Stop Making Sense

Narayana Kocherlakota has a new post entitled, “Trump Starts Making Economic Sense”:

About a month ago, I urged the presidential candidates to explain what policies and leadership they would like to see at the Federal Reserve. So I was glad to see Trump address Fed-related issues in an interview with Fortune magazine last week.

His key comments: “We have to rebuild the infrastructure of our country. We have to rebuild our military, which is being decimated by bad decisions. We have to do a lot of things. We have to reduce our debt, and the best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly.”

I read this as calling for two forms of fiscal stimulus.

That’s funny, I read the statement “we have to reduce our debt” as calling for austerity. Of course the second half of that sentence is a call for fiscal stimulus.  I attribute the contradiction to either:

1.  Trump having an IQ in the 80 to 85 range, or . . .

2.  Trump being a shameless demagogue.

I would also point out that Mr. Trump was actually discussing fiscal policy, not monetary policy.  That’s a distinction I worked really hard making in my economics classes, back when I taught at Bentley.

Kocherlakota continues:

Another question is whether Trump would be comfortable with the Fed pursuing an inflation target higher than 2 percent (such as the 4 percent target suggested by Professor Larry Ball of Johns Hopkins University). This has been advocated as a way to give the central bank more ammunition to fight future recessions (by generating higher nominal interest rates, it would provide more space to lower them before hitting zero). But it would also give the Fed more room to support fiscal stimulus of the kind suggested by Trump.

I’m not quite sure what Kocherlakota is trying to say here.  The whole point of raising the inflation target to 4% is so that you don’t have to use fiscal stimulus in the first place, not as a way of “supporting” fiscal stimulus.

Undoubtedly all these things that make no sense to me are perfectly clear in the mind of The Donald.  Recall that Trump will pay off the national debt in 8 years, a “making sense” proposal that Kocherlakota does not comment on.  Nor does he comment on the fact that Trump will achieve this miracle by shielding entitlements from cuts, sharply boosting spending on the military and infrastructure and reducing the top tax rate to 25% percent (all while raising taxes on “the rich”) and eliminating taxes entirely on 75 million Americans.  What’s the secret sauce that will make this all possible?

Trade

PS.  People have offered three explanations for the rise of Trump, struggling blue-collar workers, trade and immigration.  All three are false.  The Economist reports that Trump voters are skewed toward the over $100,000 group.  A new poll shows surging support for the claim that immigrants help the country.  And other polls show surging support for the view that trade is an opportunity, not a problem.

Sorry Pat Buchanan, the rise of Trump is not about your issues—it’s not about Making America Great Again.  He’ll drop your issues the day he takes office.  It’s about Making Donald Trump Great Again.

PPS.  People think I’m exaggerating when I compare Trump talk to a baby’s “ga ga” talk.  I’m dead serious.  Read this sentence 100 times in a row, until you have it figured out:

We have to reduce our debt, and the best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly.

Yes, reducing the debt by borrowing more would be amazing.  

Trump says:

I know words, I have the best words

Yes, Trump has some excellent words.  But he does not yet have sentences with meaning.  He needs to work on that before becoming President.  Not just words, words that are grouped together to produce meaning.

Just once, I’d like to hear Trump say:

I am familiar with many terms, I possess a quite sophisticated vocabulary.


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98 Responses to “Stop Making Sense”

  1. Gravatar of Britonomist Britonomist
    29. April 2016 at 07:06

    I absolutely despise Trump, but I can make sense of the first two claims.

    The first sounds contradictory but is fairly standard: you have to spend money to make money. Obviously to Kocherlakota this means rapidly growing the economy through large amounts of fiscal stimulus such that the economy grows enough to outgrow its debt, or more easily service it with higher tax receipts. Now you obviously might object that the multiplier isn’t high enough to allow it, but if that’s true that would just make his statement wrong, not incoherent.

    The second point is completely straightforward to me, if the inflation target is 2% and the US is near that, the Fed might think further fiscal stimulus might push the economy above the 2% level and they would start to tighten – the monetary offset. However if the target is 4% and the economy is currently at 2% – if the government were to enact fiscal stimulus in this case the Fed would not have to immediately tighten and engage in a monetary offset, which in effect is ‘supporting’ that stimulus by keeping monetary policy accomodative until the 4% level is reached.

  2. Gravatar of Lawrence D’Anna Lawrence D'Anna
    29. April 2016 at 07:11

    Trump really does have the best words.

    His use of language is brilliant.

    It sounds stupid if you expect it to be logically coherent and make sense, but Trump isn’t trying to make sense.

    Normal candidates talk nonsense because they don’t know it’s nonsense. Trump talks nonsense because he doesn’t care. He talks to deliver affect and connotation. He knows literal meaning is irrelevant.

    Trump won because Republican primary voters, media, and institutions are unworthy of anyone better than Trump.

  3. Gravatar of Gary Anderson Gary Anderson
    29. April 2016 at 07:28

    Pat Buchanan is such a bigot, IMO. Yet he is a genius in foreign policy and exposed the neocons as being the War Party. And I agree, Scott, Trump will dump America great. He is a typical NYC globalist. Nothing more, nothing less. And IMO he is a bigoted globalist, along the lines of Ihor Kolomoyski. You should read up on that dude.

    As for Kocherlakota, he does not understand true monetary policy. Or he chooses not to. He thinks that Helicopter Money must be funded by treasury bonds, which Eric Lonergan told me is simply not true: http://www.talkmarkets.com/content/bonds/eric-lonergan-precisely-defines-helicopter-money?post=92811

    I wonder if the Fed could finance infrastructure with a one time grant to the government, sans treasury bonds in return, as well?

  4. Gravatar of XVO XVO
    29. April 2016 at 07:45

    Scott you should take some time to read Scott Adam’s (Creator of Dilbert) blog posts on Trump being a “Master Persuader”. Really helps explain what Trump is doing and how he’s become so popular. He predicted Trump doing well before anyone else I’ve seen.

    I trust Trump will be better than Hillary Clinton as president, despite him speaking nonsense. He’s not trying to convince people with facts and debate because that is a weak way to convince people. Apparently the only two ways to win in national politics is through demagoguery or corruption. We’ve tried corruption my entire life and it doesn’t seem to be working, things just slowly get worse. Maybe putting someone in office that got there without having to take bribes will be good.

    Maybe he’ll be the next Hitler, who knows. But I doubt our corrupt Congress and Senate will let him do much damage, they’re corrupt not murderous.

  5. Gravatar of E. Harding E. Harding
    29. April 2016 at 07:56

    “A new poll shows surging support for the claim that immigrants help the country.”

    -But only among Democrats.

    We have to reduce our debt, and the best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly.

    -Sumner, there is no contradiction in this sentence. Trump is saying the austerity doesn’t have to be quite as harsh given the low-real-interest-rate environment.

    Trump does not read a lot. You should understand that.

    “Sorry Pat Buchanan, the rise of Trump is not about your issues—it’s not about Making America Great Again.”

    -Yes, it is.

    “The whole point of raising the inflation target to 4% is so that you don’t have to use fiscal stimulus in the first place, not as a way of “supporting” fiscal stimulus.”

    -This is true. My opinion of Kocherlakota’s wisdom just fell.

  6. Gravatar of E. Harding E. Harding
    29. April 2016 at 08:02

    “Trade”

    -There’s nothing unreasonable about this. Trump believes protectionism will strengthen the U.S. economy, and a strong economy can paper over many fiscal problems. Trump might also believe his trade policy would boost exports, which would create the opportunity for revenue via export taxes. Most obviously, the U.S. federal government actually relied on “trade” for most of its revenue for most of its history. Tariffs are not at a revenue-maximizing level. Trump plans to raise revenue the same way 18th century Americans did-by raising tariffs.

  7. Gravatar of Lewis Lewis
    29. April 2016 at 08:07

    “The whole point of raising the inflation target to 4%…”

    Here is what I believe Kocherlakota is thinking: The Fed can’t feasibly, on its own, raise inflation up to 4%. The institutional barriers are too high; it might require a lot of credible commitment, maybe some QE or negative interest rates in the short run; and people would hate the deliberate adoption of the goal. But if congress raised aggregate demand a lot through fiscal policy, the Fed could raise inflation silently, by sitting on their hands. In fact, they could raise rates now and then, and as long as they did it with a lot of pomp and circumstance and tough language, everyone would think they were fighting inflation the whole time. Kocherlakota has worked in the trenches and seems to think monetary activism just isn’t that possible, even though he knows it is effective.

    Also, I see in Kocherlakota the mistake common to American macroeconomists, regarding infrastructure, that the modern Untied States is in any way similar to the United States of the 30s-60s or to other OECD countries. Infrastructure is something we cannot do well. We are the world’s worst at infrastructure. Any federal infrastructure initiative should be thought of primarily as a borrow-and-transfer program for consultants, lawyers, landowners, and contractors, which will take about 10 years to start paying out. There is little to no falsifiable cost-benefit analysis in federal transportation spending anymore; standards have been dilluted to the effect that applications must pay homage to unfalsifiable cluster concepts of values such as community engagement, environmental justice, multimodalism, livability, climate change, etc. While these may be worthy ideas (I like them!), in practice what this means is that consultants can get pretty much anything funded by creating an exciting-enough report, especially when the project has something cute about it (e.g., solar panels on a bus stop) that will merit favorable press. Moreover, the procurement process is literally designed to increase costs; you can look through Amtrak’s budget statements, and they count all of their expenditures as job-creating social benefits, even trying to estimate multipliers. Amazingly, Miami is building an entire factory just to make its own light rail cars, and they are proud of it; they are happy they will be prey to a monopolist with no experience to make dangerous machines that are supposed to last three decades.

    One thing I don’t get is why US liberals don’t endorse something like the following idea: have the Federal government issue about $1 trillion of debt, then use it to buy up $1 trillion of municipal bonds. Since the interest on munis is tax deductible, the Federal government will not only earn the interest—it will also earn higher tax receipts from the wealthy by eliminating the deductions. This would probably lower yields on that debt: QE lowered treasury yields even though there are a lot more of those (there are $4 trillion munis). And lower yields would mean more municipal spending (via refinancing and via new borrowing). State and municipal governments do not as often blow their own money on white elephants as they do the Fed’s money. For example, if you look at NC’s recent issuance, they are spending it on a lot of new research buildings and community colleges—little to none on useless infrastructure white elephants that should be funded from user fees anyway.

  8. Gravatar of ssumner ssumner
    29. April 2016 at 08:08

    Britonomist, On the first point, I hope you are joking.

    On the second, the whole point of 4% inflation is to avoid using fiscal stimulus. Why would you want to accommodate it?

    Lawrence, Yup.

    XVO, Yes, he might be another Hitler, but what the hell, let’s give him a shot.

    When supporters of a candidate defend him by saying we have no idea what he will do, and if he tries to become another Hitler, we’ll stop him, then I don’t even need to ask the critics what they think.

    Harding, You said:

    “Sumner, there is no contradiction in this sentence. ”

    Trump is turning you into a moron. Reducing the debt can only be done with a budget surplus. That means we need to stop borrowing money. But he wants to borrow more.

  9. Gravatar of ssumner ssumner
    29. April 2016 at 08:13

    Harding, You second comment on trade is so moronic I won’t waste time responding.

    Lewis:

    “Here is what I believe Kocherlakota is thinking: The Fed can’t feasibly, on its own, raise inflation up to 4%. The institutional barriers are too high; it might require a lot of credible commitment, maybe some QE or negative interest rates in the short run; and people would hate the deliberate adoption of the goal.”

    That would be a truly bizarre view, given that we are not even at the zero bound.

    You said:

    “But if congress raised aggregate demand a lot through fiscal policy, the Fed could raise inflation silently, by sitting on their hands.”

    But that was tried in Japan, and failed.

    However I do agree on infrastructure, we are horrible at building infrastructure.

  10. Gravatar of Mark Mark
    29. April 2016 at 08:31

    Trump’s support among the wealthy is I admit a surprise, but the two polls you mention are pretty meaningless I think; polls say little about what people actually believe; plenty of Stalinists will proudly proclaim their love of free speech and due process.

    Also, compared with other developed countries, as I understand it, our infrastructure is middle of the road. In any case, I think we spend too much on infrastructure; we just spend it poorly.

  11. Gravatar of E. Harding E. Harding
    29. April 2016 at 08:32

    “Reducing the debt can only be done with a budget surplus.”

    -Indeed. Trump is saying the same budget surplus can be accomplished with a larger amount of government spending, due to the low interest rates we now have on the national debt.

    “Harding, You second comment on trade is so moronic I won’t waste time responding.”

    -Hey, it’s true. I strongly doubt U.S. tariffs today are revenue-maximizing. And saying something is “moronic” does not make it so. Come on, Sumner. If I have made a mistake, point it out.

    Sumner, I tell you again, think outside the box for a second.

  12. Gravatar of Lewis Lewis
    29. April 2016 at 08:44

    “That would be a truly bizarre view, given that we are not even at the zero bound.”

    But that IS kocherlakota’s view. On his blog he writes,
    “It seems unlikely to me that simply announcing a new target would, in fact, make it credible. The Fed would have to build the credibility of its new target by allowing inflation to rise toward (and possibly overshoot) it. If an aggressive stimulus plan were to generate significant inflationary pressures, the Fed would have the perfect opportunity to build up the credibility of a new higher target. Thus, there are good reasons to believe that Fed need not tighten in response to fiscal stimulus. In that case, fiscal policy can generate materially super-normal aggregate growth over the next few years. ”

    What Kocherlakota might believe is that there is pressure on the Fed—both internal and external—to return nominal rates to levels people consider historically normal, regardless of what the real rate would be. See his bloomberg piece on the dot plots. Some governors act as though they have a sort of money illusion, and to have made a totem out of certain FF rates. Now, it may be possible to convince decision-makers with such a preference to slow down the pace of normalization (we’ll get there, just be patient); but what is likely impossible is convincing them to go backwards for a little while, to cut rates back down to zero until inflation hits some higher target. It seems likely that governors don’t want to get reamed out for supporting what the lay politician or banker thinks of as easy money; and cutting rates feels more like easy money than too-slow rises.

    This is what I believe Kocherlakota believes, not what I do. But I would not call his opinion “bizarre.” Kocherlakota is attuned to the interpersonal aspects of the Fed, and he is writing down what he believes massive deficits would produce under those constraints.

  13. Gravatar of Benjamin Cole Benjamin Cole
    29. April 2016 at 08:51

    Trump=Hitler and Cruz=Lucifer.

    The GOP is less boring than when Mitt Romney and Jeb Bush were the annointed leaders.

  14. Gravatar of Peter Peter
    29. April 2016 at 08:54

    Trump apparently has more support in areas where middle aged white men have a higher mortality.

    https://www.washingtonpost.com/news/wonk/wp/2016/03/04/death-predicts-whether-people-vote-for-donald-trump

  15. Gravatar of XVO XVO
    29. April 2016 at 09:02

    Ayayay…..

    He’s not going to be another Hitler. He backtracked on charging women with a crime for abortions, does that sound like something Hitler would do? Idiots propagandists in the media say he’s like Hitler I was being hyperbolic to make the point.

    Worst case he’s corrupt but entertaining. That’s better than Hillary’s best case which is that she is corrupt but doesn’t enact any major leftist policies. You’re suffering cognitive dissonance.

  16. Gravatar of Peter Peter
    29. April 2016 at 09:17

    And Trump ‘University’ really was a big scam.

    http://arstechnica.com/tech-policy/2016/04/we-witnessed-the-birth-of-trump-university

  17. Gravatar of Britonomist Britonomist
    29. April 2016 at 09:25

    “Britonomist, On the first point, I hope you are joking.”

    Care to explain? These are standard Keynesian talking points, the idea that austerity (in certain circumstances, particularly during a recession or when the economy is below its potential) actually increases rather than decreases national debt is one of their most often repeated claims.

    “On the second, the whole point of 4% inflation is to avoid using fiscal stimulus. Why would you want to accommodate it?”

    Again, it depends who you talk to. Some economists don’t have a preference for monetary or fiscal policy as stimulus, and others still prefer fiscal policy and only advocate a higher inflation target to avoid the monetary offset.

  18. Gravatar of E. Harding E. Harding
    29. April 2016 at 09:27

    “He backtracked on charging women with a crime for abortions, does that sound like something Hitler would do”

    -Well, yes. Hitler backtracked when there was serious native German opposition:

    http://rinr.fsu.edu/fallwinter97/features/hitler.html

    @Peter

    “By 2010, Trump apparently lost interest in the seminar business. He had established himself as a leader of another sort, questioning the citizenship of President Barack Obama at a time when this had almost fallen out of fashion.”

    -And it totally worked. Trump led Barack Obama to release his long-form birth certificate.

    And, yes, Trump is frequently dishonest. So what? So were John McCain and Mitt Romney. Being frequently dishonest is a benefit, not an impediment, to a politician.

  19. Gravatar of Britonomist Britonomist
    29. April 2016 at 09:34

    “Reducing the debt can only be done with a budget surplus.”

    Amazingly, higher government spending might not preclude a surplus in the future, this is straightforward. Also there’s literally reducing nominal debt, and there’s reducing debt as a ratio of GDP, which is what most economists focus on. If you’re calling Kocherlakota an idiot, you’re essentially calling the overwhelming majority of New Keynesians, Old Keynesians, Neo Keynesians etc.. including Krugman, an idiot. They’ve all proposed policies throughout the years of ending austerity and at least initially increasing spending to get the economy back to a higher GDP growth level trajectory, making it easier to have a surplus or much lower deficit *in the future*. They will typically point to countries like Greece to show how austerity actually *increased the debt crisis* much more than it could have been, despite intending the opposite result.

    This is mainstream, this is the stuff students are taught: http://www.economicshelp.org/blog/6106/economics/austerity-will-increase-uks-debt-burden/

  20. Gravatar of Gene Frenkle Gene Frenkle
    29. April 2016 at 09:48

    Sometimes a cigar is just a cigar but in the case of Trump the cigar (skyscraper) is obviously a peni$.

  21. Gravatar of ssumner ssumner
    29. April 2016 at 11:01

    Mark, You said:

    “but the two polls you mention are pretty meaningless I think”

    I agree, as are all claims by people that they know why voters vote for Trump.

    I also agree with your comment on infrastructure.

    Harding, You said:

    “Indeed. Trump is saying the same budget surplus can be accomplished with a larger amount of government spending, due to the low interest rates we now have on the national debt.”

    That’s utterly moronic, and I’m not going to waste time responding. Is Trump some sort of virus, that makes people dumb.

    Lewis, I criticized that quote in an earlier post, it makes no sense.

    I would call the view that the Fed is unable to raise inflation to 4% to be “bizarre”. Almost all economists agreed with me until 2008. It’s not my fault that many have forgotten this fact.

    If the Fed wants to raise inflation, they just cut the IOR, it’s not complicated. The Fed is now raising rates precisely because they don’t want to raise inflation to 4%.

    XVO, A homeless drunk would also make an entertaining President, would you vote for him?

    Britonomist, I doubt any economist would agree with Trump’s claim that we reduce debt by borrowing more. You are making this way too complicated.

    I also do not agree with your claim that the “Laffer effect” (lower taxes raise revenue) is an implication of the Keynesian model, it isn’t. But even if it was, it would have no bearing on Trump’s claim that we need to borrow more money because rates are low, and that borrowing more money will reduce the debt.

  22. Gravatar of E. Harding E. Harding
    29. April 2016 at 11:36

    “That’s utterly moronic”

    -No, it’s not; it’s basic math. A higher interest rate leads to a lower surplus, ceteris paribus. Stop accusing me of being moronic without providing any evidence that I’m mistaken.

    “A homeless drunk would also make an entertaining President, would you vote for him?”

    -No. But Trump is a teetotaler and has lots of homes, so he’s literally the opposite of a homeless drunk.

    “I doubt any economist would agree with Trump’s claim that we reduce debt by borrowing more.”

    -Except that he isn’t claiming that at all. Read Trump’s sentence again. He’s saying spending when interest rates are lower reduces debt relative to spending when interest rates are higher. That should be trivial to understand, especially for someone as smart as you.

    And you’ve still given me no explanation for my explanation for why “trade” is a perfectly reasonable response.

  23. Gravatar of XVO XVO
    29. April 2016 at 11:47

    He’s Hitler, worse than a homeless drunk, yet he’s going to be President. There is no doubt now, you’ll see him crush “crooked”, “low-energy” Hillary.

    http://blog.dilbert.com/post/143479429146/and-then-there-were-two

    He’s good at persuasion, perhaps you could get some pointers from him to help spread Market Monetarism?

    “I know words, I have the best words” This is called, knowing your audience aka the average American voter doesn’t want someone who treats them with condescension. Mr. Pompous “I am familiar with many terms, I possess a quite sophisticated vocabulary.”

  24. Gravatar of E. Harding E. Harding
    29. April 2016 at 11:48

    We have to reduce our debt, and the best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly.

    -I’m pretty sure Obama or Clinton once said something like that, and it’s a perfectly reasonable statement. Trump is making you moronic, Sumner. Not me.

  25. Gravatar of E. Harding E. Harding
    29. April 2016 at 12:06

    I estimate a 51-53% chance of a Trump victory in the general election. If Trump can win Pennsylvania, Ohio, and Florida, as well as all the states Rmoney won (easy enough, as Romney was famously un-populist), he’s POTUS.

    The three-state strategy is the best one; it’s not good to bother with Nevada or Colorado -too many Mexicans there. The felon vote was unleashed in VA.

  26. Gravatar of Massimo Heitor Massimo Heitor
    29. April 2016 at 12:07

    “We have to spend more! We have to reduce our debt!” Basically, everyone can have their cake and eat it too. Politicians don’t say this kind of thing out of simple stupidity, but because they are engaging in manipulative rhetoric, telling people what they want to hear, and trying to win elections.

    This is standard stuff that is quite common for politicians. Obama said this kind of thing extensively. He talked about paying off the debt and massive increases on spending.

    The ACA was promised to both radically change health care but also keep it the same if you liked it the way it was. The ACA was promised to deliver massive increases on Medicaid spending, massive subsidies to the poor and near poor, but also save money for everyone else, and even cut back on the government deficit. So, I expect this from politians, what surprised me was to hear highly ranked academic economics PhDs like Gruber write comic books pushing this nonsense.

    Sumner is repeating himself. He is outraged that Trump uses manipulative rhetoric. Many have commented that this is common behavior for politicians, but somehow Trump offends Sumner more, and I can’t fully understand why.

  27. Gravatar of Britonomist Britonomist
    29. April 2016 at 12:10

    “we reduce debt by borrowing more.”

    Honestly, are you being deliberately obtuse? It’s you that’s equating “fiscal stimulus” as permanently higher debt *forever*, not Trump/Kocherlakota. I can’t figure out what your angle is here.

  28. Gravatar of Art Deco Art Deco
    29. April 2016 at 12:41

    which would create the opportunity for revenue via export taxes.

    There’s an explicit constitutional provision which prohibits that.

  29. Gravatar of E. Harding E. Harding
    29. April 2016 at 12:53

    Art knows the U.S. Constitution better than I do. And he’s right on this count. Aw, well, no export taxes.

    I suggest Trump make Ivanka his VP, if Kasich is deemed unacceptable. She’s popular among the ladies. Kasich’s eating during press conferences is bad for press.

  30. Gravatar of Steve F Steve F
    29. April 2016 at 13:14

    My man Ted gonna solve this problem. First with a crushing in Indiana.

  31. Gravatar of Rajat Rajat
    29. April 2016 at 13:26

    I agree with Lewis. Scott, as far as many economists and policy-makers are concerned, it doesn’t matter if a country is not *literally* at the ZLB. Many central bankers feel uneasy being anywhere near it, as the thought of unconventional measures makes them feel queasy.

    Consider Australia. Our OCR is 2%; but ever since it was 2.5%, the RBA has been very reluctant to cut it further. The Governor, Glenn Stevens, has been saying things like:
    1) Lower interest rates (from 2.5%) might actually reduce confidence and hurt savers – there’s more a cost-benefit trade-off to be made than when rates were higher.
    2) The cost of borrowing is no longer a constraint on businesses investing, the issue is lack of confidence/animal spirits. RBA research (presented by the likely new Governor, Phil Lowe) shows the businesses’ ‘hurdle rates’ for investment have not come down despite a lower risk-free rate – the implication being that it’s businesses who have to make an adjustment, not policy-makers.
    3) It’s not in Australia’s interests to engineer a consumption boom by encouraging people to borrow against future income, given already-high levels of consumer debt and the fact that prospects for income growth are not as positive as they once where [due to commodity prices falling].
    4) The federal government should be spending more on infrastructure and doing supply-side reform.
    These views may be very wrong-headed, but they are pretty widely-held in Australia and I’m sure elsewhere. For some reason, businesses or governments borrowing to invest is seen as a good thing, but consumers borrowing to invest is seen as a bad thing.

  32. Gravatar of Gordon Gordon
    29. April 2016 at 13:56

    Scott, the Marginal Revolution post about trade only provided the main graph from Gallup while the full Gallup post about trade had some interesting details such as 28% of Americans want to withdraw from free trade deals while 28% oppose a withdrawal. The rest did not understand trade well enough to have an opinion. Gallup went on to say that another poll found that 50% of Americans favored higher taxes on imports from China.

    http://www.gallup.com/poll/191135/americans-split-idea-withdrawing-trade-treaties.aspx

    While a majority of Americans may support trade in the abstract, Bernie and Donald have framed trade with China as a problem for American workers. And what doesn’t help is that last month when the latest trade data came out, every news article I saw on the subject made the assertion that a large trade deficit had a large negative impact on GDP. I did not see a single quote from any competent economist to counter this fallacy.

  33. Gravatar of E. Harding E. Harding
    29. April 2016 at 14:33

    @Steve F

    -Polls project a Missouri-like Trump victory in Indiana. Trump’s NE primary wins showed for the first time that Trump has momentum. As of yet, he hasn’t lost it.

  34. Gravatar of Lorenzo from Oz Lorenzo from Oz
    29. April 2016 at 14:38

    “People have offered three explanations for the rise of Trump, struggling blue-collar workers, trade and immigration. All three are false. The Economist reports that Trump voters are skewed toward the over $100,000 group. A new poll shows surging support for the claim that immigrants help the country. And other polls show surging support for the view that trade is an opportunity, not a problem.”

    I wouldn’t have thought I would have to point this out to yourself, but “skewed” by what benchmark? The Economist graph look to me like compared to normal Republican primary voters, Trump does unusually well among lower income and lower educated.

    As for the other two points, The Donald has been doing quite poorly by the standards of previous Republican frontrunners (hence a contested Convention even being a possibility). It is perfectly possible to have the wider populace becoming more positive about trade and immigration and yet have a significant section being alienated on both.

    Of course, it is also possible that The Donald has been encouraging folk to be more positive on trade and immigration in reaction to The Donald himself. A cheery thought, possibly :)

  35. Gravatar of ssumner ssumner
    29. April 2016 at 14:55

    Harding and Britonomist, Must be nice to live in a world where spending more reduces debt. If only the Greek had spent another trillion or two they’d be completely debt free. I feel like the whole world is going crazy.

    Massimo, You said:

    “This is standard stuff that is quite common for politicians. Obama said this kind of thing extensively. He talked about paying off the debt and massive increases on spending.”

    No he doesn’t and other politicians don’t either. Only Trump.

    XVO, You said:

    “He’s good at persuasion, perhaps you could get some pointers from him to help spread Market Monetarism?”

    That would be the kiss of death. I’ve had much more success persuading the people that determine policy than Trump has, or ever will have.

    Art, Aren’t 40% import tariffs on China also illegal? There must be so sort of WTO rule against them, or else what does “most favored nation” even mean?

    Gordon. The news media is just hopeless. No wonder Trump is doing so well.

    Rajat, You said:

    “For some reason, businesses or governments borrowing to invest is seen as a good thing, but consumers borrowing to invest is seen as a bad thing.”

    It’s even worse that that. An expansionary monetary policy tends to reduce consumption as a share of GDP. That’s because investment/GDP is procyclical.

    Lorenzo, Are you claiming that 1/3 of Republicans make over $100,000/year? That would surprise me.

    On your other two points, let me state my point in another way. Pundits have been saying that the Trump phenomenon is evidence that Americans are increasing anti-trade and anti-immigration. That is surely false.

  36. Gravatar of E. Harding E. Harding
    29. April 2016 at 15:12

    “Must be nice to live in a world where spending more reduces debt.”

    -Sumner, are you being deliberately obtuse? Read our comments again. Nobody here (including Trump) ever said spending more reduces debt.

    “No he doesn’t”

    -Yikes, Sumner. What’s happened to you? Your IQ has dropped 60 points. Don’t talk about politics; please, it’s making you an embarrassment.

    https://www.washingtonpost.com/blogs/fact-checker/post/annotating-obamas-2006-speech-against-boosting-the-debt-limit/2013/01/14/aa8cf8c4-5e9b-11e2-9940-6fc488f3fecd_blog.html

    https://www.uschamber.com/above-the-fold/remember-when-obama-called-fiscal-responsibility-neither-does-he

    “If only the Greek had spent another trillion or two they’d be completely debt free.”
    -If they were gonna spend a trillion (for whatever reason), the right time to do so was in 2007, not in 2012, because Greek interest rates were lower in 2007, thus lowering their debt burden relative to them spending the same money in 2012. That should be obvious to you, but isn’t.

    “I’ve had much more success persuading the people that determine policy than Trump has”

    -You are vastly overestimating your own importance.

    “Aren’t 40% import tariffs on China also illegal?”

    -America has 80%+ import tariffs on a whole host of Chinese products.

    http://www.moderntiredealer.com/news/402154/doc-affirms-tariffs-increases-rates-for-nearly-all-tire-makers

  37. Gravatar of Britonomist Britonomist
    29. April 2016 at 15:22

    “Harding and Britonomist, Must be nice to live in a world where spending more reduces debt.”

    If the government spending multiplier is high enough, spending increases output more than the increase in debt from that spending, if the high deficit is mostly due to the deep recession then if you can restore the economy back to a higher growth trajectory this effect reverses and the deficit is reduced or turned into a surplus, the net result is that in the long/medium term *borrowing is reduced not increased*.

    You’re either arguing against the multiplier, in which case nothing Kocherlakota is remotely incoherent, you just think he’s wrong.

    Or you’re accepting the multiplier (for the sake of argument at least), which means you’re *literally arguing against arithmetic*, which is ridiculous.

  38. Gravatar of Major.Freedom Major.Freedom
    29. April 2016 at 15:23

    “I would also point out that Mr. Trump was actually discussing fiscal policy, not monetary policy. That’s a distinction I worked really hard making in my economics classes, back when I taught at Bentley.”

    There is no hard distinction between these two concepts. The fact you had to work at all trying to convince people otherwise is Testament to the fact that they are not absolutely distinct.

    The decision to pint money, is not just printing money and dropping it from helicopters all over the country. No, the Fed engages in fiscal policy by discriminating in what specifically they “buy”. Summer is a demagogue when it comes to inflation, hilariously and tragically a believer that what the Fed buys has no affect at all on the activities of those people who are closely involved with the issuance and management of said securities. He is trying and failing to prove that fiscal policy is absolutely separate from monetary policy.

    The Fed affects the balance sheet of the government, and affecting the balance sheet of the government is fiscal policy. It does not matter that the Fed buys Treasuries from member dealers as opposed to from the Treasury directly. That the member dealers get a small cut from this perpetual helicopter dropping that is our monetary system, seems to be an excuse by Sumner to pretend that this completely isolates the Fed from fiscal policy.

    I really hope a small number of his students were brainwashed by his preachings. The world is otherwise a worse place.

  39. Gravatar of E. Harding E. Harding
    29. April 2016 at 16:04

    Okay, Britonomist does argue more spending can reduce debt. I doubt this severely, but that wasn’t what Trump said, anyway.

  40. Gravatar of Britonomist Britonomist
    29. April 2016 at 16:31

    “but that wasn’t what Trump said, anyway.”

    So you’re saying he’s going to rebuild infrastructure and rebuild the military without increasing spending? Ha. Why even mention interest rates if there’s no additional spending involved?

    Still, I don’t care what Trump says, they’re just mindless platitudes with little thought behind them. It’s Kocherlakota’s interpretation that I’m interested in here. He interpreted it as fiscal stimulus, and I’m saying the goals of fiscal stimulus and reducing debt aren’t totally self annihilating, as long as you look further than the very very short term.

  41. Gravatar of Bonnie Bonnie
    29. April 2016 at 16:37

    I think this time Kocherlakota was speaking the nonsense. But then there are a lot of people I thought to be smart drinking the Trump koolaid, the IQ-reducing serum, and stumping for Trump as of late. I fear that now they may no longer be able rationalize the difference between making peace with a situation one can do nothing about and supporting it.

  42. Gravatar of E. Harding E. Harding
    29. April 2016 at 17:56

    “So you’re saying he’s going to rebuild infrastructure and rebuild the military without increasing spending?”

    -No. He’s saying he’s going to increase spending and also find new sources of revenue, and that funding long-term projects when interest rates are low minimizes their fiscal impact.

    “I fear that now they may no longer be able rationalize the difference between making peace with a situation one can do nothing about and supporting it.”

    -There is no difference between these.

    Trump has been the best Republican nominee since George H.W. Bush.

  43. Gravatar of bob bob
    29. April 2016 at 17:58

    You say that Trump has to work on his sentences before he becomes president. I don’t think so: Making any sense, especially in economic matters, has never been a requirement to be president. In a country where you don’t need to make economic sense to have a vote at the Fed, why would a president need any more than rhetoric? It’s really what got Obama there in the first place, not his policy ideas.

    And I say this thinking that Trump is a far worse option that electing a president by randomly choosing a random resident of Kansans. Making sense is not important: Reflecting the mood of the electorate is. And this is just as true in the US as it is in Europe.

  44. Gravatar of Britonomist Britonomist
    29. April 2016 at 18:09

    “He’s saying he’s going to increase spending and also find new sources of revenue”

    Such as?

  45. Gravatar of E. Harding E. Harding
    29. April 2016 at 18:21

    Tariffs, getting Japan, Germany, etc., to pay for their defense, taxes on remittances.

  46. Gravatar of Scott Freelander Scott Freelander
    29. April 2016 at 18:25

    Major.Freedom,

    You should read a lot of Bryan Caplan. Read about why he’s left Austrianism behind as a student.

  47. Gravatar of E. Harding E. Harding
    29. April 2016 at 18:27

    Scott, this is Major Freedom we’re talking about here. Lifelong fearless Austrian ideologue, has never changed his mind on anything. He’s useful, if only for reminding us what real Austrian ideology stands for.

  48. Gravatar of Scott Freelander Scott Freelander
    29. April 2016 at 18:31

    Trump Defenders,

    While Trump has been a protectionist and perhaps conservative on some criminal justice issues for decades, he also has decades of comments that seem to come from the left on every other issue I heard him speak on. Couple that with the fact that he was party to a genuine scam with Trump “University” and doesn’t mind that some are mislead when he merely licenses use of his name for building projects he otherwise has nothing to do with, and it seems likely he’s taking conservatives for a ride.

  49. Gravatar of Scott Freelander Scott Freelander
    29. April 2016 at 18:34

    Scott,

    In case you weren’t aware, here’s a link to a Letterman interview with Trump in ’88. Trump had the same rhetoric about trade back then. So, he’s probably credible on this issue, not to his credit.

    https://www.youtube.com/watch?v=KA-Q59yW9rI

  50. Gravatar of Britonomist Britonomist
    29. April 2016 at 18:37

    “Tariffs, getting Japan, Germany, etc., to pay for their defense, taxes on remittances.”

    So more taxes, something that isn’t a source of revenue (only an excuse to reduce military spending, but he wants to *rebuild it*), and more taxes. But he also wants to *lower* taxes at the same time? Snake oil, he’ll never be able to reintroduce meaningful import tariffs and get much revenue from them – he wont be able to fight against the WTO, various treaties, constant threats of reciprocation and apparently the constitution in order to do this.

  51. Gravatar of Scott Freelander Scott Freelander
    29. April 2016 at 18:39

    Harding,

    Yes, Major is lost. Would even graduate level education in economics help him?

    Of course, a few econ classes didn’t seem to help Trump.

  52. Gravatar of E. Harding E. Harding
    29. April 2016 at 20:59

    “something that isn’t a source of revenue”

    -Trump can make it become so.

    “But he also wants to *lower* taxes at the same time?”

    -Reagan did this with more reliable payroll v. less reliable income taxes.

    “he wont be able to fight against the WTO, various treaties, constant threats of reciprocation and apparently the constitution in order to do this.”

    -I think you are badly underestimating Trump’s persuasive abilities.

  53. Gravatar of Scott Freelander Scott Freelander
    29. April 2016 at 23:30

    Harding,

    I may regret asking, but why would you support protectionist policies, even in retaliation for subsidized “dumping”, etc? From a selfish American perspective, what’s wrong with other countries subsidizing American consumption?

    We can adopt policies like wage subsidies to help blunt the loss of manufacturing jobs. If the Fed then does it’s job, free trade is then mostly not a problem, even for the relatively few displaced.

  54. Gravatar of Postkey Postkey
    30. April 2016 at 00:30

    “Not only is Donald Trump likely to gather the most votes of any GOP Presidential nominee ever, having swept the East Coast and crushed the anti-Trump alliance between Kasich and Cruz even before it made the news cycle; but now, as Reuters reports, the GOP establishment faces an ever bigger problem. Wealthy, well-educated voters helped carry the Republican front-runner to victory this week – a demographic the famously blunt-spoken billionaire had struggled to attract in the past.As we noted previously, with a number of states remaining including California, Trump is set to surpass current record holder George W. Bush, who received 10.8 million votes in 2000.”

    http://www.zerohedge.com/news/2016-04-28/its-hard-believe-establishment-stunned-trump-gains-wealthy-well-educated-voters

  55. Gravatar of Scott Freelander Scott Freelander
    30. April 2016 at 01:32

    Postkey,

    Yes, Trump could get more votes, but notice that on the graph he’s getting a lower percentage of the votes than other front runners. It looks like turnout is way up at the same time, which could be due to how divisive he is. This doesn’t seem like a good sign for Trump or Republicans to me.

  56. Gravatar of Postkey Postkey
    30. April 2016 at 06:14

    Thanks for pointing that out.

  57. Gravatar of Saturos Saturos
    30. April 2016 at 06:47

    Someone needs to do Scott a favour and show him how to make anti-Trump memes (image macros). Should be a nice alternative way for him to vent.

    Until then, it’s pretty hilarious watching him slowly lose his mind. (Hilarious, because I still feel relatively safe over here in Australia.)

  58. Gravatar of Britonomist Britonomist
    30. April 2016 at 07:53

    “Trump can make it become so. …I think you are badly underestimating Trump’s persuasive abilities.”

    Yeah this is starting to sound cult of personality-ish.

  59. Gravatar of Mark Mark
    30. April 2016 at 08:02

    Harding: “Trump can make it become so.”
    Sure, by multiplying the loaves and the fishes and turning water into wine.

  60. Gravatar of Mark Mark
    30. April 2016 at 08:05

    Britonomist: “Yeah this is starting to sound cult of personality-ish.”
    No, like a bona fide cult. Trump could start selling his own urine as a cure for cancer for $100 an ounce and he’s have a ready market in his followers.

  61. Gravatar of E. Harding E. Harding
    30. April 2016 at 08:46

    Scott, I’m not a fan of protectionism at present. I’m just pointing to obvious sources of revenue Trump is going to point to when asked to explain how he’ll fix the budget shortfall.

    The thing is, the everyday American does not understand trade. Trump and Sanders are exploiting that. Thus, the protectionist rhetoric. For a politician, it is best to work with the prejudices of the people, not attempt to change these prejudices.

    Look, guys, every new source of revenue, by definition, didn’t originally exist. What’s so implausible about Trump making allies pay for their defense, and getting some profit for the U.S. treasury from that?

    @Postkey

    -Trump looks like Taft 1952 and Reagan 1968 (didn’t win) and Goldwater 1964 (won nomination, but lost in a landslide in the general). In any case, Trump is no Goldwater. Cruz is. America is much more susceptible to the ideas of Goldwater than it was when LBJ was alive, but probably not enough for Cruz to triumph in Ohio.

  62. Gravatar of Prakash Prakash
    30. April 2016 at 09:55

    I think it is obvious that Trump is loyal to no ideology at all. It would be absolutely trivial for him to pivot from promising a 35-40% tariff to implementing a 35% devaluation of the dollar via QE that also effectively reduces debt. Boom, promises achieved, just achieved using methods that are different from those promised. I think that the highest value exercise for pundits right now is to get the devaluation via monetization mantra to the political class. As Scott has said a few posts ago, a currency war between nations may actually be beneficial right now. For better or worse, it looks like the most flexible one right now is Trump. The problem is that he probably listens to no one. But give him an option like this which can resolve so many of his promises and he might like to take a look.

    For those who believe that the federal reserve will be able to hold off the new president’s craziness for sometime, rethink the trillion dollar coin debate in the light of PRESIDENT TRUMP. Minting 16 one trillion dollar coins and poof, there goes the federal debt!

  63. Gravatar of Scott Freelander Scott Freelander
    30. April 2016 at 10:39

    Harding,

    Okay, so you’re not protectionist. Are you for a more restrictive immigration policy? I hope a reader of this blog is too sophisticated to succumb to the lump of labor fallacy.

  64. Gravatar of Mark Mark
    30. April 2016 at 11:35

    “The thing is, the everyday American does not understand trade. Trump and Sanders are exploiting that. Thus, the protectionist rhetoric. For a politician, it is best to work with the prejudices of the people, not attempt to change these prejudices.”

    Good point. Why waste precious time trying to convince the masses that Jews aren’t so bad when you can fill public coffers by looting their stores and houses?

    And we have every reason to believe both Trump and Sanders sincerely believe their own protectionist rhetoric and would follow through given the chance. And congress might be inclined to let them if opposing popular tariffs means losing their seats. It’s happened before.

  65. Gravatar of E. Harding E. Harding
    30. April 2016 at 12:00

    “Are you for a more restrictive immigration policy?”

    -Yes. This is because Mexicans are turning Colorado and Nevada blue due to their higher birth rates, even if a lot of the illegals have left after the housing crash. I don’t want America to turn into Mexico or South Africa or what have you in the future.

    “Good point. Why waste precious time trying to convince the masses that Jews aren’t so bad when you can fill public coffers by looting their stores and houses?”

    -You can’t make the good the enemy of the perfect.

    “And we have every reason to believe both Trump and Sanders sincerely believe their own protectionist rhetoric and would follow through given the chance.”

    -Sure. But tariffs do not last forever.

  66. Gravatar of Scott Freelander Scott Freelander
    30. April 2016 at 12:48

    Harding,

    Okay, so immigration is a partisan issue to you? While it seems to be the case that more immigration will turn us more blue, what are the policies you fear will prevail as a result? As you pointed out, Reagan was a “RINO” in your eyes on some issues, including immigration. What was wrong with the Republican Party 20-35 years ago? Reagan was considered quite conservative in the 80s.

  67. Gravatar of ssumner ssumner
    30. April 2016 at 12:54

    Harding, Show me any other presidential candidate who said we’d pay off the entire national debt in 8 years, while boosting spending sharply and slashing taxes. Please find the specific quote.

    You said:

    “You are vastly overestimating your own importance.”

    How can I be overestimating my importance, when I believe my influence is tiny, infinitesimal. Are you saying my actual influence is strongly negative?

    You said:

    “America has 80%+ import tariffs on a whole host of Chinese products.”

    That has no bearing on my comment. I hope you are just being a jerk, and are not actually that clueless.

    Britonomist, You said:

    “If the government spending multiplier is high enough, spending increases output more than the increase in debt from that spending,”

    If so, the national debt still rises, but by less than otherwise. Trump said we need to reduce the debt.

    In the Keynesian model, deficit spending increases the national debt. That’s true regardless of whether there is a multiplier effect or not. And again, this has no bearing on Trump’s comment, which said we need to borrow more because rates are low.

    Bob, Trump obviously doesn’t reflect the mood of the electorate, as the vast majority of people say they’d never vote for him.

    Harding, You said:

    “getting Japan, Germany, etc., to pay for their defense,”

    That’s not revenue, and Trump’s going to increase our military spending.

    And are you really so dense that you think tariffs and taxes on remittances bring in substantial revenue?

    Scott, There is not much chance that Trump would institute his trade ideas, as they are illegal. He doesn’t have the authority.

    Saturos, At a personal level, Trump winning the presidency would be the best thing for me and my blog. I’d spend the rest of my life saying “I told you so” to all those jerks who voted for him in the naive belief he wasn’t a troll. It would be lots of fun.

    But for America . . . what a disgrace.

    Prakash, I agree that he might want a devaluation, but presidents don’t control the value of the dollar. Also note that devaluation is not like a tariff. One distorts trade and leads to deadweight losses, the other does not.

  68. Gravatar of Scott Freelander Scott Freelander
    30. April 2016 at 13:19

    Scott,

    Yes, I wouldn’t expect much of the Trump agenda to pass, as I stated in previous comments.

    That being said, I wouldn’t assume that he couldn’t hurt our trade policy as President. After all, the W. Bush administration ripped up the anti-ABM treaty with Russia, and ignored the Geneva Conventions when torturing prisoners, for example.

    I realize the diplomatic and economic costs to violating WTO and other trade agreements might be much, much more significant, I don’t want to underestimate the cowardice of either political party, or especially the desire of the Republican Party to pander to its worst elements. Let’s also not underestimate the economic illiteracy of many Democrats.

  69. Gravatar of Major.Freedom Major.Freedom
    30. April 2016 at 13:29

    Scott Freelander,

    “You should read a lot of Bryan Caplan. Read about why he’s left Austrianism behind as a student.”

    I’ve already read his critiques. I identified too many errors for his critique to hold any water.

    You should read his critique.

    You should also read some of the responses to his critiques:

    https://mises.org/blog/caplan-and-responses

    ———————–

    E. Harding

    “Scott, this is Major Freedom we’re talking about here. Lifelong fearless Austrian ideologue, has never changed his mind on anything. He’s useful, if only for reminding us what real Austrian ideology stands for.”

    Not true. I am not a lifelong Austrian. I used to believe in the nonsense you believe in.

    I have changed my mind on a number of issues in economics and philosophy, but I don’t those ideas here because they are quite frankly over your head.

    ——————-

    Scott Freelander:

    “Yes, Major is lost.”

    Actually I know where I am. I am in my office viewing a blog that I resemble to an insane asylum. For me the comments here are for entertainment.

    “Would even graduate level education in economics help him?”

    You say this as of all education is equal. There is education and there is brainwashing. What others have an incentive to teach you, is not identical to what is for your own unique benefit. This is a prevalent, often vicious, cycle that explains why you’re a sheep. Unlike you I don’t need to be saved and rescued by concepts of authority in order to be “found”.

    The best education is what is self-taught. For it allows you to make yourself a better you.

    I notice that neither of you have even engaged, let alone refutes or challenged, the argument I presented above.

  70. Gravatar of ssumner ssumner
    30. April 2016 at 13:33

    Scott, Good points. Check out the post I put up 2 minutes ago.

  71. Gravatar of Scott Freelander Scott Freelander
    30. April 2016 at 14:39

    Major.Freedom,

    I have no use for a combination for myth, political ideology, and moral philosophy. Austrian economics, as discussed on mises.org, is not economics.

    That being said, there are real economists who are somewhat Austrian, like Peter Boettke, who actually seems open-minded to a degree and to whom evidence seems to matter.

    Before I’ll ever discuss economics with a self-described Austrian, first I have to know what that person thinks about sticky wages. A person who denies that wages are sticky, or denies that wages are sticky even in absence of wage floor policies, is not prepared to have a conversation about so called business cycles.

    It is patently obvious, for example, that if wages and certain other prices weren’t sticky, inflation wouldn’t have real effects, even in the short-run. So, without naturally sticky wages, Austrian business cycle theory, as I understand it, can’t be true.

  72. Gravatar of Massimo Heitor Massimo Heitor
    30. April 2016 at 15:09

    “Yikes, Sumner. What’s happened to you? Your IQ has dropped 60 points. Don’t talk about politics; please, it’s making you an embarrassment.”

    Sumner is just so angry about the whole Trump thing, he has lost interest in having calm, thoughtful reasonable debate with people who disagree. He is just making sloppy, dumb, angry statements.

    “At a personal level, Trump winning the presidency would be the best thing for me and my blog. I’d spend the rest of my life saying “I told you so” to all those jerks who voted for him in the naive belief he wasn’t a troll. It would be lots of fun.”

    This is childish. People correctly predict horrible political choices all of the time. For example, people predicted electing Hugo Chavez as president of Venezuela would be a catastrophe, and unfortunately, they were right. “I told you so” is still childish.

    I’m guessing the defense is, “Trump is childish, therefore why not react with even more childishness.” That is a poor choice.

  73. Gravatar of Major.Freedom Major.Freedom
    30. April 2016 at 16:15

    Scott Freelander:

    “I have no use for a combination for myth, political ideology, and moral philosophy.”

    Then why do you use those very concepts? You believe in a myth, you definitely have a political ideology, and your posts presuppose a moral philosophy.

    “Austrian economics, as discussed on mises.org, is not economics.”

    It is the only actual economics in the world today, since it is the only economics that is based on real world individual action.

    What you do is not economics. What you do is history, and you are trying to find economic principles by mimicking physicists and chemists consciously or not, all the while using a statist ideology consciously or not, and collectivist moral philosophy consciously or not.

    “That being said, there are real economists who are somewhat Austrian, like Peter Boettke, who actually seems open-minded to a degree and to whom evidence seems to matter.”

    What you call “real” economists are just those you agree with who share your interpretation of history. What you call “evidence” is actually just history.

    “Before I’ll ever discuss economics with a self-described Austrian, first I have to know what that person thinks about sticky wages. A person who denies that wages are sticky, or denies that wages are sticky even in absence of wage floor policies, is not prepared to have a conversation about so called business cycles.”

    Think about sticky wages how exactly? The term is so loaded and does not even have an accurate definition. I have never seen a cohesive definition that does not merely beg the question by being defined with other equally loaded and inaccurate words.

    What I can say about it is that if sticky means “not adjusting instantlyto changes in demand”, then all prices are sticky. All prices do not instantly adjust to every change in demand. Not stock prices, not foreign exchange rates, nothing. All prices adjust over time when there are changes in demand, and in exactly the same way, all changes in demand are “sticky” in response to changes in prices. This is not inherently an evil that the state oought to act on to “offset”.

    The funny thing is that you said you do not wish to use political ideology or moral ideology, but your belief that the Fed, which iis a state institution, “should” do anything after it previously drove up spending and prices which the market then responded to with a corrective deflation, indeed presupposes a political ideology and moral philosophy!

    What I find to be perhaps the most common trait among self-professed “non-ideologues” and “amoralists” is a lack of self-reflection. So many of you believe in this myth that to be statist and to advocate for the Fed to do this and do that, is not being political or being a moralist, but somehow advocating for the market to solve monetary problems is being a political ideologue and moralist.

    “It is patently obvious, for example, that if wages and certain other prices weren’t sticky, inflation wouldn’t have real effects, even in the short-run. So, without naturally sticky wages, Austrian business cycle theory, as I understand it, can’t be true.”

    I like it how you just casually added “certain other prices”. As if your challenge to me of answering for sticky wage theory, has to answer for an unexplained set of “certain other prices.”

    The truth of course is that even if prices instantly adjusted to every change in demand, which by the way is an assumption no Austrian ever made as even conceivable, let alone possible in a free market, then non-market inflations of the money supply, indeed all money increases, would still be associated with real side changes. The concept of “prices” includes all combinations of real goods and services. One economy with “flat price inflation” could in real terms be totally different from another economy with identically “flat price inflation”. An economy with a central bank that forces “2% price inflation” will not be the same in real terms as a free market economy with no central that just so happens to also have “2% price inflation”.

    Austrian theory is not that the business cycle can be avoided in a world of instantly adjusting prices. Austrian theory is that the business cycle caused by central banks can be avoided, by abolishing central banks and allowing market forces of profit and loss to apply to competitive money issuers. People are not stupid. They will find a money that works. Even in our fascist monetary regime, people still found a way to develop Bitcoin.

    The business cycles that you have been reading about in history books that were written by political ideologue antagonists of the free market, are caused by state intervention in money, not sticky prices. If central banks do not inflate in the first place which is the cause for subsequent deflationary market forces, then there is no reason to expect sudden widespread and significant increases in cash holding from within the market process itself whereby sticky prices are blamed as a scapegoat.

    To blame sticky prices for business cycles is like blaming sticky kidneys for hangovers.

  74. Gravatar of E. Harding E. Harding
    30. April 2016 at 18:07

    “For example, people predicted electing Hugo Chavez as president of Venezuela would be a catastrophe, and unfortunately, they were right.”

    -The vast majority of the bad stuff happened after his death.

    @Freedom

    “Not true. I am not a lifelong Austrian. I used to believe in the nonsense you believe in.”

    -When? 2005?

    “I have changed my mind on a number of issues in economics and philosophy,”

    -Name three. I haven’t seen you change your mind on anything since at least 2009.

    “but I don’t those ideas here because they are quite frankly over your head.”

    -No, they’re not.

    @ssumner

    “How can I be overestimating my importance, when I believe my influence is tiny, infinitesimal.”

    -Trump’s influence on national policymakers is way larger than yours.

    “That’s not revenue”

    -Again, Trump can make it so. Empires in the old days used to make their protectorates pay tribute to them. Currently, we pay tribute to Israel. That’s nuts.

    How the heck does my point that the U.S. has 80%+ tariffs on a lot of Chinese products have no bearing on your

    “Aren’t 40% import tariffs on China also illegal?”

    ???

    I don’t see where I’m clueless.

    As the U.S. has 80%+ import tariffs on a bunch of Chinese products, 40% import tariffs on China are not illegal.

    In 1912, the U.S. collected $311 million worth of tariff revenue.

    http://www.progressive-economy.org/trade_facts/tariffs-raised-30-percent-of-government-revenue-in-1912-and-now-raise-1-percent/

    According to this site:
    http://www.usstuckonstupid.com/sos_downchart.php?year=1910_2010&units=s&chart=gdp&bar=0&stack=1&size=m&title=&color=c

    U.S. nominal GDP at the time was 37 billion dollars. So the U.S. collected a little less than 1% of GDP from tariff revenue. That’s enough to cut 2015’s Federal deficit by a third.

    Remittances from the U.S. were $120 billion dollars -a little less than 1% of U.S. GDP.

    http://www.pewsocialtrends.org/2014/02/20/remittance-map/

    Maybe a third of that can be collected, so let’s add another $40 billion to the hypothesized $170 billion of new tariff revenue.

    Then add what Germany and Japan are willing to pay for the cost of U.S. military occupation there. That’s probably not $600 billion, but could easily be $100 billion or $200 billion. So let’s add another $100 billion to our total. That gives us at least $300 billion of new revenue from my hypothesized Trump policies. That’s a lot of money, and enough to more than halve the 2015 Federal deficit.

    “Show me any other presidential candidate who said we’d pay off the entire national debt in 8 years, while boosting spending sharply and slashing taxes.”

    -I don’t think any other candidate claimed that he’s going to pay off the entire national debt in 8 years, but Obama still talked about reducing our children’s debt burden and “fiscal responsibility” and tax cuts and government spending increases(both part of the 2009 stimulus). Again, this is standard politician talk. Trump’s just taking it a bit further than most.

    “And again, this has no bearing on Trump’s comment, which said we need to borrow more because rates are low.”

    -Yes, because it reduces the national debt relative to borrowing the same amount of money when rates are higher. What don’t you get about that?

    “While it seems to be the case that more immigration will turn us more blue, what are the policies you fear will prevail as a result?”

    -America’s institutions being transformed into Mexican ones in general. Combined with greater support for Latin-American-style socialism.

    “It is the only actual economics in the world today, since it is the only economics that is based on real world individual action.”

    -LOL.

    “Bob, Trump obviously doesn’t reflect the mood of the electorate, as the vast majority of people say they’d never vote for him.”

    -Not true. And, in any case, Trump and Clinton do reflect the mood of the electorate because they’re winning.

    “He doesn’t have the authority.”

    -So what? He’ll get it.

    “What was wrong with the Republican Party 20-35 years ago?”

    -A lot. There’s a lot of ruin in a party. However, I have not thought about it, so my best points haven’t been thought up. Off the top of my head, it was insufficiently uncompromising, was not in control of the House, was soft on immigration and spending, and was unwilling to cut the welfare-warfare state.

  75. Gravatar of Scott Freelander Scott Freelander
    30. April 2016 at 19:34

    Major.Freedom,

    Look, this is very simple. Wages are not just sticky on the downside, but on the upside. Otherwise, inflation could not erode purchasing power. If wages and all other prices adjusted in tandem, again, inflation would have no real effects.

    And this must have always been the case. Yes, this has been the case even pre-workplace regulations. Inflation could be a problem in every economy that had a currency.

    You mention various prices only adjusting with lags, but highly liquid asset prices adjust within seconds or less to salient news. That includes the stock and bond markets, commodity markets, forex, etc. This seems easily observable on any given trading day.

    There is also, of course, plenty of empirical evidence that wages are sticky, but even just the considerable sum of our common experience tells us it’s true. Unit wages don’t tend not to fall for years as unemployment rises due to the slowing of economic growth. Similarly, wages do not rise in tandem with the rises in inflation, tending to lag.

    This is natural market failure, pure and simple. Say’s Law only holds for barter economies.

  76. Gravatar of Benjamin Cole Benjamin Cole
    30. April 2016 at 21:33

    “Even if Donald Trump dresses up as Hillary Clinton, he shouldn’t be using the girls’ restroom,” Cruz declaimed at a rally. It’s his new favorite line. He is constantly reminding Republican voters that Trump, when asked which bathroom transgender people should use, simply replied the one that they felt most appropriate.”

    Explain to me again who is the nut ball in this election.

  77. Gravatar of derivs derivs
    1. May 2016 at 03:00

    “to implementing a 35% devaluation of the dollar via QE”

    I wonder how one can guarantee this without controlling both countries currencies. I’d meet you one to one if I were the other country and you tried this. Guaranteed one big giant circle jerk.

    “Explain to me again who is the nut ball in this election.”

    Face it, the establishment hates this guy more for their fear over there not being a place at his table for their voices to be heard.

    “The vast majority of the bad stuff happened after his (Chavez) death.”

    Is that like the drunk guy who kills himself driving. The bad stuff only happened after he got in the car? All OK though… Today everyone in Venezuela got a 30% raise to go along with their 5 day weekend…. and the bus driver sings.. “the wheels on the bus go round and round… join in Evo you have the voice of an angel!!”

    “Just once, I’d like to hear Trump say: …I am familiar with many terms, I possess a quite sophisticated vocabulary.”

    I made a conscious effort in High School to never speak like that again. People in general, most importantly pretty girls, don’t warm to you when you talk like that.

  78. Gravatar of ssumner ssumner
    1. May 2016 at 05:47

    Massimo, I think you took that the wrong way. I don’t want Trump to win just because it would benefit me, I’m not that selfish.

    My point was that his winning would benefit me, so my opposition is not driven by self-interest.

    Harding, You said:

    “The vast majority of the bad stuff happened after his death.”

    This is what happens when you are obsessed with GDP data. The bad things happened when he was alive, but were covered over for a time by soaring oil prices. Once that went away, the house of cards fell. But the policies that ruined Venezuela were implemented by Chavez.

    You said:

    “Trump can make it so. Empires in the old days used to make their protectorates pay tribute to them. Currently, we pay tribute to Israel. That’s nuts.”

    You remind me of Trump, hard to tell when you are joking, or just being stupid.

    You said:

    “How the heck does my point that the U.S. has 80%+ tariffs on a lot of Chinese products have no bearing on your”

    Do you know anything at all about trade law? About the WTO? About MFN? If not, go learn about them and then come back here.

    You said:

    “That’s enough to cut 2015’s Federal deficit by a third.”

    But what about Trump’s massive income tax cut? What about the big increases in spending he promised. He would not cut the deficit at all, he’d increase it. And even if he cut the deficit by 100% immediately, that would do nothing to pay off the national debt in 8 years. Please tell me you aren’t this stupid.

    derivs, You said:

    “I made a conscious effort in High School to never speak like that again. People in general, most importantly pretty girls, don’t warm to you when you talk like that.”

    I was joking.

  79. Gravatar of Major.Freedom Major.Freedom
    1. May 2016 at 07:51

    Scott Freelander:

    Much like you use the doctrine of “sticky wages” as a litmus test to parse a person’s understanding of economics, so too do I use the doctrine of “market failure” to parse a person’s understanding of economics. Now unlike you, I passed your test, because I accept the triviality that prices do not instantly adjust to every change in demand. Such a world would in fact be so chaoic that economic action would be virtually impossible. Prices would be changing constantly, even in between the time you choose to pay for a good and the time the price is set. There would be ticker tapes of the prices of potatoes, table salt, and everything else.

    You failed my test because there is actually no such thing as market failure in the context of individual economic freedom. Sure, when you START with your morality of “private property rights ought to be violated, and aggression is moral when introduced by men with badges”, then of course, the counter-factual world to that would be chock full of “failures”. For a free market would prevent all manner of outcomes that require aggression and a violation of property rights.

    With market failure, there is the thought that the free market fails when a non-market standard is introduced and arrogated as “the” standard. YOU want others to do this or that as optimal, pretending that what you want is really what they want but are just too stupid to know any better, and when they do not do what you want, that constitutes THEIR failure. This is what the doctrine of market failure boils down to. The notion that the available solutions of cooperation within a framework of respect for individual rights, is suboptimal in the eyes of those who do not want to respect individual economic freedom. And this is based on the notion of what you believe other people might say they want in some hypothetical world, is what should be had, and if it isn’t had due to the available actual real world choices in a context of individual rights keeping those hypothetical as hypotheticals, then the real world actions are to be called “failures”. Someone is going to be aggressed against and their economic freedom infringed upon, leading to Pareto failure, all so that YOU can rest happy that the production follows your ideal as opposed to the combined ideals of the individuals involved. And then you have the gall to claim that you are just helping people get what they really want.

    You prefaced your post with “Look this is simple”. That is another litmus test I use to parse a person’s understanding of economics. You failed that one as well. No, it is not as simple as you make it out to be. Simplistic thinking like that leads to innocent people being victimized. Pareto failure.

    Now on to your comments. I have to admit, there was lots of head shaking. You wrote:

    “Look, this is very simple. Wages are not just sticky on the downside, but on the upside. Otherwise, inflation could not erode purchasing power. If wages and all other prices adjusted in tandem, again, inflation would have no real effects.”

    We are already past this. Yes, prices obviously do not adjust instantly to every change in demand. That is a GOOD thing. Economic planning would be impossible if prices were not “sticky”.

    “You mention various prices only adjusting with lags, but highly liquid asset prices adjust within seconds or less to salient news. That includes the stock and bond markets, commodity markets, forex, etc. This seems easily observable on any given trading day.”

    No this is not true. Even stock prices are affected by the unpredictable choices of retail, pension fund, and individual investors, whose choice matrixes are not limited to the minute by minute “news”. The speculators cannot scientifically predict future human knowledge and actions. The cannot even predict their own future knowledge or actions.

    When you observe changes in prices of currencies, you are not only observing the choices of the high frequency traders who “react” (like automatons it seems) to news by the second. You are also observing the delayed effects of past news that made the speculators change the prices from that baseline instead of another. Why did the USDJPY exchange rate rise from the level it was at yesterday? You attribute the change since then to some news, but what caused the change to occur from that level as opposed to another level? Surely the level then price is at is as equally important as any change in the price. Well, that level is the combined effect of all information and actions, past and present. THIS is wat cannot predicted scientifically, since there are no constants in human knowledge.

    “There is also, of course, plenty of empirical evidence that wages are sticky, but even just the considerable sum of our common experience tells us it’s true.”

    You see what your theory allows you to see.

    “Unit wages don’t tend not to fall for years as unemployment rises due to the slowing of economic growth. Similarly, wages do not rise in tandem with the rises in inflation, tending to lag.”

    There are actions people take that make wages and prices stickier than they otherwise would be. Inflation for example makes wages more sticky. When people expect prices to keep rising, there is less emphasis put on temporary deflations. People become accustomed to viewing falling output prices as an exception to the rule. Of course workers and employers will in this environment play the waiting game as long as they can, which of course is exacerbated by welfare and other state created rewards to playing the waiting game. Why agree to a pay cut now when workers can go on welfare temporarily until price rise back up by inflation of the money supply?

    Now as mentioned, even in a laissez market, prices do not, thankfully, adjust instantly. But they do in fact adjust. The empirical evidence bears this out. When the alternative is a reduction in profits, and starvation, wages adjust. We saw a semblance of this with the recession of 1920-21. Wages adjusted. They would have fully adjusted downward had there not been a Fed to reinflate and bring about its second massive inflationary boom post 1913.

    “This is natural market failure, pure and simple.”

    Non sequitur. You cannot go from “wages do not adjust as fast as I want them to” to “therefore market failure.” You need to make explicit the standard from which you identify this “failure”. And what standard are you using? It certainly is not all individual choices in a context of laissez faire.

    “Say’s Law only holds for barter economies.”

    I guess we can chalk up not understanding Say’s Law either. How surprising. Say’s Law does not require instantly adjusting prices either.

  80. Gravatar of Major.Freedom Major.Freedom
    1. May 2016 at 08:06

    Barter ratios in a barter economy do not instantly adjust either. Production takes time. Learning takes time.

    Say’s Law is NOT “every additional or available supply finds a demand”. Say’s Law is only that what constitutes demand is supply. This remains true in a monetary economy.

  81. Gravatar of E. Harding E. Harding
    1. May 2016 at 08:55

    “You remind me of Trump, hard to tell when you are joking, or just being stupid.”

    -I’m not joking.

    “This is what happens when you are obsessed with GDP data. The bad things happened when he was alive, but were covered over for a time by soaring oil prices. Once that went away, the house of cards fell.”

    -Venezuela started having serious problems almost as soon as Chavez died, a full year before oil prices dropped. And oil prices weren’t skyrocketing in, say, 2012, when Chavez was re-elected.

    http://www.gallup.com/poll/167564/venezuelans-rated-lives-worse-ahead-protests.aspx

    “But what about Trump’s massive income tax cut?”

    -Changes in income tax rates have no correlation with changes in income tax revenue.

    “What about the big increases in spending he promised.”

    -Did he give any dollar numbers? Ted Cruz explicitly promised to raise military spending, and he even gave dollar figures. One can’t say the same thing for Donald Trump, who, as usual, gave contradictory signals on where he’d take military spending.

    “And even if he cut the deficit by 100% immediately, that would do nothing to pay off the national debt in 8 years.”

    -That can only be accomplished by sales of Federal assets (like student loan debt, or government land).

    “Do you know anything at all about trade law? About the WTO? About MFN? If not, go learn about them and then come back here.”

    -I know the barest minimum about international trade law. Surely stuff like the WTO and acceptance of China’s status as MFN are not constitutional amendments. They can be repealed by Congress, just as easily as they were passed by that body.

  82. Gravatar of Scott Freelander Scott Freelander
    1. May 2016 at 10:13

    Major.Freedom,

    My assertion about sticky wages is not a litmus test to determine if one knows enough about economics to have a discussion with me, but whether one is open-minded enough and has a coherent enough view of things to make a discussion productive. Two people must at least agree on the facts to have a productive discussion.

    We cannot have a productive discussion, because we disagree on the facts. We agree that wages and other prices can be sticky, but I see this fact as necessarily a problem and market failure, as it leads to unnecessary unemployment and to economies having more severe and longer lasting economic downturns than necessary.

    You say you’re actually glad wages and some prices adjust with a lag. There is no coherent economic theory I can conceive of in which this differential adjustment is a good thing.

    So, we have nothing to discuss when it comes to economics.

  83. Gravatar of Art Deco Art Deco
    1. May 2016 at 10:30

    Explain to me again who is the nut ball in this election.

    You are. Cruz’ statement is perfectly sensible.

  84. Gravatar of Art Deco Art Deco
    1. May 2016 at 10:37

    They would have fully adjusted downward had there not been a Fed to reinflate and bring about its second massive inflationary boom post 1913.

    Whatever.

    http://www.usinflationcalculator.com/inflation/consumer-price-index-and-annual-percent-changes-from-1913-to-2008/

  85. Gravatar of Mark Mark
    1. May 2016 at 11:29

    Scott Freedlander:

    “There is also, of course, plenty of empirical evidence..”

    I think this is where you lose Major.Freedom. He doesn’t believe the notion of empirical evidence applies to economics. Much like a Marxist, he automatically attributes any empirical evidence contrary to his utopian worldview to some sort of ideological corruption of his opponent, rendering actually, like, rebutting such evidence unnecessary in his mind.

    Major, you clearly don’t understand the idea that economics and morality are separate disciplines. You sound like someone trying to argue that the immorality of using an atom bomb constitutes a refutation of the fact that splitting Uranium atoms causes a chain reaction resulting in a massive release of energy.

    You don’t understand what a market failure is either, it would see. The very point is that prices *do not* reflect that current supply and demand for a given good (i.e., the aggregate of the choices of consumers) because of price stickiness. It’s not a matter of disagreeing with the choices of consumer; it’s that consumers’ choices aren’t reflected in the prices.

    You really need to learn to separate morality from economics. Complaining about the immorality of what you perceive to be the policy implications of a claim does not constitute a refutation of that claim.

  86. Gravatar of Scott Freelander Scott Freelander
    1. May 2016 at 11:35

    Mark,

    And I didn’t even mention the disagreement over whether highly liquid markets immediately react to new information. I’ve been watching markets daily for years, both as a former stockbroker and now as a financial advisor. It seems about as clear a fact as exists about economics and markets that highly liquid markets react more or less immediately to new information.

  87. Gravatar of Major.Freedom Major.Freedom
    1. May 2016 at 12:18

    Scott Freelander:

    “My assertion about sticky wages is not a litmus test to determine if one knows enough about economics to have a discussion with me, but whether one is open-minded enough and has a coherent enough view of things to make a discussion productive. Two people must at least agree on the facts to have a productive discussion.”

    You are saying the same thing in two ways there.

    We’ve already agreed that wages and other prices do not instantly adjust to changes in demand. Now what?

    “We cannot have a productive discussion, because we disagree on the facts. We agree that wages and other prices can be sticky, but I see this fact as necessarily a problem and market failure, as it leads to unnecessary unemployment and to economies having more severe and longer lasting economic downturns than necessary.”

    But thta is not market failure! What YOU believe to be “unnecessary” employment is in fact not actually unnecessary in the valuations of the individuals themselves. You are arrogating your own wants and needs about others over and above their own wants and needs for themselves.

    If threatening people with jailtime so as to monopolize the monetary system, from which money is printed at will, is the failure. It is a failure from the standard of individual economic choice.

    What is “necessary” employment is exactly that level of unemployment that results from individual choices in a market. Not your opinions. The actual choices and actions of all individuals.

    “You say you’re actually glad wages and some prices adjust with a lag. There is no coherent economic theory I can conceive of in which this differential adjustment is a good thing.”

    I just explained to you why an absence of sticky prices is a “bad thing”. Prices for everything would be constantly changing all day long, every day. That would be a bizarre world, an unrealistic world. To subject the real world to an unrealistic standard, and then condemn that very world as a “failure” for not living up to that standard, whereby out of the blue threats and actual uses of gun violence against innocent people, is what logicians have long ago exposed as a fallacy called the Nirvana fallacy. You are a victim of this fallacy. You have taken hook line and sinker for it. You were taught to believe it, you never bothered to question it or search for critiques or alternatives, and now you’re trying to assimilate my mind like the Borg where now I am to narrow my range of cognition to what you are able to conceive of.

    You say you cannot conceive of any “coherent” economic theory where actions are sequential and not contemporaneous. Are you for real? You actually cannot conceive of a world where information is digested over time, where thoughts take place over time, where planning takes place over time, where weighing costs and benefits takes place over time, where you ask for a price for your goods for sale, and that it is literally impossible for you to instantly know and react to the continuous path of demand throughout the day? That you cannot conceive of pricing being discretely set as opposed to continuously set every millisecond, for all goods and services all over the world?

    Really? Maybe instead of constraining your entire understanding to hostile to the market “models”, you should actually study actual people?

    ” So, we have nothing to discuss when it comes to economics.”

    You just proved my point about the litmus test. I refuse to advocate for inncoent people to be aggressed against in the name of “what I want employment to be”, which is a subjective valuation, and that to you is where the ” discussion” never even started. You don’t want a discussion. You want obedience to the law you depend on when you believe you are entitled to utilize it for your own personal wants. Anyone who disagrees can either shut up and obey, or else.

    Now if you really were interested in a debate, then you would debate the people who do not enter into the employment contracts you say they ought to enter into. You would be having a discussion with the people for why they made their choices, and then you would shut up and accept their choices. But you don’t do that. No, you want the “discussion” to consist of “I obey your command. I shall obey the property rights violations, as law, I shall obey what you and your mob friends believe to be “necessary” employment.”

  88. Gravatar of Major.Freedom Major.Freedom
    1. May 2016 at 12:29

    Mark:

    “I think this is where you lose Major.Freedom. He doesn’t believe the notion of empirical evidence applies to economics. Much like a Marxist, he automatically attributes any empirical evidence contrary to his utopian worldview to some sort of ideological corruption of his opponent, rendering actually, like, rebutting such evidence unnecessary in his mind.”

    You’re closer to Marxism than I am, Mark, just so you know. Your utopia is statist monetarism. You attribute empirical evidence contrary to your utopian worldview as a character flaw on my part. The evidence is onmmy side, not yours, because my worldview is both empirically consistent AND it has what you don’t have, an internally consistent theory that does not fall prey to all the fallacies you fall prey to.

    Empirical evidence in economics is history. History is a unique sequential path. It cannot be tested. There are no empirical constants in human action.

    “Major, you clearly don’t understand the idea that economics and morality are separate disciplines.”

    Tell that to Scott, who is introducing his own moral claim about what employment “ought” to exist as opposed to what actually would take place in a free market

    YOU fail to separate economics from morality. You view the empirical evidence, and you blame people whose morality conflicts with yours.

    “You don’t understand what a market failure is either, it would see. The very point is that prices *do not* reflect that current supply and demand for a given good (i.e., the aggregate of the choices of consumers) because of price stickiness. It’s not a matter of disagreeing with the choices of consumer; it’s that consumers’ choices aren’t reflected in the prices.”

    That is not a market failure. YOU do not understand how to handle the observations historians make. Prices cannot possibly reflect all CURRENT known information, since pricing is an action that takes place over time. Information dissemination is an action that takes place over time. Planning and adapting are actions that take place over time. Pricing is always necessarily historical. It is literally impossible for past events to contain future events.

    You are the one who cannot separate morality from economics. You take what is true in economic action, and you introduce a subjective valuation of it as a “failure”. To call anything a failure presupposes a morality. You are just too uneducated to grasp this.

    To say that in the market people “fail” to price in accordance with your silly pure and perfect markets doctrine, and as a result the state ought to monopolize money and inflate so as to save people from their own inherent failure to price they way they ought to price, is one gigantic morality play masquerading as an economic theory. A morality play that rivals Marxism.

  89. Gravatar of Major.Freedom Major.Freedom
    1. May 2016 at 12:40

    Scott Freelander:

    “And I didn’t even mention the disagreement over whether highly liquid markets immediately react to new information. I’ve been watching markets daily for years, both as a former stockbroker and now as a financial advisor. It seems about as clear a fact as exists about economics and markets that highly liquid markets react more or less immediately to new information.”

    You are not able to see the past information that effects current stock prices because your theory BLINDS you to it. You don’t seem to want to understand that economic data, history, is not what drives your theory. It is your theory that is telling you to see what you believe you are seeing.

    Yes, stock prices when observed over time, and information/news releases over time, very much indeed display a strong correlation with very little “lag”. This does not make stock pricing somehow “better” or “superior” to the pricing of say labor. Quick pricing changes is neither inherently good nor bad.

    You only believe quick price changes are “good” because those price changes are closest to your theoretical framework of general equilibrium. Equilibrium theories cannot cope with time very well. Even the time varying models are crude. The quicker the changes occur, the less you need to think about the market process. You can continue to use the “model” of in this case EMH. Those prices that change less frequently over time, cannot be fit in your modelling, and so constitute a failure. Other human beings want to disassociate themselves for a time while they replan and reasses, and that to you is justification to consider your morality of state intervention as “just dealing with market failure.”

  90. Gravatar of Major.Freedom Major.Freedom
    1. May 2016 at 12:54

    To subject the market to an unrealistic standard that is not only impossible to act in accordance with, but would also be a bizarre world of chaos even if prices did do what you say they ought to do, and then advocating for state aggression to “fix”, is sociopathic.

  91. Gravatar of E. Harding E. Harding
    1. May 2016 at 14:04

    “There are no empirical constants in human action.”

    -Except “Major Freedom will always be an Austrian ideologue”.

  92. Gravatar of Scott Freelander Scott Freelander
    1. May 2016 at 14:38

    Major.Freedom,

    You can’t credibly call the kind of pragmatism I advocate sociopathic, when it is in fact closer to the norm than your morality. A certain behavior can hardly be pathological when it’s been displayed by most people in every era in which we’re aware, and in fact, seems genetically hardwired in many respects. That said, it doesn’t mean my position is morally correct.

    However, I believe it is morally correct for the government to intervene in markets when the widely-shared benefits clearly outweigh the costs. In the case of monetary stimulus, there virtually are no net costs to anyone, as long as its conducted competently. However, the benefits are enormous.

  93. Gravatar of Scott Freelander Scott Freelander
    1. May 2016 at 14:44

    Major,

    And with respect to more flexible wages and certain other prices, I wouldn’t expect wages or menu prices, for example, to fluctuate along with those of liquid assets. However, if it were possible for all prices to adjust in unison, instead of chaos, I’d expect considerably more stable economic growth, ceteris paribus. I don’t see where the chaos comes from, as there’d be real price stability, with changes only being nominal.

  94. Gravatar of Christian List Christian List
    2. May 2016 at 02:10

    “The Economist reports that Trump voters are skewed toward the over $100,000 group.”

    Why would you even need a poll for that? This was obvious from the beginning. And it makes perfect sense. It’s a pretty rational decision.

    “Your IQ has dropped 60 points. Don’t talk about politics please”

    That’s also my impression about ssumner when he talks about politics, especially Trump.

  95. Gravatar of TravisV TravisV
    2. May 2016 at 07:56

    Disappointing analysis by Daniel Clifton and Strategas Research Partners.

    http://www.businessinsider.com/fiscal-stimulus-stocks-outperforming-the-market-2016-5

    “Government spending is slowly on the rise and the stock market has taken notice”

  96. Gravatar of ssumner ssumner
    2. May 2016 at 15:59

    Harding, You said:

    “That can only be accomplished by sales of Federal assets (like student loan debt”

    ?????????

    Christian, I’ve estimated my IQ drops by about 20 points, but each person is entitled to their opinion.

  97. Gravatar of Major.Freedom Major.Freedom
    2. May 2016 at 16:13

    E. Harding,

    “There are no empirical constants in human action.”

    “Except “Major Freedom will always be an Austrian ideologue”.

    That is also not a constant. I could always have a stroke or a brain aneurysm and become a market monetarist ideologue.

    ———————————–

    Scott Freelander:

    “You can’t credibly call the kind of pragmatism I advocate sociopathic, when it is in fact closer to the norm than your morality.”

    Oh I get it. Sociopathology ceases to be when it becomes widespread.

    Actually, if by “the norm” you mean what most people think is right for them to do with their family, friends, colleagues, even strangers, then no, it is much closer to my morality not yours. What you call your morality is actually just what you believe people with badges and who are members of the state can do. You are not talking about any human ethic.

    “A certain behavior can hardly be pathological when it’s been displayed by most people in every era in which we’re aware, and in fact, seems genetically hardwired in many respects. That said, it doesn’t mean my position is morally correct.”

    It is not genetically hard wired. Nice try. People can learn. There are people who reject your morality, so it cannot be hard wired in humanity as such.

    Sorry, but most people believe and act in accordance with the morality that initiating threats of force, or initiating actual force, against people is wrong. Most people believe that it would be morally wrong, not just “illegal”, for you or me to tomorrow do what the Fed does and what the rest of the state does, on a daily basis, which is engage in activity that is backed by threats of violence if others try to opt out and try to use their property in ways they see fit as opposed to how the thugs see fit.

    All private property ethics in a political sense consists of, is universalizing what most people already consider to be moral and just behavior in the “citizen to citizen” sphere of interaction.

    “However, I believe it is morally correct for the government to intervene in markets when the widely-shared benefits clearly outweigh the costs.”

    Your belief is based on the hypostatization fallacy. Also known as the reification fallacy. Namely, you are taking the concept of “society” or “humanity”, which is merely an abstract concept that refers to real world diverse and separate individuals, and then claiming that this concept has the same properties as individuals in that it can experience “benefits” and “costs”.

    Or what is more often used, is a sort of utilitarianism where it is moral for you to harm a person in order to help yourself and one other person. Two against one, and out of nowhere this makes your actions morally justified. One person raping 10 people is morally wrong, because the rapist is statistically outnumbered. 10 people raping an individual is morally right, because the rapists statistically outnumber the victim. Only one person is worse off, but 10 people are better off! You must then “believe” it is moral for large groups of rapists to “intervene” in peaceful civilized society, where the widely shared benefits outweigh the costs.

    I’ll help you out and say that there is this one really poor girl in a third world country, whose productivity is very low and she doesn’t have any family. Go over there and teach her about your non-sociopathic morality that completely ignores individual rights and freedoms, in favor of raising up “society” instead. Bring 10 of your friends and tell her all about how “you believe” you have a right to “intervene” in her life, because “the widespread benefits exceed the costs.”

    What’s that? You feel repulsed at that? Congrats, that is the structure of your morality. Exploit the minority for the sake of the majority.

    Scott, I will tell you that your morality is sociopathic by definition, because your morality has absolutely no compassion whatsoever for the victims. You relegate real world human beings to an entry in the ledger of initiators of violence. “Sorry Mr. Smith, you will be aggressed against because more people will be better off.”

    In actuality of course, respecting individual rights is the way to increase the benefits of the most people. Aggressors can increase their material standard of living in a world by ceasing their aggression and seeing their fellow human beings being free to produce in peace.

    This is how the human race rose up from the rest of the animal kingdom that hasn’t learned cooperation in a division of labor to anywhere near the same extent.

    Stop justifying violence. There is no benefit to you.

    “In the case of monetary stimulus, there virtually are no net costs to anyone, as long as its conducted competently. However, the benefits are enormous.

    Yeah and there are virtually no adverse consequences by communicating the country….as long as the Communist tyranny is conducted “competently”.

    Did you know that only the market can reveal the information needed to rationally judge whether such activity is “competent”?

    ————————-

    “And with respect to more flexible wages and certain other prices, I wouldn’t expect wages or menu prices, for example, to fluctuate along with those of liquid assets.”

    Oh but they would have to if prices are to be “ideal” and not sticky. That is the only way your conception of “failure” can be avoided.

    Now you are saying you “wouldn’t expect” those prices to adjust perpetually? What basis is this “expectation” made and why does it not lead to “expecting” wages to not adjust perpetually either? Why are sticky menu prices suddenly not a market failure when you just wrote above that sticky prices are a market failure?

    What standard are you using to lump one set of prices in the “these sticky prices here are not a market failure” bucket, and “these sticky prices here are a market failure” bucket, and why is something other than a totally arbitrary distinction that you just accepted and never really thought about?

    What, is it the temporary harm that comes from unemployment? Oh I know, I’ll just borrow from your sociopathic morality and say that the unemployment that results from market driven deflation is a benefit that outweighs the costs to “society”. And I will define ” society” in my own way, like you did, to conveniently be composed of people whose interests are more important than those who incur the costs.

    If individual sacrifice is to be advocated, then bring them all to the “Scott Freelander believes” temple where the high priest can teach the masse that this is how “society” can be nourished and praised.

    “However, if it were possible for all prices to adjust in unison, instead of chaos, I’d expect considerably more stable economic growth, ceteris paribus. I don’t see where the chaos comes from, as there’d be real price stability, with changes only being nominal.”

    What is this make believe fairy tale? All prices changing in unison? Inflation does not and cannot work that way. Inflation always and everywhere has heterogeneous effects on prices. You say “if it were possible” as if A. Prices were set by a singular consciousness and B. Goods never change.

    Do you have anything to say about the real world? Or is it just unrealistic models?

  98. Gravatar of Christian List Christian List
    4. May 2016 at 00:44


    Christian, I’ve estimated my IQ drops by about 20 points, but each person is entitled to their opinion.

    Yes 20 points might be more accurate. I didn’t really realize it said 60 points. That sounds like way too much. Unless you got 180 in other fields, which is quite possible.

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