Monday, March 15, 2010


Murphy Double Play

* At MasterResource I tut-tut Robert Frank's NYT column on climate change that scared the children. I use the latest Economic Report from the President (as in Obama), as well as a chart from the latest IPCC report (aka "the scientific consensus"), to show that the world is not ending, at least according to our trusted government and association-of-governments documents.

* At Mises I show the hidden paradox in standard free market arguments for drug legalization and against union thuggery. Specifically, a typical economic case for drug legalization will blame gang violence on the lack of contract enforcement (e.g. a drug dealer can't call the cops if he gets robbed), and free market economists will also usually say that unions can achieve above-market wage rates because the government doesn't intervene to protect "scabs" from picketers.

On the face of it, aren't these odd positions for a rabid free marketeer to take? In other words, s/he is arguing that there would be less gang violence, and a more coordinated labor market, if only the government would use its monopoly of courts and police more.

I resolve the paradox in my article.


Knappenberger Catches the IPCC With Its Pants Down

Over at MasterResource, Chip Knappenberger (who is a published climate scientist, though he is ABD I believe) has a great post documenting the IPCC Fourth Assessment Report's treatment of Antarctic sea ice. Here is the intro:
Some climate scientists have distanced themselves from the IPCC Working Group II’s (WGII’s) Fourth Assessment Report (AR4), Impacts, Adaptation, and Vulnerability, prefering instead the stronger hard science in the Working Group I (WGI) Report—The Physical Science Basis. Some folks have even gone as far as saying that no errors have been found in the WGI Report and the process in creating it was exemplary.

Such folks are in denial.

As I document below, WGI did a poor job in regard to Antarctic sea ice trends. Somehow, the IPCC specialists assessed away a plethora of evidence showing that the sea ice around Antarctica has been significantly increasing—a behavior that runs counter to climate model projections of sea ice declines—and instead documented only a slight, statistically insignificant rise.

How did this happen? The evidence suggests that IPCC authors were either being territorial in defending and promoting their own work in lieu of other equally legitimate (and ultimately more correct) findings, were being guided by IPCC brass to produce a specific IPCC point-of-view, or both.
I warn you that Chip's post is a bit long, and for full effect you need to read it carefully. But if you are at all interested in this issue--and you don't want to reflexively say "hoax! hoax!" just because you are a libertarian--I think Chip's post is well worth the effort.

Let me give one more hint: The post keeps getting better, the deeper you get into it, but you can't just skip to the punchline. You need to read the whole thing as it builds to the climax, and the noose tightens around the IPCC authors who were in charge of this particular section.


Paul "W." Krugman

Krugman continues to outdo himself. In this article he somehow ends up saying: "In short, right now America has China over a barrel, not the other way around." Right, just like I have my credit card companies right where I want them.

Here's a fun experiment: Go through this Krugman column and replace "China" with "Iraqn," and "import surcharge" with "bomb the crud out of them." The Krugman op ed suddenly turns into a Max Boot piece.

Sunday, March 14, 2010


Should Christians Support a Necessary Evil?

[CORRECTION within post, below.]

Kevin Clauson gave an interesting talk at the Austrian Scholars Conference concerning the apparent (but spurious in his mind) tension between evangelical political views and Austro-libertarianism. During the talk he described government as a "necessary evil" and cited Romans 13 to show that God had instituted civil authority, but that the sinful nature of men meant that government needed to be very limited.

Norman Horn in the Q&A raised a question along the lines of, "I happen to disagree with you that government is necessary, but let's put that aside. I'm interested in your acceptance of the very concept of a necessary evil."

Clauson reiterated his points about the sinful nature of man (making government necessary but at the same time very dangerous) and once again cited Romans 13. But then Norman explained that he wasn't challenging the existence of government, but rather the concept of a necessary evil. Then he said something like, "But earlier in the book of Romans he says, 'What shall we say then? Shall we do evil that God may work good from it? By no means!'"

[UPDATE: The following is wrong, I picked up the wrong passage when I tried to find what Norman was alluding to. Please read the comments to see a much better debate.] I think he was referring to Romans 6, and the translation here is not exactly how I remembered Norman making his point. In other words, the translation here (and the ones I'm used to) are not as clearly in conflict with someone who thinks there is such a thing as a necessary evil, i.e. that Christians could use an admittedly evil thing (the State) to effect a good outcome.

Anyway I am not sure myself how I feel about all this. According to my own arguments on this very blog, I think I would have to agree that the world itself is a necessary evil in God's plan.

Note that Norman could still argue that humans shouldn't use evil things as a way to effect good outcomes, even though God does that (e.g. Joseph's betrayal at the hands of his brothers). But I think Norman was trying to argue that the very notion of a necessary evil is nonsense.

Friday, March 12, 2010


Why Supply-Siders Needs to Learn Austrian Business Cycle Theory

Case in point.


Murphy Demolished?

I actually don't have a problem with this lengthy review of New Deal revisionism (thanks to reader teqzilla for the tip), because the writer quotes me more than I think any other reviewer has done. I'm reading his stuff thinking, "Yep, yep, this guy Murphy makes a lot of sense." I don't recall "sniff"ing and being disgusted with things, the way the reviewer describes my book, but perhaps I need outside eyes to be objective.

I will probably write a response to this at some point, but it will have to wait for now...In the meantime, here's a good excerpt:
But since the mobilization effort mandated such measures as price controls, the draft, and rationing of scarce materials such as rubber and steel for war production purposes, the whole thing was the foulest of economic abominations. “So the carefully constructed measures of ‘inflation-adjusted gross domestic output’ during the 1940s are about as meaningful as the economic statistics reported by the Soviet Union,” Murphy notes in disgust. “The government effectively made it illegal for market prices to signal how much inflation the Fed was pumping into the system.”

And so it is with all the economic measures of the grotesquely defiled Forties. Sure, the poor saps drafted into the Army or the female workers who thronged into war production factories might have thought things were turning around. But they were blind to how the pure model of laissez-faire was being molested! After all, Murphy explains, “there are other goods and services that those scarce resources could have produced, but which humans will now never enjoy because they were devoted to government projects.” Think of all the miniature golf facilities, nylon stockings and radios senselessly sacrificed just for the liberal vanity project of defeating fascism!

Likewise with the erstwhile layabouts now caught up by the draft—how could anyone count this as a legitimate form of employment? Suppose, for example, “that FDR announced in 1940 that in an effort to fight the Depression, all able-bodied unemployed men would be shipped to African jungles (where they faced lions and disease). That policy would have brought down the official unemployment rate,” Murphy sniffs, “yet it obviously would not have promoted actual economic recovery. Had FDR suggested something this monstrous as a ‘cure’ for mass unemployment, citizens would have rightfully recoiled in horror.”

Indeed, one can almost picture Murphy himself, after typing up such infamies, smiting his breast, slumping alongside his laptop, lifting his head heavenward only to convulsively shout, “Unclean! Unclean!” After all, had the market approved of the war, it could by itself have instructed wartime production facilities where to allocate resources, by the magic of the price mechanism. “Precisely because World War II was an unprecedented event, there were no ‘experts’ on transforming civilian production to military production on this scale. When it comes to motivating millions of people to brainstorm and quickly come up with better ways to make a mousetrap (or tank), nothing beats the profit-driven market economy.”

Back in consensual reality, however, the Second World War doesn’t actually reduce to a perverse safari outing. There was a Japanese attack on a U.S. naval base, and a massive German effort to conquer the West and spread racial genocide. Oh, and the “pecuniary” stakes were far from negligible, as well, with a war-driven Nazi command economy curiously indifferent to the domestic production needs of Poland, France, Belgium, the Balkan states, and so on. A laissez-faire outlook among the Allied powers, in other words, would almost certainly have resulted in a fascist triumph. (Even more inconveniently, the killing blow to Nazi imperialism was delivered by the most hatefully statist command economy of them all, Stalinist Russia.)

Thursday, March 11, 2010


Trade Deficits and Fiat Currencies

Wow, you know I must be super busy if I forgot to blog my Mises Daily on Monday. It was "Trade Deficits and Fiat Currencies," showing the connection between the two. I both praise and critique the author of The Creature From Jekyll Island.

This morning I gave my talk at the Denver Petroleum Club. One of my opening slides talked about the IER D.C. office and how I didn't have a picture of it because we had recently moved, so instead I said this shot represented our efforts. I didn't get as big a laugh as I was hoping--perhaps because it was an older crowd--but other than that things went well.

Then I hopped on a plane to Atlanta, retrieved my car from the Economy lot, and drove down to Auburn. I'm about to crash and then tomorrow morning I give the Hayek lecture at the Austrian Scholar's Conference.

I think I actually get to sleep Friday night. I can't wait.

Sunday, March 7, 2010


I Write Six Days a Week, and Rest on the Sabbath

Lately I have tried to do a better job of "observing the Sabbath," meaning that I try not to work on Sundays. As a consultant, I never have a vacation. At any given time, there is always something I could be doing (or at least get the wheels moving) to bring in more revenue.

Currently my compromise is that I allow myself to read "worky" things, and I allow myself to work on the household budget, but I don't produce anything that someone else is paying me for. Eventually I will get to the point where I truly "don't work on Sundays."

Similar to the rule about tithing, the same holds for observing the Sabbath. Paradoxically, I have found that I get more done in a seven-day period, when I know during the week that I am not going to allow myself to do "real work" on Sunday. Presumably this has to do with the fact that you really can't go nonstop for a week without taking mini-breaks, and you use your time more effectively from Monday through Saturday if you know you are going to really take Sunday off.

Friday, March 5, 2010



Hey kids, just to let you know, I am swamped with "real work" for the foreseeable future. (I'm even busier than this guy.) Also, if it works out, I will be migrating the blog to Wordpress during my hiatus.

For anyone in the area, I am giving a talk at the Denver Petroleum Club on Thursday morning (will they be expecting a troll?), and then it's off to Auburn for the Austrian Scholars Conference [.pdf]. My intelligence sources indicate that there is a new karaoke bar in Auburn, which features karaoke every night of the week.

Wednesday, March 3, 2010


Boosting Productivity By Ditching the Boob Tube

Lately people have been asking me how I get "so much" done. This always strikes me as funny since, at any given time, I'm usually behind on several projects.

One obvious thing is that we have not had a TV in our house since we left Hillsdale. (And even then, we didn't have cable and were on a lake so we had bad reception.) That literally gives you an extra two hours a day at least to get work done. Even if you're not watching it, someone else probably is. Imagine if one class of comparable students taking a test had a TV on in the background, while another had peace and quiet. Which group would score better?

When I had a TV in grad school, I used to wind down by watching Seinfeld and other reruns late at night after the long train ride from NYU to my apartment in New Jersey. Asking me at the time to give that up would have been like making me become a vegetarian.

But once you go through withdrawal, you will be amazed at how ridiculous TV is. If you have had one all along, you probably haven't noticed just how ludicrous it has become. I only see it now when I visit someone's house or stay in a hotel, so I see it in short samples spread out over weeks.

I'm not saying this as a prude, just making an observation: Modern American cable television is literally pornographic. If you flip through the channels, you will see cleavage or a sexually suggestive scenario (like a crime show where the victim is a stripper or a prostitute or something) on about every 5th channel, depending on the time of day. Fueled by FOX, every news show has to have a really attractive person on the camera at all times if possible.

And don't get me started on what's happened to wrestling since my younger brother used to watch Macho Man Savage and the Undertaker.



* This blew me away: Joe Salerno discusses Murray Rothbard's call for anti-statists to pull their money out of the commercial banking system. OK, so let's suppose Austro-libertarians agree that they should stop the inflating Fed in its tracks by boycotting the commercial banks. But what is the free market alternative? (Don't think tax-qualified retirement plans.) It would be nice if it already existed, in a time-tested financial product that Austro-libertarians already have an affinity for. Well we can dream.

* Sometimes even Joe Romm has to backpedal. Debate! Debate!

* Why I read EPJ: The real explanation for the fate of Charlie Rangel.

* Here's the audio of my talk at Jekyll Island, titled, "Only the Austrians Can Explain Depressions." Some jokes in the beginning, and then Scott Sumner bashing in the middle.

* I don't believe in Profile updates and all that jazz, but Vijay Boyapati had a cool Gandhi quote the other day: "The ideally non-violent state will be an ordered anarchy. That State is the best governed which is governed the least."


Onion Reports: Obama Caught Lip-Synching Speech

This made me chuckle three separate times, and that's good enough for government-bashing work. (HT2 Viresh Amin)


A Picture Is Worth a Thousand Lies

This is hilarious. Lew Rockwell sends along the Cleveland Fed's latest video in its, "Really bad drawings, real simple explanation" series (check the link if you think I'm making up the title). It's 9 minutes long so maybe that's too much for you, but at least watch it through 3:55 to see the graph of how the Fed maintains a stable purchasing power of the dollar from 1 - 10 years out.

If someone has a lot of free time on his or her hands, it would be hilarious to do a parody of this, explaining how the CIA works.

In closing, I must say that the tone of this video intrigues me. You get the sense that the actual Fed staffers know full well they're participating in something shady. For example listen in the beginning when they introduce Ben Bernanke, or at the very end when they say, "However you feel about the Fed..."

Tuesday, March 2, 2010


Bernanke Still Breaking Records

Reports of the imminent collapse of the monetary base have thus far been greatly exaggerated... I'm not saying that Bernanke was lying when he claimed the base would start shrinking real soon, I just want to point out that it wouldn't be the first time.


This Is Potentially the Screwiest GDP Chart I've Ever Seen

Paul Krugman links to Mark Thoma who in turn cribs from the Federal Reserve Bank of San Fran to give us...

The definition of "potential GDP" comes from the San Fran bank:
Potential output is not a measure of maximum output that can be achieved, but instead maximum sustainable output. As such, it is the level of real GDP that is consistent with stable inflation. When actual real GDP is running higher than potential GDP, the economy is said to be producing above full capacity.
Now look back at that chart, to see if we like the implications of this typical macro way of looking at things. Actual GDP was higher than potential GDP during the recession of 2000-2001; isn't that a bit weird?

Then, at no time whatsoever during the housing and stock market boom (except maybe a little blip in 2006) was actual GDP higher than potential. According to the CBO's calculation (which is where SF got the potential GDP number), the US economy in the year, say, 2005 was in a perfectly sustainable configuration. We could have repeated the experience of 2005 indefinitely, if only we had implemented the proper policies.

And now, of course, there is no reason for output to have fallen in the current recession. It's just that aww shucks aggregate demand collapsed for some nonsensical reason, and now we're stuck with a trillion dollars less in output per year than we ought to be enjoying.

There are two lessons from all this:

(1) Mainstream macroeconomists have a very very crude notion of the structure of production. Their models literally cannot handle the possibility that an unsustainable boom from 2002-2006 could have physically necessitated a drop in measured output from 2007-2008.

(2) As the persistent von Pepe keeps reminding me, the mainstream focus on CPI as the measure of "inflation" is wrong. As the chart above shows, people who think the economy is in great shape so long as CPI grows at a moderate pace can often fall flat on their faces.

Monday, March 1, 2010


The Futility of a Violent Revolution

I want to give a quick summary of my views on violent resistance to a tyrannical government, in light of the Austin plane attack and the (possible) attack on a Utah IRS facility.

* There is a big difference between arming yourself and saying, "If they come onto my property, it's show time" versus, "I am going to fly my plane into a government office." If you're trying to win converts, the former is a lot more likely to garner sympathy than the latter.

* Proponents of violent resistance have in mind the idea that if we could just get x million fellow citizens to think like us and stand up to Big Brother, we'd eventually win after they killed y million of us. Well OK, but if we had x million fellow citizens who thought like us, then I submit it wouldn't take violence. They could just stop paying taxes and see what happened. The results would be the same--eventual crumbling of the empire--but with a lot less bloodshed.

* People (like the Austin pilot) who think it's smart strategy to provoke the government into doing something awful because then the people will rise up, are being awfully optimistic about the mass of Americans they otherwise refer to as "the sheeple." Remember Waco? How much more awful would the government have to be? But did the average American go buy a long gun and renew his membership in the John Birch society? Of course not. Most Americans just needed to hear a TV anchor give the official explanation. "Oh OK, yeah I guess that makes sense. If I were in charge of rescuing a bunch of children from abusive parents, I'd probably send in chemical weapons and tanks too. Too bad those kids had religious nutjob parents and got burned up."

Last point:

* People often invoke the Founding Fathers. Yes they were brave and they fought a war to free the country. And yet, many of the same people who love the Founding Fathers go on to chastise present-day Americans by saying, "Our nation of wimps now have a level of taxation far higher than the colonists endured under King George." Hmm there are two ways to interpret this. One is to say, "It's time for another bloodletting!" Another is to say, "Hmm maybe the violent American Revolution wasn't such a hot idea after all."


Bloomberg Writer Blasts British Keynesianism

This is a pretty uppity article by Matthew Lynn on Bloomberg (HT2 Jeff Tucker):
The U.K. has been in Keynes overdrive for the past 18 months. The budget deficit is already more than 12 percent of gross domestic product, on a par with Greece. And while the Greeks are cutting spending, the British deficit is widening. Figures for January showed another fiscal blowout. At the same time, interest rates have been slashed to 0.5 percent. And the pound has slumped in value, which is supposed to boost demand for British goods, and help close the trade gap.

Just about everything possible has been done to encourage consumption. The results have been miserable.

Retail sales excluding gasoline in January fell 1.2 percent from the previous month, twice as much as economists forecast. The number of people receiving unemployment benefits jumped to 1.64 million in January, the highest level since April 1997. The yield on U.K. government debt is now higher than on Spanish or Italian bonds, a sure sign that investors are losing faith in the country’s ability to pay its debts. The inflation rate has also accelerated to 3.5 percent.

Triple Whammy

In reality, Britain has the worst of all possible worlds: a stagnant economy, a crippling budget deficit and rising prices.

The Keynesian consensus is that things would have been far worse without the stimulus provided by government. And if the economy isn’t pumped up with inflated demand, it will collapse back into recession. If it’s not working, that just proves the stimulus should be even larger.

It is the argument quacks always push: If the medicine isn’t working, increase the dosage.


JFK, Blown Away, What Else Do I Have to Say?

Viresh Amin sends this very interesting snippet. Does anyone know what the official response to this is?

Incidentally, I did a decent amount of research over the summer and concluded that there was more than one shooter. I'm not saying I have a theory as to who shot JFK, just that I am confident the official story is bogus.

I will write up my case at some point, but it will take a lot of my time. I have to get someone to take a diagram from a book and translate it into a computer shot, etc.


Hazmat Team Called to IRS Building in Utah

Details are still sketchy, but apparently two people were carried out on stretchers from an IRS facility and a Hazmat team was called in.

If this turns out to be another attack, let me reiterate my position: This is foolish. Ask yourself this: Why does it even make sense for the government to engage in "false flag" operations (whether or not you think it actually does this)? Because this allows the government to expand its power over a terrified citizenry.

I grant you, average people are less scared from attacks on the IRS as opposed to, say, the subway. But violence is the government's game. I strongly disagree with the strategy--let alone the morality--of those who think it's time to fight the US government.


Inventories Don't Kill Growth--People Kill Growth

[UPDATE below.]

This is an esoteric piece, but is actually one of my personal favorites. I was struggling with this notion of an "inventory bump" in GDP growth for a while, and I resolved the issues (at least to my own satisfaction) in this article. So if you have always been vaguely uncomfortable with people attributing percentages of GDP growth to inventory adjustments, this one's for you. From the conclusion:
The textbook GDP equation is not false; it is a tautology and so of course it is true. Nonetheless, it is a destructive framework for thinking about macroeconomic events. Abuse of the equation leads economists and pundits to blame savings and praise reckless consumption, to hate imports and love exports, and (in principle) to attribute a doubling in the flow of goods coming out of factories to a nonchange in the level of a nonexistent stock of inventory.
The part I've just underlined is the contribution of the article; I came up with an easy numerical illustration showing that the standard GDP logic leads to that absurd possibility.

UPDATE: David R. Henderson has a good piece on "GDP fetishism" at EconLib today. Something isn't quite clicking for me in his example of the government paying $10 billion to workers who dig holes and then fill them up. David argues that if the workers get paid $10/hour for work that they would only have been willing to do for at least $6, then only $4 billion of "well-being" has been created on net, once we take into account the loss of leisure. But isn't this too an overstatement, since the workers only value the wages because of the actual goods and services they will be able to buy (and hence redistribute away from everyone else)? Maybe David is capturing that in his categories of price inflation or future tax hikes. Anyway, it's a good article.

This page is powered by Blogger. Isn't yours?

Subscribe to Posts [Atom]