog commenters were especially relentless in pointing out his inconsistencies. In one post, Krugman admitted that “politicians will always find ways to shield the powerful.” Posters piled on, pointing out that Krugman’s universal policy prescription gave politicians more power under the assumption that they would defend “the proletariat.” Krugman replied that he was “sure that there’s a large literature” on government cronyism and corruption. Secure in his big-government ideology, he admitted that he had never read that literature. But like the ideologue that he is, Krugman then expressed his faith (the only word appropriate) that “bureaucracy will do a heckuva job” if it is not “downgraded and devalued.” Bloggers responded by citing the latest economic science showing the impossibility of Krugman’s “utopian dictatorship-by-bureaucracy.”
So what is Krugman or his liberal Kool Aid drinkers to do, when they get rebutted with facts? They censor them of course.
By July, Krugman had lost his “Battle of the Blog.” On July 23, Latrina commented, “Who is this Sean from Florida? He takes everything that [the] Professor [says] and shreds it, piece by piece. He shouldn’t be allowed to post his comments on this blog since he seems to be winning all the debates. We progressives need to stick together and embellish our talking points without someone from the outside pointing out fallacies in our ideology.”
Krugman had also had enough. On July 23, Krugman showed that he was clearly no longer “in love” with his commenters. Now he called them “ranters” and “trolls.” On July 28, Krugman changed his comment moderation policy. Claiming that “ranters … say the same thing every time,” Krugman announced that he was going to throw away posts longer than “three inches.” His thinking must have been thus: Three inches are sufficient to write “Krugman is brilliant,” but not sufficient to present a documented and persuasive rebuttal to whichever of Krugman’s standard arguments he was peddling that day.

Do you really need anymore proof that Liberals don’t do economics? Facts hurt their worldview to much.

Wednesday is Hayek Day II: Julian Simon edition

So I was browsing the interwebs looking at Ehrlich-Simon sites because of the last post. I came across this page, Lo and behold I do find a mighty gem!

March 22, 1981

Dear Professor Simon,

I have never before written a fan letter to a professional colleague, but to discover that you have in your Economics of Population Growth provided the empirical evidence for what with me is the result of a life-time of theoretical speculation, is too exciting an experience not to share it with you. The upshot of my theoretical work has been the conclusion that those traditional rules of conduct (esp. of several property) which led to the greatest increases of the numbers of the groups practicing them leads to their displacing the others — not on “Darwinian” principles but because based on the transmission of learned rules — a concept of evolution which is much older than Darwin. I doubt whether welfare economics has really much helped you to the right conclusions. I claim as little as you do that population growth as such is good — only that it is the cause of the selection of the morals which guide our individual action. It follows, of course, that our fear of a population explosion is unjustified so long as the local increases are the result of groups being able to feed larger numbers, but may become a severe embarrassment if we start subsidizing the growth of groups unable to feed themselves.



Oh wait, there is one more!

Shimoda, Nov. 6, 1981
Dear Professor Simon,

… I have now at last had time to read [The Ultimate Resource] with enthusiastic agreement. So far as practical effect is concerned it ought to be even more important than your theoretical work which I found so exciting because it so strongly supports all the conclusions of the work I have been doing for the last few years. I do not remember whether I explained in my earlier letter that one, perhaps the chief thesis of the book on The Fatal Conceit, the first draft of which I got on paper during the past summer, is that the basic morals of property and honesty, which created our civilization and the modern numbers of mankind, was the outcome of a process of selective evolution, in the course of which always those practices prevailed, which allowed the groups which adopted them to multiply more rapidly (mostly at their periphery among people who already profited from them without yet having fully adopted them.) That was the reason for my enthusiasm for your theoretical work.

Your new book I welcome chiefly for the practical effects I am hoping from it. Though you will be at first much abused, I believe the more intelligent will soon recognize the soundness of your case. And the malicious pleasure of being able to tell most of their fellows what fools they are, should get you the support of the more lively minds about the media. If your publishers want to quote me they are welcome to say that I described it as a first class book of great importance which ought to have great influence on policy….

With best wishes,


F. A. Hayek

I have to admit, I haven’t read Ultimate Resource II. It’s free here. With that kind of endorsement, I’m going to be putting it on my Nook here shortly!

Categories: Books, Hayek

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!

Road to Serfdom number 1 on Amazon

I meant to publish this last week. =\

Hayek’s Road to Serfdom is number 1 on Amazon right now.

I’m a big Hayek fan, so I think this is a very ery good thing.

I didn’t realize Glenn Beck was pimping the book on one of his recent shows. But thank you Beck. The more people reading Hayek, the better.

With Beck giving the book it’s due, it’s going to be interesting to see how many bogus 1 star reviews are going to get posted by Leftists. Right now there are 8.

This is the newest one, dated…Today, June 9th.

All I know is what I’ve sampled on

However, The book in question, The Road to Serfdom, apparently is an anachronism. Book’s original title: Socialism, the Road to Serfdom. In the 1930’s, totalitarian and despotic GOVERNMENTS were the chief threat to personal liberty, and they still are in some places of the world, possibly Africa. The fall of the Soviet Empire signalled to me the end of the nation-state era.

Over the last quarter century or so it’s become evident that in the economically developed world, the threat to liberty is corporate interests. CORPORATIONS HAVE FOUND THE EASIEST ROUTE TO POWER: BUY IT. Not a new idea, certainly, but now practiced on a world dominating scale. Look at the standard of livng of the american worker which has steadily fallen since the Reagan Era.

America and the world may be waking up to the corporate threat after our wall street induced depression or the recent oil spill, but….????

Hayek’s thinking hadn’t changed much by his 1976 preface, and Glenn Beck (where I saw this tome waved about yesterday) and his kind are provide a major distraction. Anti-Socialism, Anti-Fascism, Anti-big government, etc. are all red herrings, but profitable grist for talk shows.

Notice how this reviewer hasn’t read the book? Typical leftists, as with the AZ law, they don’t read the underlying document before making their ideological rants.

Market Failure vs Government Failure

June 9, 2010 4 comments

I’ve been going back and forth with Prof. Hutchinson at Dissenting Justice on the Progressive blogging thread I wrote about earlier. It’s nice to have a civil discussion on a liberal blog again.

It got on the subject of market failures and Prof. Hutchinson makes some good points. I think that he, being a liberal, plays down the anti-capitalistic views on the Left. Then talks about how Government intervention rests on “market principles.”

As far as the rest of your post, I am somehwere in the middle on these things like regulation. Many liberal economists are as well. I would not say that everyone on the Left (or even most persons on the Left) favor government over markets. That just is simply untrue — at least when you think of liberal economists (i.e., people who know something about economics).

I strongly believe in the concept of a market failure. Sometimes, correcting a market failure requires government intervention, but usually, this intervention rests on market principles. So, for example, the polluter does not internalize the costs to society of pollution. The market intervention should force the company to take these costs into consideration. This is a simplistic example, but it shows collaboration between market and private among the Left.

I think his view is indicitive of the Left. Yet, he makes no mention of Government failure, which is also indicitive of the Left. Why do liberals only talk about Government failure when the other team is in charge? (Bush and Katrina, Iraq, Global Warming, etc ad nauseum)

Here’s my response.

I see your point. I just think it’s indicative of more than just his double standard.

I agree markets do fail. But how they fail and to what extent is largely subjective. We probably will agree on the margin but not on average, on what constitutes a market failure. For example, you may or may not think the financial crisis was a market failure, while I see it as a government/regulation failure. I think a lot of the cause of it was due to past government actions, institutional moral hazard (ie Too Big to Fail, Russ Roberts has a good essay on it)

I think the big place we might differ is on solutions to market failures. I think the predominant though among the Left is that Government needs to step in. I disagree, due to Public Choice concerns. I see government action as being the worse of any possible solutions in a lot, but not all cases.

I think another place we differ is on your assertion that “intervention rests on market principles.” I take the Hayekian view that markets are a very dynamic and random phenomena. We can’t predict what 1000 people are going to do tomorrow, yet the market is explicitly dependent on what those 1000 people do. The incentives for each actor might be exactly the same, but each of those 1000 might do totally different things, that might be perceived by an outside observer to be totally random or worse, go against “market principles.” (I’m assuming that when you say market principles your talking about rational choice theory)
When your say that Government intervention rests on market principles, I see that as an oxymoron. The Market is decentralized, and by imposing top down centralized rules, your not going to get the results you want. I liken it to a mad scientists working in a lab, saying that evolution isn’t working fast enough, so he is going to help it along. How does he know which path evolution was going to take? Same with intervention resting on market principles. How does the central planner know what the market was going to do?

While you say the government will force the company to internalize externalizes, I say buy doing that your distorting what the market was going to do. How do we know the market wasn’t going to bankrupt that company from the get go?

Think about the BP spill. If it wasn’t for Government rules and regs that restrict entry into the drilling business, who’s to say Transocean, Halliburton, or BP wouldn’t go bankrupt over their actions? Or what about Goldman Sachs. Government intervention, bailouts, kept Goldman in business. The market would have bankrupted all those Wall Street firms that had a part in crisis, but it was government interaction that keeps them in business now, against market principles.

I could go on, but I’ll stop. I think it’s enough to say we will probably never agree, but I don’t see that as a bad thing.

Oh one last thing. Re: “I would not say that everyone on the Left (or even most persons on the Left) favor government over markets.”

That’s your opinion and I respect that, but we don’t have any hard data on that. At least I couldn’t find a poll that explicitly asks “Do you favor Government over Markets?” The best we can do for data is use a proxy. The Public option is a good proxy, I think. We can probably bicker on the percentages of Liberals that want a public option, depending on the pollster, but I think we can both agree that it the majority. Right?
Also there is this old Rasmussen poll (Which liberals usually don’t like, I don’t know your take on Rasmussen) that says 30% of Democrats prefer socialism to capitalism (39%). Either way Capitalism aka markets are in the minority.

We’ll see what the response will be. It’s nice to be able to have a good conversation and not be called any ad hominems. Kudos to Prof. Hutchinson, I wish liberals were more like him.