My macro toolkit

I’ve begun reading a very interesting book by the brilliant Steven Landsburg, entitled The Big Questions.  I find that we share a taste for contrarian opinions.  Of course Steven is much more skilled at defending his views.  Here’s something that caught my eye:

I sometimes hear economists defend the unrealism of their models thusly: “Economics is an infant science. Today our models are unrealistic; a decade from now, they’ll be a little so, in a decade from then little less. Eventually we’ll have realistic models that make accurate predictions.”

That, I think, is pure poppycock. Our predictions are not, and never will be, based on models; they’re based on informal reasoning. We study models because they own our reasoning skills. We can figure out what happens in these models and thereby develop a good intuitive feeling for what sorts of reasoning are likely to be productive.

In this we are no different from, say, physicists.

. . .

When economists can’t do is tell you what interest rates will be eighteen months from now. Neither can the physicists. You could, I suppose, point to that as a failure of modern physics. After all, interest rates are determined by physical processes in the brains of bond traders; isn’t that the stuff of physics? The answer, of course, is that physical (or economic) models are not designed to make precise predictions of complicated phenomena outside the laboratory.  They are designed to hone the intuition.

Great stuff.  I used to complain that physicists were horrible at predicting earthquakes, or the weather next month.  Steven has the courage of his convictions, and finds even deeper flaws.  :)

So I decided to sit down and try to make a list of my money/macro toolkit.  Here’s what I came up with off the top of my head:

1.  The hot potato effect (AKA Quantity Theory of Money.)

2.  The interest elasticity of money demand

3.  Value of money = 1/P (or 1/NGDP, or 1/forex prices)

4.  Money neutrality

5.   The liquidity effect

6.  The income effect

7.  The price level effect

8.  The Fisher effect

9.  Money superneutrality

10.  The Natural Rate Hypothesis (Exp. augmented Phillips Curve.)

11.  Sticky wages and prices.

12.  Nominal debt contracts

13.  Non-indexed capital income taxes

14.  Money illusion

15.   Purchasing power parity

16.   Interest parity theorem

17.   current account deficit =  capital account surplus

18.   Consumption smoothing

19.   Okun’s law

20.   Wage tax =  consumption tax =  universal 401(k)

21.   Exchange-rate overshooting

22.   Balassa-Samuelson effect

23.   Optimum quantity of money

24.   Efficient markets hypothesis

25.   Arbitrage

26.   Asset purchases =  asset sales

27.   Ricardian equivalence

28.   Crowding out

29.   Monetary offset of fiscal policy

30.   Policy impotence under fixed rates

31.    Temporary versus permanent monetary injections

32.   Downward-sloping labor demand schedule

33.   Expectations hypothesis of the term structure

34.   Liquidity premium hypothesis of the term structure

35.   Laffer curve effect

36.   Solow growth model

37.   CAPM

38.   Tax equivalence: consumer and producer taxes

39.  Tax equivalence: import and export taxes

40.   Export subsidies neutralize import taxes

41.   Zero bound on nominal interest rates

42.  Wicksellian equilibrium interest rate

43.  Identification problem

44.  Lucas critique

45.  Rational expectations

46.  AS/AD model

47.  Policy credibility

(I’m sure there are dozens I’ve forgotten)

Some of these tools are based on more basic tools.  Thus Dornbusch’s overshooting model relies on the QTM, PPP, liquidity effect, price level effect, ratex, and IPT.

Some economists are really good at zeroing in the the proper tool to employ in a given situation. Paul Krugman is perhaps the best in the macro blogosphere. Among academics, Bennett McCallum is excellent.  Keep in mind that this is just one skill among many.  Thus about 90% of the time I would agree with John Cochrane on policy issues more than with Paul Krugman, and yet on methodological issues I’m far closer to Krugman.  I tend to think the profession overrates the importance of things like micro foundations and general equilibrium, although for certain problems a GE model is appropriate.

Regarding Landsburg’s opening remarks about progress in economics, I can’t help thinking of Milton Friedman’s claim (made in the 1970s) that in the past 200 years macroeconomics had merely gone one derivative beyond Hume.  Today I can proudly say we are ahead of Hume in three areas, monetary superneutrality (the extra derivative), rational expectations, and the EMH.  The latter two also represent advances over Friedman.  Unfortunately, on the liquidity trap the profession still lags behind John Locke.  (Yes, Landsburg’s point was slightly different.)

Over at Econlog I repeat the Landsburg quotation, and apply it to a specific example.

PS.  David Beckworth has recently been showing off his artistic skills.  I’m honored to be portrayed here and here.

Update:  In this op ed, John Cochrane shows off one of his best skills, brutally skewering Keynesianism.


Tags:

 
 
 

142 Responses to “My macro toolkit”

  1. Gravatar of Charlie Jamieson Charlie Jamieson
    22. December 2014 at 10:24

    Yeah, what do physicists know?
    A physicist can’t predict interest rates or earthquakes. A physicist probably can’t even hit a curveball. Sure they helped put a man on the moon, but whatever. Keynes could have done that, too.
    :)
    Not only can economists not predict events in their own field, they can’t even agree on what happened in recent history.
    If you gave 50 economists the parameters of the situation in 1928 (without telling them it was 1928) you would get 50 different predictions.
    Because, really, ‘economics’ matters very little in economics. Geography, culture, rule of law, history, politics, etc., etc. are the key factors.

  2. Gravatar of Luis (Miguel) Luis (Miguel)
    22. December 2014 at 10:47

    Sorry, Scott, but the Liquidity Trap is a GREAT progress, without which it is impossible to understand large period with high level of unemployment. The only tool you need to arrive at is the Animal Spirits, a logical idea rejected by mainstream economics.
    Is not the LT other think that a disruption in liquidity demand BUT in the long run?
    Naturally, you must abandon the MEH, which is not a great idea…

  3. Gravatar of ssumner ssumner
    22. December 2014 at 10:52

    Charlie, Landing the man on the moon was a simple physics problem, no more complex than options pricing. The physicist doesn’t have to worry about the psychology of the moon, or hurricanes in outer space. We did this in the 1960s, when our IT was quite primitive. And how many physicists understand options pricing?

    I’ve noticed that people who show a general ignorance of the basic principles of economics are the most contemptuous of the field. I suppose it is natural for people to be resentful that they are unable to understand the concepts that others find quite useful.

  4. Gravatar of ssumner ssumner
    22. December 2014 at 10:53

    Luis, Sorry, can you translate that into English?

  5. Gravatar of Charlie Jamieson Charlie Jamieson
    22. December 2014 at 11:01

    Well, the math is always the math. Two plus two equals four.
    If you can use the math to get to the moon, you’ve done something constructive. If you use the math to build complicated investments — and those investments fail! — then you’ve done damage.

  6. Gravatar of Kevin Donoghue Kevin Donoghue
    22. December 2014 at 11:16

    Somewhat off-topic, but I don’t think Scott will ever object to a comment quoting Lars Svensson:

    The best measure of the monetary policy stance, however, is what one can call the policy-rate gap, the gap between the real policy rate and the neutral real interest rate. Monetary policy is expansionary, neutral, or contractionary depending on whether the policy-rate gap is negative, zero, or positive, respectively.

    I’ve often thought that setting questions for an economics test is a doddle. All you have to do is quote some sage and add the command: “Discuss.” The above is a good example.

    Read the whole thing, of course:

    http://larseosvensson.se/2014/12/22/a-very-expansionary-monetary-policy-ignorance-or-disinformation/

  7. Gravatar of Luis (Miguel) Luis (Miguel)
    22. December 2014 at 11:24

    Yea. Thank to the crisis, we have learnt that the EMH has failed completely. Whithout that, all your toolkit means more or less nothing about reality.

  8. Gravatar of Brian Donohue Brian Donohue
    22. December 2014 at 12:01

    OT- I recall when Robert Lucas won the Nobel, he was asked about where interest rates were heading. He said such predictions were a mug’s game.

    Many economists, of course, are paid to opine precisely upon such matters. 2014 suggests Lucas was right, and most economists really aren’t any good at predicting the path of interest rates, even when the general economic forecast holds up:

    http://www.businessinsider.com/wrong-10-year-yield-forecasts-in-january-2014-12

  9. Gravatar of brendan brendan
    22. December 2014 at 12:02

    Great post Scott, thanks.

    Re Solow, I keep assuming that there’s something to his growth model that I just don’t get because it seems utterly trivial. I listened to his talk with Russ Roberts, and Solow describes his big aha! moment when he realized that the residual – innovation – matters a lot for growth. What am I missing?

    Landsburg is interesting but obnoxious. Reading The Big Questions, I recall his assertion that Free Trade’s desirability is literally a matter of mathematical proof, as obviously true as 1+1=2. I accept the conventional economist wisdom on free trade, but am a bit sick of the straw man that even the smartest Protectionist’s haven’t grokked Ricardo. They have.

  10. Gravatar of Kevin Donoghue Kevin Donoghue
    22. December 2014 at 12:11

    Brendan “Re Solow, I keep assuming that there’s something to his growth model that I just don’t get because it seems utterly trivial.”

    A sustained increase in the rate of saving (i.e. capital formation) does not result in a sustained increase in the rate of growth. Is that so trivial? I certainly took a while to see it, as a student.

  11. Gravatar of James in London James in London
    22. December 2014 at 12:15

    Good to see it now takes two top Keynesian bloggers to take on one MM. Over at Mostly Macro S W- L tag teams with PK to use two concepts missing from your list, the liquidity trap and the ZLB.

    I know you don’t believe either exists, the trap can always be exited and the Bound is no bound, and I agree, but we’re they ever useful tools in some contexts?

  12. Gravatar of ssumner ssumner
    22. December 2014 at 12:31

    Charlie, I regret to inform you that our rockets keep blowing up, and our astronauts keep dying. About 20 so far, if I’m not mistaken. So much for physics.

    Kevin, That’s OK I guess, but given that the only way to identify whether the rate is above or below the Wicksellian equilibrium is by looking at the nominal goal variable, why not just use the nominal goal variable (inflation or NGDP) as your measure of the stance of monetary policy?

    Luis, The EMH did very well during the crisis, much better than policymakers. Markets saw the problems before the Fed. If we had relied on the EMH the recession would have been far milder.

    Brian, Good comment.

    Brendan, I also thought that proof was overstated. But in fairness Krugman reached the same conclusion in Pop Internationalism. He showed that many so-called “expert” protectionists did not understand Ricardo. They kept asserting that Ricardo’s comparative advantage requires X, Y and Z to hold true, when it does not.

    But yes, I can imagine that people who don’t agree with Landsburg would be annoyed by his tone. Fortunately I usually agree.

    James, I do have the zero lower bound on the list. It does not apply to IOR, of course, but it is approximately true of market interest rates. Where Keynesians go wrong is in assuming it hinders monetary policy. It only hinders monetary policy regimes stupid enough to rely on interest rates as a signal of monetary policy.

  13. Gravatar of James in London James in London
    22. December 2014 at 12:49

    Missed that, you get so used to the ZLB acronym. Interestingly, at least six major countries have two year bond yield markets trading below zero right now: Japan, France, Germany, Netherlands, Sweden and Switzerland. And Swiss yields even trade negative on the five year bond.

  14. Gravatar of tesc tesc
    22. December 2014 at 12:54

    Sumner,

    let me translate Luis for you.

    ‘Keynes was right and you are wrong.’

    I would say Sumner is right and Krugman is wrong. 2013 showed there is no liquidity trap and Fiscal policy is irrelevant in the short run.

    LuisMi,

    Long periods of unemployment are explained by bad supply side fiscal policies, New Deal and the unecessary expansion of unemploynebt benefits during the Great Recession. Regime uncertainty is also part of the problem. All this coupled with wrong monetary choices.

    Luis,

    How do you explain long

  15. Gravatar of Student Student
    22. December 2014 at 13:37

    I think that Scott and others have made a pretty strong case that monetary policy can be effective at the ZLB. However, to say the liquidity trap doesn’t exist is taking it to far. CBs certainly seem to operate ineffectively at the ZLB, whether or not monetary policy can theoretically still be effective. Just because monetary policy can be effective, doesn’t seem to translate to it being effective. So it sure seems like there is some kind of trap there. Upward price level/interest rate rigidity????

  16. Gravatar of ssumner ssumner
    22. December 2014 at 13:43

    James, Good point. I’d say the actual lower bound is the negative of the cost of storing cash in safety deposit boxes.

    Student. Yes, central banks do poorly at the zero bound. This is not because the zero bound itself is a problem, but rather because central banks foolishly rely on interest rate targeting. Even worse, they avoid level targeting. Even worse, they have an irrational fear of large balance sheets. It’s a mental block; the zero bound itself is not a problem, as FDR showed.

  17. Gravatar of Student Student
    22. December 2014 at 14:02

    I get what you are saying. But why is there a mental block at the ZLB though? Is it because at the ZLB virtue becomes vice and prudence is folly, as Krugman would say?

    Is it a psychological thing? A consequence of asymmetries in the risk/reward positions of the have and have nots (taking it as a given that the haves run the CBs)? I don’t know but it still seems to make things different in the end.

    Does it really matter if I cant shoot free throws at all or if I just cant make them in crunch time when I am at the free throw line with 1 second to play in the NCAA finals? At that critical moment, I dont care if its a mental block or not. Its still a problem.

  18. Gravatar of Daniel Daniel
    22. December 2014 at 14:33

    Student,

    Ask yourself this – what’s the hang-up over the ZLB, when the central bank owns the printing presses ?

    What’s stopping the head of the central bank from saying “we are going to print money until we get the amount of inflation we want” ?

    If there’s a trap, it’s inside the human brain, which still uses a stone age (literally) mental toolkit.

  19. Gravatar of Daniel Daniel
    22. December 2014 at 14:34

    Upward price level/interest rate rigidity

    Now you’re just making up stuff.

  20. Gravatar of Student Student
    22. December 2014 at 14:36

    Again, does it matter if the trap is mental or not? Either way, the result is the same.

  21. Gravatar of Student Student
    22. December 2014 at 14:38

    Haha, it was a joke Daniel. Or was it…..

  22. Gravatar of Brian Donohue Brian Donohue
    22. December 2014 at 15:07

    @Student, I think the ‘liquidity trap’ IS the mental block here. Or more generally, viewing monetary policy as = interest rate policy. In such a mindset, you’re out of ammo at the ZLB by definition.

  23. Gravatar of Adam Platt Adam Platt
    22. December 2014 at 15:10

    Student,

    “CBs certainly seem to operate ineffectively at the ZLB, whether or not monetary policy can theoretically still be effective.”

    Only because they haven’t tried the policies that would, in fact, be effective at the ZLB. Scott has mentioned a few of these. They haven’t tried price level targeting or NGDP targeting. Wouldn’t it make sense to try setting and hitting those targets before dismissing monetary policy?

  24. Gravatar of Student Student
    22. December 2014 at 15:20

    I am not dismissing it. I am saying when the CB castrates itself, I think it’s time for fiscal policy to fertilize some biznitches. Better someone than noone.

  25. Gravatar of Doug M Doug M
    22. December 2014 at 15:52

    “And how many physicists understand options pricing?”

    I would wager that a greater percentage of physicists can explain the Black-Scholes pricing model than economist can explain the three-body problem.

    My problem with economists is that two economists can look at the same data and draw the opposite conclusions. The 2013 fiscal cliff proved / disproved the Keynesian theory….

    Krugman is the best economist in the blogosphere? Every time someone points me to Krugman I am amazed at his ability to use any data to reinforce his never-changing political agenda.

  26. Gravatar of Doug M Doug M
    22. December 2014 at 15:59

    “After all, interest rates are determined by physical processes in the brains of bond traders; isn’t that the stuff of physics?”

    I would say that the weather drives the level of interest rates 18 months from now more than the psychology of traders.

    The weather drives agricultural productivity, energy use, apparel demand, etc. and hence has a significant influence on aggregate demand, aggregate supply, the price level and hence money demand.

  27. Gravatar of Market Fiscalist Market Fiscalist
    22. December 2014 at 16:06

    As an artist , David Beckworth makes a brilliant Market Monetarists !

  28. Gravatar of Market Fiscalist Market Fiscalist
    22. December 2014 at 16:06

    As an artist , David Beckworth makes a brilliant Market Monetarist !

  29. Gravatar of ssumner ssumner
    22. December 2014 at 16:08

    Student, If it’s just a misunderstanding on the part of central bankers, the solution is much easier than if monetary policy were ineffective. Recall that central bankers overcame earlier cognitive biases, when they adopted the Taylor Principle. Why can’t they learn additional lessons?

    We found out that fiscal policy was impotent back in 2013, but Keynesians still don’t seem to have gotten the message. They’re shooting blanks, to use your metaphors.

    Doug, The question is not how many physicists can explain the options model if taught. Most top economists could easily understand physics if they studied it. These guys are math geniuses.

    You said:

    “Krugman is the best economist in the blogosphere?”

    Who gave you that nutty idea?

  30. Gravatar of Student Student
    22. December 2014 at 16:35

    Those racists! In all seriousness though, how long do we wait for them to understand before we give up and use the second best option.

  31. Gravatar of dtoh dtoh
    22. December 2014 at 17:46

    Scott,
    I note that HPE is number one on your list. Just to reiterate (for the hundredth time)…

    While the HPE is predicatively accurate, it confuses causality with correlation. People and firms do not buy more goods and services because all of sudden they mysteriously hold more money. They acquire more money specifically because they have been induced by Fed action (either through higher asset prices or expectations of higher NGDP) to exchange financial assets for real goods and services. Money serves as the intermediate medium of exchange to effect that exchange of financial assets for real goods and services.

    I don’t how many times I have to say this… people do not decide to buy more goods and services because they hold more money. Rather they acquire more money because they have made a decision to purchase more goods and services.

  32. Gravatar of dtoh dtoh
    22. December 2014 at 17:52

    Scott,
    One other thing. The ZLB is only a problem if people and firms (the non-banking sector) exchange financial assets for cash rather than for good and services. There are zillion simple ways to prevent this including: electronic cash with negative interest rates, fees for cash withdrawals…. or the Fed could simply decide to purchase assets that necessitate the purchase of real goods and services such as securities backed by assets like mortgages on new homes, new cars loans, new investment in plant and equipment, etc., etc.

  33. Gravatar of wufwugy wufwugy
    22. December 2014 at 17:57

    love the birdshot one

  34. Gravatar of Ray Lopez Ray Lopez
    22. December 2014 at 19:41

    Noted by our Fearless Leader:

    1/ physics envy 2/ name-dropping 3/ disrespecting the hard sciences (at the same time as 1, impressive Hegelian dialectic) 4/ vanity 5/ a grab bag list of econ concepts, for I guess impressing his gullible fan boys; it’s like an incompetent craftsman who buys the latest expensive tool, but does not know how to swing a hammer. I point out two recent examples: our leader did not object to the statement that low velocity of money is a problem (he thinks that low velocity of money is irrelevant); and that the Gold Exchange Standard of the interwar years is the same as the Gold Standard pre-WWI (it is not, even anti-gold economists–which is most of them–agree it is not).

    BTW, contrary to what our leader says, meteorologists (who are often not physicists) do predict the weather several months out. They predict the envelope of the non-linear equation that’s weather. It’s done all the time and there’s even a weather futures market for farmers on this, which is more than I can say about NGDP at the moment.

    BTWII, physicists can predict earthquakes more and more. It’s just that they cannot predict them so far in advance that it’s useful at the moment. A brilliant geo-physicist turned economist (now there’s a waste of talent!) named Didier Sornette even has a (patented!) formula based on earthquake physics to predict the (envelope) of economic non-linear events. He sees btw a potential singularity (‘bad thing happening’ / ‘discontinuity’ for you literature majors, which seems to be many economists) around 2050, about the time, coincidentally–as the model does not take population as an explicit independent variable, last I checked–that world population peaks–though it’s very speculative. See more here: http://en.wikipedia.org/wiki/Didier_Sornette

    I think I have a working hypothesis about our Fearless Leader. He has obsessive-compulsive disorder that compels him to respond to every poster. I and MF seem to get under his skin. But I really do not want to disturb the crazy man. I’m simply here to learn more about targeting NGDP and also expose you freaks of economics (and nature) to alternative points of view, so you can broaden your warped minds. I feel though that it’s like when I was on the Mises Institute’s Austrian website (where I got banned, as I have from Mankiw’s and DeLong’s (old) websites. Compare, favorably, with Marginal Revolutions more enlightened website where I am a fixture and get along mostly fine with people that disagree with me). The Austrians at Mises, by way of example: (1) refuse to believe in aggregate demand or aggregate supply, (2) shun experimental data, relying on ‘thought experiments’, and, (3) believe Say’s Law is an ironclad law of nature. How are you people any different, in your own way? themoneyillusion is the Church of the Poisoned Mind.

    Oh… Merry Christmas, Happy Holidays, and Happy New Year to you too.

  35. Gravatar of Ray Lopez Ray Lopez
    22. December 2014 at 19:56

    Read it and nod your head in agreement! Sticky wages, another Keynesian myth not backed by historical data , only non-real time laboratory experiments. In fact, neither nominal wages nor real wages are sticky stay the historic data from the Great Depression. Possibly, as Bernanke says, because union membership was LOW then (I always thought it was high, I was wrong). See data below.

    from Bernanke’s paper on Gold:

    Chapter Title: The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison
    Chapter Author: Ben Benanke, Harold James
    Chapter URL: http://www.nber.org/chapters/c11482

    The reliance on nominal wage stickiness to explain the real effects of the deflation is consistent with the Keynesian tradition, but is nevertheless some-what troubling in this context. Given (i) the severity of the unemployment that was experienced during that time; (ii) the relative absence of long-term con-tracts and the weakness of unions; and (iii) the presumption that the general public was aware that prices, and hence the cost of living, were falling, it is hard to understand how nominal wages could have been so unresponsive.
    Wages had fallen quickly in many countries in the contraction of 1921-22. In the United States, nominal wages were maintained until the fall of 1931 (possibly by an agreement among large corporations; see O’Brien 1989), but fell sharply after that; in Germany, the government actually tried to depress wages early in the Depression. Why then do we see these large real wage increases in the data? {maybe: measurement problems} … The case for nominal wage stickiness as a transmission mechanism thus seems, at this point, somewhat mixed.

    http://www.unionancestors.co.uk/Images/TU%20membership%201900-2000.pdf

    Note by RL:

    Proportion of people in employment who are members of a trade union; United Kingdom 1900 to 2000. 10% to 1910, then jumps to 40% by 1920, then drops to 25% by 1930, rises to 45% in 1945 and peak of 55% in 1978, down to 30% today.

    In USA, the peak union membership was only 35% in 1954, 7% in 1930, 12% or less today.

  36. Gravatar of Ray Lopez Ray Lopez
    22. December 2014 at 20:11

    Re free trade: you can prove on paper that it works to produce more output, as long as countries A and B have differential prices between goods (that is, widget X and Y are priced differently in the two countries). However, like “sticky wages”, 100% free trade is in fact more seen in the laboratory than in the real world. Alexander Hamilton’s idea of protecting infant industry first, before engaging in free trade –which was later espoused by the German economist List and forms, even today, the backbone of German successful industrial policy– is more common and was practiced by the USA’s industrial North. In fact, manufacturing tariffs gradually went up over the course of the 19th century in the North. It was the backwards South that practiced free trade, since they sold commodities from many different producers who could not get their act together to form a cartel.

    Further, economists like Landsburg often don’t know game theory when they advocate unilateral free trade. Given that countries don’t like free trade due to short-term disruptive effects to their labor market, they resist free trade. Landsburg and others then advocate that a country like the USA should open their borders to free trade even if their trading partners are closed. But that’s a mistake says game theory. It’s better for the USA to threaten, credibly, retaliation rather than engage in unilateral free trade, since only under *bi-lateral* or non-unilateral free trade are the beneficial effects of free trade most felt. This can be proved using game theory, and is something politicians intuitively understand (when they call for ‘fair trade’) but economists don’t seem to get. Having said that, if threats fail, then of course the fall back is unilateral free trade but only as a last resort, not a first resort as Landsburg and other free-trade fundamentalists think.

  37. Gravatar of James in London James in London
    23. December 2014 at 00:11

    Looking into the cost of storing of storing cash.

    The rent of a secure (very) small room in Luxembourg is $5-12k. To be on the safe side you’d perhaps want no more than $100m in $100 bills (one standard pallet) per room. A rent of just 0.01% per annum. No big deal.
    http://www.economist.com/news/briefing/21590353-ever-more-wealth-being-parked-fancy-storage-facilities-some-customers-they-are

    A good article, shows that the biggest issue is insurance. Tax and duty issues also loom if you want to move it in and out of a legal jurisdiction.
    Moving costs could be significant if you were really serious, perhaps $10k in and out?

    Storing Swiss Francs is easier as they have CHF 1000 bills ($1000), and make up 60% of cash “in circulation”. Trouble is you are then tied to the Euro as an upper bound in value.

  38. Gravatar of ssumner ssumner
    23. December 2014 at 06:40

    Student, You said:

    “before we give up and use the second best option.”

    For the last time, there is no other option. If you think I’m wrong then please tell me why. Don’t keep ignoring my evidence.

    dtoh, You said:

    “I don’t how many times I have to say this… people do not decide to buy more goods and services because they hold more money. Rather they acquire more money because they have made a decision to purchase more goods and services.”

    I don’t agree. I think causation goes from money to nominal spending. Note that more money leads to more nominal spending whether the money is introduced by buying assets of from a helicopter, it makes no difference. After 1492, Spain’s nominal GDP rose sharply. Did the rise in spending cause the discovery of America, and its gold and silver, or did the discovery of America cause the rise in spending?

    When there is a big apple crop and NGDP measured in apple terms rises, is it because of more apples, or a change in asset prices?

    Ray, Your posts are so silly that they provide comic relief. I thank you for that. Steven Landsburg doesn’t understand game theory? Or that game theory proves unilateral free trade is bad? Is that a joke?

    There’s a reason I never respond to MF. When I get bored with mocking your inane comments I’ll give you the same treatment.

    Here’s another laugh out loud funny comment of yours:

    “Sticky wages, another Keynesian myth not backed by historical data . . .
    In the United States, nominal wages were maintained until the fall of 1931 (possibly by an agreement among large corporations; see O’Brien 1989), but fell sharply after that;”

    You deny sticky wages, and then provide excellent historical data that wages were sticky! Even MF is going to start getting embarrassed by you, as his mistakes are slightly less absurd.

    And I see you are just as ignorant about earthquake forecasting. No, geologists cannot predict earthquakes.

  39. Gravatar of ssumner ssumner
    23. December 2014 at 06:42

    dtoh, The zero bound is not a problem at all. No serious economist thinks it prevents a country from depreciating its currency. No need to discuss it any further.

    Thanks for the info James.

  40. Gravatar of Philippe Philippe
    23. December 2014 at 06:58

    “After 1492, Spain’s nominal GDP rose sharply. Did the rise in spending cause the discovery of America, and its gold and silver, or did the discovery of America cause the rise in spending?”

    That new gold and silver was spent into circulation. Fiscal policy in other words.

  41. Gravatar of dtoh dtoh
    23. December 2014 at 07:43

    Scott,
    Helicopter drops, bumper apple crops and silver discoveries are entirely different from Fed OMP. (Would you be equally willing to get $100,000 by having someone give it to you as you would by mortgaging your house to get it?)

    Just answer one question, tell me why the final counter-party (not the banking intermediary) to a Fed OMP trade enters into the transaction? Is there someone forcing them to do the trade?

    BTW – Totally agree on the ZLB issue. It’s just a mythical boogeyman.

  42. Gravatar of Brian Donohue Brian Donohue
    23. December 2014 at 08:36

    @dtoh,

    “One other thing. The ZLB is only a problem if people and firms (the non-banking sector) exchange financial assets for cash rather than for good and services. There are zillion simple ways to prevent this…”

    In the current US example, holding cash (or, short-term assets like bank accounts or t-bills) has been an expensive proposition. At the height of the crisis, at the end of 2008, trillions upon trillions was sitting in cash.

    A risk inverse investor holding 1-year t-bonds since then has seen a 10% erosion in purchasing power. All this despite inflation being less than 2%. Extraordinary.

    The beatings are continuing as I type. (Note, I approve of this policy, which is largely demographic driven and will continue (new normal) even after the fear subsides, which it is doing.)

  43. Gravatar of Morgan Warstler Morgan Warstler
    23. December 2014 at 08:51

    I’m offended GICYB / Uber for Welfare is not officially listed in your toolkit.

  44. Gravatar of Mike Sproul Mike Sproul
    23. December 2014 at 09:00

    Scott: We agree on something!

    Specifically 15, 16, 24, 25, 26, 28, 32, 37, 38, 39, and 40

    Except that they are Microeconomics/finance topics, not related to money/macro.

  45. Gravatar of dw dw
    23. December 2014 at 09:46

    sorry i cant do much more than laugh when economists complain that physicists cant predict earth quakes???? really? i thought geologists were the ones studying such things. and they cant predict the weather next month? isnt that what meteorologists would be doing? course physicists do predict things, and at least they can perform experiments to try and determine if they are are right or wrong. where as economists have too many hands. and cant predict what will happen tomorrow, without them. course they also seem to let their views shade their opinions, more than any facts, which do seem to be really really hard to get.

  46. Gravatar of Ray Lopez Ray Lopez
    23. December 2014 at 09:59

    @Sumner – please raise your game to my level. Your reading comprehension is horrible, or you are deliberately abstruse. Get it now?

    Ray, Your posts are so silly that they provide comic relief. I thank you for that. Steven Landsburg doesn’t understand game theory? Or that game theory proves unilateral free trade is bad? Is that a joke?

    You misread me, though I’m glad I make you laugh. Think of three pies: no trade is the smallest, then unilateral free trade is bigger, and the biggest pie of all is bilateral free trade that results from threats of retaliation–but they must be credible threats, kind of like your credible central bank promising to inflate. Get it now?

    There’s a reason I never respond to MF. When I get bored with mocking your inane comments I’ll give you the same treatment.

    That’s when I’ll stop posting here…so please keep it up. Get it now?

    Here’s another laugh out loud funny comment of yours:

    “Sticky wages, another Keynesian myth not backed by historical data . . .
    In the United States, nominal wages were maintained until the fall of 1931 (possibly by an agreement among large corporations; see O’Brien 1989), but fell sharply after that;”

    You deny sticky wages, and then provide excellent historical data that wages were sticky! Even MF is going to start getting embarrassed by you, as his mistakes are slightly less absurd.

    No, you misread me again. Look at the quoted language about 1921 (no sticky wages then), and note the words “fell sharply after that”, yet the Great Depression lasted after 1931 (so sticky wages cannot have been a factor after 1931), further, Bernanke’s conclusion: “The case for nominal wage stickiness as a transmission mechanism thus seems, at this point, somewhat mixed.” MIXED IS BAD. Get it now?

    And I see you are just as ignorant about earthquake forecasting. No, geologists cannot predict earthquakes.

    LOL, now you’re putting words in my mouth! I actually said: “BTWII, physicists can predict earthquakes more and more. It’s just that they cannot predict them so far in advance that it’s useful at the moment.” Physicists != (not equal to) geologists. And predict is only by a few minutes. Get it now?

    How did you become prominent with such a biased worldview? And I thought Krugman was bad…

  47. Gravatar of Brian Donohue Brian Donohue
    23. December 2014 at 10:12

    Scott: “There’s a reason I never respond to MF. When I get bored with mocking your inane comments I’ll give you the same treatment.”

    RL: “That’s when I’ll stop posting here…so please keep it up. Get it now?”

    Me: “Please get it, Scott. Please.”

  48. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    23. December 2014 at 11:20

    John Muellbauer resurrects Michele Boldrin’s idea (in his 2009 stimulus smackdown with Brad DeLong);

    http://www.voxeu.org/article/combatting-eurozone-deflation-qe-people

    “The author proposes that the ECB should pursue ‘quantitative easing for the people’, such as sending each adult citizen a €500 cheque.”

  49. Gravatar of ssumner ssumner
    23. December 2014 at 13:15

    Philippe, You said:

    “That new gold and silver was spent into circulation. Fiscal policy in other words.”

    So when new money goes into circulation it’s fiscal policy?????

    dtoh, If apples were injected into the economy via open market operations (i.e sold for T-bills) would the price of apples, and NGDP in apple terms, be materially different? I say obviously not.

    Mike, But then as I recall you believe macro is finance. :)

    dw, I thought the laws of physics claimed to explain the motion of objects. Indeed all objects in the universe. I’ll let you and Ray debate that one.

    And what is the difference between opinions and facts, in your opinion?

    Ray, Humor me–how much do you actually know about Steven Landsburg? Write down everything you know in the next comment.

    You previous comment would be sort of like criticizing Hawking by saying he doesn’t understand Newton’s three laws of motion.

    All of your comments about wages are wrong. Wages were certainly sticky in 1921, they fell much more slowly than prices. The year 1921 say the largest increase in real wages of the entire 20th century And the fact that the depression lasted after 1931 has no bearing on the sticky wage theory, because prices continued falling after 1931. You don’t seem to understand what the term “sticky wages” means, it does not mean rigid wages, it means adjusts more slowly than prices. Like MF, you have the amazing ability to be wrong about everything, but nonetheless seem to show extreme levels of confidence. It’s that mixture that makes your comments so funny.

    Brian, First let me have my fun!!

  50. Gravatar of TravisV TravisV
    23. December 2014 at 13:48

    Two-year treasury yield is the highest it’s been since 2011……

  51. Gravatar of Cameron Cameron
    23. December 2014 at 13:52

    (Apologizes if already posted, I looked and couldn’t find it)

    http://krugman.blogs.nytimes.com/2014/12/23/nothing-non-gold-can-stay/

    “I wrote about this back in 2011, explaining why I devoted my efforts in 2009 to pushing for fiscal stimulus. It seemed obvious to me that the Fed viewed the crisis as temporary, and was just not going to be willing (or even able) to commit to a permanent change in policy, especially with all the sniping it faced from the right. And that’s still true now, even after six years at the zero lower bound.”

    This is almost comical. Monetary policy won’t work because of opposition on the right, so let’s dramatically increase government spending to support the economy. No need to support Obama making fed appointments at all.

  52. Gravatar of Ray Lopez Ray Lopez
    23. December 2014 at 14:01

    @Sumner: “Ray, Humor me-how much do you actually know about Steven Landsburg? Write down everything you know in the next comment.”

    http://en.wikipedia.org/wiki/Steven_Landsburg (“In a blog post from March 20th, 2013 titled “Censorship, Environmentalism and Steubenville,” Landsburg wrote that it was difficult to make an argument, from strictly economic principles, against the rape of an unconscious victim, if the benefits (to the rapist) exceed the costs (to the victim). “As long as I’m safely unconscious and therefore shielded from the costs of an assault,” he argued, “why shouldn’t the rest of the world (or more specifically my attackers) be allowed to reap the benefits?”) – your hero, a fellow professor. You are welcome to defend somebody who makes such a comment in public. Oh yes, freedom of speech in academia…go on. In private I would still be ashamed, but in public? Shows an alarming lack of balance. Sound familiar? BTW what I know about Landsburg has nothing to do with the theory of free trade as I outlined above, which BTW is not my original work, and you should be aware of it, are you?

    Sumner: “All of your comments about wages are wrong. Wages were certainly sticky in 1921, they fell much more slowly than prices. The year 1921 say the largest increase in real wages of the entire 20th century And the fact that the depression lasted after 1931 has no bearing on the sticky wage theory, because prices continued falling after 1931. You don’t seem to understand what the term “sticky wages” means, it does not mean rigid wages, it means adjusts more slowly than prices. ”

    Hey thanks! Actually I did not know some of that. But strictly speaking, if you look at what I said, I’m posting on what *Bernanke*, as in Ben, wrote. And you got it wrong. Look at what Bernanke wrote: “Bernanke: “Wages had fallen quickly ***in many countries*** in the contraction of 1921-22…In the United States, nominal wages were maintained until the fall of 1931 (possibly by an agreement among large corporations; see O’Brien 1989), but fell sharply after that; in Germany, the government actually tried to depress wages early in the Depression. Why then do we see these large real wage increases in the data? {maybe: measurement problems<–this BTW is me, you are welcome to read the paper and disagree} … The case for nominal wage stickiness as a transmission mechanism thus seems, at this point, somewhat mixed."

    (1) Bernanke (Ben, not Ray Lopez) says 'in many countries in …1921-22' there were NO STICKY WAGES. Not in the USA, but many countries internationally (we said that three times, did Scott get it now?); (2) "the case for nominal wage stickiness as a transmission mechanism [for the Great Depression spreading internationally, is] somewhat mixed". Again, Bernanke.

    You know, we hapless readers of your blog could learn a lot about economics if once in a while you tried to educate your audience instead of simply trying to win the debate. Get it now? (Now let's see Scott dodge the questions raised herein by (1) ignoring Landsburg's outrageous comments entirely, a wise move, and (2) goal post shifting on what Bernanke (not I) said.)

    PS-You need to post a link–if you have one–on your theory that sticky wages don't matter if they fall less than prices. Intuitively it makes sense, yes, but Bernanke seems to disagree with your definition. I wonder if this is another non-mainstream Scott Sumner theory?

  53. Gravatar of James in London James in London
    23. December 2014 at 14:20

    3q14 fina revised RGDP number is really good QoQ annualised (5.0%), still not great YoY (2.7%). Same with NGDP numbers (6.2% and 4.3%) . That wierd 1q14 drop in both data sets is still hanging around making the longer term trend hard to discern. Still, better than many experts expected, especially given the global circumstances.

  54. Gravatar of tesc tesc
    23. December 2014 at 14:35

    Thanks Cameron. That is a good example how obsession about politics makes Nobel Prize winners say the craziest of things.

    “Monetary policy is not an option because of opposition on the Right so fiscal policy is the only option.”

    You know, the Right would never oppose fiscal policy, only monetary policy.

    : )
    laughable

  55. Gravatar of Kenneth Duda Kenneth Duda
    23. December 2014 at 14:54

    Off topic as usual, I found Krugman’s most recent blog post http://krugman.blogs.nytimes.com/2014/12/23/nothing-non-gold-can-stay/ striking. What he argues, in effect, is that the Fed cannot get traction at the ZLB without a real regime change. Which is *exactly* why we need an NGDP targeting regime at the Fed. Krugman’s logic seems right on, but then he just refuses to take the last step.

    The intelligent Austrians don’t want people bidding up the price (in goods/services terms) of the medium of account, reducing mutually beneficial trading in real goods and services for the sake of accumulating more medium of account (deflationary money demand shock). NGDPLT avoids that sort of market failure by adjusting the quantity of the medium of account as needed to sustain real spending. Meanwhile, on the other side, the intelligent Keynesians understand aggregate demand shortfalls are better addressed by monetary policy than fiscal policy until monetary policy loses traction, and Keynesians don’t want monetary policy to lose traction any more than the rest of us. NGDPLT avoids traction loss exactly the way Krugman indicates, by changing the model so that the market understands what portion of the monetary base expansion will be permanent, namely, the portion that must remain permanent to keep total nominal spending on path. I feel that market monetarists have a tremendous opportunity here to unify the Austrians and the Keynesians in a monetary policy regime change that benefits everyone and is compatible with the assumptions and philosophies of both sides.

    -Ken

    Kenneth Duda
    Menlo Park, CA

  56. Gravatar of Brian Donohue Brian Donohue
    23. December 2014 at 15:06

    Great comment Kenneth. How isn’t worldwide adoption of QE and Chuck Norris-style forward guidance not a slow motion regime change in central banking over the past few years?

    It’s right there, and he can’t see it.

    Also, I thought this was hilarious:

    Yes, I’m turning into one of those crotchety old economists who says in response to anything, “It’s trivial, it’s wrong, and I said it decades ago.”

    Krugman claims provenance over any trivial, wrong observation!

  57. Gravatar of Philippe Philippe
    23. December 2014 at 15:52

    Scott,

    “So when new money goes into circulation it’s fiscal policy?”

    No, it’s money-financed fiscal policy if it is spent into circulation. Say the govt mints new coins and uses them to pay its army, for example, or to build a castle. Buying bonds is lending, rather than spending.

  58. Gravatar of Nick Nick
    23. December 2014 at 16:11

    Scott wrote:
    ‘Brian, First let me have my fun!!’
    +1
    This has all been fun stuff. The part where Ray links to wiki in answer to ‘tell me everything you know about Landsburg?’ Made me smile.
    Sometimes I should just link to wiki in answer to questions like that, but I’m not that honest.

  59. Gravatar of tesc tesc
    23. December 2014 at 16:21

    Phillipe

    The point of Market Monetarism, and the Hayekian Money Stream regime, is that buying bonds will cause increasing spending.

    If the FED buys all assets in the US, stocks and bonds would that not cause increase in spending (NGDP)? As it did in 2013.

  60. Gravatar of dtoh dtoh
    23. December 2014 at 16:43

    Scott,
    You said; “If apples were injected into the economy via open market operations (i.e sold for T-bills) would the price of apples, and NGDP in apple terms, be materially different? I say obviously not.”

    I agree. As I have said, HPE is predicatively accurate but is not an accurate description of causality.

    That said however, helicopters drops are different than OMP. If the Fed regularly engaged in helicopter drops, it would be no different than simply redenominating the currency.

    And… you didn’t answer my question… Why does the final counter-party (not the banking intermediary) to a Fed OMP trade enter into the transaction?

  61. Gravatar of Major.Freedom Major.Freedom
    23. December 2014 at 17:49

    Sumner:

    “There’s a reason I never respond to MF. When I get bored with mocking your inane comments I’ll give you the same treatment.”

    Mocking, yes.

    Refuting, seriously challenging, or even engaging them? Not even close.

    “You deny sticky wages, and then provide excellent historical data that wages were sticky! Even MF is going to start getting embarrassed by you, as his mistakes are slightly less absurd.”

    What mistakes? You keep claiming all these mistakes are being made, but not even when you avoided and dodged my posts in the early stages was there any exposing of mistakes.

    “”I don’t how many times I have to say this… people do not decide to buy more goods and services because they hold more money. Rather they acquire more money because they have made a decision to purchase more goods and services.””

    “I don’t agree. I think causation goes from money to nominal spending.”

    You did not even address his point. He did not say the causation goes from nominal spending to money. That would have made your reply at least constitute engaging the point.

    He said people do not decide to buy more goods and services because they hold money, but rather they acquire more money because they want to buy more goods and services.

    Wanting to acquire more goods and services is not satisfied with more money in the aggregate, more spending in the aggregate and higher prices in the aggregate. People do not have a desire to consume more goods and services merely because they have money.

    You misunderstant the relationship between money, spending and real goods. You completely ignored the real goods and services that makes money valued at all.

    The argument that people acquire money because they want to purchase more goods and services is NOT an argument that people get more money when there is more spending, nor is it an argument that people want to acquire money because they have made a decision to “spend”.

    His point is correct, yours is not even relevant.

    Yes, the causation between “spending” and “money” is that more money causes more spending. But people don’t want to just spend more and consume the same. People want to consume more and spending more is a means to that.

    If spending increases without an increase in real production, then a desire to acquire more money so as to purchase more goods is not satisfied.

    In a free market, the acquisition of more money will not make everyone better off, it will only make the individual better off relative to their peers, unless there is an aggregate increase in production, in which case the individual acquiring more money, which all else equal reduces the money incomes of others, makes everyone materially better off despite the lower incomes, because prices fall by more than wage rates or profit rates.

    “ote that more money leads to more nominal spending whether the money is introduced by buying assets of from a helicopter, it makes no difference.”

    More nominal spending by exactly whom, and exactly when? How exactly does my income rise, and when does it rise, by this inflation process in addition to what earns me money through regular competition?

    Abstracting from relative values and the factor of time, and thinking about aggregates without any time factor, is the path to confusion.

    If a central bank buys assets tomorrow, my income is not raised at that time by a single nickel. That additional money goes into the pockets of the initial receivers. It also takes time before any additional spending they then bring about, to be respent and respent from person to person until finally those who I offer goods and services will be in a position to spend more money on me.

    “Wages were certainly sticky in 1921, they fell much more slowly than prices. The year 1921 say the largest increase in real wages of the entire 20th century And the fact that the depression lasted after 1931 has no bearing on the sticky wage theory, because prices continued falling after 1931. You don’t seem to understand what the term “sticky wages” means, it does not mean rigid wages, it means adjusts more slowly than prices.”

    This entire passage is wrong. First, wages did not fall “much more slowly” than prices. They fell more slowly than prices for sure, but “much more” is an exaggeration for rhetorical effect. Wage rates were falling much more quickly than they did in the 1930s, and would have approached what you might call “equilibrium” soon after had it not been for the Fed reinflating.

    Second, prices falling past 1931 does indeed have “bearing” on sticky wage theory. You just referred to falling prices and a (false) analysis on “sticky” wages after 1920.

    Third, sticky wages is NOT a theory that “wages adjust more slowly than prices”. It is the theory that wage rates adjust slowly to changes in the nominal demand for labor. Prices have nothing to do with this. If real productivity doubled and prices halved, or if real productivity halved and prices doubled, THAT would have “no bearing” on sticky wage theory because in these cases, product sales revenues are unchanged, and there is no downward pressure on profits or demand for labor, given these events.

    Fourth, you just accused Ray for having the character flaw of having the combination of being overconfident and under-informed.

    You need to take a good look in the mirror. It is OK to admit you have wasted many years and lots of money on malinvestment of the intellect.

    “Like MF, you have the amazing ability to be wrong about everything”

    You have not SHOWN anything I have ever said to be wrong. You have an amazing ability in believing that merely wanting to believe I am wrong “about everything”, somehow constitutes an actual argument showing exactly how I am wrong.

    I am not going to be so innane and claim “everything” you write is wrong, because I am not as worried as you about having my worldview demolished over and over again if I am grant you one single agreement. I find lots to agree with in your critiques of Keynesianism. You are just almost always wrong about money, because of your arbitrary socialist ideology towards it, that’s all.

    You know deep down that my worldview is so consistent and well connected, that granting the validity of ANY premise in what I write, would logically necessitate you to accept the entirety of it. That is why you have to believe and convince yourself that “everything” I write is wrong. Either you agree with one thing I write and thus logically accept everything, or pretend everything I write is wrong.

    If you want to refute anything I say, you are going to have to strike the root of it, because it all depends on it. You have publicly stated you are not interested in epistemology or ontology, or the philosophy of knowledge or the philosophy of science. How in the world can you possibly believe that you have corrected anything I wrote? Your weak minded followers either name call, or pretend that ignoring my comments is going to minimize their validity. An irony is that the most crude and crass among your followers, who are least well equipped to find better arguments and new knowkedge, are seemingly the most concerned about truth. Whether it is from fear or hate or whatever, they care about those core ideas. They are relatively the most likely to find a critical error in the root of my entire worldview.

    But in your case, your worldview is schizophrenic and muddled with contradictions. I don’t believe in the myth that these contradictions are either not contradictions or are necessary for the sake of some higher duty, be it pragmatism or in your case nationalism. I can accept a lot of what you write without having to accept the entirety. I am not afraid like you in this respect.

  62. Gravatar of Saturos Saturos
    23. December 2014 at 18:22

    Utterly off topic, but Scott, do you know anything about this Korean movie that Thomas Piketty recommends?
    http://www.theguardian.com/film/2014/jun/20/snowpiercer-first-look-review-edinburgh-2014

  63. Gravatar of Adam Platt Adam Platt
    23. December 2014 at 18:28

    Yet another blatant Fisherian fallacy.
    http://www.economist.com/news/finance-and-economics/21636750-new-book-prescient-economist-lets-get-fiscal?fsrc=scn/fb/wl/pe/letsgetfiscal

    The article (and Koo’s work) is full of fallacies, but this is the line that nearly made my head explode:
    “Private sectors in most countries in the West today are minimising debt or maximising savings in spite of zero interest rates, behaviour that is at total odds with traditional theory,” he writes.

    NO! It’s as if the editors of The Economist have never heard of the Fisher Hypothesis. If inflation and growth expectations are too low, it makes perfect sense that the private sector would minimize debt even at 0% Nominal rates.
    Aside from that the article basically just rehashes the same nonsense that one always hears in the economic establishment (“Monetary policy can only do so much.” “We need more fiscal stimulus”, etc…). Maddening to read in a publication called “The Economist”.

  64. Gravatar of Brian Donohue Brian Donohue
    23. December 2014 at 19:36

    @Adam, very shabby by The Economist. Disappointing.

    What ensues from a balance-sheet recession but deleveraging and a protracted recovery? Didn’t we know this years ago?

    Household and business deleveaging may be drawing to a close, but gubmint needs to straighten out its own self. Five years into the recovery, federal debt is $18 trillion and still growing as fast as the $17 trillion economy, with every year now another turn of the Baby Boomer Entitlement Tsunami screw.

  65. Gravatar of TV Calendar TV Calendar
    23. December 2014 at 21:44

    Two-year treasury yield is the highest it’s been since 2011……

  66. Gravatar of Ray Lopez Ray Lopez
    23. December 2014 at 21:46

    @Nick – “Sometimes I should just link to wiki in answer to questions like that, but I’m not that honest.” – start then. Wikipedia is a good resource for first-approximation answers to questions. Landsburg is unbalanced, like our host. A supposed free-marketeer yet misogynist and somebody who spews wrong answers just to get publicity. An abuser of his position as a public intellectual. I hate to be his student (same with Sumner).

    @MF – right on brother! I learn a lot from reading your posts. In particular, I enjoyed just now learning about how “sticky wages” are really defined. I thought Sumner was lying or ignorant when he said sticky wages simply mean wages fall slower than prices, as I don’t recall economists making that distinction. And I was right.

    @Sumner – run away little man! Just as I predicted. Everything MF says I adopt. For purposes of discussion, though we’re two different people with different ideas, MF is me, I am MF. Engage in debate you intellectual coward.

  67. Gravatar of Ray Lopez Ray Lopez
    23. December 2014 at 23:42

    @Brian Donohue – please don’t drink the Kool-Aid, see http://marginalrevolution.com/marginalrevolution/2013/09/why-michael-woodford-supports-monetary-tapering-kaminska-wins.html

  68. Gravatar of James in London James in London
    24. December 2014 at 02:38

    Ken Duda
    Lovely thought. It would make for a lovely Xmas gift. Who knows? I will be up early tomorrow to find out.

  69. Gravatar of Nick Nick
    24. December 2014 at 04:16

    Ray,
    Wiki is indeed a good resource! I have to say I’m a little disappointed with your answer … It’s boring and literal. Imagine for a moment that I (and other readers of his blog) are fully aware of wikipedia, and expect all individuals opinions to be ‘unbalanced’ in one way or another. Do you have anything left for us? When you defend Gold I at least see links to things I haven’t read before on occasion.

  70. Gravatar of Ben J Ben J
    24. December 2014 at 04:50

    I took a look at the Marginal Revolution comments, and everyone there seems to agree that Ray is having some sort of weird econ blogosphere commenting meltdown. Ray previously said the MR commenters are much smarter than us, so I suppose I’ll take their word for it. Take a Valium and have lie down Ray!

  71. Gravatar of Brian Donohue Brian Donohue
    24. December 2014 at 06:27

    @Ray,

    I stand by my comment in that year-old thread, although I’ve warmed more to MM in the past year.

    The Fed did taper this year, as the economy strengthened.

    Inflation is falling and TIPs spreads are well under 2%. There is still slack in the economy. Forward guidance from the Fed that economic slippage will be met with continued accommodation is a good thing (Chuck Norris don’t have to do anything).

    There is no asset bubble. Interest rates reflect the demographic New Normal. Get used to it.

    The people that need to be listening to Scott right now are in the ECB.

    The fact that you simultaneously gush over Krugman and embrace goldbuggery tells me that you’re flat-out trolling. Merry Christmas!

  72. Gravatar of Brian Donohue Brian Donohue
    24. December 2014 at 06:58

    @Ray,

    Back to Woodford. Ok, the Fed has a $3 trillion portfolio. With the end of QE, this will decline as the portfolio matures.

    If inflation is low (or we have deflation), the Fed will turn a tidy profit on its portfolio, like any other investor.

    If inflation is higher, the Fed will suffer some losses. The whole risk is in a couple hundred billion range.

    Now over here, we have the Treasury’s $18 trillion (and growing) Federal debt.

    If inflation is low (or we have deflation), this will become crippling, particularly as the entirely predictable Baby Boomer Entitlement Tsunami unfolds.

    If inflation runs 2-3%, we just might be able to get on top of this.

    Plus, still slack in the economy.

    Plus, under deflation, the rich get richer just by being rich. I want the rich to sweat a little, take a little risk, invest in the economy. 2% inflation is a good nudge.

  73. Gravatar of Mike Sax Mike Sax
    24. December 2014 at 07:16

    So when we’re talking about Keynesianism it’s ‘dead’ because of bad predictions but when we’re discussing Monetarism it’s not dead because bad predictions in no way discredit a model.

  74. Gravatar of ssumner ssumner
    24. December 2014 at 09:47

    Ray, If you took a few courses in macro you might be able to understand Bernanke’s views on sticky wages. You are far from that point. I’m quite confident that Bernanke would agree with me, not you. Unless you provide evidence to the contrary, I’ll assume that Bernanke knows what the phrase sticky wages means.

    Regarding Landsburg, you forget this part:

    “Landsburg issued an apology in which he said that he had assumed all of his regular blog readers would know that he found rape repugnant, and that the point of the post was to illustrate the paradoxes that arise when trying to prove such obvious conclusions from first principles.”

    So you have to read Wikipedia to find out who he is, and then provide information out of context, just like you frequently do over here with Bernanke. About what I would have expected from someone has devoid of ethics as you seem to be.

    Oh, and in the Bible it says; “There is no God.” Scandalous!

    You said:

    “BTW what I know about Landsburg has nothing to do with the theory of free trade as I outlined above, which BTW is not my original work, and you should be aware of it, are you?”

    On no! I assumed that no one had applied game theory to international trade negotiations before you! I’m so disappointed to find that you didn’t create that theory.

    Seriously, thanks for the laughs.

    Ken, I agree that NGDPLT should have appeal to people on both the left and the right. It won’t happen right away, but I think time is on our side.

    Philippe. No it has nothing to do with whether it’s spent on bonds or gold or buildings. It depends on how it affects the path of government spending and taxes.

    dtoh They enter into the transaction because they are offered an attractive price. A penny more than the market price. So they make a penny profit. And what does that tell us?

    Saturos, Yes, it’s sort of entertaining, but hardly the best film. Piketty likes it because it is socialist propaganda. In other words, don’t rely on his movie reviews, he views films through a very narrow lens. The director’s Korean films are far better, if you want to see one of his films.

    Mike Sax, Actually old monetarism is almost dead.

  75. Gravatar of ssumner ssumner
    24. December 2014 at 10:12

    (I deleted a Daniel/Mike slugfest, which was getting tiresome even by the depraved standards of this comment section.)

  76. Gravatar of ssumner ssumner
    24. December 2014 at 10:22

    Mike, I’d add that you misinterpreted my comment (which was from an older post, I had to check.) I wasn’t saying that bad predictions should not discredit a model, I was referring to the fact that Keynesianism (and Austrianism?) has not been discredited in many people’s eyes despite lots of bad predictions. Reread the comment. Of course it’s a grey area as to how many bad predictions should be allowed, in an imperfect science like economics.

  77. Gravatar of Mike Sax Mike Sax
    24. December 2014 at 10:57

    Yes I had intended to put this comment on the other post.

  78. Gravatar of Mike Sax Mike Sax
    24. December 2014 at 11:04

    Actually this is the comment I actually had in mind.

    “And of course Friedman made some bad predictions in the 1980s (but since when do bad predictions discredit a model?)”

    http://www.themoneyillusion.com/?p=28226

  79. Gravatar of dtoh dtoh
    24. December 2014 at 17:47

    Scott,
    You said; “They enter into the transaction because they are offered an attractive price. A penny more than the market price. So they make a penny profit. And what does that tell us?”

    As soon as the Fed makes the bid, that’s the new market price. Selling doesn’t make the seller a profit, it only allows them to recognize the profit. There has to be an ultimate counter-party to the trade who wants to exchange a financial asset for money. So again…tell me why the counter-party decides to make the exchange of financial assets for money.

  80. Gravatar of ssumner ssumner
    24. December 2014 at 19:38

    Mike, I know and I was being sarcastic. Krugman keeps making these wrong predictions, but the Keynesian model marches on, while everyone insists old monetarism is dead. That’s what the “since when” meant.

    dtoh, Because the price is attractive enough to make them want to sell. Not because they need the cash. If the Fed bought assets from me, I’d take the cash and immediately buy more assets.

  81. Gravatar of dtoh dtoh
    24. December 2014 at 21:09

    Scott,
    Come on.

    Did you give up on EMH or have you bought into the MF Cantillon Effect school of thought. Other assets will instantaneously reprice as soon as the Fed makes a bid.

    And, as I have said there has to be an ultimate buyer who takes money for the financial assets, otherwise the OMP just results in an increase in ER with no effect.

    So please answer the question, why does the ultimate counter-party exchange the assets for money?

  82. Gravatar of Philippe Philippe
    25. December 2014 at 03:47

    dtoh, why do you think the ultimate counter-party exchanges the assets for money?

  83. Gravatar of ssumner ssumner
    25. December 2014 at 07:44

    dtoh, My answer had nothing to do with the EMH, nor did it have any implications for Cantillon effects. If you don’t like my answer, tell me why you think people sell assets to the Fed, then I’ll explain why you are wrong.

    And there are no “ultimate buyers,” as what makes money special is that it’s a hot potato.

  84. Gravatar of dtoh dtoh
    25. December 2014 at 07:47

    Phillipe,
    The Fed doesn’t pay for the Treasuries with apples. The ultimate counter-party ends up with the money….MB to be specific. Of course, if the ultimate counter-party is a financial institution, then the money just goes into ER and the OMP have no effect. And… there can of course be some asset shuffling going on, e.g. a bank sells Treasuries to the Fed and makes new auto-loans, but at the end of the chain, there has to be a counter-party who is exchanging financial assets for money.

  85. Gravatar of ssumner ssumner
    25. December 2014 at 08:02

    dtoh, Obviously I agree that when the demand for base money rises at the same rate as the supply of base money, there is no effect. But I don’t see where you are going with that. It’s equally true for cash injections that sit in safety deposit boxes.

  86. Gravatar of dtoh dtoh
    25. December 2014 at 08:16

    Scott,
    As far as I can tell the supply and demand for base money are always equal. OMP works because it drives up the demand for real goods and services through expectations and/or by raising the price of financial assets relative to the price of goods and services. The resulting marginal increase in the exchange of financial assets for goods and services increases the demand for base money….which the Fed simultaneously supplies. It’s like ying and yang. The Fed can’t increase supply (absent helicopter drops) unless they simultaneously induce an increase in demand.

  87. Gravatar of Philippe Philippe
    25. December 2014 at 09:11

    “OMP works because it drives up the demand for real goods and services through expectations”

    But that won’t necessarily work if there isn’t a direct effect of OMPs that is not dependent on expectations.

  88. Gravatar of dtoh dtoh
    25. December 2014 at 09:32

    Phillipe,
    You don’t need expectations. If the price of financial assets rises relative to the price of good and services, there will be a marginal increase in the exchange of financial assets for goods and services. The Fed causes this by bidding up the price of financial assets.

  89. Gravatar of Daniel Daniel
    25. December 2014 at 09:51

    dtoh,

    Dude, you really gotta give up on your fixation with “financial assets”

    http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/01/is-the-macroeconomic-importance-of-finance-an-artefact-of-monetary-policy.html

  90. Gravatar of Philippe Philippe
    25. December 2014 at 09:56

    dtoh, so what people refer to as the wealth effect.

  91. Gravatar of dtoh dtoh
    25. December 2014 at 10:31

    Phillipe, I think the term “wealth effect” is not particularly useful. It is both a misleading and incomplete way to describe the underlying phenomenon. An increase in financial asset prices could equally induce a) a billionaire with a large financial portfolio to sell securities and build a new vacation home, b) someone with zero wealth to take out a new car loan, c) a firm to draw down on a capex line of credit to add a new line in a factory, or d) you or me to go out for dinner and run up our credit card balances

    In each case, there is an exchange of a financial asset for real goods or services which is caused by an increase in the price of the asset relative to the price of the good or service.

  92. Gravatar of Philippe Philippe
    25. December 2014 at 10:53

    in the case of a car loan the asset being exchanged for a real good is money.

  93. Gravatar of Philippe Philippe
    25. December 2014 at 11:33

    I mean, if the cb buys a bond from someone, and that person makes a car loan, that car loan is a liability of the person who buys the car with money. The original bond has been ‘exchanged’ for a loan, not for a car. The car loan represents a newly issued liability o the person who buys the car. The financial asset that is exchanged for the car is money.

  94. Gravatar of dtoh dtoh
    25. December 2014 at 15:48

    Phillipe, money is simply the medium of exchange used to effect the exchange of the financial asset for the car. The net transaction to the car buyer is an exchange of a financial asset (the car loan) for the car.

  95. Gravatar of Philippe Philippe
    25. December 2014 at 16:18

    ok, but the loan is not an asset to the car buyer, its a liability. So when you say ‘exchange a financial asset for the car’, you mean issue a liability, or borrow money, to buy the car.

    So you’re saying more people might be tempted to go into debt to buy a car, due to lower interest rates resulting from the liquidity effect of OMPs…yes?

  96. Gravatar of dtoh dtoh
    25. December 2014 at 18:11

    Phillipe – Don’t get caught up with long (positive) and short (negative) positions. The car buyer is still exchanging a financial asset for the car. He or she is just taking a short position (as opposed to someone who has a lot of financial assets and is reducing their long position.)

    People seem to get confused when traversing from positive to negative. It’s the same problem people have with interest rates, which is why it’s better to talk about financial assets in terms of price rather than yield (e.g. interest rate.)

    In response to your second question. Yes and no. They go into debt (i.e. hold less financial assets) because the price of the financial asset has risen relative to the price of the car (or they have changed expectations about future GDP…and possibly their own future income.) I would not describe it as a liquidity effect.

  97. Gravatar of ssumner ssumner
    25. December 2014 at 20:27

    Dtoh, I certainly agree that asset prices generally respond faster than goods prices, but I still think that’s a side issue. The key point is that the extra money will lead to more nominal demand for goods and services. That would be true even in an economy that lacked financial assets, where all you had were goods and cash.

  98. Gravatar of Philippe Philippe
    25. December 2014 at 20:47

    “They go into debt (i.e. hold less financial assets) because the price of the financial asset has risen relative to the price of the car”

    ?

    People might choose to borrow more because the cost of borrowing has gone down. That seems like a more sensible way of describing it.

  99. Gravatar of dtoh dtoh
    25. December 2014 at 21:44

    Phillipe – You can describe it either way. It’s the same thing. In terms of thinking about an exchange of one item for another item, it’s sometimes more convenient to think about the price of one item changing relative to the price of the other item, but as I said either way works. For the purpose of looking at monetary theory, I tend to think of asset prices as (1 – the annualized expected after tax risk adjusted IRR)/1 (e.g. a risk free bond paying no interest has a price of 100). That allows you to assume that all financial assets are fungible and have the same price, which is sometimes useful.

    I’d just use whatever makes it easy for you to understand. I spent time on the bond desk at an IB so for me prices and interest rates (yields) are just different ways of saying the same thing. Sometimes one is more convenient; sometimes the other is better.

  100. Gravatar of dtoh dtoh
    25. December 2014 at 22:04

    Scott,

    “I certainly agree that asset prices generally respond faster than goods prices, but I still think that’s a side issue.”

    That is a huge understatement. If wages and prices (of goods and services) were not sticky (i.e. more sticky than the price of financial assets), then monetary policy would be totally and completely and utterly unnecessary (and also totally ineffective).

    The key point is that the extra money will lead to more nominal demand for goods and services. That would be true even in an economy that lacked financial assets, where all you had were goods and cash.”

    Obviously! In that scenario Fed OMP would consist of the CB buying goods with cash so of course the extra money would boost demand. Or alternatively…. if the tool for monetary policy in that scenario was helicopter drops, then expectations would adjust and the effect of any helicopter drop would be exactly equivalent to a redenomination of the currency and have no effect.

    You have to give up the bumper apple crop analogy. It’s not applicable. Money does not just spontaneously appear like apples in a good year. The Fed has to create the demand for money in order to supply it. They do this through expectations and/or by adjusting financial asset prices.

  101. Gravatar of Brian Donohue Brian Donohue
    26. December 2014 at 07:48

    Scott and dtoh, good conversation. thanks.

  102. Gravatar of Jeff Jeff
    26. December 2014 at 13:28

    Ken and Scott both think that NGDPLT should appeal to both Keynesians and Austrians. If only. The only people arguing for crude Keynesian policies are political liberals whose answer to everything is to grow the government. Krugman, for example, is not too stupid to understand how and why NGDPLT would work, but he doesn’t actively support it because the state of the economy doesn’t matter to him as much as his political ideology does.

    Meanwhile, the Austrians, at least the ones who show up in the comments section here and at other websites, are too busy arguing over the definitions of words to be convinced of anything they didn’t think of themselves. I used to consider myself something of an Austrian until these guys showed up and gave the term a bad name.

  103. Gravatar of W. Peden W. Peden
    26. December 2014 at 14:53

    Jeff,

    The upside is that NGDPLT often appeals to academics and policymakers (including those of a Keynesian or Austrian persuasion)in part precisely because of why it doesn’t dominate the commentsphere: it doesn’t tie in neatly with any simple set of solutions.

    And don’t let the Austrolls steal the good name of the Austrian School. Mises, Hayek, Kirzner et al were never about being boorish, but about being rationally persuasive, and we are all the heirs of their efforts.

  104. Gravatar of Negation of Ideology Negation of Ideology
    26. December 2014 at 17:51

    W. Peden –

    I’m not sure I’d include Mises in your never boorish list. Milton Friedman tells the story of his intolerance here:

    “Fritz Machlup was a student of Mises’s, one of his most faithful disciples. At one of the Mont Pelerin meetings, Fritz gave a talk in which I think he questioned the idea of a gold standard; he came out in favor of floating exchange rates. Mises was so mad he wouldn’t speak to him for three years.”

    http://reason.com/archives/1995/06/01/best-of-both-worlds/4

    But I agree with your larger point. We shouldn’t judge the Austrian School by the rantings of internet trolls. However, I do wonder why such a high percentage of internet trolls subscribe to that philosophy.

  105. Gravatar of Jeff Jeff
    26. December 2014 at 20:48

    I think my real problem with the Austrians is that they make few, if any, empirical predictions that are different from predictions you would get from neoclassical economics. This makes it hard to evaluate statistically whether there’s any there there.

    I do like the Austrian emphasis on markets as a discovery process, an insight most traditional economists rarely think about. Products are constantly being improved in steps both small and large. Millions of innovations take place year in and year out. Nobody plans this all out, it just happens as a side effect of competition between product suppliers. The idea that the government is somehow going to improve on this process is laughable, but non-Austrian economists don’t seem to understand or care.

  106. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 00:34

    Sumner:

    “Ray, If you took a few courses in macro you might be able to understand Bernanke’s views on sticky wages. You are far from that point. I’m quite confident that Bernanke would agree with me, not you. Unless you provide evidence to the contrary, I’ll assume that Bernanke knows what the phrase sticky wages means.”

    A good macro course in economics does not need to contain Bernanke’s personal views on what sticky wages means. A good macro course will define and treat sticky wages as wages that adjust more slowly than demand for labor.

    If wage rates instantly adjusted to demand for labor changes, then there would never be any non-frictional unemployment. Prices of outputs would have no bearing on employment. That is why macro models don’t treat sticky wages as wages that adjust more slowly than output prices. The way output prices are related to sticky wages in most macro textbooks is by way of reference to real wages. In many models, employers and employees are modeled as negotiating “real” wages, whereby real wages above some target level leads to unemployment. But even in those cases, the link between output prices and wages is demand for labor. The only connection between falling output prices and unemployment is when the fall in prices is accompanied by a fall in quantity of goods/services demanded, in which case firms earn fewer revenues which then leads to a fall in nominal demand for labor. In other words, it has nothing to do with output prices per se, but on spending variables. If technological innovation leads to increased productivity and increased supply, and thus falling unit costs and unit prices, then it is not the case that wage rates not falling is a case of sticky wages and its effects on employment. Firms are not earning fewer revenues or profits in this circumstance. It is when the lower output prices are accompanied by lower output that prices are connected to sticky wages.

    I think the response you made that suggested you were talking about what Bernanke believed sticky wages means all along, is off the wall. You wrote: “You don’t seem to understand what the term “sticky wages” means, it does not mean rigid wages, it means adjusts more slowly than prices.”

    How can anyone read this as you referring to what Bernanke believes?

    ————————

    Jeff:

    “I think my real problem with the Austrians is that they make few, if any, empirical predictions that are different from predictions you would get from neoclassical economics. This makes it hard to evaluate statistically whether there’s any there there.”

    This is something Austrians understand as a strength, not a weakness. As Mises never tired in pointing out, there are no empirical constants in the field of human action.

    Since statistical prediction making is a method that presupposes the existence of empirical constants, Austrians know that using that method in economics does not work. It fails because the subject matter does not follow the process that empiricism requires. In other words empiricism does not work in economics because the structure of the subject matter is completely different from what empiricism requires in order to be effective.

    Can you predict what you will learn over the course of the next year, before you actually go out and learn the next year’s worth of knowledge? The answer is trivial. It’s no. If we assume you could predict what you will learn over the next year, and know it now in the present, then that would require us to conclude that you are a entity that can know something before you actually go out and learn to know that something. Clearly that is illogical.

    Knowledge is a very special phenomenon. Knowledge is not like a constant mechanical process. Knowledge is a form. Empirical predictions are a content. What empiricists are trying to do is predict the form by ignoring it and considering only the separate contents.

    Knowledge is absolutely unpredictable. Knowledge acquisition is something that MUST be experienced by the subject. It absolutely cannot be predicted. Knowledge cannot be known before it is known.

    Now, to the extent that knowledge affects our actions, we can then conclude that actions also absolutely cannot be predicted.

    And it is not merely a question of degree and accuracy, like many empiricists retreat to when confronted with their lack of discovering any empirical constants in economics the way physicists and chemists have discovered such constants in mechanical processes as in thermodynamics, biochemistry, and engineering.

    Knowledge and actions are game changing points of departure from methodology. Knowledge and actions cannot be understood as caused by empirical constants. Even if you attempted to find such a constant, you would invariably be frustrated by failure, because the very process of trying to find such a constant, would presuppose you own mind as capable of learning, and learning something new changes who you are. In short, it is impossible for you to find any empirical constant in your actions, because the act of learning any such constant would require an absence of constancy in your mind.

    The reason why empiricism works so well in the natural sciences is because human knowledge is itself logically structured to assume a constancy in whatever action comes into contact with, i.e. the non-acting portion of the universe. Action does not contain any empirical constants in the content, which is why emoiricism does not work in economics, but action is constant in its form, i.e. means and ends, profit and loss, counting, etc, and so the constant form of action gels with the constant content of the non-acting material part of the world.

    The science of forms is not a posteriori, but a priori. Thus mathematics, formal logic, economics, and philosophy are all a priori. They are the sciences that are grounded on the form of human knowledge acquisition, and action in general. They are not intended, “designed”, to make any empirical predictions of content.

    A mathematician can tell you why the form of an argument is true, but he cannot tell you what the content will be that will eventually be observed.

    Do you chastise the mathematician or the logician for not making predictions? No, right? Well Austrians regard economics as a science in the same department as mathematics, philosophy, and logic.

    Personally, I am baffled at how after over at least 60 years of empiricism now making up the mainstream of economics worldwide, the total absence of any empirical economist anywhere ever having discovered an empirical constant in economics has not at least called into question the validity of empiricist methodology in economics.

    I study the history of economic thought, as well as the history of the philosophy of science, and I can tell you that there has been many instances whereby what the mainstream consensus happened tobe at one time, ended up being learned by the consensus as wrong sometime later, sometimes many generations. It took literally hundreds of years before the consensus on “usury” shifted. Actually, the consensus on “usury” has wavered over the centuries. The consensus from Aristotle’s time all the way up to Aquinas’ time, was that interest was immoral and against natural law.

    Austrians know that “natural” interest is a category of human action. Action is a phenomenon whereby all else equal, want satisfaction in the present is worth more than want satisfaction in the future. We act now because utility is, ceteris paribus, worth more to us now than later.

    “I do like the Austrian emphasis on markets as a discovery process, an insight most traditional economists rarely think about. Products are constantly being improved in steps both small and large. Millions of innovations take place year in and year out. Nobody plans this all out, it just happens as a side effect of competition between product suppliers. The idea that the government is somehow going to improve on this process is laughable, but non-Austrian economists don’t seem to understand or care.”

    Right. Now apply that exact same thought towards money production and distribution.

  107. Gravatar of W. Peden W. Peden
    27. December 2014 at 03:01

    Negation of Ideology,

    I was thinking of Mises’s published works. We’re all unpleasant in our personal lives sometimes!

    I don’t think it’s a coincidence that (a) heterodox economic theories are relatively non-mathematical and (b) heterodox economic theories are popular online. This doesn’t tell us anything about the truth of Post-Keynesian or Austrian School ideas, but it would be expected to be part of their appeal to people who want quick arguments. It would also explain why the really technically difficult parts of Austrian School economics (like the Regression Theorem or Hayek’s capital theory) are found less online than the more sloganish bits.

    Jeff,

    Agreed, but contrary to what some Rothbardians and Misesians would say, the Austrian School’s economic ideas are detatchable from their methodology. Hypotheses about opportunity cost, the importance of entrepreneurship, and the dispersal of useful knowledge are testable. Some of the economists who have done empirical work on these issues (like McCloskey and Sowell) are some of my favourite empirical economists.

    And though I’m no anarcho-capitalist, I think that it’s a very good de-naturalising mental exercise in the social sciences to do what Rothbard does in “Man, Economy and State”, which is to consider an anarcho-capitalist set-up and THEN consider what difference adding in a state makes, rather than just always work backwards from a society with a state to that society without a state.

  108. Gravatar of Daniel Daniel
    27. December 2014 at 03:47

    Re: Austrian economics

    Whatever useful insights they had (and there were plenty of those) have already been integrated into mainstream economics.

    What’s left as distinctly austrian (the likes of praxeology) is radioactive sludge no sane man would touch with 10-foot pole.

    Oh, and regarding the regression theorem – no historian or anthropologist has been to find proof for such a thing occurring anywhere. So it’s pretty safe to say it’s false – along with everything that relies on it.

    As for praxeology – it’s not that it’s wrong, it’s NOT EVEN WRONG. Mises decided to throw any pretence of science out the window and just started making stuff up and claiming it’s unfalsifiable.

    Face it – the Austrians have no one to blame but themselves for their awful reputation.

    consider an anarcho-capitalist set-up and THEN consider what difference adding in a state makes

    Seeing as how the only way to be stateless is to be a nomad, I fail to see the point of such an exercise, other than to prove your freedom-loving (as long as you adhere to a particular definition of “freedom”, that is) credentials.

  109. Gravatar of Jeff Jeff
    27. December 2014 at 06:26

    MF,

    I actually have a copy of Human Action that somebody gave me once, but I’ve found it unreadable. Part of it is that translations from German always seem unreadable to me, but in the case of Mises it’s also that I find armchair reasoning to be a waste of time. If you’re not making falsifiable statements, you don’t have any way of knowing whether or not what you’re saying is correct.

    Thousands of philosophers through the ages have done the exercise of starting with a few unverifiable assumptions (usually arrived at via introspection) and then building a theory of how the world or society works on those assumptions. And they come out with thousands of different theories, none of which can be judged in relation to the others except by looking at how well they predict. Much of Mises seems like that to me. I’m with Friedman and the Positivists: Theories that don’t make empirical predictions cannot really be evaluated. I would go further and call them religions.

  110. Gravatar of Philippe Philippe
    27. December 2014 at 09:48

    “consider an anarcho-capitalist set-up and THEN consider what difference adding in a state makes”

    Historically, states came first and capitalism developed later. I guess by an “anarcho-capitalist set-up” you really mean a sort of ‘minarchist’ state with laissez-faire capitalism.

  111. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 10:05

    Daniel:

    “Whatever useful insights they had (and there were plenty of those) have already been integrated into mainstream economics.”

    Ah, the old reverse “useful” ex post criteria that is really nothing but an indirect way of saying the mainstream is ahead of Austrianism and serves as some standard bearer.

    All of Austrianism is useful, if you want to learn how markets work.

    In truth, the mainstream did not “integrate” the core of Austrian theory which is the epistemological foundation and logical category of economics. The mainstream could not, let alone may or may not have, integrated the theory that empiricism self-contradicts when applied to human action, as I only summarized above.

    The mainstream has also not integrated the concept of economic calculation, heterogenous capital, nor the nature of the effects of intervention versus non-intervention on the first two.

    ————

    Jeff:

    “I actually have a copy of Human Action that somebody gave me once, but I’ve found it unreadable. Part of it is that translations from German always seem unreadable to me, but in the case of Mises it’s also that I find armchair reasoning to be a waste of time. If you’re not making falsifiable statements, you don’t have any way of knowing whether or not what you’re saying is correct.”

    I don’t believe you’ve actually read it, but let us assume you have. OK, then what sort of statement is that one you made just there? That all statements that say anything true about the world must be falsifiable by experience?

    Clearly if you’re right, then the statement “All statements that say anything true about the world must be falsifiable by experience” must itself be either falsifiable by experience, and hence capable of saying something true about the world, or it is the kind of analytic statement that you dismiss as not useful and in the same category as Austrian statements.

    Let us suppose it is a statement of the second category, an analytic one. Then by your own argument it is arbitrary and merely a definition, a convention, of how we group terms. It would be a statement you seem to be condemning as not saying anything really true about the world. That would seem a dead end.

    Let us then suppose it is a statement in the first category. If that is the case, then you are obligated to treat the statement as a hypothesis only. That you can’t say it is absolutely true before actually testing all possible statements and finding no true non-falsifiable ones. For now you would be obligated to believe that it could always be in principle falsified at some point in the future through experience. But then if that is the case, then you must at least in principle be open to the possibility of being wrong, by way of being shown and then understanding statements that are true, but not falsifiable through experience.

    Tell me Jeff, have you even attempted to test that alleged falsifiable theory? Would you even understand a true non-falsifiable statement if you saw it, without having done the requisite study to be capable of doing so? Have you gathered every statement ever made and tested whether they are or are not true non-falsifiable and honestly not locate any? I am going to assume no. And yet you just asserted that every statement whatever must fall into one of these two categories, where the only ones that can say anything true must be falsifiable.

    You are making a non-falsifiable statement about human learning that you believe, and want me to believe, is nevertheless true.

    Can you explain that?

    If the statement “All statements that say anything true must be falsifiable, else they be analytic ones” is a hypothesis only, then it does not even qualify as an epistemological statement, that is, a statement of how humans learn truth about the world. It would be at best a suspended, qualified belief, which must in principle be open to the possible existence of true non-falsifiable statements.

    “Thousands of philosophers through the ages…”

    What the hell is this? Are you saying you have read the complete works of thousands of philosophers and then made an informed judgment of what all of them have written?

    Or are you making yet another statement you never tested, but nevertheless claim as true anyway?

    “…have done the exercise of starting with a few unverifiable assumptions (usually arrived at via introspection) and then building a theory of how the world or society works on those assumptions. And they come out with thousands of different theories, none of which can be judged in relation to the others except by looking at how well they predict.”

    Lol, so then what did you just so? NOT start out with a few unverified assumptions like the ones you have made above, including the unverified assumption that all true statements must be falsifiable? That you believe in something other than a non-falsifiable set of assumptions about how the human mind learns? That you somehow believe in something other than the unverified statement that all statements cannot in principle (before you have actually even thought about them all, let alone formally test them) be known as true or false except through filtering only falsifiable statements and testing them?

    “Much of Mises seems like that to me. I’m with Friedman and the Positivists: Theories that don’t make empirical predictions cannot really be evaluated. I would go further and call them religions.”

    So because you have just presented to me either a hypothesis only, or an arbitrary analytic statement, according to your own pronouncements, you nevertheless want me to believe what you say is true before either of us even test it?

    Jeff, if you’re with the positivists, you’re contradicting yourself.

  112. Gravatar of W. Peden W. Peden
    27. December 2014 at 10:17

    Philippe,

    No, I don’t mean that. And what happened historically isn’t usually relevant to a thought-experiment.

  113. Gravatar of W. Peden W. Peden
    27. December 2014 at 10:18

    (Meaning that something doesn’t have to have happened in order for us to think about it.)

  114. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 10:28

    Philippe:

    “Historically, states came first and capitalism developed later.”

    That is false. Historically private property existed before states, and all capitalism is is private property.

    Private property came into existence without any laws enforced by any state, or anyone. It came into existence by natural homesteading and free trade, and those are not acts of enforcement of one against anyone else. It is individual activity towards the natural world.

    I do not become a private property when you believe it is OK or when you accept it or when you recognize it. I become a private property owner when I act against the material world to make it suitable for my life. The only thing that can happen through action against the material world is that you either become a property owner yourself, or you violate the property rights of another. This is the case whether you or anyone else agrees with it or recognizes it.

  115. Gravatar of Daniel Daniel
    27. December 2014 at 10:36

    W. Peden

    Meaning that something doesn’t have to have happened in order for us to think about it.

    I think a proper question would be “Why hasn’t X happened, not even once, in the entire history of mankind ?”

  116. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 10:44

    Daniel:

    “Oh, and regarding the regression theorem – no historian or anthropologist has been to find proof for such a thing occurring anywhere. So it’s pretty safe to say it’s false – along with everything that relies on it.”

    It is a logical necessity. In order for any King or warlord to even be in a position of taking wealth from others and calling it taxation, it must have already been valued and owned by the victims.

    There is no evidence whatsoever for the regression theorem being falsified or refuted.

    “As for praxeology – it’s not that it’s wrong, it’s NOT EVEN WRONG. Mises decided to throw any pretence of science out the window and just started making stuff up and claiming it’s unfalsifiable.”

    That is not even an argument backed by any documentative evidence.

    Mises did not throw science out the window, he threw positivism out the window. You are presuming the non-falsifiable statement that all statements that say anything true about the world must be falsifiable through experience, and claiming it is true anyway. You are also contradicting yourself.

    “Face it – the Austrians have no one to blame but themselves for their awful reputation.”

    They don’t have an awful reputation. They have an excellent reputation. But even if their reputation is poor, that does not mean what they say is false. You seem to believe that if you believe my reputation from your perspective is bad, that I should cease believing what I believe. That is not the approach of an intellectual or someone interested in truth. That is the approach of someone who just wants acceptance and validation from his peers. You’ll believe in the most absurd myths if it means acceptance and having a “good” reputation.

    To the extent Austrian theory has any extent of a bad reputation, that is the prerogative of those who are imputing a bad reputation on the theory, it is not the flaw of the theory.

    You are not an intellectual, you’re a pundit who won’t think for himself, but seek validation from others as the means to rejecting or accepting a philosophy.

    “Seeing as how the only way to be stateless is to be a nomad, I fail to see the point of such an exercise”

    You fail to see because your initial assumption is false. It is not true that competing security and protection rather than a territorial monopoly, somehow requires as a natural law every individual being wandering nomads.

    “…other than to prove your freedom-loving (as long as you adhere to a particular definition of “freedom”, that is) credentials.”

    It is not your particular definition of freedom that is actual freedom. Your definition of freedom has some people initiating aggression against others in the name of the idea of nationalism. Zeig heil, or USA USA!, are the mantras of your religion.

  117. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 10:49

    Daniel:

    “I think a proper question would be “Why hasn’t X happened, not even once, in the entire history of mankind ?”

    What is so magical about past generations of people that requires them to have learned and passed on all truth and knowledge to you? Is there something special about your time that makes falsehoods in the consensus an impossibility?

    How many thousands of years did it take for market monetarism to arise as a theory? You claim it is the best, and yet 100 years ago some dufus could have easily said “Oh ya? If market monetarism is so good, why hasn’t it been accepted by the mainstream yet?”

    Your problem Daniel is that you are always letting your emotions cloud your reason. Maybe it is an oversized amygdala and undersized prefrontal cortex, or maybe you were not breast fed which has hampered your cranial development. Or maybe you’re just traumatized. Whatever is the case, it is not conducive to being able to understand that which you criticize.

  118. Gravatar of Philippe Philippe
    27. December 2014 at 11:56

    Moron,

    I suppose you think hunter-gatherer tribes are ‘capitalist’ societies.

    What you describe has nothing to do with the actual history of mankind.

  119. Gravatar of Daniel Daniel
    27. December 2014 at 12:18

    Phillipe,

    Like he himself said, Mises threw positivism out the window, therefore what actually happened is irrelevant.

  120. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 14:25

    Philippe:

    “Moron”

    LOL

    “I suppose you think hunter-gatherer tribes are ‘capitalist’ societies.”

    What is a capitalist? A capitalist is one who owns capital, i.e. means of production. That presupposes private property.

    What difference does it make what adjective you place in front of “society”, depending on the level of technology?

    “What you describe has nothing to do with the actual history of mankind.”

    Sure it does. What you describe is not consistent with history. History empirically falsifies your claims.

    If an individual or many individuals homestead land, and become owners of means of production, which surely took place in “tribal societies”, then “capitalism” is taking place.

    Even if you don’t pay wages, you’re still a capitalist if you own means of production and sell goods/services.

    You don’t even know what capitalism is ya noob.

  121. Gravatar of Jeff Jeff
    27. December 2014 at 14:43

    MF, what I said was perfectly clear, and since you seem to be confused, it’s certainly true that the statement that the correctness of theories that don’t make falsifiable statements cannot be known is itself a falsifiable statement. You can at least think about how to disprove it: come up with a theory that has no testable implications but which you can evaluate the correctness of. Most of the Mises stuff I read I could not think of a way to test. If I have to take it on authority, it isn’t science.

    Like Scott, however, I think arguing with you is a waste of electrons, so I will not reply to anything else you say in this thread.

  122. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 15:41

    Jeff:

    I wasn’t disputing the clarity of what you wrote. It was indeed clear. However what you wrote is problematic, that’s all.

    You write this time:

    “…it’s certainly true that the statement that the correctness of theories that don’t make falsifiable statements cannot be known is itself a falsifiable statement. You can at least think about how to disprove it: come up with a theory that has no testable implications but which you can evaluate the correctness of. Most of the Mises stuff I read I could not think of a way to test. If I have to take it on authority, it isn’t science.”

    There is in fact a way to “test” such non-falsifiable statements for correctness. You do so by logical deduction. Now all logical deductions require some initial, or foundational, statements from which the deductions are grounded, and since we cannot keep backwards deducing forever, as there would be nothing holding up the whole chain, we need a foundation that can be known as true without any other, external or additional statements to it. For such a statement or statements to qualify as true, they must be true within circumspection, or, in other words, known as true because there is no possibility it cannot be otherwise even in principle. Mises discovered that ACTION satisfies this. Action is an irrefutable foundation, as we cannot refute it even in principle, for any “refutation” would itself be an action.

    Action is multifaceted, despite the fact that it is just a single word. It is from this foundation, and the continuous integration of it in argumentation, that enables us to “test” the correctness of a non-falsifiable theory grounded on action, such as economics.

    That is now we test Austrian theory. It is not by way of observing that 5 pies were made instead of a predicted 3, but rather, logically testing a proposition by engaging in subjective introspection. This allows only some propositions in. It does not allow God, or immortality, or religion. It is a purely descriptive, real world, a priori, non-falsifiable by experience body of knowledge.

    It is good that you are at least willing and able to understand that the positivist statement must itself be falsifiable if it is going to at least be non-self-refuting. That puts you in the upper echelon of economic thinkers. Most economists who preach the one liners and “it must be falsifiable!” endless mantras have no understanding of this.

    How many economists have actually empirically tested their own method’s pronouncements? None! That is what gets me. Such pomposity and bravado about how positivism is King, and they don’t even bother to practise what they preach.

  123. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 15:42

    Jeff:

    “Like Scott, however, I think arguing with you is a waste of electrons, so I will not reply to anything else you say in this thread.”

    Your loss.

  124. Gravatar of Ben J Ben J
    27. December 2014 at 18:30

    Logical deduction is not a test. Saying so is sophistry. No pages of rhetoric or countless comments will change that.

  125. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 18:41

    Ben J:

    Testing for logical consistency is indeed a valid test for propositions that are not falsifiable by experience.

    Sophistry? I guess you’ve been visiting university campuses across the country and calling every mathematics department “sophistry”…

    You must be tired.

  126. Gravatar of Ben J Ben J
    27. December 2014 at 18:58

    More sophistry. Mathematicians do not make claims about the business cycle. You do, and your claims are unfalsifiable, and your “logical deductions” do not provide the tests required for your claims to be falsifiable. This has always been your weakest argument Major, and just as weak as when you were ‘Geoff’.

  127. Gravatar of Philippe Philippe
    27. December 2014 at 19:49

    a funny overview of the praxeology nonsense here:

    http://rationalwiki.org/wiki/Ludwig_von_Mises

  128. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 19:51

    Ben J:

    You haven’t shown any “sophistry” in what I wrote a first time, so saying “more” as if I did is inaccurate.

    Mathematicians don’t need to make claims about the business cycle or any other potentially empirical phenomena before what I said is a worthy analogy.

    And you fell back on asserting the unfalsifiable statement that they must be falsifiable before they can say anything true.

    The entire market process can be deduced from individual action. Not independent from observation, but verified a priori and not a posteriori.

    The theory of the business cycle is a logical deduction of the effects of non-market activity. It is a model to the extent that we observe non-market intervention by states or non-state aggressors.

    Whether or not we will actually observe either a free market process or not, is an empirical question outside the scope of the theory.

    ABCT explains what has happened in worlds with central banks, and it explains what takes place when a central bank acts. It doesn’t make any prections.

    Mathematicians do not make falsifiable statements, and you claimed that makes Austrian theory “sophistry”. Now you’re changing your argument and saying that non-falsifiable statements are in principle valid, but now we must not include reducing from action that takes the form of information degradation.

    If you’re just going to continue to no true scotsman your silly argument every time your last attempt is shown as flawed, then who is the sophist again?

  129. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 20:02

    Philippe:

    You haven’t shown how praxeology is “nonsense.”

  130. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 20:12

    Ben J:

    You do not need to empirically test the theory that a state monopoly over money that brings about credit expansion makes it impossible for investors in a division of labor to learn what consumer time preferences really are. You can know this by way of what the terms themselves mean and how they logically fit together.

  131. Gravatar of Philippe Philippe
    27. December 2014 at 20:17

    basically praxeology is based on lies like your whole personality, mf. The idea that everything in Misean economic theory is logically derived from the single ‘action axiom’ is farcical.

  132. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 20:27

    Philippe:

    “basically praxeology is based on lies like your whole personality, mf.”

    You have not shown that praxeology is based on lies, nor have you shown anything I said is a lie. Accusing people of lying is just you feeling exasperated at being unable to show how your beliefs are more true than mine.

    “The idea that everything in Misean economic theory is logically derived from the single ‘action axiom’ is farcical.”

    You have not shown how it is “farcical”.

    You don’t even understand it, so calling it farcical only shows an absence of substantive arguments in your gut feeling that something is wrong with it.

    You’re putting faith in your gut feelings, and you’re too afraid to educate yourself in it lest you expose your intellectual investment as a malinvestment.

    Any attempt to refute the action axiom would itself constitute an action.

    Your only choice is to accept what is true, or deny what is true. You can’t turn it false by denying it or using defeatist rhetoric like you’re doing.

  133. Gravatar of Philippe Philippe
    27. December 2014 at 20:34

    you haven’t shown that it isn’t farcical. All you’ve done is show how farcical it is, and what an illogical and nutty idiot you are.

    “Any attempt to refute the action axiom would itself constitute an action”

    So what.

    Idiot.

  134. Gravatar of Major.Freedom Major.Freedom
    27. December 2014 at 20:48

    Philippe:

    “you haven’t shown that it isn’t farcical.”

    http://rationalwiki.org/wiki/Negative_proof

    You have not shown what you claimed it was. You’re shifting the burden of proof.

    That rationalwiki article is a funny overview of your garbage.

    “All you’ve done is show how farcical it is, and what an illogical and nutty idiot you are.”

    Where did I make a farcical statement, and why exactly is it farcical?

    [crickets]

    “Any attempt to refute the action axiom would itself constitute an action”

    “So what.”

    So it means action is a synthetic a priori true statement, and satisfies the criterion of a logical deduction requiring a foundational premise in order to avoid an infinite regress.

    Idiot.

  135. Gravatar of Philippe Philippe
    27. December 2014 at 21:57

    “You’re shifting the burden of proof.”

    Hilarious. All you ever do is assert that your ideology is strictly logically derived from the ‘action axiom’. You have never shown this to be true. You simply assert it, over and over, without any substantive logical argument at all.

    “So it means action is a synthetic a priori true statement”

    “action” is a synthetic a priori true statement?

    Everything you write is moronic.

  136. Gravatar of sdfc sdfc
    28. December 2014 at 06:42

    MJ

    So you want banks to have the ability to issue notes as well as deposits.

    Just what is the advantage of introducing credit risk to the currency?

  137. Gravatar of sdfc sdfc
    28. December 2014 at 06:43

    MJ?

    MF

  138. Gravatar of Major.Freedom Major.Freedom
    28. December 2014 at 08:40

    Philippe:

    “Hilarious. All you ever do is assert that your ideology is strictly logically derived from the ‘action axiom’.”

    And you’re still shifting the burden of proof.

    No, I have never asserted that my entire ideology is derived logically. The deductions from action are all wertfrei, but I also advocate for individual liberty, a prescriptive idea, which is independent from economics/Austrian theory.

    “You have never shown this to be true. You simply assert it, over and over, without any substantive logical argument at all.”

    You never back up your claims that what I write is wrong. You never engage my challenges in what you write. You rarely if ever respond to simple questions (such as whether or not a starving person who blocks another starving person from his food, is killing that other person). You have never provided any substantive argument for why you believe you are entitled to violate my or anyone else’s property rights as derived from homesteading and free trade. You have never provided any reason why a subsequent visitor who uses violence to oust the homesteader, and not the homesteader, should have their plans implemented on the land.

    What is hilarious is reading your hypocrisy that you don’t even seem to be aware of.

    “So it means action is a synthetic a priori true statement”

    “”action” is a synthetic a priori true statement?”

    Well if you want to get technical, it is “Individuals act”, or “I act”, or “you act”, or “Humans act”. “Action” by itself is a shorthand. It is assumed you know we’re talking about people.

    “Everything you write is moronic.”

    You have not shown anything I wrote to be moronic. “You just keep asserting it over and over and over again.” Lol

  139. Gravatar of Major.Freedom Major.Freedom
    28. December 2014 at 08:51

    sdfc:

    “So you want banks to have the ability to issue notes as well as deposits.”

    “Just what is the advantage of introducing credit risk to the currency?”

    Introducing? There already is credit risk in the currency. The overwhelming bulk of the money supply consists of money created through credit expansion unbacked by saving, where default on that credit literally destroys money and reduces the money supply. This is what acutely took place during the early 1930s. The money supply shrank by about a third. People have been living with credit risk in the currency since before our parents were born.

    Monetarists want this. They want banks to be structured on fractional reserves. I don’t see how you are making this something I am wanting to have introduced as a novelty.

    But that isn’t what is implied in free market currency anyway. What is implied is for banks to issue anything they want to willing acceptors, provided they do not have any government enforced monopolistic or oligopolistic privilege.

    I want everyone to be legally permitted to create paper money that they can use as money without threats of violence to coerce them otherwise (as in our present system where we must pay taxes in currency that includes money created by bank credit) so that everyone will voluntarily not accept paper anymore. They will begin to accept what is in their own best interests, not what is in the best interests of the special interest groups, the controllers of the state or the Federal Reserve System.

  140. Gravatar of Negation of Ideology Negation of Ideology
    28. December 2014 at 12:23

    Major –

    “Monetarists want this. They want banks to be structured on fractional reserves.”

    Milton Friedman’s 1959 “A Program for Monetary Stability” advocates Irving Fisher’s 100% reserve plan. He wrote a new preface for the 1992 edition saying he still advocated it. So the the most famous monetarist didn’t want banks to be structured on fractional reserves for most of his professional career – and maybe the rest of his life, I have not found any writing from him after 1992 on the topic.

    I assume many, perhaps most, monetarists support fractional reserve banking, but is certainly not an inherent part of monetarism.

  141. Gravatar of Philippe Philippe
    28. December 2014 at 13:05

    “you’re still shifting the burden of proof”

    You haven’t presented a substantive argument to back up your assertions. There is no reason why should I be obliged to waste more of my time responding in depth to your unfounded assertions.

    “but I also advocate for individual liberty”

    You constantly conflate your political/moral ideology with economics.

    For example you will assert that government action causes economic ‘distortions’ or ‘errors’, which sounds like you’re making an economic argument. Then it turns out that what you actually mean is that actions by existing governments are necessarily wrong for moral reasons. This assertion is based on your beliefs regarding who is morally entitled to do what.

    So in the end your argument, which was masquerading as an argument about economics, was actually just an assertion of your beliefs regarding morality. You do this all the time.

    “whether or not a starving person who blocks another starving person from his food, is killing that other person”

    I responded to a question along those lines but you didn’t understand my comment because you are stupid.

    “why you believe you are entitled to violate my or anyone else’s property rights as derived from homesteading and free trade”

    Why do you believe you are entitled to unilaterally decide what constitutes a legitimate ‘property right’ and what constitutes an illegitimate violation of ‘property rights’?

    What you do is just invent imaginary property rights and then assert that people are illegitimately violating them. Then you start arbitrarily redefining words to mean whatever you want, so as to try to make them fit with your ideology.

    All you are really doing is asserting that your beliefs regarding morality are necessarily correct, and that no one is entitled to legitimately disagree with you. This is your typical rhetorical strategy.

    “Individuals act”

    That tells you nothing in itself.

  142. Gravatar of sdfc sdfc
    29. December 2014 at 00:19

    MF

    You commented on the state having a monopoly over money. There is no government monopoly on the creation of deposits, which suggests you are talking about the currency.

    Once again, what is the advantage of introducing credit risk to the currency?

Leave a Reply