Archive for July 2013

Bernanke: A Tenure of Failure: An Addendum

President Obama recently commented that he wanted a next Fed chairman who would do good for all not just for Wall Street and the rich [and politicians and chrony capitalists  supporting government spending at unsustainably high levels), but for everyone. Perhaps if what he has in mind is a real “helicopter Ben” who, instead of buying $85 billion in securities a month from financial institutions, would drop $85 billion from helicopters at pre-announced locations, the common folk might feel an illusion of increased prosperity in the very short run. If he is truly serious about a first do no harm monetary framework, he would work with closely Ron Paul not just to audit the Fed, but to dismantle it.

Robery Murphy’s archive and Mark Thornton’s archive are highly recommended.

More criticisms of Bernanke’s post 2008 policy from Austrian sympathizers and non-Austrian sources:

From yesterday’s Wall Street Journal Ronald I. McKinnon makes a similar point to Salerno’s argument that a low interest rate environment impedes recovery. In  “The Near-Zero Interest Rate Trap”, McKinnon summarizes nicely, “By trying to stimulate aggregate demand and reduce unemployment, central banks have pushed interest rates down too much and inadvertently distorted the financial system [and real structure of production] in a way that constrains both short- and long –term business investment. The misnamed monetary stimuli are actually holding the economy back.”

Steven H. Hanke also has some relevant commentary on how current policy has retarded rather than stimulated recovery. See:

The Federal Reserve vs. Small Business

Rethinking Conventional Wisdom: A Monetary Tour d’Horizon for 2013

Especially section 3: Rethinking the Fed’s Monetary “Stimulus”

Here is a sample of John B. Taylor’s commentary:

← Older posts

Same Old Slow Recovery Posted on February 4, 2013by John Taylor

The data released last week generated a lot of news stories, first bad ones about the GDP numbers and then good ones about the employment numbers. When you put the numbers in perspective, however, the economic story is little changed from … Continue reading →

Posted in Slow Recovery

Don’t Blame Weak Recovery on State and Local Spending Cuts

Posted on June 15, 2013by John Taylor As the economic recovery has remained weak well into its fourth year, some Washington policy makers have increasingly been blaming cuts in government spending, with much of their finger pointing at state and local governments where purchases of goods and … Continue reading →

Posted in Slow Recovery

Ed Leamer on the Weak Recovery Posted on June 3, 2013by John Taylor

In a recent “chart cast” video posted on YouTube, Russ Roberts interviewed Ed Leamer of UCLA on why the recent economic recovery has been so weak. Ed’s list of causes differs a lot from mine, which Russ discussed with me … Continue reading →

Posted in Slow Recovery

An Unusually Weak Recovery as Usually Defined Posted on October 26, 2012by John Taylor

The view that the current U.S. recovery is unusually weak compared to past U.S. recoveries from recessions with financial crises is gaining more and more support. Economists David Papell and Ruxandra Prodan in an article posted on Jim Hamilton and … Continue reading →

Posted in Slow Recovery

Weak Recovery Denial

Posted on October 18, 2012by John Taylor

Paul Krugman disagrees with my recent post that the recovery is weak compared to recoveries from past serious U.S. recessions including those associated with financial crises. I’ve been writing about the reasons for weak recovery for two years, but the … Continue reading →

Posted in Slow Recovery

More on the Unusually Weak Recovery Posted on October 15, 2012by John Taylor

The weak recovery continues to be a major topic. Over the weekend, Russ Roberts issued the second episode of his three part “chartcast” series on the topic, which is based on interviews with me and builds on his highly-regarded podcast series, … Continue reading →

Posted in Slow Recovery|Leave a comment

A New Chart Cast on the Bad News Recovery Posted on September 8, 2012by John Taylor

As many have observed the employment report for August released today was disappointing news, but it really is a continuation of a steady stream of bad employment news that has been the story of this recovery since its beginning. The … Continue reading →

Posted in Slow Recovery

It’s Still a Recovery in Name Only–A Real Tragedy Posted on August 4, 2012by John Taylor

I have been regularly charting the path of real GDP and employment during the recovery from the recession as new data are released. From the start it was clear that the recovery was very weak. By its second anniversary the … Continue reading →

Posted in Slow Recovery

Policy Uncertainty Makes Firms Reluctant to Hire: New Evidence Posted on July 31, 2013by John Taylor

I have been arguing that economic policy–in particular policy unpredictability or uncertainty–has been a factor in the slow recovery. That’s the main theme of the book I edited with Lee Ohanian and Ian Wright. A chapter by Scott Baker, Nick … Continue reading →

Posted in Uncategorized

More on Monetary Policy Before and After the Panic of 2008 Posted on June 28, 2013by John Taylor

Many agree that the provision of liquidity by the Fed during the panic period in the fall of 2008 was helpful in alleviating severe stress in the markets and rebuilding confidence. Most criticism of the Fed pertains to the period … Continue reading

“Trapped” in Rental Contracts

In today’s feature on the US housing market, an NPR correspondent sadly notes that foreclosure victims are “trapped” in rentals. Why, those poor, unlevered souls, choosing to purchase a flow of housing services over time, rather than buying a huge, illiquid housing asset outright, using borrowed funds. Tragic!

It made me think of similar tragedies:

  • Mercedes and BMW drivers trapped in lease contracts, rather than buying their cars with cash or credit
  • Individuals trapped in wage and salary contracts, rather than raising the capital, arranging the inputs, and bearing the uncertainties to be sole proprietors
  • Companies trapped in outsourcing agreements, rather than owning all upstream and downstream production processes directly, as vertically integrated firms
  • Vacationers trapped in resort hotels, rather than owning their own vacation condos or timeshares
  • Readers trapped by downloading and reading books on their Kindles, essentially “renting” them from Amazon, rather than buying physical books
  • Movie fans trapped in DVD rental agreements with Netflix, rather than owning massive DVD libraries

Don’t these suckers know that goods and services should always be purchased outright, rather than rented or borrowed?

[Cross-posted at Organizations and Markets]

Judge Napolitano at Mises University

Mises University this year featured a  “conference within the conference”.  The distinguished jurist and television commentator Judge Andrew Napolitano offered a course of five lectures on “The Growth of the Commerce Clause as an Instrument of Federal Power.” Judge Napolitano presented a masterful survey of how the Supreme Court has interpreted the commerce clause, from Gibbons v.Ogden (1824) to the present. In clear defiance of the plain meaning of the constitutional text, the Court expanded the scope of the clause so that the power of Congress to regulate the entire economy had by the 1940s become little short of plenary. Wickard v. Filburn (1942) was perhaps the culminating case in this sorry record of biased construction. Fortunately, the Court has recently indicated some willingness to recognize limits to the power of Congress in this area. In his final lecture, Judge Napolitano noted that in its recent opinion upholding the individual mandate of Obamacare  as an exercise of the taxing power, the Court also held that use of the commerce clause for this purpose was unconstitutional.

Judge Napolitano followed the Socratic method in teaching the course, but he was a Socratic interlocutor of great kindness, and it was clear that he had won the hearts of his students. His impressive command of the intricate legal issues at stake was everywhere apparent, and no less apparent was his devotion to individual liberty.

Central Bank Organization

A new NBER working paper by Ricardo Reis (unfortunately gated) tackles “Central Bank Design.” I’ve written a little on this myself, and gave a lecture Saturday at Mises University on “Microeconomics of Central Banking” elaborating on my ideas. I’ve been particularly critical of “independence,” the idea that central bank policies should be immune from public or legislative oversight, to avoid “politicizing” monetary policy. Governance and accountability are central to any model of organizational design, and it’s surprising — stunning, actually — that so many mainstream economists oppose any kind of oversight for the monetary authority.

I expected Reis to take the mainstream line, and he is indeed more sympathetic to the practice of central banking than I am (after all, he presumably supports the objectives, which I don’t). But his take is quite balanced and surprisingly critical, though he devotes less space to governance and oversight than I would have preferred. For example, here’s a passage from the conclusion:

While many have defended the virtues of central bank independence in general, looking at more specific questions led to a more mixed message. Even if there is a case for central banks to independently conduct the operations of monetary policy, basic democratic principles would imply that society would still choose the goals. Committing to a stable long-run nominal anchor may reduce the costs of price uncertainty, but that is not the same as having a fanatic central banker committed to 2% inflation at all times, and research shows that a flexible price-level target may be able to lower the variance of inflation and real activity. In turn, releasing the central bank from the duty to raise seignorage to make transfers to fiscal authorities does not imply that the central bank can assume large risks through bold credit policies. Moreover, even if central bankers are appointed to long terms that are independent from political pressure in order to attenuate the problem of time inconsistency, this goal will only be accomplished it the policymakers are politically accountable and transparent.

Definitely worth a read for an “insider” take on this issue.

Plutocracy in Action

Those who still believe the hogwash that the the United States is a two-party, representative democracy should ponder the following. On Wednesday, the amendment to the Defense Appropriations Act of 2014 proposed by libertarian-leaning Rep. Justin Amash (R-Michigan) was narrowly defeated in the House by a vote of 217-205. The amendment would have ended the authority for the unconstitutional, police-state metadata-phone call spy program carried out by the NSA whose existence was leaked by the heroic whistleblower Edward Snowden last month. Interestingly, the amendment had bipartisan support, with 99 Republicans and 111 Democrats voting for it. Its opponents included the leadership of both parties, as both House Speaker John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-California) voted against it. This seeming paradox is easily unraveled if one follows the money. According to an analysis commissioned by Wired, over the past two years those representatives who opposed the amendment and supported the spy program received more than twice the amount of cash contributions from defense and intelligence firms (e.g., Lockheed Martin, Boeing, United Technologies, Honeywell International, etc.) as those who did not. On average, House members who voted to uphold the domestic spy program received an average of $41,635 whereas those who voted to revoke authority for the program averaged $18,765. By the way, the leaders of the two “opposing” parties in the House, Boehner and Pelosi received $131,000 and $47,000, respectively, from the defense-intelligence establishment.

This is just another reminder of the thesis of the great Italian sociologist and classical liberal Vilfredo Pareto (1848-1923) that every democracy is inevitably transformed into a “demogogic plutocracy” that is run by a ruling elite of “fox-like” politicians and their corporate capitalist cronies.

HT to Wolf von Laer.

All This Week: Watch Mises University

Click here for the live video feeds. And click here to enroll in Virtual Mises University, to receive a Certificate of Participation, and more!

And watch Tom Woods’s inspiring talk from last night here.

Mises University 2013 Starts Tonight!

The top scholars in the Misesian tradition are joined by 150 students and 15 observers from 124 schools and universities, 35 states, and 23 countries.

Tom Woods kicks it all off tonight. Watch his speech live via YouTube. And don’t forget to sign up for Virtual Mises University, to receive a Certificate of Participation and more!

Skyfall

Watched Skyfall on a plane the other day. A well-made and entertaining film. Old fogies like me will appreciate the retro Bond touches. But it’s hard to be a libertarian and fully enjoy these sorts of movies, especially in today’s political climate. The surveillance / national security state is glorified every day in the mainstream press; do we need this from Hollywood as well? Of course, in the film, Bond’s MI6 uses its cameras and supercomputers and technical genius to spy on the bad guys, unlike the real MI5 and MI6 and FBI and CIA which use this stuff to spy on you and me. (I much prefer the way the CIA is portrayed in the Bourne films, as a lawless predator using shadowy “assets” to carry out its extrajudicial executions. And the portrayal of the NSA in the Will Smith film Enemy of the State is even better)

Skyfall opens with an exciting car, motorcycle, and train chase set in and around Istanbul. But I couldn’t help noticing the wanton destruction of person and property carried about by Bond and his agent-partner, smashing cars, shops, and market stalls belonging to innocent bystanders, even using a piece of construction equipment to crush cars and rip a train car in half, all to recover a stolen computer hard drive containing the identities of NATO spies embedded in “terrorist” organizations around the globe. Hey, what’s the life and property of a few random Turks compared to vital Western national security interests?

And, as is usual in Hollywood portrayals, MI6 is coordinating this melee from its headquarters in London, with nary a Turkish official in sight. (We see this too in the Bourne films, where the CIA can apparently control all the CCTV cameras in London with a few mouse clicks.) Perhaps the most egregious example I can remember appears in Fantastic Four: The Rise of the Silver Surfer, where US special forces are seen operating at will in Germany, using tanks and helicopters and futuristic weaponry to capture the titular bad guy in a Bavarian forest before taking him to their secret local base. You’d think that some German military or civilian officials would be at the scene, granting permission for Americans to blow stuff up on German soil, but I suppose this would have gone over the heads of the American audience.

Orson Welles on Contracts and the Rule of Law

From Peter Biskind’s hilarious and irreverent My Lunches with Orson, the edited transcripts of Orson Welles’s conversations with director Henry Jaglom in the mid-1980s:

HJ: In the old days, all those big [movie] deals were made on a handshake. With no contract. And they were all honored.

OW: In common with all Protestant and Jewish cultures, America was developed on the idea that your word is your bond. Otherwise, the frontier could never have been opened, ’cause it was lawless. A man’s word had to mean something. My theory is that everything went to hell with Prohibition, because it was a law nobody could obey. So the whole concept of the rule of law was corrupted at that moment. Then came Vietnam, and marijuana, which clearly shouldn’t be illegal, but is. If you go to jail for ten years in Texas when you light up a joint, who are you? You’re a lawbreaker. It’s just like Prohibition was. When people accept breaking the law as normal, something happens to the whole society. You see?

Of course, the US today is a society in which every citizen is a lawbreaker, virtually all the time — and it’s often impossible to know which law you’ve broken until ex post facto, when a government official decides. What can the rule of law possibly mean in such a system?

Fractional Reserve Banking Paper

You may have missed this paper by Bagus, Howden, and Block on Fractional Reserve Banking: Deposits, Loans, and Banking: Clarifying the Debate

Here is an online version of the working paper

Man Has Home Ransacked by Police for Paying Cash

Of the many crimes that have been committed by governments against their citizens in their global war on cash (also here), perhaps this is the most bizarre. Here is the story

It all started one Saturday morning when Jarl Syvertsen, a 59-year-old disabled Norwegian man, purchased a PC, TVs, and washing machines for 80,000 kroner (roughly US$13,000) which he paid in cash. The store immediately alerted the police about the large cash payment. On Sunday a male and a female police officer appeared on Mr Syvertsen’s doorstep. Upon seeing them, Mr. Syvertsen at first feared that something may have happened to his mother, who is 86 years old and resides in a nursing home. But the police were there with a warrant to search his home, charging that the cash he had spent was money that “came from a criminal offense.” In fact, the money was actually part of an approximately one-million dollar advance on an inheritance he had received. Mr. Syvertsen attempted several times to explain to the officers where the money had come from and to show them a letter confirming that fact, but they would have none of it and proceeded to invade his home and his privacy. Eventually the police realized their error and left his home.

Although the police now admit that they investigated Mr. Syvertsen prior to the warrant being issued and found that he had never been implicated in any criminal activity, they insist that “there were reasonable grounds to suspect” criminal activity given the “sum of the information available,” that is,  the large cash payment. As Mr. Syvertsen points out, however, had the police waited until Monday, the matter could have been resolved “in a single phone call to the bank.” But the police are unrepentant and have the unmitigated gall to lecture law abiding citizens against carrying large sums of cash on their persons for their own safety–against private thugs, not police thugs of course. According to acting station commander Jarle Kolstad:

It is far safer to pay such large amounts [with] cards than to go with 80,000 [kroner] in cash on the body. Not because you risk getting the police at the door [really?], but because it is safer to use the cards. . . .

Mr Syvertsen’s reply to such self-serving nonsense?

It’s not stamped on my forehead that I have 80,000 [kroner] on the inside pocket, so I judge [it] as quite safe. Besides, I have previously experienced not [being able to] pay because payment terminals are down. Therefore, I chose to pay with cash, and there is no prohibition [against it] in Norwegian law. . . .

In the aftermath of this egregious home invasion, Mr. Syvertsen is suing the police for compensation. In the meantime, his experience with such lawless and arbitrary police conduct makes him feel unsafe in his own home and leaves him wondering “How low the threshold is supposed to be for police to intrude into private homes”? Well Mr. Syvertsen,as in the case of any government war against its own people (e.g., the War on Drugs, the War on Terror etc.) the threshold is very low indeed.

HT to Vegard Notnaes.

Why Nations Fail

Peter Klein mentioned the Acemoglu-Robinson book, so I thought my review of it might be of interest:

Block, Walter E. 2013. “A 1,000-Year Tour,” Book review of Why Nations Fail: The Origins
of Power, Prosperity and Poverty,
by Daron Acemoglu and James A. Robinson. Crown Business, 544 pages; Barron’s,
February 4; http://online.barrons.com/article/SB50001424052748703892404578269870031384986.html (when you link to this url, first, you’ll see a review by Mark Skousen; to see this review of mine, go to page 4)

Editorial job opening

Are you interested in becoming an editor of a prestigious journal? The founder of the American Review of Political Economy is now looking for a successor. This is not an Austrian economics journal, nor it is one solely dedicated to libertarianism, my own two major interests. Instead, while it is very much open to these perspectives and will continue to be, its pages are available, also, to other heterodox viewpoints as well as to orthodox ones. The new editor would have to undertake to be true to this long-established mission of the American Review of Political Economy.  However, I think this is altogether a good thing. It is important for us Austro libertarians not only to focus on our own interests (happily, there are now many journals that do precisely that), but also to be open to the views of others, and have a vehicle that will introduce our own viewpoints to them.

 

I myself have since 2008 been involved with publishing in this journal, under the splendid editorship of

 

Zagros Madjd-Sadjadi, Ph.D.

Professor of Economics &

Chair, Department of Economics and Finance

RJR 120-A

Winston-Salem State University

(336) 750-2398

manuscripts@arpejournal.com
zagrossadjadi@yahoo.com

sadjadizm@wssu.edu

 

Here are my own publications in this journal:

 

Block, Walter and Patrick Tinsley. 2008. “Should the Law Prohibit Paying Ransom to Kidnappers?” American Review of Political Economy; Vol. 6, no. 2, December, pp. 40-45; http://www.arpejournal.com/ARPEvolume6number2/Block_Tinsley.pdf

 

Block, Walter and William Barnett. 2009. “Monopsony Theory.” American Review of Political Economy June/December, Vol. 7(1/2), pp. 67-109; http://www.arpejournal.com/ARPEvolume7number1-2/Block-Barnett.pdf; http://www.arpejournal.com/

 

Anand, Shashank, Tiffany Fleming, Barbie Frie Hotard and Walter E. Block. 2010. “Competing Catholic Views on Private Property and Free Enterprise.” American Review of Political Economy, June, Volume 8(1), pp. 80-109.

 

Block, Walter E. and William Barnett II. Forthcoming, 2013. “Milton Friedman and the financial crisis,” American Review of Political Economy, December

 

Block, Walter E. 2013, forthcoming. Book review essay of McCloskey, Deirdre N. 2006. The Bourgeois Virtues: Ethics for an Age of Commerce. Chicago, IL: The University of Chicago Press, American Review of Political Economy

 

Here is a message from Prof. Zagros Madjd-Sadjadi:

 

It has been 12 years since I founded the American Review of Political Economy. I have nurtured this from a one-man labor of love into a respected journal that serves as one of the top worldwide outlets for heterodox economists. I have paid all expenses, never taking a dime from contributors or readers. The journal has always been published as a PDF, taking on the look and feel of a full-fledged print journal. It is abstracted in Econlit, is part of the ProQuest series of electronic journal resources found at many libraries, and is listed in Cabel’s. I simply no longer have the time or energy to continue to serve as editor and publisher of the journal. I have also gone from being an adjunct professor and government economist to a full professor and chair of a department of economics and finance at a university in North Carolina. It is time for me to move on and hand this off to someone else and this is a call for someone to come to take over this responsibility.  Whoever takes it over must agree to place me on the masthead as the founding editor or editor emeritus, so that I can continue to be affiliated with the journal even as I no longer will have day-to-day responsibilities. We must continue to fulfill our mission to publish articles in political economy, broadly defined, from all schools of thought, both heterodox and orthodox. The American Review of Political Economy is a place where economists of all stripes may conduct dialogue. It has a unique mission in academia and the world and the light of its search for truth shall never be extinguished, even if it must be diminished somewhat due to the constraints of time.

 

If you are interested in being considered this very important position, please contact Prof. Madjd-Sadjadi and do copy me at wblock@loyno.edu. It is my understanding that while at present this is an unpaid position, there might be a publisher interested in taking it on, in which case there would be an honorarium attached to this editorship.

Debunking Governments’ “Lying Statistics” About Inflation

Steve Hanke is a maverick free-market economist who for decades has tirelessly advised de-socializing and developing countries against following the disastrous monetary and fiscal policies foisted on them in exchange for bailouts by international bureaucracies like the IMF and World Bank. Hanke’s latest efforts have been directed toward debunking inflation statistics fabricated by governments of developing countries that are trying to cover up the consequences of their highly inflationary or even hyper-inflationary monetary policies. Such official statistics, of course, are accepted and parroted by the media and the aforementioned international bureaucracies. Hanke gives the following example:

In many cases, governments fabricate inflation statistics to hide their economic problems. In the extreme, countries simply stop reporting inflation data. This was the case in Zimbabwe, a country that recorded the world’s second-highest hyperinflation. Results of research determined that Zimbabwe’s hyperinflation peaked in mid-November 2008, at a monthly rate of 7.96 × 1010% — roughly 8 followed by 10 zeros.

But, the Mugabe government stopped reporting inflation data in July 2008, when the peak monthly inflation rate was “only” 2,600%. Unfortunately, these official July 2008 data are still used in press reports and by venerable institutions like the International Monetary Fund. There is, of course, a “little” problem. The hyperinflation actually peaked at monthly rate 30 million times higher than the official peak inflation rate. The true peak of Zimbabwe’s hyperinflation occurred 3.5 months after the government’s last release of official inflation data.

Many countries have followed this course — failing to report any usable monetary data and neglecting to report inflation data in a timely and replicable manner. Those data that are reported are often deceptive, if not completely fabricated. Yes, official economic data from countries with troubled currencies often amount to nothing more than “lying statistics” and should be treated as such.

To address this problem Hanke has started The Troubled Currencies Project under the joint auspices of the Cato Institute and Johns Hopkins University. The project collects data on black market exchange rates and then applies the purchasing power parity theory, which links exchange rates with price levels, to more accurately estimate rates of inflation for troubled currencies. The project currently includes Argentina, Iran, North Korea, Syria, and Venezuela and will update the data and estimates on a regular basis. In the current chart that appears on its site, Syria reports an official annual inflation rate of 36.43% while the rate estimated from the movement of black market exchange rates is 336.50%; the respective inflation rates for Venezuela are 35.24% and 240.10%.

A Return to Folly?

This quotation appeared on my Facebook page (lifted from Robert Higgs and sourced as Psalm 26:11) and is dedicated to  Keynesians of all stripes:

“As a dog returneth to his vomit, so a fool returneth to his folly.” Psalm 26:11.

Alan Blinder returneth with his July 8, 2013 Wall Street Journal editorial “The Economy Needs More Spending Now: U.S. growth would be more robust if we didn’t confuse short-term stimulus with long-term reform.” The argument, which is intended to highlight the urgent need for even more fiscal stimulus of the increased spending type as opposed to tax reductions, instead highlights the what Robert Solow identified as the “major weakness of core macroeconomics,” a “lack of coupling between the short-run picture and the long-run picture” (quoted by Roger Garrison in the “Foreward” to the Hayek-Keynes debate-Lessons for Current Business Cycle Research, iii). Garrison goes on to argue that it is Hayek (and the Austrians) that provide the coupling.

For an Austrian argument on a coupled path to recovery – shrinking government involvement in the economy by lower spending, lower taxes, and reducing regime uncertainty which is supported by recent research on ‘multipliers,’ see “Stopping the Keynesian Death March.” Elsewhere,  Steve Kates explains the fundamental error of analysis based on aggregate demand, the foundation of Keynesian short-run thinking.

A dog or a fool? You decide

Peter Temin on the Whig Theory of History

Murray Rothbard argued persuasively against the Whig theory of history (1, 2, 3), and of intellectual history, in which events or ideas are portrayed as steadily and consistently improving with little room for detours, controversy, and backtracking. Peter Temin, the distinguished MIT economic historian, also worries that modern economics has become too Whiggish. He has written a brief account of the rise and fall of the economic history field at MIT that I found interesting, though targeted mainly toward insiders. Consider this critique of Daron Acemoglu and James’s Robinson’s 2012 book Why Nations Fail, which has generally been favorably received within Austrian circles:

This is a deservedly successful popular book, making a simple and strong point that the authors made originally at the professional level over a decade before (Acemoglu, Johnson and Robinson, 2001). They assert that countries can be “ruled by a narrow elite that have [sic] organized society for their own benefit at the expense of the vast mass of people” or can have “a revolution that transformed the politics and thus the economics of the nation … to expand their economic opportunities (Acemoglu and Robinson, 2012, pp. 3-4).”

The book is not however good economic history. It is an example of Whig history in which good policies make for progress and bad policies preclude it. Only transitions from bad to good are considered in this colorful but still monotonic story. The clear implication is that if countries can copy the policies of English-speaking countries, they will prosper. No consideration is given to Britain’s economic problems over the past half-century or of Australia’s relative decline for a century.

The book takes a shotgun approach to economic history, and many of the pellets go astray. In the areas I know about, their interpretations are out of date and misleading.

The essay unfortunately lapses into Krugmanesque, sophomoric gibes about austerity and Bush-Gore and Citizens United. But the central point that contemporary neoclassical economists, even clever ones like Acemoglu and Robinson, are weak on economic history, and that this results from phasing out the field from the graduate program, is worth reflection. Mises, Hayek, and Rothbard were careful historians as well as theorists, and their students and followers like Ron Hamowy and Bob Higgs have continued this tradition. Like Temin, I hope that economic history and the history of economic thought continue to be part of the core training for Austrian economists.

Summer Austrian Seminar in Poland

Instytut Misesa in Poland will hold a conference in September called ‘Summer Austrian Seminar’ where the main topics will be the problems of the Eurozone examined from the Austrian point of view. You can find the full program here. The lecturers are mostly scholars associated with the Mises Institute and the Mises Institute’s Summer Fellows Program.

Keynesian Economics in a Nutshell

Hayek on Keynes:

The decisive assumption on which Keynes’s original argument rested and which has since ruled policy is that it is impossible ever to reduce the money wages of a substantial group of workers without causing extensive unemployment. The conclusion which Lord Keynes drew from this, and which the whole of his theoretical system was intended to justify, was that since money wages can in practice not be lowered, the adjustment necessary, whenever wages have become too high to allow “full employment,” must be effected by the devious process of reducing the value of money. A society which accepts this is bound for a continuous process of inflation.

From Sudha Shenoy’s excellent 1972 compilation, A Tiger by the Tail: The Keynesian Legacy of Inflation (p. 68).

The Potency of Marijuana

Here is my interview with Reason TV on the rising potency of marijuana.

Monster

Never has a political song over four decades old applied so well to contemporary events as the song “Monster” recorded in 1969 by the rock group Steppenwolf, best known for its anthemic hard rock masterpiece “Born to Be Wild.” The lyrics are printed below and a YouTube video that vividly illustrates their application to our current situation is here (be sure not to miss the visual references to the Fed and the fiat dollar).

Monster/Suicide/America

(Words and music by John Kay, Jerry Edmonton, Nick St. Nicholas and Larry Byrom)

Once the religious, the hunted and weary
Chasing the promise of freedom and hope
Came to this country to build a new vision
Far from the reaches of kingdom and pope
Like good Christians, some would burn the witches
Later some got slaves to gather riches

But still from near and far to seek America
They came by thousands to court the wild
But she just patiently smiled and bore a child
To be their spirit and guiding light

And once the ties with the crown had been broken
Westward in saddle and wagon it went
And ’til the railroad linked ocean to ocean
Many the lives which had come to an end
While we bullied, stole and bought our homeland
We began the slaughter of the red man

But still from near and far to seek America
They came by thousands to court the wild
But she just patiently smiled and bore a child
To be their spirit and guiding light Read More→