Tuesday, June 16, 2009
Potpourri
* Von Pepe sends me this 2002 Krugman piece (via Arnold Kling). The money quote:
But come ON. A bunch of us have been saying for more than a year that Krugman's prescription for fixing the current mess, is exactly what caused the housing bubble and would only cause another crisis down the road. Doesn't the quotation above seal the deal? What more do we need? Oh wait, here's more evidence that, despite all the formal models with their bells and whistles, Krugman has the crudest of business cycle theories. At the end of his 2002 article he says: "But wishful thinking aside, I just don't understand the grounds for optimism. Who, exactly, is about to start spending a lot more?"
Incidentally, this is pretty weird, now that we have Krugman in 2002 predicting the housing bubble, but not really. The only thing like it is Tyler Cowen in early 2005 predicting the housing crash from an Austrian point of view, but not really.
* Here's an odd article from Charles Hugh Smith (HT2 Tim Swanson) that says: "The idea that the super-wealthy and super-influential folks who own the politicos will benefit from inflation does not hold water." Right, they don't benefit from the price inflation per se, but they do benefit from the trillions in bailouts financed by the Fed and Treasury. Be careful: I think Smith just "proved" that Caesar would never have debased the coinage.
* Tyler Cowen responds to my charge the he flipped on carbon taxes. If you go read the post, maybe you can help me out: Is Tyler saying I need to lose weight?
The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.I realize there's a danger of playing "gotcha!" with the Nobel (Memorial) laureate. Fortunately only Silas Barta combs through my past writings with the same effort and cynicism, and I'm not sure I like it.
But come ON. A bunch of us have been saying for more than a year that Krugman's prescription for fixing the current mess, is exactly what caused the housing bubble and would only cause another crisis down the road. Doesn't the quotation above seal the deal? What more do we need? Oh wait, here's more evidence that, despite all the formal models with their bells and whistles, Krugman has the crudest of business cycle theories. At the end of his 2002 article he says: "But wishful thinking aside, I just don't understand the grounds for optimism. Who, exactly, is about to start spending a lot more?"
Incidentally, this is pretty weird, now that we have Krugman in 2002 predicting the housing bubble, but not really. The only thing like it is Tyler Cowen in early 2005 predicting the housing crash from an Austrian point of view, but not really.
* Here's an odd article from Charles Hugh Smith (HT2 Tim Swanson) that says: "The idea that the super-wealthy and super-influential folks who own the politicos will benefit from inflation does not hold water." Right, they don't benefit from the price inflation per se, but they do benefit from the trillions in bailouts financed by the Fed and Treasury. Be careful: I think Smith just "proved" that Caesar would never have debased the coinage.
* Tyler Cowen responds to my charge the he flipped on carbon taxes. If you go read the post, maybe you can help me out: Is Tyler saying I need to lose weight?
Comments:
Hi Bob, I just started reading your blog a few weeks ago and I must say that I've enjoyed every post! You do great analysis that's deep yet accessible to the lay reader. I used to just read guys in the NY Times or Wash Post like Krugman, de Long et al, and had no idea about economists like you or other Austrians. But since the crisis has shown that those guys don't know as much they pretend to, I've expanded my reading to include Austrians like you.
After reading/studying blogs online for awhile, I've decided to study it formally and tackle the major books head on. I've read intro's to Aust. Econ online so I understand the basic concepts, so I feel like I can try studying Mises' and Rothbard's work directly.
I was wondering what order you would recommend studying Mises and Rothbard. I've narrowed down the books to start with to Man, Econ, and State, Human Action, and Theory of Money and Credit. I've been told that Human Action might be too challenging to begin with because of its heavy philosophical content, and that I should tackle that later. So I'm trying to decide between MES and Theory of M&C. What order would you suggest? Any other general advice about approaching this?
Thanks, and keep up the excellent work!
After reading/studying blogs online for awhile, I've decided to study it formally and tackle the major books head on. I've read intro's to Aust. Econ online so I understand the basic concepts, so I feel like I can try studying Mises' and Rothbard's work directly.
I was wondering what order you would recommend studying Mises and Rothbard. I've narrowed down the books to start with to Man, Econ, and State, Human Action, and Theory of Money and Credit. I've been told that Human Action might be too challenging to begin with because of its heavy philosophical content, and that I should tackle that later. So I'm trying to decide between MES and Theory of M&C. What order would you suggest? Any other general advice about approaching this?
Thanks, and keep up the excellent work!
# posted by 
: June 16, 2009 at 11:20 PM
: June 16, 2009 at 11:20 PM
Hi Peter,
I would totally recommend Rothbard first. And note that my study guide [.pdf] is online to help you get through it.
After that, if you want to tackle Mises, I would recommend something like Liberalism first, and then Human Action if you are up to it. If you digest H.A., only then would I recommend ToMaC.
I would totally recommend Rothbard first. And note that my study guide [.pdf] is online to help you get through it.
After that, if you want to tackle Mises, I would recommend something like Liberalism first, and then Human Action if you are up to it. If you digest H.A., only then would I recommend ToMaC.
Awesome, thanks!
Good thing I asked....I almost started with ToMaC.
And thanks for the study guide! Will make my studying much less painful.
Good thing I asked....I almost started with ToMaC.
And thanks for the study guide! Will make my studying much less painful.
# posted by : June 17, 2009 at 1:51 AM
: June 17, 2009 at 1:51 AM
I read this differently.
PK: "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble".
Bob: "Incidentally, this is pretty weird, now that we have Krugman in 2002 predicting the housing bubble, but not really".
I do not read this as Krugman predicting the housing bubble, but as recommending creating a housing bubble to 'fix' the 2001/2002 recession.
PK: "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble".
Bob: "Incidentally, this is pretty weird, now that we have Krugman in 2002 predicting the housing bubble, but not really".
I do not read this as Krugman predicting the housing bubble, but as recommending creating a housing bubble to 'fix' the 2001/2002 recession.
# posted by : June 17, 2009 at 8:29 AM
: June 17, 2009 at 8:29 AM
1. I seem to recall that recently, in response to a claim that only the Austrians predicted the housing bubble crash, someone asserted that Keynesians such as Krugman predicted it and warned about it (I will endeavor to search for the citation...it may have been Krugman himself). Which is quite odd seeing that Krugman proposed creating a housing bubble as a corrective governmental measure. In any event, Krugman's 2002 quote is quite an amazing admission that it is government central central banks that create housing bubbles in the first place.
2. For a newbie Austrian, I would also suggest reading Rothbard's "The Essential Von Mises" which I first read as a pocket sized mini-book in 1975. It's now free online:
http://mises.org/resources/3081
http://mises.org/books/evm.pdf
In easy to read language, Rothbard explains how Von Mises came to his revolutionary ideas.
2. For a newbie Austrian, I would also suggest reading Rothbard's "The Essential Von Mises" which I first read as a pocket sized mini-book in 1975. It's now free online:
http://mises.org/resources/3081
http://mises.org/books/evm.pdf
In easy to read language, Rothbard explains how Von Mises came to his revolutionary ideas.
# posted by : June 17, 2009 at 11:20 AM
: June 17, 2009 at 11:20 AM
Krugman has commented (he's is one slippery fellow):
"One of the funny aspects of being a somewhat, um, forceful writer is that I’m regularly accused of all sorts of villainy...The latest seems to be that I called for the creation of a housing bubble...
Guys, read it again. It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened."
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"One of the funny aspects of being a somewhat, um, forceful writer is that I’m regularly accused of all sorts of villainy...The latest seems to be that I called for the creation of a housing bubble...
Guys, read it again. It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened."
# posted by : June 17, 2009 at 2:43 PM
: June 17, 2009 at 2:43 PM Subscribe to Post Comments [Atom]
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