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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Is it really any more ridiculous than…

A large number of people, certainly the majority of the political looter class, think the best way to deal with the rapidly deepening economic crisis is via ‘stimulus packages’ with money plucked off the magic money tree… which is to say, by trying to re-inflate the credit bubble that actually caused the crisis. This is a bit like treating alcoholics by urging them to buy more whiskey.

So is this actually any more daft? Frankly I do not think so and it is at least a whole hell of a lot more funny.

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23 comments to Is it really any more ridiculous than…

  • Yes, it is. Sorry.

    That a man turned himself into a goat to evade police is a ridiculous thing to believe in the age of the jet engine, electricity and the internet.

    However when it comes to economics, its not really a ‘hard’ science is it? Fair enough it deals with numbers and mathematics, but these do not take into account human behaviour. Any claim that economics is anything more than a ‘social’ science is on shaky ground in my opinion. Economics is a feild of study which is rendered amost useless if you throw out the variety of assumptions it makes about how large groups of people behave. For instance: show me a rationally acting human being with perfect knowledge. No such person exists and yet alot of economic theory (as I understand it) depends on the behaviour of these fantastic beings. As such the people who make policy don’t really know what they’re doing, they just want to be seen to be doing something. Having ‘A Plan’ to present to a nation crying out for something to be done is much more politically acceptable than sitting back and letting the thing run its course (which is probably the best course of action). And so they close the stable door after one horse has bolted, and leave the stable to burn whilst there are still more horses in their stalls.

    Its not funny either. That there can exist people who believe in nonsense such as witchcraft in this day and age and that police time and energy can be wasted placating the poor fools is tragic.

  • tdh

    While witchcraft as a belief system is just as irrational as Keynesianism, witchcraft as a practice would be, albeit not optimal, ironically rational. Now, that’s amusing!

  • The Nigerians send emails to Americans, who send back hundreds or thousands of dollars. That is a fact.

    So, why not believe in witchcraft?

  • Paul Marks

    Mandrill – sadly it is in the very effort to ape “hard” science such as physics that economics goes wrong.

    Collecting statistics and so on is vital task for economic history – but it has nothing to do with real economics. Which is a “science” in the old sence of a body of knowledge (not in the new sense of “the scientfic method”).

    It is economists who try to imitate the methods of physics who forget that such things as issuing more money to try and keep a credit bubble economy going, or government spending more money itself in the face of economic decline, are insane.

    This is because they do not see any vital role for the laws of human reasoning and action (as you say human beings and their doings) in what they are doing – and economics is based on human action (see Ludwig Von Mises’ “Human Action” or his “Theory and History” or his “The Ultimate Foundation of Economic Science”).

    Instead almost every school and university from here to China teaches that an “expansionary monetary policy” (issue more money) and an “expansionary fiscal policy” (more government spending) are the correct response to a recession.

    And, contrary to those who think education does not matter, these ideas get into the media (even the entertainment media) and thus into the population – as well as to the educated political, administrative and academic elite.

    I can think of only one university in the whole of Latin America where such ideas might be attacked. And (before people say “that is only Latin America” – i.e. only a continent and a half) I can think of only one university in Britain (Buckingham) where they might be attacked – and I am not sure they are attacked even there. In the United States it is a handful of universities – out of hundreds.

    The left have something close to cultural hegemony – so is it any wonder that they have so much political power?

    It is not just corrupt special interests (although, yes, these play a role).

    For example, I despise former President Bush (or Bush brain, as I have long called him) – but I believe that corrupt motives had ZERO influence on his economic policy judgements. He honestly did what he believed to be right – with advise from the leading academics and so on.

    And the results are terrible.

    I happen to believe that Barack Obama is a bad man (not just someone who had a different view of politics) – but it would not matter if he was a good man. Noble motives are of no use if education teaches doctrines that are wildly wrong.

  • Paul Marks

    Actually there is a positive side to what I have just written.

    If politics really were determined simply by “Public Choice” style special interests then there would be no hope at all – as the concentrated benefits of government spending are always going to be more important (from a political point of view) than the spread out costs of the government spending. Even though it is not a zero sum game (which is presented as the most negative interpretation) – actually it is a minus sum game as the spread out costs are greater (much greater) than the concentrated benefits.

    However, as education and culture matter (i.e. the ideas in people’s heads) if there was ever a country where the most widespread view was that (for example) cutting government spending was the correct thing to do in a recession (which it is).

    Then THIS IS WHAT WOULD BE DONE IN THAT COUNTRY.

    In short there is hope.

  • AWC

    I love the term “political looter class”. Keep using it! Looting is the *only* thing going on in Washington, DC right now.

  • austrianschooliswrong

    Paul Marks – If you don’t like statistics then how about empiricism? We cut taxes, cut spending, balanced the budget, and reduced the money supply by 1/3 during the 3 years after the 1929 crash. The result? 33% unemployment.

    FDR, on the other hand, did full keynesianism and monetarism. He increased government spending, increased borrowing and spending, increased the money supply, and got unemployment down to 15%. Still nothing to be proud of, b/c he did some stupid stuff like price controls. It wasn’t until the period of the largest borrowing and spending and inflation in our country’s history (world war 2) that we truly got out of the Great Depression.

    In regular times I agree with you, low spending and low taxes are good. But depressions turn this on its head, because everyone is hoarding cash. Cutting taxes merely causes people to hoard cash even more. You need the biggest spender of all – those “political looters” in washington – to start spending to get economic velocity back up.

  • TAF

    Regarding the goat…I imagine that this particular ‘car thief’ will be found to be guilty of being delicious.

    When the police can cook and eat the suspect, is anyone safe?

  • Jason

    “If you don’t like statistics then how about empiricism? We cut taxes, cut spending, balanced the budget, and reduced the money supply by 1/3 during the 3 years after the 1929 crash. The result? 33% unemployment.”

    That you actually believe this is a sad testament to the state of our education system. Hoover’s policies were anything but laissez-faire; most of the policies of the New Deal were continuations of programs that Hoover himself instigated.

    Further, the most egregious mistake Hoover made was actually a tax increase – the imposition of the Smoot-Hawley Tariff.

  • Ming the Merciless Siamese Cat

    Mandrill wrote

    That a man turned himself into a goat to evade police is a ridiculous thing to believe in the age of the jet engine, electricity and the internet.

    Its not funny either.”

    Yes, I’m pretty sure it is.

  • Stephan

    Paul Makrs, Im honestly curious about your reasons: Why do you think Obama is actually a bad man? What differentiates him from Bush and most other heads of state in the west? They all seem bad by libertarian or even liberty lovers standards, So why him genuinly bad in particular?

  • Janine McA

    We cut taxes, cut spending, balanced the budget, and reduced the money supply by 1/3 during the 3 years after the 1929 crash. The result? 33% unemployment.

    Well duh, the economy has already crashed so what would you expect? Instant magic?

  • Actually Janine the thing that really screwed the pooch was inflationary protectionism at the worst possible moment. The tariff barriers to “protect American jobs” were catastrophic and far far outweighed any other measures in their effects.

  • hitnrun

    “What differentiates him from Bush and most other heads of state in the west? They all seem bad by libertarian or even liberty lovers standards”

    There’s a vast difference between someone who is repulsive in theory or philosophy, and someone who is repulsive in fact, offensive in a way that palpably effects your wallet and liberty.

    Bush, for all the preening by certain diehard libertarians about Iraq and Gitmo and social issues, did not actually effect the real lives of people in the West (except by his continuation of the ghastly fiscal policy of the last 40 years that is only now coming home to roost). Obama, by contrast, will.

  • CFM

    austrianschooliswrong: (revealing choice of moniker) Attempting to drain the deep end of the pool by pumping the water into the shallow end does not constitute “empiricism”.

    Hoover & Roosevelt’s tariffs, taxes, and social meddling turned a recession into a depression by starving the productive, read: PRIVATE sector of the resources required for recovery. WWII may have been necessary and ultimately successful, but it starved the industries and sectors responsible for real economic growth of further resources. The stock market – and the economy – did not regain their pre-1929 levels until 1954 – 9 years with comaratively little Government meddling after WWII ended. Account for the inflationary effect produced by Hoover and FDR’s meddling, and we’re living with the consequences to this day.

    Here’s a secret: Government does not create wealth. All Government does is pump water from the deep end to the shallow end. Changing Government policy can only adjust the level of interference in the economy and process of wealth creation. More interference, less wealth due to imposed inefficiencies. Less interference, greater efficiency in wealth creation by the only people with the knowledge to allocate their recources efficiently: the private sector.

    Don’t agree? Go ahead – tell us about wealth created by Government action. It isn’t Government’s purpose. Government’s only legitimate function in the economy is to support stability – e.g. integrity of the means of exchange, stable legal environment, and a minimally intrusive regulatory regime.

    And don’t tell us about Space Pens. Several billions for an expensive and unpopular novelty pencil replacement just won’t cut it.

  • Michiganny

    Go ahead – tell us about wealth created by Government action.

    The Hoover Dam, the US transportation system, the American university system. Public infrastructure has made possible many private enterprises. And greater investment in infrastructure will boost private enterprise.

    We need both.

  • CFM

    “We need both.”

    Infrastructure is indeed necessary. Infrastructure facilitates wealth creation by providing common means of transportation, etc.

    However, resources for the construction of infrastructure are appropriated from the private sector, so the applications to which those resources would have been applied are no longer possible.

    Cost-benefit has to be applied to such efforts to determine if a net positive result is obtained. Otherwise, many infrastructure projects become net destroyers of wealth, providing some temporary employment but resulting in underutilized infrastructure which does not significantly contribute to the general benefit. Heavily, and eternally subsidized mass-transit projects are a case in point – forever consuming tax revenues for an economically insignificant ridership.

    I’m not stating that all infrastructure projects are unworthy, as they may indeed facilitate wealth creation by providing economical transportation, etc. These things still represent a net cost, not creation of new wealth. It is new wealth, the growing pie, which constitutes economic growth and results in increasing living standards.

  • Paul Marks

    Someone above seems to have got 1929 confused with 1921.

    It was in 1921 that government spending and taxes were cut.

    Actually President Hoover raised taxes – and not just those on imports, he vastly raised income taxes as well. He also supported keeping up wages (in the face of the slump) in order to “keep up demand” – indeed he said stuff very much like what President Obama and Vice President Biden did at today’s press conference.

    This is the thing about “empirical” people – they are not empirical at all.

    It is NOT that they defend history against “theory dominated” economics, they do not know anything about history either.

    Nor do they know anything even about the world today.

    For example, George Walker Bush (the President who has increased government spending more than any other in my lifetime – even exculding military spending) is presented as a fanatical free market “libertarian” by Paul Krugman and others.

    And the “Economist” (and other establishment journals) blame deficits on tax cuts (which increased revenue – not reduced it) not on things like the increase in domestic government spending.

    So these establishment leftists have not the faintest knowledge of the empirical facts around them.

    Or they do have such knowledge – and are liars.

  • Paul Marks

    One point I did not deal with was “we reduced the money supply by a third”.

    Did the government go around burning Dollar bills much faster than it was printing them between 1929 and 1933?

    Errr – no.

    What actually happened was that the credit money bubble burst.

    What to prevent a bust?

    Prevent the increase in funny money in the first place.

    The credit money bubble was the one thing I can NOT blame on Herbert “The Forgotten Progressive” Hoover – for it was created by Ben Strong of the New York Federal Reserve (and his banker pals who used the fractional reserve game to magnify the effects of the credit money he was pumping into the system).

    There have been many credit/money bubbles in American history (for example see “The Panic of 1819” by Murry Rothbard – if you are really interested in economic history) the most recent before 1929 being the one that burst in 1920-1921 (the WWI credit money bubble).

    What was so different about 1929 was the insanely statist response to the bust – Herbert Hoover and many others were determined to PREVENT markets clearing.

    I could go on about banking – how it is demented to break the rule that all lending (“investment”) must be from real savings (not smoke and mirror games), but I doubt there would be much point.

    Statists, such as Paul Krugman and other such, are not really interested in economics (the very subject they get prices for) anymore than they are interested in economic history.

  • Paul Marks

    Turning aside from Austrian-economics-is-wrong guy (who I rather like – as I can turn on the natural hatred that fills my soul, without any fear that I am attacking an innocent person, because he is so plainly a scumbag). I should make a point in reply to Michiganny.

    Unfortunatly Michiganny is a decent person – so I can not express myself in the way I like to.

    Michiganny suggests that government spends money on new roads, bridges and so on.

    You must not be left with the impression that this is a negative sum game – that taking the money (either by taxes, borrowing, or printing) will just take resources from non government activity.

    Actually it is worse than that – it is a negative sum game.

    Any move of resources (by taxes, borrowing, of by increasing the money supply) to government will make economic life worse than it otherwise would have been.

    So you will work hard in politics – and with the best of compassionate intentions, and INCREASE the sum total of human suffering.

    Personally I doubt that Comrade Obama cares at all about the human beings in distress (for example he only started giving money to charity when he started his for President – before that the poor was just cannon fodder for his Community Organizer political path to power).

    But I fully accept that you care.

    Actually you are much further in spirit from Comrade Obama than I am.

    I am ashamed to say that I understand him with ease.

  • CFM

    Thanks Paul Marks. The biggest question facing us today seems to be: how the hell do we manage to get people to understand this stuff?

  • Paul Marks

    Many already do understand it – or as much of it as they need to CFM.

    I can name many people, even in the Senate and House, that understand it.

    As for people outside of Congress (and if the Republicans return to sanity they will nominate someone outside of Congress) Governor Mark Stanford understands it.

    “But what about Republicans who do not understand it – and try and make deals with Obama and co”.

    As I keep on saying – tell them that if they do that they will face a Primary challenge.

    Whoever they are – even the war hero in Arizonia.

    If they want to make deals (“look government spending is only going up by X hundred billion Dollars because of my deal, whereas it would have gone up by Y hundred billion Dollars”) they are better off in retirement with their grandchildren.

    In hard times only candidates with a clear message have a chance – not deal makers.