Friday, September 11, 2009
Murphy does it again
I can't get enough of Robert Murphy. Not only does he write great books (they're all available at mises.org), but his articles are awesome - straight and to the point and easy to understand. Read this one here, as he debunks some cranky economics by some statist writing for that left-wing rag, the New York Times. Thanks to mises.org for posting another great Murphy article.
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While I don't really feel the need to defend Norris (let's be honest, the Union was going to print money with or without Spaulding), but Murphy's article is just throwing rocks from his glass house.
His first problem with Norris' article was that he said the stock markets are recovering, to which Murphy grants that they are, but... na-na-na-na-na-na, Paulson and Co. didn't SAY that was the reason for the bailout. Okay... the reason that they said was that it was for jobs, and then Murphy goes ahead and points to some Obama conjecture of the unemployment rates with and without the stimulus. After he goes through all of this he admits that everything he just said doesn't prove (emphasis his) anything, because it was just conjecture, and who's to say without the stimulus, the employment rate wouldn't be 14%? That doesn't matter to Murphy though, because "plenty" of free-market economists (read: Austrians) believe that "deficit spending transfers productive resources into the bloated government sector", and for that reason, it proves that the free-marketeers were right (??). Keynesians were wrong, because.... Austrians... say so, even though Murphy admits their policies are apparently working? I also find this kind of ironic since he later knocks Norris for using Spaulding's book as a source when Murphy is using his own school's economists (including himself) to back up what he's arguing.
Second, he has a problem with fiat money (big surprise). He emphasizes Norris' argument that without fiat money, "this country might not have survived." Murphy doesn't argue this at all; he just has a problem with the amount of people killed keeping the country together; all of which he blames on fiat currency. As if without the shift from specie-backed moneys, the North would have just allowed the South to go on its merry way (I think you need to teach this guy some history Mr. Scott!). As if that's not enough, Murphy then has to invoke Godwin's Law just to drive home his point--Fiat money killed the Jews! Come on now.
Third and last, he quotes Norris' article that, "Contrary to the expectations of Representative Morrill, paper money did not set off sharp inflation over time." Murphy then shows figures of FIVE YEARS as proof (ignoring the -over time- part), and laughably, points at the Confederacy's inflation as a reason that the gold standard is superior. Because had the Confederacy stayed on the gold standard, they would have won, right? Since Mr. Murphy seems obtuse on these matters: the reason that the Confederacy, Zimbabwe, and the Wiemar Republic experienced hyperinflation was because their money was backed by the reputation of their ill-fated governments, which to the world, was worthless.
I've got to say, don't the Mises Institute writers have anything better to contribute to the world of economics than their trolling of The New York Times for articles written by journalists? I suppose they've finally realized that they can't compete with actual economists, and have relegated themselves to such.
Well, Hazlitt wrote The Failure of the New Economics, where he destroyed Keynesianism. And it wasn't from a glass house. We'e still waiting for a defense from the Keynesians. And, if Keynesiansim and Monetarism is so good, why are we in such a deep recession after following their policies?
I don't think a defense is coming; the general reception of Hazlitt's work was that it wasn't worth an academic refutation, probably due to his own lack of academic credentials and his misunderstanding of Keynes' General Theory. Though really, the best defense to Keynesian economics is the point you bring up: we're in a recession, not a depression. Business cycles are an inevitability; under Keynesian policies, depressions are not. I don't think you can say the same for for laissez-faire.
Of course the Keynesians are going to say it's not worth their time. Isn't that an easy defense? And who could understand the convoluted General Theory, which has so many holes in it. "Under Keynesian policies, depressions are not inevitable?" Maybe, maybe not. Who's to say this Keynesian- caused recession won't turn into a depression? The laissez faire, or Austrian, response to the recession of 1920 did wonders - we were out of it quite quickly. Deficit spending, one of the main planks of the Keynesian model, doesn't work and doesn't make sense.
I'm not going to go Norris' route and make the foregone conclusion that we're out of the woods on this recession, but can you not honestly agree that we're on the slope upwards rather than downwards?
You're right on the 1920 recession--supply-side economic policies do reverse downward trends (priming the pump is priming the pump), but to describe Harding's policies as laissez-faire is not really true, unless "hands off" is just double-speak for "tax cuts for the rich". The effects of Harding's policies were the same as Reagan's, a much worse downturn in 1929 and 1987 respectively, something that Keynes saw and predicted correctly. I'm curious what your arguments are for why deficit spending doesn't work or make sense though, when there's historical, empirical data that shows the opposite.
Well, before we look at data, let's look at common sense. If a husband and wife check their checkbook after paying bills and realize they are $1,000 behind, does it make sense to then go the mall and shop? If it doesn't make sense for them, why should it make sense on a grander scale? And if it's so good, why are we getting close to $2 trillion in the hole? Spend some time on mises.org
Micro versus macro; apples versus oranges. The reasons we've got a two trillion dollar (projected over ten years) budget deficit? Too much military, too much corporate welfare, and not enough taxes.
I've actually spent a bit more time on the Mises Institute's site than I should have. I've found that the gold standard is archaic, short-sighted, and at this point impossible. That anarcho-capitalism is an oxymoron. And that in the Austrian utopia, we'll have a flourishing market to sell our children to the highest bidder: http://mises.org/story/2568. I honestly don't know how their positions are defensible. Keynesianism has its fair share of problems, but it at least has a foundation in pragmatism that makes it applicable to the real world. How do you defend it?
Not enough taxes? Sorry Will, no longer need to carry on the conversation. You're a statist and have no problem letting the government violate your property rights. The great ecnonomis from Australia, Frank Shostak, was a Keynesian until he read Human Action by Mises. Now he can't even believe he was so ignorant so as to accept Keynesianism. Hopefully, the same revelation will come to you. Good luck.
Well, we can disagree on the word statist as a pejorative, but yes, not enough progressive taxes. The person making a billion dollars a year pays the same percentage of income taxes as a person that makes $373,000. You asked why we have a two trillion dollar budget deficit and I told you the reasons. Drop the military budget, stop the subsidizing of corporations, and enact more realistic tax brackets; deficit solved. Statist, socialist, pragmatist--whatever you want to call it.
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