Deficits, Federal Reserve, Individual v. Collective, Liberty, Live and Learn

When Facebook Comment Threads Explode

Every time a Swift Economics article is published, an angel gets its wings. Well, actually the interim step is that the article link gets tweeted out on our Twitter handle and our status is updated on the SE Facebook page. Or as the immortal Bill Belichick calls it: “MyFace.”

There’s no telling what kind of reactions these economics articles will get. The world of social media is a vast place. Every once in a while a comment thread will explode. It just sometimes happens on a social bookmarking site or other forum about one of our articles. A Facebook comment explosion recently happened on my inactive personal account (at least an explosion of economic and political passion). My only hope is that these things take place on this website or the SE Facebook page in the future. The tweet/status update was as follows: “An untenably long title to a piece comparing liberals, conservatives, & libertarians. Who is smarter in economics?” (With a link here.) Naturally, this got some people pretty amped.

As this thread proves, some people are not afraid to level personal attacks to make their point, as if that makes them more right. A lot of baseless assumptions are made and it appears people are willing to say things that are much more abrasive and disrespectful behind the protection of their avatar than they would ever try to do in person. Apparently not all of us learned or retained the fallacies of logic in school. It also seems people are firmly entrenched in their way of thinking, with little or no propensity to modify their point of view. It’s a fascinating phenomenon. I’ve always tried to avoid being placed into one set of beliefs or philosophies my entire life. That has never made sense to me. Why would I subscribe to a pre-built belief system which I know I’m not going to totally agree? Why wouldn’t you just take things issue by issue and save yourself the labels? Such a modus operandi allows for flexibility in thought, reason, and ability to change one’s mind. Fortunately, this thread also has some great debate and interesting economic discourse.

I’ll save any further opinions for what I hope will be a comment explosion on the bottom of this page!

I included only first names, which may or may not have been changed, to ensure anonymity. Enjoy:

An untenably long title to a piece comparing liberals, conservatives, & libertarians. Who is smarter in economics?

Joel: Always liberals.
Me: Always is a lot. Good thing overconfidence hasn’t set in.
Joel: Libertarians are insane. We cannot end the Fed. That will never happen. Conservatives think the rich create jobs and that taxes prevent them. That is just ideology. Historically, for the past 30 years tax rates have gone lower and lower. We are living with the aftermath of 30 years of conservative policies. SS is not an entitlement, people have been paying into it their entire lives. Confidence in liberals and progressives is innate. We use different parts of our brain and make decisions based on logic. Not fear or emotion. That is a scientific fact. Conservatives think war is good for the economy, but it has never been. Post war recessions have always been coated with higher taxes. Bottom line Mr. Swift, libertarians are irrelevant. Conservatives have completely been brainwashed by Fox “News,” and lost their way. Liberals and progressives create surpluses and safety nets for the unfortunate for hey know it is a fact that our system is broken. Who created the last surplus? Who helped women vote? How can a conservative be pro war, and pro life? How can a free market conservative not be an outspoken advocate for the legalization and taxation of cannabis? How can YOU a 20 something year old not take the side of sanity in politics? My guess, your parents and grandparents.
Andrew: It’s impossible to end the Fed ehh, we’ve ended two central banks before, but now it’s impossible. And the government is bigger now than it was 30 years ago by virtually every metric available just so you know. Furthermore, liberals don’t have nearly as pristine a record as you think. All four major wars in the 20th century were started by liberals (only WWII being necessary). Alcohol prohibition and eugenics (at least in the U.S. and U.K.) we’re pushed by progressives. And let’s not forget their flirtations with communism and bolshevism (FDR’s brain trust was enamored with Stalin’s U.S.S.R. in the 20’s). Welfare has caused marriage to collapse in the working class leading to fatherless children and higher crime rates (they more than doubled by the end of the 70’s) and it’s disincentives to succeed have caused poverty to stagnate, whereas poverty was falling by about 1% per year from 1900 to 1960. Yes liberals have done good things, like women’s suffrage, ending Jim Crow and the military draft (although the irrelevant libertarian Milton Friedman lead that movement). And conservatives have done bad things (i.e. War on Drugs, Iraq War and Patriot Act). But didn’t Harry Reid accuse Rand Paul of wanting terrorists to have WMD because Paul opposed the Patriot Act? Yup. And who escalated the war in Afghanistan and started one in Libya; well that would be liberal Barack Obama. Both liberals and conservatives have plenty to atone for.
Joel: Barack the tax cutting Obama is a liberal? Please. He is a moderate at best. Don’t argue or debate someone who studied finance and economics, works in private wealth management, worked for BOA air AIG and is obsessed with politics. Lots of writing there but nothing of value. Conservatives ruined our economy. That is a fact. Cutting taxes is spending. Going to war on a credit card is worse than spending. Don’t put any blame on Obama. He doesn’t make laws. Only congress does that. Get mad at your congress. They are he hilbillies who are ruining our economy all under the guise of patriotism. Mitch McConnell’s primary objective is to make Obama a one term President. That is all you need to hear. All you conservatives were asleep at the wheel while bush ran our country off a cliff. You didn’t wake up until We elected a black president. You aren’t fooling anyone…
The firm I work for manages 3.2 trillion dollars of investors wealth. We are also the number one benefit provider in the world. I know everything about Obamacare, also known as RomneyCare, and I have studied all I need to. Do I Sound smug? Good. I have actual facts and experiences, and Freakonomics. Not ideology or naive social upbringings.
Andrew: Joel, if you’re so smart and successful and good at debating, you’d think you would realize I wasn’t defending conservatives. However, I must admit, appeal to authority fallacies are all the more impressive when you’re appealing to your own resume. All spending increases are effectively tax increases; either a tax increase, deficit (delayed tax increase) or inflation (regressive tax increase). Of course the tax “cuts” with spending increases under Bush was a bad idea. But do you really think that Fannie Mae pushing down lending standards and the Fed holding rates at 1% for two years had nothing to do with the crisis? …
Furthermore, accusing me of being a racist because I think both Obama and Bush aren’t good presidents, aside by being just an ad hominem (hey, more logical fallacies, yay) is simply nonsense. My first post took Bush to task and I’ve been consistently anti-war.
Lake: The economics is simple, conservative and libertarian economic theories, from menger forward have done everything possible to limit the scope of economic thought. Now today the only thing that is discussed is exchange, marginal productivity individualism isolated from all of the social surrounding. Power relationships are taken out, the need to be apart of and from society is brushed aside and the state, the creator of all markets is minimized and considered the problem. Furthermore consrervitive or libertarian theory is at best based on an economy which existed 500 years ago if ever, barter. Once these schools of thought can give a historically accurate account of what money is and how it is in itself plays the most important part of motivations and decisions they are irrelevant. The need to focus on a capitalist economy not their make believe utopia, then perhaps this would be a close call.
Andrew: There was this old joke about Keynes, where a student fell asleep in his class and so Keynes woke him up and asked “do you know what question I just asked?” The student responded “no, but the answer is more stimulus.” Every economic philosophy has it’s beliefs and arguing for those beliefs doesn’t limit the scope, it by definition expands the scope unless you prevent others from giving their opinion (and which libertarians are doing this exactly?). Furthermore, libertarianism is not a unitary theory, Ludwig von Mises disagreed with Milton Friedman on all sorts of things. Lastly, the state makes the rules and regulates markets (which I think it should), but it does not create them. Even in pre-state societies people are bartering (think of how a prison economy works with cigarettes being used as money despite no governmental regulation of it (other than to try and eliminate it perhaps). That’s a small note however, because prison economics aren’t good. I just want to make it clear the market came first, then government regulation/rule making.
Lake: first, it is not true that limiting the scope is limiting opinions. limiting the scope is holding to assumptions which are not true and pushing theorists out of the academy when they refute those assumptions. There has to be some basis in reality which both of conservitive and libratarian philosophies lack. Friedman’s methodologies is a great example.
Second, of course those two disagreed, however by the time friedman was seriously writing, Austrian theory was dismissed. So he had little reason to engage him. Austrian theory was over and they all turned to the cause of “freedom” after Sraffa torn Hayek apart about interest rates at the end of the 20’s i believe. They are still yet to win a capital controversy, including the original between clark and bohm bawerk. Once again it goes back to capital as both a productive took and a fund of wealth.
Third prison economy? Really? thats your prime example? Is there a spot price and forward price for cigarettes? wow. In order for there to be barter there has to be private property, and private property did not exists for the masses until maybe roman times. And even at that point it wasn’t like a capitalist exchange economy. your barter system is a fiction. Next are you going to tell me that money was invented to solve the double coincidence of wants? all enterprise until the 1600 hundreds was done at the behest of the state, including agriculture, and then redistributed from there. Human history is not as some like to say a trial and error until we reach the pinnacle of creation, capitalism. We have traveled through many different types of economies and the belief that humans were producing truck and bartering for exchange imprints your capitalist notions on an economic system which has nothing to do with capitalism. While it was not a collectivist society it was close. BARTER NEVER EXISTED trade for profit or even the division of labor is a recent phenomena. while money has existed for at least 4000 years, and its appearance is around the time of the appearance of social classes. It has always been used to get society to work for the state.
Now on to markets. Markets are not time and local specific, they are a continuous abstract institution which needs rules. As Keynes states, the state makes and writes the dictionary. Thus it gets to tell all the agents how they get to interact with each other, buys and sellers whether firm to firm or firm to society.
Andrew: Which academics have been pushed out because of the all pervasive conservative bias on universities? Paul Krugman? Larry Summers? Christina Romer? Dean Baker? Most academics are interventionists of some sort (even the conservative ones), so what are you talking about? Your first point is simply that libertarians/conservatives​ are wrong, thereby they limit the scope of the argument by continuing to make said arguments; ‘you’re wrong, so shut up.’
Your third point on bartering seems very strange to me. Was I arguing that barter systems are advanced economies with sophisticated financial instruments? C’mon. States were nothing like what we think of as states today pre-1600. They were usually feudal fiefdoms where nobles simply took some of the product of the serfs (sound familiar?). They were not centrally directed economies by any means. While there was a lot of communal living, the produce was not brought to some central location and then distributed. They didn’t have the capital or technology to do that if they wanted to. I made a small caveat using the first example that popped in my head, that markets of exchange begin organically. No historian would disagree other than brain dead Marxists obsessed with peaceful, pre-historic communist tribes (they were actually absurdly violent, see Steven Pinker). One might as well argue there are no black markets, since they take place outside the state system. Or that people didn’t exchange any food or services back in the middle ages. It is true, as Adam Smith noted back in 1776, the division of labor is recent, but that doesn’t mean there was no specialization whatsoever (see artisan guilds) or that nobody traded with each other and everyone lived self sufficient lives or in some sort of co-op. Pogroms were launched against Jews for charging interest on loans while Christians found ways to cheat the system and charge interest anyways. The silk road flourished. Venice and Florence became hotspots of commerce. Double entry accounting started in the 12th century and in the 16th century, the School of Salamanca came out with a theory of prices and interest. Hell, even chimpanzees have been shown to exchange reciprocal services. And no, I don’t support a stateless system, I agree that ADVANCED economies do need rules, and I do have a lot of problems with the “power relationships” you mentioned early which is why I and most libertarians and even many conservatives oppose corporatism (after all, Republicans were about twice as likely to vote against the TARP bailout as Democrats).
Finally, “winning” is kind of a subjective matter in intellectual affairs. I would say the failure of stimulus to get the United States out of this recession may be evidence against Keynesianism. Not enough stimulus you say? Well how about Japan, what are they on, 13 stimulus packages now? Maybe just one more. Perhaps the stagflation of the 1970’s, which Keynesians had thought was “impossible” could be considered evidence. How about Treasury Secretary Henry Morgentahu’s line in 1939: “We have tried spending money. We are spending more than we have ever spent before and it does not work… I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot.” I’m not as familiar with the Sraffa-Hayek debates as much as the Keynes-Hayek debates (other than that Sraffa thought costs and not the marginal value determine prices), but if I understand the debate correctly, Sraffa argued that there is no natural rate of interest since many things would have many different natural rates and Hayek the odd response that the natural rate of interest on different items varies. Seems like a lot to do about nothing to me. We have different interest rates on cars, credit cards, houses, business lines of credits, etc. But that doesn’t mean these rates are arbitrary. Hayek just saw the neutral rate as what the market determined without government interference (or only with the government setting the rules and then leaving things be)…
By the way, I know you’re not a Marxist and I’m not saying you are. I hate it probably almost as much as you when conservatives call Keynesians socialists.
Lake: don’t worry about calling me a marxist, while i don’t believe all of what he has to say, volumes 1-3 is the best understanding of the capitalist system put into a book ever. that is what it is though.
as far as academics goes. ya it happens. there is a purge ever 30 years or so to make sure everyone is taught the same thing. All those you mentioned are huge corporatist. you think that there is a huge difference between the democrats and republicans? there isn’t, its the slope of their lines that separates the two. its the only conservative profession in the university, though still not that consrervitive i will say, but it is econ and law which are the hold outs.
You like to keep mentioning stimulus packages while that is kinda what keynes said, it was more of what Hicks said as he reinterpreted the general theory in a terrible way. It has to do with the rate of interest of commodities compared to the subjective return on money, people will always hold money for comfort. Stimulating effective demand is the goal but there has to be enough to make capital investments higher than the return on money. remember the goal is money. This is what sraffa told hayek. hayek would be right that all those interest rates do not matter if money did not exist. if it did not exist commodities would all have the same interest rate at full employment. However since money exists and when its demand goes up labor employed does not go up so when capitalist hold money it does not employ labor. meaning that Say’s Law does not hold and if the yield of capital assets does not at least equal the yield on money then there will be no investment.
This means there is no labor market since not everyone who wants to be employed is employed. There is your power, it is the choice of the capitalist on the number employed. The real wage and amount of laborer employed is not a function of disutility of labor rather how many employees need to be profitable. Again you are right, prices are costs + markup. However, they are administered rather than given. If they weren’t administered than large capital investments could not happen since their return would be unpredictable as prices would fluctuate as supply and demand shifted all over the map. if prices fall than yields fall and the investment good might not be profit able and since the goal of production is to make more money then the original investment.
as far as the barter thing goes, whatever. It is the topic of my dissertation, state power and money. Egypt, greece, Babylon, even the vikings there was no barter and money existed in those societies long before markets ever existed around the 1300’s like you said. before that there were no markets and all produced for all in their community. before egypt it really was a communicative society but that was 5000 years ago.
Some random string ends, in feudal society you are right that the king took what he wanted, but the peasants didnt go trade away the surplus. how would someone that poor travel to trade. it was communal among the peasant. other than that it was the kings job to take care of them noblesse oblige i believe its called. not a market situation. Adam smith’s most important work was called theory of moral sentiment.
IN 1939 we didnt spend all the money we could because the next 5 years we spent a lot more and there was no more depression. which just goes to show that we can get out of any depression if the state just says we will spend 4 trillion dollars in the next year. that will empty inventories and make a lot more, putting a lot of people back to work.
The 70’s we learned that the money supply was endogenous rather than exogenous, we cannot stop banks from lending no matter how high interest rates are. if banks think they can make a profit on the loan they will make the loan.
Your no state system is very Hobbesian we all kill each other. It wasnt a warrior take all at least no until science made enough progress to catch up to religion. once again greece maybe but post dark ages for sure. Charlemagne i would say is the break.
The capital controversies between have left the austrians in the dust. believe what you’d like but it is a fund of wealth
now i have been drinking and must quit for the night, but this is my favorite topic in the world and would be glad to continue.
Jerry Sader: This was entertaining.

Yes, Jerry, it was. This is the kind of discussion which is very illuminating. A sort of window into how some people think and to some of the great economic debates of the last couple centuries.

Photo Credit (Preview): west.m


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