So if a majority of people think there should be private ownership of property, the majority has the authority to enact laws against stealing and enforce those laws - even against the minority that didn’t believe in private property.
If a majority of people of people think there should be income tax, does the majority have the authority to enact an income tax law and enforce it - even against the minority that didn’t believe in income tax?
If you disagree, what’s the standard you apply? What issues are the majority allowed to impose upon the minority and what issues are the majority not allowed to impose upon the minority? And who decides which issues are which?
I am aware that real wages should track productivity. The problem is that since around the mid 70’s real wages have stagnated while productivity has continued to increase. I am aware that important advances have been made after FDR abandoned the gold standard domestically and Nixon internationally. There were many important advances during the era of the gold standard, but that is neither here nor there.
During an inflationary boom, resources are diverted to industries where where they are not put to work satisfying consumer demands. So for example if the Fed fuels a bubble in housing, resources are diverted into constructing houses that nobody wants or are too expensive. The resources diverted to these “malinvestments” are essentially wasted as evidenced by the subsequent bust, when they must be redirected into more productive channels. So yes, I feel that with a tighter monetary policy, resources will be distributed in a way that more efficiently satisfies consumer demand. Do I believe technical advances would have occurred even faster? There is no way to answer this question.
No I blame the federal reserve for fueling speculative boom after speculative boom under Greenspan and Bernanke. The casino-ization of the stock market has led to nothing but growth in the financial sector. Here, vast resources from these capitalist profits you mention, including some very bright individuals, are devoted to cashing in on the next bubble (housing derivatives). To see how this would have an effect on real wages I’ll quote economist Bob Murphy:
[QUOTE] Here’s a pdf from the Bank of England which may have useful graphs. It shows average prices and wages over a 300-year period. Looking at its Chart 3 I see
[LIST][li] The longest, and highest, stretch of real wage growth was from the end of W.W. I to the present, a period of slight inflation.[/li][li] There is also a period of strong growth from the defeat of Napolean until W.W. I, a period of very slight deflation. This 19th century growth rate is somewhat lower than the 20th century growth rate.[/li][/QUOTE]
You have looked at one country. Atkeson and Kehoelooked at 17, each for a period of 100 years. Just to warn you of potential childishness, I’ve linked to mises.org. But here I quote from the study:
Now back to the author:
[QUOTE]
[li] The main difference visible on the graph is how erratic the real wage was on the gold standard. The “busts” you worry about were very much a pre-modern problem.[/li][/QUOTE]
There were problems with the gold standard, no doubt. There were also problems with banking regulations during this period resulting in numerous panics. Suspension of specie payments, allowed by government, were commonplace. This was nothing more than an implicit bailout, creating incentive for banks to act recklessly.
Aside from the Atkeson and Kehoe study discussed in my link to mises.org, you could read the short chapter in Murray Rothbard’s History of Money and Banking… entitled "A Burst In Productivity" You will find that despite price declines, the 1880’s was marked by tremendous growth. He quotes Friedman and Schwartz quoting R.W. Goldsmith:
Oh get over yourself, bud. I didn’t even jump into the thread until after that conversation was over. If I had time to denounce every lie, I’d be unemployed.
I could give two shits if I flunk a test by some cat on the internet, lol. I understand the tragedy of the commons quite clearly.
The fact that mandatory vaccinations would be good for society, and has been good so far, is irrelevent. Mandatory abortions for homeless women could produce a positive result. The only difference between a policy of mandatory vaccinations and mandatory abortions is that one has been mandated through the democratic process, while one has not. If you apply your “test” to a policy of mandatory abortions, a majority of people would flunk it. Does this mean that the political theory of these people is now illegitimate? I think not.
You imagine libertarians advocating some utopian society in which everyone’s beliefs is given full credence. I’m not aware of this theme in libertarian political theory. In a libertarian society, this hypothetical free-thinker would be in violation of the Non-aggression Principle. He would be free to join likeminded folks who insist they all hold property in common, though, that would be his choice. Otherwise he would still be subject to laws recognizing property rights of other individuals.
In my defense, I have heard plenty of libertarians speaking of how their system in based on non-coercion. But enforcing laws against individuals who didn’t consent with those laws seems pretty much like coercion to me.
What’s your views on the other questions I asked (in 241)?
Mr. Farnaby’s take on recent booms is much different than mine.
[ul][li] To the extent that the value and supply of money is a source of booms and busts, good central bank regulation should be superior to unpredictable gold.[/li][li] Much employment during the 1990’s telecom boom and the 2000’s housing boom, was in lieu of un-employment, not in lieu of employment “better” allocated.[/li][li] One looks at housing occupancy statistics and realizes there is a supply/demand problem right now, but this can be blamed in part on the failure of government to impose remedies, e.g. compelling banks to treat some mortgages temporarily as rental arrangements.[/li][li] The mortgage fiasco and associated credit crises should be blamed on under-regulation, not over-regulation. Beginning with Reagan, F.R.B. and other regulators have become lapdogs for corporations, esp. those on Wall St.[/li][li] I advocated in the 1990’s that the F.R.B. raise interest rates in response to asset price bubbles; I am glad to see economists coming around to that view. However, asset price bubbles aren’t as bad as all that. The big problem of 2008 wasn’t the housing bubble but the egregious policies and bets made by big banks that led to crises of solvency and credit. Again, I do not see unbridled caveat emptor laissez-faire as the key to better bank behavior. YMMV.[/li][li] It is ironic that you blame Greenspan, in part, for policy errors. He is an Ayn Rand disciple. [/li][/ul]
I think the fable you quoted about the nation of identical workers would have been less misleading had you not omitted the sentence preceding your excerpt:
The phrase “nation of identical workers” is where attention needs to be focused for understanding. I meant to stress that my discussion refered to average real wage. It is the increasing differential between wages for highly-skilled and low-skilled workers that “progressives” worry about. This is not a problem libertarians seek to solve, if they even treat it as a problem at all.
There is much agreement between you and me. Where we differ is on the remedies.
The eradication of smallpox, possible only with coercive government, is an achievement some would compare with the greatest technical achievements of the 20th century. I find it very odd that you are so concerned about something like excess fiber optic capacity from the 1990’s, yet seem not to care whether the world has smallpox or not.
Holy cow, is this the argument you want to be bringing? “Yeah, we’re not a cult, you’re a cult, with all this cultish behavior (that you never actually do, but if I had to argue against actual positions I’d fall flat on my face and never get up again)!”
WillFarnaby deserves our thanks here for bringing notes of intelligence and sanity to Libertarianism.
Other extreme libertarians seem to regard HFT and the trillion-dollar derivatives markets as the best things since buttered bread. Since liquidity is similar to lubrication, I try to argue “If it is good to add a tablespoon of oil when you cook your egg, is it even better to add a quart of oil?” but the analogy is lost on them.
I continue to encourage self-professed libertarians to start their own thread and debate their differences. This should be instructive for them and perhaps entertaining for the rest of us.
Government is NOT “productive”. By definition, government cannot produce wealth, it can only destroy it. It can redistribute wealth, it can confiscate wealth, and it can impede the private production of wealth.
Productive activities are those activities which make at least one person better off, *without making any other person worse off. *
For example, lets say I am the original appropriator of a plot of land that was previously unowned or unused by other individuals and I start a small farm with my family. I grow strawberries and other fruit and vegetables and then sell it at the local farmers market. Immediately I am better off because I can feed my family and I am self sufficient. Furthermore, I make some money by selling the excess crops that my family cannot eat.
I am better off but I made no one else worse off my my activities. Other free individuals could have homesteaded the land or bought it from its previous owner but did not. They refrained from appropriating the land because it did not interest them, they did not believe they would be made better off by owning that land. So my act of appropriating the land and then farming on it made me better off but made no one else worse off. Everyone else still retains their property. Everyone else remains at their current standard of living and are free to use their existing resources at they see fit. Their ability to engage with their fellow man economically is not impaired in the least by my acquisition of land and the act of farming that land.
Furthermore, by selling my excess crops in the local farmers market, I am helping to feed the community. The buyers buy my crops because they desire healthy and nutritious food more than the few dollars I am charging them. This makes many in the community **better **off than they would have been had I not been engaged in the productive act of farming on my justly acquired property.
That is an example of a productive activity.
On the other hand, government cannot do anything without making some people or groups worse off while they make other groups better off. This makes their activities inherently non-productive. Before government can do any activity that alleges to help any group of citizens, it must first hurt some citizens and make them worse off than they would have been otherwise. How can you argue against this demonstrable fact?
Now you might say that even if it is only a zero sum game with government rather than it being a truly productive entity, that is fine because it will take wealth from some to give to more deserving groups, thus providing a more equitable distribution of the wealth that already exists in society. This too would be entirely wrong.
You see, not only is government non-productive, it actually destroys wealth and makes society less prosperous than it otherwise would be. The inherent inefficiency of government means that all the money that government steals from its citizens will not “go as far” as if the money remained in private hands. Money inevitably is wasted on things that there is no demand for. Without being subject to profits and losses and consumer preference in a marketplace, the money government spends cannot be efficiently allocated.
Therefore, the job of the economist is always to look at the unseen rather than at the obvious. You might point out all the “wise” public works projects government undertakes and suggest with indignation “look at that museum, and that bridge and that park that the government funded. You want all this stuff to have never been built?” This is an incredibly superficial way of looking at things.
Any of those items might have been built or not built in the private market. But one always has to think “what would that money have been spent on if it was NOT taken out of the economy by taxation?” Perhaps a bridge would have been built AND a homeless shelter could have been built to help the poor?
When government spends money, it is spent for political reasons NOT for addressing the most pressing social problems. Though there are times where there is some benefit, like when you enjoy a walk on a government funded public park, the money might have been better spent on improving the rotting infrastructure in many major cities.
A market economy free of State intervention, will be far more efficient in allocating the money towards the most pressing needs in society.
Thus, government cannot by definition engage in productive activity. You are free to explain a government that makes one or more people better off WITHOUT making one or more people worse off.
Inevitably you will be unable to provide such an example because no government in history has accomplished this simple task that free people, engaging in voluntary behavior free of coercion or threats of violence, have been accomplishing from the beginning of time.
Factually incorrect, so I won’t bother debating the rest of it.
The US Government has invented technologies that have allowed others to create wealth. Licensing of radio frequency bands has been a huge gold mine for telecoms. Regulations and government directives can create entire new industries, and thus, new wealth. I don’t really think I need to go on. I’m sitting at home with a high fever, for a start.
It occurs to me that with vaccinations, at least, we have actual real world evidence of what would happen in Libertopia: the effect of anti-vaccination conspiracy theories on the real world, specifically the drop in vaccinations. And it ain’t pretty.
Baloney. There is no such definition. I give you the Interstate Highway System, the National Park System, the Centers for Disease Control, to name a small fraction of the wealth created by the federal government, wealth that is far beyond the capability of private enterprise to produce or manage. Indeed, private enterprise as we know it could not exist without a strong federal government; the US Patent Office, the federal court system, the transportation system built with federal funding made available for all with strong federal regulation and taxation. The economy we have today is impossible without the federal government that made it all possible; they didn’t build that, we the people did.
What exactly are “the responsibilities of society”? It seems clear that unless progressives and modern leftists are successful in projecting the blatantly false concept that libertarians are motivated by greed and selfishness and they don’t care about “community”, “society” or helping others, the entire rationale for the Progressive platforms breaks down.
In fact, it is precisely BECAUSE I care deeply about civil society and morality that I reject the entire premise of the modern State. They are not helping society, or the middle class or the poor or any other group your favorite mythology would have you believe.
If we reject the immoral initiation of force and violence against peaceful individuals then society can function on a far more moral foundation. We can have a principled rejection of non-civil and antisocial behavior that actually breaks down a society and degrades the culture.
If we cede the argument that we grant the government the right and obligation to initiate force against peaceful citizens, then we have given up the moral high ground to make the claim to private citizens that it is wrong to engage in that same activities that we tolerate or government from doing. Confidence in the court system, and society in general deteriorates as people think to themselves “I cannot seek revenge and kill the person who raped my daughter? The State kills people all the time. I can’t steal from my bank? The government has been stealing from me for years and then bailing out the banks with that expropriated money. I am just getting a bit of my stolen money back.”
And so forth. To allow two sets of laws to exist, one for a “privileged class” (the government and associated private interests) and one for the rest of us leads to the breakdown of civil society and morals in general.
All the libertarian seeks to do is have one universal set of laws (also referred to as common law) that no one in a society is allowed to break.
I also find it amusing how insistent State apologists are in using euphemistic language to conceal the plain reality of what the State is and does. You admonish me for stating the plain fact the government is force, and launch into a bunch of bullshit about what “we the people have decided” and what “society agrees to” and all that. None of this is remotely true. Government is force, taxation is theft, State sanctioned killing whether it is in war or as punishment for a crime, is murder. That is the plane truth of the matter. If you support government intervention and an expansive role for government, just don’t lie to yourself about the nature of the institution you are defending.
I also find it tragically naive how many of you seem to excuse the horrific actions of the State by claiming that “well, just vote out the bad guys and get better elected representatives who will follow the will of the people”. Assuming the will of the people actually should matter in the slightest regarding public policy and human rights (and it certainly should not), the American people CANNOT alter public policy in any substantial way through the electoral process. That is the fact. Can we vote for the Federal Reserve chairmen? Will either the Republican party or the Democrat party eliminate corporate and banking bailouts? Will either party make ANY structural changes to our government?
If all the people who actually design policy are un-elected “think tanks” and international organizations, corporate leaders and financial interests, how do you suppose our current government remotely represents the “will of the people”?
This whole thing is a gross charade and a macabre spectacle that should outrage you as to the intolerable tyranny of an out of control State.
And just to address this point which I missed on my previous response, this is an absolutely absurd sort of argument.
“Before the Government was doing it”. I am going to assume that you are referring to pre-New Deal United States and in particular the 19th century.
First, do you not see the patent absurdity in looking back at history from our current position in 2013 and saying “look how bad the poor and middle class had it in 1900!” Yeah, no shit. The average life expectancy was something like 46 in 1900. Any time you look to the past, specifically the distant past, the quality of life for those people will look absolutely horrible in comparison to our current lives. Thus comes the absolutely fallacious notion that because we had expansion in government since 1900, our increase in standard of living and the rising prosperity in society was **because **of government and not in spite of government.
Human progress will continue regardless of what form of government exists. Some authoritarian regimes can impose controls that will slow that progress significantly, but the totality of human progress will not go backwards. Citizens of oppressive States can also benefit tremendously from the innovations and progress made in freer States around the world. As our government has grown more oppressive from a somewhat free market and industrial force to a fascist police state of sorts, other nations have become much more liberal in their economics and more respecting of civil rights. Human progress marches on.
No libertarian I know of says we should adopt wholesale the policies of 19th century United States. We can do far better in so many areas, our knowledge of economics and political theory has progressed significantly. However, the Gold Standard, even a flawed one like we had in our early history, is a better monetary standard than a complete fiat currency run in secret by a central bank.
As for libertarian policies being inherently bad for the poor or middle classes, how much larger was the American middle class in 1920 than it was in 1850? To make the case that the middle class was the result of FDR’s New Deal and the Progressive Era is completely contrary to recorded history. At the turn of the 20th century, the American middle class had already grown into the largest and most prosperous in the history of the world. The increase in prosperity would have continued regardless of the policies of our government in the early part of the 20th century.
We would have been much better off had we not been sidetracked with two world wars and a fifteen year depression which were completely avoidable. It seems almost comical that our political class could have engineered that level of death and destruction and then take credit for what prosperity we still had by the time the 1950s rolled around.
Government is not a business. It’s not supposed to produce wealth. Government is a service you pay for.
Does the police department produce wealth? Does the fire department produce wealth? Does the army produce wealth? Does a public school produce wealth? Does a highway department produce wealth?
Businesses produce wealth (at least the successful ones do). Governments produce services.
Complaining that the government didn’t make a profit is like saying that Microsoft is a failure because it didn’t arrest any criminals in 2012. It just shows you don’t understand economics.
Who are the “parasites” in society today? A parasite is one who is an exploiter rather than a producer, correct? A parasite is one who only takes and takes and gives nothing back. The parasites today use government to exploit the rest of us. They are large corporate interests, banking interests, oil companies and the rest of the economic fascists.
I would hope that we could at least agree on the reality that we live in a corporate oligarchy of sorts. Yet you seem to think that these same corporations could accomplish the same things without the State. You fail to see any connection between the parasitic corporate influence and exploitation and the government that caters to them.
As I posted earlier, libertarians advocate productive economic activity and not exploitative and unproductive activity. Productive activity is activity that makes one or more people better off but makes no one worse off.
Under libertarian rules and regulations, productive activity will be the only permissible economic activity. If we have property rights and a Republic that enforces contracts and punishes violators of the non aggression principle, exploitative behavior is not possible. Economic activity will be strictly productive, meaning benefiting one or more people without making any person worse off than they were before.
Workers will be voluntary contractors who are selling their labor in exchange for wages. They can choose to work for any employer, quit their job at any time, or become an entrepreneur themselves and employ others.
It is even entirely permissible for a group of workers to voluntarily come together as a collective and jointly own land and a business and sell their products and split the profits among themselves, a quasi communist concept but perfectly acceptable if done voluntarily.
Likewise the Capitalists, or entrepreneurs have to enter into agreements with workers that are acceptable for both sides. Thus, there is no exploitation. The employer is better off because he hires good workers and is able to make a profit (or attempt to make a profit), and the workers are better off because they have a wage that they voluntarily decided to trade their labor for.
It is a Marxist notion to assume that Capitalism is inherently exploitative. I know you are not a Marxist but you might have bought into the myth of the Exploitation Theory of Labor.
Marx asserted that Capitalism is inherently exploitative because even though the worker is free to quit at any time, work for someone else, or become a capitalist himself, the fact is that the owner makes a profit, the worker doesn’t get the full value of his production.
For arguments sake, lets assume that a worker has a job picking apples. Lets also assume he is also paid in apples. The worker in a given day picks 100 apples but is paid 80 apples as wages. Thus the employer gets a profit of 20 apples. Isn’t this exploitation? Shouldn’t the worker get 100% of the production of his labor?
But why did the worker agree to such terms? Why didn’t he plant his own orchard, pick his own apples and get ALL the return from the productivity of his labor? The reason is that he would have had to wait a lot longer and taken on a lot more risk for the potential reward of the full 100 apples in wages for his productivity. In economics there is the concept of “time preference” whereby present goods are ALWAYS valued more highly than future goods.
Therefore the worker knows that he is guaranteed an instant income of a certain amount and is willing to give up the potential to make more money in the future for the same amount of work. Therefore there is no exploitation in the relationship between the Capitalist and the worker in a free market economy and under libertarian rules.
Furthermore it should be especially noted that the entrepreneur and capitalist also takes on enormous risk in started and running a business. If I am started a business and I higher workers, I HAVE to pay them first. I am contractually and legally obligated to pay them the agreed upon wages. I might NOT make a profit the first couple of months, I might take losses for a while. I might go bankrupt and lose all I have invested into my business venture.
So not only will I have to wait longer to get the profits I seek, I might not make any profits at all. In many ways, the position of the worker is more secure and more stable than the position of the capitalist.
Thus, in a free market where laborers are free to work for whoever they desire and are free to quit whenever they want, and furthermore there is no entity that protects market share for certain companies or prevents new entry into the market by a competitor, there is no exploitation under such a system.
Tremendous productivity is the end result of such an economic system. Everyone who enters into an economic agreement or transaction is made better off through the exchange or at least intends to be made better off. Sure you can make a mistake and buy something you later regretted and thus you decided you were NOT better off in that transaction, but there was no exploitation. By and large all actors in a market economy are made better off than they were previously through voluntary transactions.
Back to your desire to see “parasites” pay “their fair share”. The parasites today are all those institutions that engage in unproductive activity and exploitation. Most of the largest financial institutions, defense contractors, big agriculture, Monsanto, Goldman Sachs, ect.
I don’t blame you for wanting to punish them. But when you raise taxes on the top income bracket, you are really hurting the honest businesses more, putting people out of business. The largest Wall Street firms and the individuals who are always pointed out as examples of parasitic corporate interests, they have their hands on the reigns of government. They end up getting exemptions, loopholes and other ways around the higher taxes, while the honest business that is trying to make it on their own without help from government, THEY will have to pay those taxes putting them at a further disadvantage against the favored larger entrenched corporate firms. Many will be forced out of business, or will have to charge more for their products.
A far better solution is to break up the bond between corporations and government and allow the free market to deliver bankruptcy and robust competition to these parasites that have been living off the taxpayer for so long. We should wither away the State to that of a Republic that is tasked ONLY with applying the law equally and fairly to all actors in the economy and protecting property rights, contracts and punishing those that initiate force or aggression against individuals in any case other than clear self defense.
Why do you continually think that such a scenario will somehow be worse than the corporate tyranny we are living under today? Businesses don’t have any power except those that are granted by a State. Without that crutch a business can only interact in a voluntary manner with its customers and workers. Maybe a business will have bad work conditions, but then how will they keep their customers? If anyone can start a business, what would stop a group of disgruntled workers from banding together and started their own business? If a larger competitor couldn’t stop them from doing this with physical force, what would the problem be?
Since we all refer to the Corporate oligarchs as the 1% and so forth, we admit that the masses of the people that want good work conditions, cheap products and decent wages far outnumber the rich and “powerful” right?
Then how on earth can you possibly imagine your absurd hyperbolic scenarios where such a small minority of the population is permitted to kill, poison and abuse the rest of us without the assistance of the State? It is absurd. You are talking about the citizens as if they were lemmings, like they would stay at a job that was paying them “slave wages”, hurting them from unsafe work conditions, and working them 72 hours a week rather than quite, work somewhere better, band together with others of the same frame of mind and start their own business where wages are higher, hours are lower and work conditions are better.
After all the 99% far outweigh the 1%, the only thing stopping the masses from being able to do anything about the corporate fascists and financial interests that abuse us is this mythology about the democratic State whereby it is the sole responsibility of government to “regulate” corporate behavior and our only recourse is to elect better representatives in the next election. The ideology you spout is dis-empowering Americans.
Without the crutch of the State to prop them up, free citizens could put these big banks out of business in short order. We would not have to wait four years for the next election and hope that our elected officials are NOT bought off corporate spokesmen this time.
You really have to examine the logic of the things you say. Slow down, take your time and recognize how a free market would ACTUALLY work and what power it would grant to the masses of consumers and workers in relation to the tiny minority of businessmen.
It is not a coincidence that corporations and banks have ALWAYS hated the free market and seek to expand government and regulatory control over the economy because that dis-empowers consumers and empowers themselves.
Yes, like libertarians are or want to be. Take , take, take and never give, then whine about oppression when society demands repayment anyway.
Without the State they’d either become the State, or society would collapse entirely.
No, it makes it easy. First the libertarians remove the protection of the State from people, then they try to forbid the people the last ditch alternative of force. As the author Kim Stanly Robinson put it, libertarians are “anarchists who want government protection from their slaves.”
I am very glad to see that you are not a blind FDR supporter who thought the New Deal was one of the greatest public policy programs in American history. And yes, destroying crops to keep prices high when people are starving is more than unwise, it is downright criminal and hideously immoral. The average person suffers due to a depression they did not cause and the political class dicks around with programs that prevent recovery, going as far as to destroy crops.
But your statement that the good outweighs the bad regarding the New Deal is kind of strange given that the Depression dragged on and on and even though he had four terms to test his economic and social policy, it was not until the next administration that we actually had any sort of economic recovery. How is that a case of the good outweighs the bad? And your suggestion that people kept voting for him as some kind of affirmation of the correctness of his program is ridiculous. Yes he was popular. People liked him and he delivered a good speech. People were scarred and remember that during a crisis, people are afraid to change leadership. The fact that the crisis lingered on and on (mainly DUE to FDR’s economic policies) is perversely the very reason why he kept getting elected.
You might love the legacy of Social Security, but for all the rest of it, it was a remarkable failure. Imagine we had an Austrian economist and libertarian, laissez faire free market guy as president during the 1930s. Imagine he had four terms and implemented a free market approach and the Depression deepened and lasted for fifteen plus years not improving until the next administration.
What do you suppose the historical verdict would be by those that now exalt FDR as one of our greatest presidents? We would never hear the end of it, how an incompetent free market advocate “did nothing” while a Depression raged on a hurt millions of people.
But I want to direct a few questions towards you, Hellestal. You seem to be one of the more contentious and respected members of this forum so I want to pick your brain broadening the current topic a little bit.
No doubt you are an advocate of Keynesian economic policy of some sort. You can talk about what the government should or shouldn’t do to stimulate the economy, what fiscal and monetary policy should be and so forth. But I would argue, like the example above of food destruction, the government is not competent to run good economic policy, even according to what Keynes would advocate.
Most elected members of Congress and our government in general have not read Keynes “General Theory” nor have they any grasp of counter cyclical spending or anything of the sort. They DO know that Keynes offers them a justification for spending money. They get that part. So if you advocate a government interventionist economic school of thought, you cannot even rely on the government to implement that economic policy correctly. When challenged about why the Depression lasted so long, modern Keynesians will say “well the government just didn’t do enough”. Others will say they did too much.
Sometimes our problems are caused by the Federal Reserve setting interest rates too high. Other times the problem is the Federal Reserve setting them too low. After every extended period of reasonable economic growth, we have heard Fed chairmen and political talking heads saying that they finally “solved the riddle”, they have solved the business cycle and we can look forward to perpetual economic growth under the wise hands of Fed monetary policy. Inevitably we suffer a huge downturn shortly after such pronouncements.
What about Krugman and others in 2001, advocating that we replace the Tech bubble with a Housing bubble? Or Bernanke in 2005, 2006 and 2007 saying that we have never seen housing prices drop across the board and there was no threat to the US economy.
Every time they claim to have solved to rubrics cube about how to effectively manage the economy, they economy crashes and they realize they made a mistake and that it won’t happen again.
At some point don’t we have to admit that the Federal Reserve CANNOT properly set interest rates that they will always set them too high or too low? For all their pretense of knowledge, central banks and Keynesian economists cannot replace the market.
But back to “counter cyclical” spending, which Keynes advocated. It is my understanding that Keynes knew that years of deficit spending was NOT good policy. That is why he advocated that the government run up deficits while in a recession but once we stabilize the economy and have some prosperity, spending should be scaled back so that we can pay down the debts and not get too far from a balanced budget.
Even the most interventionist economists today concede that in the long term the debt and government spending is a big problem but, citing Keynes, in an economic downturn of the magnitude we have today, we absolutely need to spend right now because of high unemployment and the “clear and present danger” (as Krugman puts it) of our current economic situation.
But from an examination of the last fifty or sixty years, it becomes pretty clear to me that we never actually engage in the other half of Keynes counter cyclical spending. Even in the good times, there is no desire to cut back and balance the budget and pay down the debt, even though it is what Keynes would have advocated.
So, like I mentioned already, government officials don’t even understand Keynesian economic theory. They just want to spend money to get reelected.
So deficits expand perpetually and the national debt grows.
This is one reason to believe in a backing to the currency, because to rely to politicians to follow even Keynesian economic policies responsibly is laughable.
If we DO have to have a Federal Reserve system for the foreseeable future, I would prefer a chairmen like Paul Volcker instead of Greenspan and Bernanke.
Volcker did the unpopular thing and RAISED interest rates, shrank the money supply and curbed the inflation of the 1970s which paved the way for some economic growth again. He was the most responsible of the modern Fed chairmen.
Are you concerned at all with the perpetually QE programs that Bernanke is undertaking? Would you be okay with a more moderate Fed chairmen like Volcker instead?
If you think that the monetary policy experiments Bernanke is undertaking are completely sound and eminently sensible, could you provide any historical precedent for this kind of monetary policy?
[/li][/ul]