Category Archives: Uncategorized

Tidbits…11/28/10

4. Here’s Why The Fed Plan Is Failing: We’re All Austrians Now

Amazingly, this article appeared on CNBC and, perhaps more amazingly, provides a pretty good summary of the Austrian theory of the business cycle (ATBC). It’s pretty simple, though, and leaves out a lot of the nuances inherent within the theory. But as far as mainstream exposure goes, it probably doesn’t get any better than this.

3. Europe’s New Contagion Worries

I have to say, this statistic literally shocked me:

Sean Egan, principal at independent debt rating firm Egan-Jones, points out that Ireland’s per capita debt has soared to about 135,000 euro, or about $180,000. That’s roughly five times the per capita debt level in the United States.

I mean, I knew Ireland’s total debt was bad, but putting it in per capita terms just makes it look that much nastier. Yeaaah, no problems here, right? Move along folks, nothing to see…

2. Our Puritanical Progressives

In today’s world it often seems as though political ideologies shift more than Heraclitus’ river. One second conservatives are crying for smaller government and the next they’re calling for more military spending. Liberals advocate marijuana legalization on the grounds that people should be free from legislating morality and then they turn around and advocate banning violent video games because it affects children. George Will gets it mainly correct when he says

The progressives’ agenda for improving everyone else varies but invariably involves the cult of expertise – an unflagging faith in the application of science to social reform.

1. Ireland Should Not Be Bailed Out

Ireland is, indeed, in a precarious situation. Something needs to be done, but not all of the proposed remedies are worth the cost. Some are better than others. Case in point: an IMF/EU bailout is probably worse than the disease. Certainly, it’s a bad deal for Irish citizens. The entire idea of a bailout is being fanatically pushed hard by certain EU members (namely, Germany, the UK, and France) because those three happen to be the largest creditors to Ireland. This isn’t about “saving Ireland” but, rather, about saving banks that voluntarily bought up Irish debt. Ireland should do what Iceland did: reject any bailout and let the chips fall where they will. Incidentally, Iceland is doing much better than Ireland at the moment.

Advertisements

The Irony of “Buy Nothing Day”

There is an event/group on Facebook calling itself “Buy Nothing Day”, in regards to Black Friday. The idea is to, well, not partake in the rampant consumerism that characterizes the day after Thanksgiving. Of course, as should be obvious, the majority of people participating in this event are leftist college students. They rage against the mindless individualism and greedy consumerism of modern day capitalism. The very idea of spending money on cheap foreign products makes them sick.

So, to combat the capitalist machine, they will all refrain from spending money whilst wearing their Che shirts and waving the Communist Manifesto proudly through the air. The irony, of course, is that these capitalist-hating individuals have implicitly rejected today’s dominant leftist economic theory which states that consumer spending is what drives the economy and leads to our high-standard of living. The typical narrative goes something like this: “Consumer spending makes up 70% of our GDP! The only way to get out of the recession is to increase spending, which puts money into businesses, who then ramp of production, which requires them to hire more workers, and suddenly the economy is back on track!” Now, as Dr. Robert Higgs points out here, consumer spending has not been the problem. Consumer spending only fell a few percentage points since the recession began back in 2008. It’s investment that really took the hit.

In more formal economic terms, many economists today (those calling themselves Keynesians) believe the problem with the economy today is that aggregate demand has fallen and, in order to get the economy back on track, aggregate demand has to be boosted. There are two ways this could be done: Government spending, and consumer spending. If consumers would only go out and began spending once again, businesses would hire more people and the economy would right itself. Unfortunately, this doesn’t happen because consumers fear uncertainty, and so begin saving. This increased savings (non-consumption) further depresses the economy. At this point, government is supposed to pick up the extra slack in the economy and spend enough to get businesses hiring again.

If the Keynesian theory is to be believed, “Buy Nothing Day” can only further deteriorate the state of the economy. At any rate, it certainly won’t help. These people’s decision to not consume is going to contribute to lower wages, more unemployment, and further depressed housing prices. Not good, right?

I would argue, however, that there is nothing economically harmful when it comes to “Buy Nothing Day”. Indeed, I don’t believe the problem is with a lack of aggregate demand. Spending does not drive the economy, savings does. One cannot consume oneself into prosperity. Prosperity and rising living standards require that some people putting aside some consumption today in order to consume more tomorrow. If we imagine a man, alone, on an island with some fruit trees, we know that he can either consumer all of the fruit on the trees, or he can consume some of the fruit and plant more fruit trees for the future. If he consumes all of the fruit today he will certainly be well off for a short period of time. Perhaps until the next evening, or so. But after that he will have nothing left to eat until the trees grow more fruit. Clearly, if this man wants to have something to eat for the future he will engage in some non-consumption in order to consume more later.

To the extent that “Buy Nothing Day” leads to less consumption today (savings) and more consumption later, I think it will be a good thing. I doubt it will have much effect on the economy, but in principle it sounds right. The economy needs more savings to finance greater output in the future. The irony with this whole thing, however, is that the people participating in this event are probably the same people calling on the government to spend more money in order to get us out of the recession. Is spending the problem, or is spending the solution? Which is it, guys?

Insanity and Criminality: Two Dilemmas

Suppose you were declared legally insane. Whether or not you have a mental illness does not really matter. Now suppose that during the course of your stay at an institution you are mistreated by the orderlies in any number of ways – starved, subjected to excessively harsh punishment, beaten, etc. Your experience, in short, is not a pleasant one.

You would not be entirely without recourse. You could complain to any number of the people managing the facility or you could petition the individuals or organization in charge of oversight. You could describe in detail to these people all the pains that have been inflicted on you. But who is likely to be persuaded? Those managing the facility are not surprised that you dislike being committed, and are naturally skeptical of anything you claim. After all, you’ve been officially declared insane. Those in charge of oversight are equally aware that an insane person is likely to say anything in order to be released. It is not hard to imagine a scenario in which you notify the proper authorities only to have their fears put to rest by orderlies who deny any such incident took place. Your abusers declare that the bruise on your head is simply the result of your clumsiness brought on by heavy medication.

In a separate hypothetical, suppose you were accused of a crime and subsequently arrested. Whether or not you are guilty does not really matter. Now suppose that during the course of your arrest you are mistreated by the arresting officer – unnecessarily beaten, tased, etc. Your experience, in short, is an unjust one.

You would not be entirely without recourse. You could complain to the police chief or head of the department or you could petition the individuals in charge of oversight (i.e., a judge). You could describe in detail all the pains that have been brought upon you. But who is likely to be persuaded? Those managing the police force are not surprised that you dislike being arrested, and are naturally skeptical of anything you claim. After all, you’re officially suspected of committing a crime. The judge presiding over the police brutality case is equally aware that a criminal is likely to say anything in order to avoid fines or jail time (or even just to get revenge). It is not hard to imagine a scenario in which you follow all the correct legal procedures only to be told that, based on officer testimony, everything that took place was legal. The bruise on your head was simply caused by you hitting it on the frame of the patrol car while the officer tried to put you in the back seat. You shouldn’t have been forcefully resisting.

It should be clear how these two scenarios are related:  your “recourse” only takes place within a system entirely constituted by people whose job it is to manage your behavior. Once you are placed in the system, your credibility is automatically less than those who are paid to run the system.

Of course, in the second scenario you have another option – notifying the press. Also, in many cases there is surveillance video or a dash cam to provide further evidence in favor of you, the abused. The advantage of having these is that they appeal to a wider audience, as it were. The public at large can put pressure on the system to help you get the justice you deserve. But the portion of the public that is reached by such methods is in a similar position as those in charge of oversight. That is, the vast majority of people – for very good reasons – hold criminals in utter contempt. This is not a bad thing; it just means that the average person is likely to dismiss accusations brought against police as trumped up nonsense.  After all, who wants to publicly side with the criminals against the police? (How many times, for instance, was it repeated, “Rodney King deserved it”? While King certainly wasn’t an alter boy, one hopes that in their heart of hearts the majority of Americans still believe in a little something called “due process”).

The big difference here between the criminal dilemma and the insanity dilemma is that to be declared insane requires a legal proceeding; to be arrested does not. Therefore the potential for abuse is far greater under the authority of the State.

On the other hand, you might be suspicious of me and dismiss this argument as the product of a criminal mind. Why should I be worried about constraints on the police if I don’t have anything to hide? Didn’t I get a speeding ticket once?