Interviewed by host Alan Butler, Jeff Deist explains how economics, foreign policy, and peace are interrelated.
Interviewed by host Alan Butler, Jeff Deist explains how economics, foreign policy, and peace are interrelated.
Here is a forecast of Gross Domestic Product based on the Austrian notion of the money supply and its growth rate. Jeffrey Peshut shows that Real GDP peaks with a variable lag to the growth rate of the True Money Supply. In other words we should expect Real GDP growth to peak from 1 to 3 years after the True Money Supply growth rate peaks. He writes:
On February 28th, the Commerce Department released its revised estimate of real Gross Domestic Product growth for the fourth quarter of 2013, reducing it from January’s original estimate of 3.2% to 2.4%. Both are down from the third quarter’s GDP growth of 4.1%. For the entire year, real GDP grew by only 1.9% after expanding by 2.8% in 2012.
Because this writer lacks the meteorological skills ostensibly possessed by Ms. Yellen and others at the Fed, RealForecasts.com will limit its analysis to data associated with GDP and the money supply.
Although TMS has been increasing over the past two years, it’s been increasing at a decreasing rate, which is what really matters. The Fed’s reduction of bond purchases will likely decelerate the growth of TMS even further, setting the stage for the next credit crisis.
Extrapolating the TMS’s current trajectory into the future, TMS growth should approach zero in early 2015, setting the stage for a credit crisis near the end of 2015 or the beginning of 2016. Based upon a one-year lag between the TMS growth rate and the GDP growth rate since 2009, the growth rate of GDP is expected to approach zero in early 2016.
By Murray Rothbard
[Editor’s Note: This is a Selection from “Nations by Consent:Decomposing the Nation-State”]
The “nation,” of course, is not the same thing as the state, a difference that earlier libertarians and classical liberals such as Ludwig von Mises and Albert Jay Nock understood full well. Contemporary libertarians often assume, mistakenly, that individuals are bound to each other only by the nexus of market exchange. They forget that everyone is necessarily born into a family, a language, and a culture. Every person is born into one or several overlapping communities, usually including an ethnic group, with specific values, cultures, religious beliefs, and traditions. He is generally born into a “country.” He is always born into a specific historical context of time and place, meaning neighborhood and land area.
The modern European nation-state, the typical “major power,” began not as a nation at all, but as an “imperial” conquest of one nationality- usually at the “center” of the resulting country, and based in the capital city-over other nationalities at the periphery. Since a “nation” is a complex of subjective feelings of nationality based on objective realities, the imperial central states have had varying degrees of success in forging among their subject nationalities at the periphery a sense of national unity incorporating submission to the imperial center. In Great Britain, the English have never truly eradicated national aspirations among the submerged Celtic nationalities, the Scots and the Welsh, although Cornish nationalism seems to have been mostly stamped out. In Spain, the conquering Castilians, based in Madrid, have never managed-as the world saw at the Barcelona Olympics-to erase nationalism among the Catalans, the Basques, or even the Galicians or Andalusians. The French, moving out from their base in Paris, have never totally tamed the Bretons, the Basques, or the people of the Languedoc.
It is now well known that the collapse of the centralizing and imperial Russian Soviet Union has lifted the lid on the dozens of previously suppressed nationalisms within the former U.S.S.R., and it is now becoming clear that Russia itself, or rather “the Russian Federated Republic,” is simply a slightly older imperial formation in which the Russians, moving out from their Moscow center, forcibly incorporated many nationalities including the Tartars, the Yakuts, the Chechens, and many others. Much of the U.S.S.R. stemmed from imperial Russian conquest in the nineteenth century, during which the clashing Russians and British managed to carve up much of central Asia.
The latest ruse of some conservatives to garner the sympathy, support, and votes of libertarians is to declare that they are “constitutionalists.” Although they are sometimes referred to as “libertarians” in the media, sometimes even portray themselves as “libertarian-leaning,” and get ecstatic when real libertarians describe them as “liberty-minded,” these conservative “constitutionalists” are not only not libertarian, they are not even constitutional.
The United States was set up as a federal system of government where the states, through the Constitution, granted a limited number of powers to a central government. As James Madison succinctly explained in Federalist No. 45:
The powers delegated by the proposed Constitution to the Federal Government, are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.
In article I, section 8, of the Constitution, there are eighteen paragraphs that enumerate the limited powers granted to Congress. Everything else is reserved to the states—even without the Tenth Amendment. Four of them concern taxes and money. One concerns commerce. One concerns naturalization and bankruptcies. One concerns post offices and post roads. One concerns copyrights and patents. One concerns federal courts. One concerns maritime crimes. Six concern the military and the militia. Once concerns the governance of the District of Columbia. And the last one gives Congress the power “to make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers.”
One can search the Constitution morning, noon, and night with an electron microscope, x-ray vision, and night-vision goggles and never see a reference to the national government having the power to identify drugs, regulate drugs, classify drugs, set up a Drug Enforcement Administration, outlaw drugs, pass a single law related to drugs, or have anything whatsoever to do with any drugs. Read More→
Behavioral economics and its close cousin, neuroeconomics, have been all the rage in the last few decades. Behavioral economists claim to go beyond the naive assumptions of neoclassical economics by taking psychology (and neurophysiology) seriously, using laboratory experiments, brain scans, and other techniques to study how economic actors “really” behave under various circumstances. While some Austrians have embraced behavioral approaches, most have tended to dismiss the field, viewing behavioral economics as psychology, not economics. I find behavioral economics an ad hoc mixture of occasionally interesting psychological insights and naive policy recommendations that fit the authors’ particular ideological views (e.g., “soft paternalism”). More important, it’s hard to identify any important substantive contributions coming out of the behavioral literature; hardly anything seems both new and true. (Some neoclassical economists feel this way too.)
A recent NBER paper (gated, unfortunately) points to an important problem in the empirical literature on behavioral responses to stimuli. Economists Rajshri Jayaraman, Debraj Ray, and Francis de Vericourt studied an Indian tea plantation that changed its employment contract, from an output-based system with wages tied to individual performance to a “softer,” more equitable system with higher guaranteed minimum payments to all and weaker performance incentives. Initially, the plantation’s output increased, seemingly supporting the behavioralist claim that strong incentive plans make workers unhappy and lower productivity. However, after the first few months, this effect completely disappears, and worker behavior is entirely explained by a conventional economic model in which workers respond to financial incentives. As the authors put it, using more technical academic language: “an entirely standard model with no behavioral or dynamic features that we estimate off the pre-change data, fits the observations four months after the contract change remarkably well. While not an unequivocal indictment of the recent emphasis on ‘behavioral economics,’ the findings suggest that non-standard responses may be ephemeral, especially in employment contexts in which the baseline relationship is delineated by financial considerations in the first place.”
In my reading, the authors have found what used to be called a “Hawthorne effect,” a temporary response by employees to any change in management practice, workplace conditions, the employment contract, etc. Trying something new, whatever it is, can have a positive effect, but only temporarily.
I think the authors have identified a more fundamental problem with the behavioral social-science literature, namely that the empirical studies typically cover a very short time horizon, so that it is difficult to distinguish transitory from more permanent effects. Many behavioral researchers begin with strong prior beliefs about what they expect to find and, once they think they find it, they stop looking.
Bernanke is absolutely savaged in the comments to this CNBC video detailing his $250K speaking fee (now that he has joined the “private” sector). This is a family blog, so we won’t reprint any of them here. But the comments show how laughably out of touch with reality our political/banking class really is. NOBODY believes the official story anymore. Central bankers are seen as deeply harmful, if not criminal.
Joseph Salerno writes in today’s Mises Daily:
Brown explains that such monetary disequilibrium is not necessarily manifested in consumer price inflation in the short run. In fact, it is generally the case that the symptoms first appear as rising temperatures on assets markets. Indeed some episodes of severe monetary disequilibrium, such as those that occurred in the U.S. during the 1920s, the 1990s, and the years leading up to the financial crisis of 2007-2008, may well transpire without any discernible perturbations in goods and services markets. Yet overheated asset markets are completely ignored in the Friedmanite view of monetary equilibrium that underlies the Bernanke-Draghi policy of inflation targeting. Brown perceptively argues that one reason for the wholesale neglect of asset price inflation is the positivist approach that is still dominant in academic economics. Speculative fever in asset markets is nearly impossible to quantify or measure and thus does not neatly fit into the kinds of hypotheses that are required for empirical testing.
Space limitations for my “Labor Unions and Freedom of Association” Daily Article today required that some of the references to the clear understanding of the issues by individualists connected to the Austrian school of economics had to be edited out. But three of those contributions, from Auberon Herbert, Sylvester Petro, and Friedrich Hayek, are worth noting here.
Auberon Herbert, in his “The True Line of Deliverance, written over a century ago, wrote:
[M]ake the free‑trade footing universal for all. I do not mean that A and B should accept work on any terms other than those that they themselves approve; but that they should throw no dam round their labor by preventing C from…accepting terms which they decline. That is the true labor principle, universal individual choice…leave every man free to settle his own price of labor…In the case of a serious disagreement between an employer and his men, the union would remove all such men as wished to leave…But there would be no effort to prevent the employer obtaining new hands…There would be no strike, no picketing, no coercion of other men, no stigmatizing another fellow‑workman…because he was ready to take a lower wage. All this would be left perfectly free for each man to do according to what was right in his own judgment. If the employer had behaved badly, the true penalty would fall upon him; those who wished to leave his service would do so…That would be at once the true penalty and the true remedy. Further than that in labor disputes has no man a right to go. He can throw up his own work, but he has no right to prevent others accepting that work.
Sylvester Petro, in his 1957 The Labor Policy of the Free Society, also wrote extensively about this issue from an Austrian perspective:
In this article published in the Journal of Business Ethics, Philipp Bagus, David Howden, and Amadeus Gabriel contend that fractional reserve deposit banking is impossible and illegitimate.
Working paper version.
The financial crisis has led to new interest in the ethics of financial markets. In this article, we further the debate on the nature of banking contracts by showing that the fundamental subjective purposes of loan and deposit contracts are irreconcilable. Any resultant mixture of the two contracts is a legal aberration. We consider a mutual fund as an important and legitimate alternative to the common demand deposit to provide high liquidity and some yield without offering full availability of a nominal sum. Besides being a close substitute for how many deposit accounts function today, the mutual fund has the additional benefit of satisfying all legal and ethical requirements. Loan and investment contracts (such as money market mutual funds) allow for the “bank” to make use of their clients’ funds while the intents of money owners are clearly classified without running into legal or ethical problems.
Peter Klein explains why the Obama administration can’t create innovative manufacturing hubs by simply throwing around taxpayer’s money.
William Anderson Walter Block Per Bylund John Cochran Jeff Deist Thomas DiLorenzo Nicolai Foss Gary Galles David Gordon Jeffrey Herbener Robert Higgs Randall Holcombe David Howden Jörg Guido Hülsmann Peter Klein Hunter Lewis Matt McCaffrey Ryan McMaken Thorsten Polleit Joseph Salerno Timothy Terrell Mark Thornton Hunt Tooley Christopher Westley Thomas Woods