Monday, September 27, 2010

There's No Magic Keynesian Fiscal Wand

From "John Maynard Keynes, R.I.P." by Richard McKenzie:
The late great economist Milton Friedman frequently peppered Keynesian enthusiasts in the 1960s and 1970s with a remarkably simple question that needs to be remembered today: Where does the government get the money it spends on roads (or bridges to nowhere)?

Friedman followed with an equally revealing observation: When the government engages in deficit spending, it must borrow the extra funds from someone who could have spent them on private-sector projects. An increase in government spending could be totally offset by a decrease in—or a “crowding out” of—private spending, as lendable funds are diverted from private to government uses. The net effect can be no net increase in aggregate demand—and no multiplier effect. Indeed, with the inevitable waste in government stimulus projects, the multiplier effect could as easily be negative as positive.

The country will learn anew an old lesson: Don’t count on the federal government to wave away the country’s economic troubles with some refurbished fiscal wand. The wand didn’t work in the 1960s and 1970s (it only contributed to “stagflation”). The wand is an illusion that should have died with Keynes long ago. We will also relearn the oft-repeated wisdom of Keynes when he wrote, “Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

84 Comments:

At 9/27/2010 9:40 AM, Blogger Sean said...

Can't we lay this out logically instead of taking dumb potshots?

"An increase in government spending could be totally offset by a decrease in—or a “crowding out” of—private spending"

The authentic Keynesian argument is that in times of uncertainty and demand shortage, private spending is not "crowded out" since returns on investment are low.
My understanding is the intended effect is more along the lines of taking the money from the rich (through some indirection of time and space) and using it to pay the needy to help themselves and each other. That is: "borrow" from whomever has enough money to tax to solve a liquidity problem among the poor. This is supposed to at least largely be repaid by taxes on the increased production spurred by employing the unemployed.

But the justification for such an act is still based on two premises:
1. the premise that the government has the right to redistribute wealth for the good of a society
2. the premise that economic activity is strongly constrained by liquidity among the poor

Reject either of those premises, and Keynesian-ism loses its justification.

 
At 9/27/2010 9:50 AM, Blogger juandos said...

"Can't we lay this out logically instead of taking dumb potshots?"...

What dumb potshots?

There's an 'authentic Keynesian argument"?!?!

"My understanding is the intended effect is more along the lines of taking the money from the rich"...

Define the 'rich'?

The owner of a string of gas stations?

Owner of a grocery store or stores?

Are these alledged 'rich' not going to pass this 'keynesian extortion scheme' costs onto the consumers?

The problem with Keynesian theory is that the one question that really is never asked is, "who pays?"...

None the less sean your final argument, re: the justification is really a good one!

Well worded elegance sir!

 
At 9/27/2010 11:28 AM, Blogger Benjamin said...

And where do we get the money to finance a global archipelago of military and foreign policy installations, as well as occupying and attempting to run not one but two deeply corrupt nations? $800 billion a year.

Where does the money come from for the $100 billion a year VA complex?

Or the huge and growing subsidies for rural infrastructure (the bridges to nowhere). $250 billion a year.

And who pays when federal military employees retire after just 20 years of service with lifetime pensions and health benefits?

Answer: It all comes fom the private jobs- and wealth-creating private sector.

 
At 9/27/2010 11:42 AM, Blogger morganovich said...

benji-

and where will the money come from to provide the huge stimulus and debt subsidies you continually demand?

same place.

you need to pick a side of the street and live on it.

 
At 9/27/2010 11:59 AM, Blogger morganovich said...

this is a very interesting HBS analysis of how pork spending crowds out private investment:

http://www.people.hbs.edu/cmalloy/pdffiles/envaloy.pdf

 
At 9/27/2010 12:08 PM, Blogger Sean said...

juandos,


"The problem with Keynesian theory is that the one question that really is never asked is, "who pays?"..."

The money comes from inflation: that is, the devaluation of savings. Whoever has money to save is who pays.

 
At 9/27/2010 12:16 PM, Blogger Benjamin said...

Morganovich-

I am not for fiscal stimulus.

I am a monetary bull, at this time.

The bulk of federal incomes taxes are eaten up by the DoD, VA, USDA, Commerce, Interior and debt payments.

Entitlement programs are largely financed by payroll taxes.

If you want to cutincome taxes (and I do) we have to cut the federal agencies mentioned above.

 
At 9/27/2010 12:38 PM, Blogger morganovich said...

benji-

you consistently argue for looser money and more QE.

that's a borrower subsidy and comes at the expense of savers.

i agree with cutting nearly all government subsidies, but for you to consistently rail against them and then demand one for borrowers is hypocritical.

it sure sounds like you want your turn at the trough just like any other special interest.

just because the tax comes in inflation and debt service costs instead of does not make it any less redistributionist.

 
At 9/27/2010 12:51 PM, Blogger Hydra said...

"Crowding Out" makes the assumption that the pot of money is fixed. This is the same error whether thinking of money available to llend or borrow, or whether the issue is jobs taken by immigrants.

==================================


"In this climate, the market fundamentalism now represented by the Tea Party, based on instinctive aversion to government and a faith that 'the market is always right',' is a global laughingstock."

Anatole Kaletsky, in todays NYT

 
At 9/27/2010 12:55 PM, Blogger Hydra said...

"same place."

===============================

So you agree that there is only one place money comes from, and it has the same bad effects no matter what the money is used for.


The only questions that remains are:

How do you get it from where it is or where it comes from to where it is needed for useful projects.


How do you prioritze what is "needed" and "useful"?

 
At 9/27/2010 1:18 PM, Blogger Benjamin said...

Morganovich--

I could argue that deflation, or unexpectedly low inflation, taxes productive people who borrow an invest.

But, actually, when an economy stumbles into deflation, and demand is weak, then we need the monetary bulls. That is where we are now. The side argument about rewarding savers or borrowers is less important.

In Japan, they have had deflation for 20 years. Property and equity markets are down by 75 percent, though buyers of Japanese bonds have not lost money. This is not a scenario I want in the USA--but we are headed there.

 
At 9/27/2010 1:32 PM, Blogger morganovich said...

first off, if you're going to encourage something, encourage the responsible thing.

saving does not ruin nations or cause depressions. irresponsible borrowing does.

there is no deflation here, nothing even close.

it's all just bad measurement.

objectively, prices are doing the same thing they did in 1974.

we can call it 8.5% or 1.8% depending on what algorithm we use, but prices are behaving the same way no matter how we mark the speedometer.

if we are near deflation now, then were were there in the 70's and 80's too.

you can't compare the numbers then to those now. they mean completely different things.

go read the gold thread.

there's no way current CPI is correct.

 
At 9/27/2010 1:33 PM, Blogger morganovich said...

also:

low inflation is not a tax on those who borrow. it's still a subsidy to them.

 
At 9/27/2010 2:01 PM, Blogger Benjamin said...

Morganovich--

Some rough cut-and-paste here--

"in the CPI, items whose prices rise are weighted too heavily while items whose prices fall are weighted too lightly -- or (as in with the calculator) not at all."--
Donald J. Boudreaux is chairman of the department of economics at George Mason University in Fairfax, Va.

"How big is the CPI’s bias? Well, in 1996, the Social Security Administration commissioned a study on the accuracy of the CPI as a measure of the cost of living. This so-called “Boskin Commission Report” said the CPI was overstated by about 1.1 percentage points per year. The commission identified several sources of potential bias, but about half of the 1.1 percentage points resulted from new products and quality changes that were slow or otherwise imperfectly introduced into the price statistic.

Now, in an article (available to all in its working paper version) appearing in the latest issue of the American Economic Review, Christian Broda and David Weinstein say the earlier estimates of the new goods/quality bias may be a bit understated. The authors examine prices from the AC Nielsen Homescan database and conclude that between 1996 and 2003, new and improved goods biased the CPI, on average, by about 0.8 percentage points per year. If this estimate is accurate, consumer price increases since last October would actually be around zero, or even slightly negative, once we account for the mismeasurement of the CPI caused by new and improved goods…."

So we have the Chairman of the George Mason Econ. Department, and Michael Boskin, and a peer-reviewed AER article are saying the CPI overstates inflation.

You have some crank, who chnaged his name to John Williams, who says the CPI understates inflation.

 
At 9/27/2010 3:33 PM, Blogger morganovich said...

benji-

we've been through this before. then you have the pimco guys and guys like david eihhorn, some of the smartest investors in the world whop all claim CPI is understating inflation.

i'm going to go with the guys who are making the money, not an academic.

appeals to authority are not going to work here when so many of the most sophisticated guys in the world agree with me. you can find an academic who believes anything.

Bill Gross of California-based PIMCO, the world's biggest bond manager, tells investors that interest rates on U.S. Treasury notes are inadequate. Inflation around the globe has averaged nearly 7 percent over the past decade, but the official U.S. inflation rate has averaged 2.6 percent. "Does it make any sense," says Gross, "that we have a 3 percent to 4 percent lower rate of inflation than the rest of the world?" And if Washington understates inflation by one percent, he adds, then gross domestic product has been overstated by that same amount. ("U.S. Inflation understated, Pimco's Gross says," MarketWatch, May 22, 2008)

Nor is Gross alone. In May, former Federal Reserve Chairman Paul Volcker told the Congressional Joint Economic Committee that "I think there's a lot more inflation than in those [CPI] figures." He said that the sharp run-up in housing before the recent implosion wasn't reflected in CPI data, adding that food and energy prices should not be excluded in gauging long-term trends. And when prices do go up, he said, government calculators are "much more inclined to say that there are improvements in quality" rather than an increase in inflation.

At Charles Schwab & Company, one of the nation's biggest money managers, chief economist Liz Ann Sonders wrote in June that "Over the past 30 years, major changes have been made to the calculation of the CPI due to "re-selection and reclassification of areas, items and outlets, [and] to the development of new systems for data collection and processing," according to the Bureau of Labor Statistics. If you eliminate those adjustments and calculate CPI as it would have been calculated in 1980, it would be nearly 12 percent today...No wonder clients constantly tell me they distrust government inflation data." ("Back to the 1970s?" Charles Schwab Investing Insights, June 19, 2008)

http://www.nytimes.com/2010/05/27/opinion/27einhorn.html?pagewanted=all

i'll go with these guys over your "experts".

 
At 9/27/2010 3:55 PM, Blogger Hydra said...

deflation, or unexpectedly low inflation, taxes productive people who borrow an invest.

=================================

Huh? These people are BORROWING. They are investing money they got from other productive people who saved up so there would be something to invest.

So If I'm one of those people and I lend it out for someone else to invest, then yes, he gets and effective tax. But providing he survives and pays me back I make out because now I have dollars that are worh more than the ones I loaned out. I get a argan and he gets screwed.

That's what the market is all about, right? since the oppotunity to borrow or lend is open to all, what exactly is unfair about this?

Morganovitch has the right take on this, I think.

 
At 9/27/2010 4:09 PM, Blogger Benjamin said...

Hydra-
Who is more sacred: The lender, or borrower who invest productively?

I go with productive borrowers.

Moot point anyway--yields are going to zero, and they will stay there, ala Japan.

Moot twice: It really doesn't matter who is the most virtuous, if the Fed doesn't promote grwoth, we will be like Japan. Bond holders have done well there, while property and equity markets lost 75 percent of their value, and the eocnomy lagged that of France. Statist France. That is tight money in action.

Morganovich: Obviously we disagree--I will note that the two who actually studied the issue and prepared reports for review--Boskin and the AER's--both found the CPI overstates inflation.

The people you cite were making intelligent anecdotal observations---but only that.

Yes, if you laready own your house, and recently had surgery and bought gold jewelry for your wife, you would think inflation is out of control.


If you just bought a house, shopped at the dollar store for utensils, and blabbed for two hours on your cell phone internationally (using a calling card), you would think prices are going down.

But we can't go with anecdotes. The real, serious studies point to the CPI overstating inflation. Read the AER study and let me know what you think.

 
At 9/27/2010 4:17 PM, Blogger Michael Cottle said...

Do we really know the size of glass well enough to say it is half full? Economists are dismal scientists.

 
At 9/27/2010 4:17 PM, Blogger Michael Cottle said...

Do we really know the size of glass well enough to say it is half full? Economists are dismal scientists.

 
At 9/27/2010 4:52 PM, Blogger morganovich said...

benji-

no one in those studies knows more than volcker or gross.

the boskin report is a piece of flimsy justification to try to save social security by limiting the increments in which payout increases.

that was a politically driven study whose conclusions were determined before the work even began.

the fact that you continually cite it demonstrates that you do not understand how politics works.

do you believe that obamacare will not increase health care costs by more than a smidgen because the CBO said so?

that new and improved goods piece is just a joke.

it only matters if the old ones are still available. if everything is "better" (even assuming you can tell how much) but more expensive, that's still inflation.

you still need a car and a blender and a couch, and you pay more for them.

subjective guesswork about product improvement has no place in measurement. it injects bias and assumption that occludes more than it illuminates.

 
At 9/27/2010 5:08 PM, Blogger Jason said...

Entitlement programs are largely financed by payroll taxes.

Benji, there are no caps on this spending. The most conservative estimates of unfunded portions of this are insane. Also, Social Security ran a deficit in 2009. It's broke. Do you advocate increasing payroll taxes to cover each shortfall?

 
At 9/27/2010 5:12 PM, Blogger Benjamin said...

Jason-

Actually, I am in favor of consumption and PIGOU taxes.

 
At 9/27/2010 5:14 PM, Blogger Benjamin said...

Jason-

But also balancing the budget--and they calls for slashing the military, wiping out the VA, wiping out the USDA, wiping out HUD and wiping out the Department of Ed.

I wouldn't snivel too much if conusmption luxury taxes wrere raised.

 
At 9/27/2010 5:48 PM, Blogger Jason said...

Benji, entitlements, HUD, DOEd can disappear tomorrow as far as I am concerned. These are all psuedo-constitutional functions anyway. And farm subsidies can go bye-bye, too. Essentially any function that is a transfer of funds and not explicity stated within the Constitution is fair game for me.

And on top of all that, privatize all gov worker pensions, and eliminate government unions.

 
At 9/27/2010 6:05 PM, Blogger Benjamin said...

Be careful how you quote the Constitution--there is no provision for an Air Force.
Strict constructionism anyone?

The Founders obviously loathed standing armies, and explicitly provided for the right of citizens to form militias and bear arms.

Does that mean Black Panthers can wear uniforms, drill and carry RPGs?

Constitutionally speaking, why not?

 
At 9/27/2010 6:10 PM, Blogger Benjamin said...

President James Madison: “…to support the Constitution, which is the cement of the Union, as well in its limitations as in its authorities; to respect the rights and authorities reserved to the States and to the people as equally incorporated with and essential to the success of the general system;… to keep within the requisite limits a standing military force, always remembering that an armed and trained militia is the firmest bulwark of republics – that without standing armies their liberty can never be in danger, nor with large ones safe;…” – President James Madison, First Inaugural address, Saturday, March 4, 1809.

James Madison: “As the greatest danger to liberty is from large standing armies, it is best to prevent them by an effectual provision for a good militia.” (notes of debates in the 1787 Federal Convention)

Thomas Jefferson: “I do not like [in the new Federal Constitution] the omission of a Bill of Rights providing clearly and without the aid of sophisms for… protection against standing armies.” –Thomas Jefferson to James Madison, 1787. ME 6:387

Thomas Jefferson: “Nor is it conceived needful or safe that a standing army should be kept up in time of peace for [defense against invasion].” –Thomas Jefferson: 1st Annual Message, 1801. ME 3:334

 
At 9/27/2010 6:16 PM, Blogger Jason said...

Benji, what is an Air Force but a Navy of the sky? And as far as militias are concerned, this is one of the best researched and well-ajudicated subjects of the constitution.

I said fair game, but everything must be re-examined and cut after thought. For instance, the USDA, BATF, FDA and SEC/FDIC are useful and necessary given trade and currency regulation powers within the constitution. I think we can create a better government by stopping the insanity and gtting back to basics.

 
At 9/27/2010 6:49 PM, Blogger W.E. Heasley said...

juandos said...

The problem with Keynesian theory is that the one question that really is never asked is, "who pays?"...

None the less sean your final argument, re: the justification is really a good one!


In response to Sean stating...

But the justification for such an act is still based on two premises:
1. the premise that the government has the right to redistribute wealth for the good of a society
2. the premise that economic activity is strongly constrained by liquidity among the poor

Reject either of those premises, and Keynesian-ism loses its justification.



Interesting. One might say that the justification is a function of "moral narcissists" being the proponents of the social justice agenda.

 
At 9/27/2010 6:50 PM, Blogger juandos said...

Hey sean...

"The money comes from inflation: that is, the devaluation of savings. Whoever has money to save is who pays"...

True but isn't that only part of the picture?

What about wealth earned through work (which is also time) but if a portion of that wealth is subtracted from the one who earns it for some Keynesian scam isn't that were the 'other' part the equation regardless of inflation?
================
pseudo benny plaintivly wails: "I am not for fiscal stimulus.

I am a monetary bull, at this time
"...

Yeah and Obama is a disciple of Milton Friedman...

 
At 9/27/2010 6:54 PM, Blogger Benjamin said...

Jason-

Another huge rip-off, in addition to huge stanbding armies in peace-time, is federally funded rural infrastructure improvements--thus creating a permanent rural welfare class.

I agree, back to basics.

FDIC? Does raise questions. Okay, we insure deposits, fine. But then do we allow banks to engagein risky loan practices? Using insured deposits? Moral hazard?
Taxpayer-insured money?

 
At 9/27/2010 7:08 PM, Blogger juandos said...

pseudo benny says: "Actually, I am in favor of consumption and PIGOU taxes"...

So instead of getting rid of useless, overly priced, and constitutionally questionable nanny state programs that prop up the parasites you want to continue to propagate these monstrosities on the backs of the productive, right?

 
At 9/27/2010 8:19 PM, Blogger Sean said...

juandos,

"True but isn't that only part of the picture?"

Yes, of course you're right. I was really referring to the fact that governments tend to borrow money and then inflate currency to borrow debt, but yeah, there has to be a real tax base too.
And taxes are spread pretty broadly on anyone making a certain amount of money.

But the Keynesian multiplier doesn't have to be that far from 1 for the expenditure to be worth it from a government perspective as long as the prescription of save during good times and spend during bad ones is followed. Of course, governments tend not to have the political will to do that.
From the perspective of a taxpayer making a decent amount of money, I can see how it would be different. :)

 
At 9/27/2010 8:34 PM, Blogger W.E. Heasley said...

Sean:

Keynesian Government Deficit Spending and Quantitative Easing are both theories developed in a low or no debt environment. Simultaneously deploying both theories in an environment of hyper-debt is uncharted economic waters fraught with unintended consequences.

Sowell would likely say that simultaneously deploying the two theories got politicos the first stage economic consequence they crave to fit their short term political time horizon. That is, the talking point that it would have been worse without government intervention and somehow government intervention directed by politicos saved the day. However, the cascading unintended economic consequences showed up very early in this particular case and politicos are left with a their short term political time horizon with no political capital.

Which takes us back to the environment of hyper-debt which we started with and the public’s concern with the hyper-debt. Ah, the evil of it all.

 
At 9/27/2010 9:31 PM, Blogger juandos said...

Hey H.E. Heasley, I said "the justification is really a good one!" didn't mean I agreed it was the correct answer or at the very least the answer I was looking for...

Sean is very good at what he's doing and I still think his language use is very good...

The funny thing is that your follow up comment: "One might say that the justification is a function of "moral narcissists" being the proponents of the social justice agenda" is also very good and you worded it much better than I could've...

In your second comment you say: "However, the cascading unintended economic consequences showed up very early in this particular case and politicos are left with a their short term political time horizon with no political capital"...

Or as Steve H. Hanke writes: The Curse of Government Failure

 
At 9/27/2010 9:40 PM, Blogger W.E. Heasley said...

juandos:

Was not meaning you agreed with Sean, merely quoting the thread.

 
At 9/27/2010 9:47 PM, Blogger W.E. Heasley said...

juandos:

BTW, thanks for the link to Hanke's article. Most excellent!

You'll need to explain this concept to Sean: If markets fail, governments fail too.

 
At 9/28/2010 5:17 AM, Blogger James Fraasch said...

Somewhat off topic but back on the free-trade thing.

Here is what I know to be fact:

If Krugman says it, then it is wrong. Krugman supports tariffs and a trade war to protect jobs. That means that policy is wrong.

It's the Bastiat candle maker fallacy. You can't shut off the sun to help the candle makers.

James

 
At 9/28/2010 8:36 AM, Blogger Sean said...

juandos,

Sean is very good at what he's doing and I still think his language use is very good...
Why, thank you! :)

 
At 9/28/2010 8:48 AM, Blogger Sean said...

W.E. Heasley,

Per high-debt environments combined with Keynesian and fiscal stimulus being uncharted waters, I'm not so sure. Theory exists, and Japan has tested the waters a bit. No, I suspect our position as a global net consumer does at least as much damage to Keynesian economic strategy as these. Stimulating local demand would not stimulate that much in the way of sustainable production.
After all, there's been a decade of full monetary push and all we have to show for it is debt. So I don't suspect a little more will magically fix our problems.

That doesn't mean Keynes was a fraud, just that his ideas don't seem likely to solve our current problems.

 
At 9/28/2010 8:53 AM, Blogger W.E. Heasley said...

Sean:

Try reading this again:

http://www.thefreemanonline.org/featured/john-maynard-keynes-r-i-p/#

 
At 9/28/2010 11:38 AM, Blogger Sean said...

W.E. Heasley,

The article contains a few solid points:
1. No one knows how to calculate the multiplier effect of stimulus accurately
2. If the production market is not sufficiently slack, private investment can in fact be crowded out
3. Money spent on stimulus has to be repaid, and public debt is a drag on future production
4. Politicians cannot be counted upon to apply stimulus well and only when needed

I think most of the rest is kind of weak.

In a sufficiently large-sized demand crater, 1. and 2. are not a problem. Countering #3 requires believing in a boom and bust cycle where the economy periodically needs to be cooled down and heated up. I don't find that a big stretch.
However, 4. is a killer.

 
At 9/28/2010 5:11 PM, Blogger Craig said...

"borrow" from whomever has enough money to tax to solve a liquidity problem among the poor

Don't the poor, by definition, always have a liquidity problem?

 
At 9/28/2010 10:53 PM, Blogger W.E. Heasley said...

Sean:

Hanging onto the notional proposition of “the way things ought to be” will not serve you well in economics.

Try this book: From Economic Man to Economic System by Harold Demsetz. Once you read that book try Intellectuals and Society by Thomas Sowell. If you have time try A Conflict of Visions by Sowell. Then go ahead and top it off with Nozick’s Anarchy, State, and Utopia.

 
At 9/29/2010 7:55 AM, Blogger Sean said...

W.E. Heasley,

Hanging onto the notional proposition of “the way things ought to be” will not serve you well in economics.
I do not think I have lapsed from analysis to fantasy, but I admit bias is hard to spot.

I will take your reading list under consideration. Thank you, sir.

 
At 9/29/2010 4:10 PM, Blogger Ron H. said...

James Fraasch said...

"Here is what I know to be fact:

If Krugman says it, then it is wrong.
"

That, sir, is a true gem. Words to live by.

I love it.

 
At 9/29/2010 6:16 PM, Blogger VangelV said...

The authentic Keynesian argument is that in times of uncertainty and demand shortage, private spending is not "crowded out" since returns on investment are low.

But don't Keynesians understand that investing for the sake of investing is not good for individuals? If building a road to nowhere does not provide a positive return the government should not build it. If it could provide a positive return then the government does not need to build it because private investors will.

My understanding is the intended effect is more along the lines of taking the money from the rich (through some indirection of time and space) and using it to pay the needy to help themselves and each other.

How does stealing money from the rich help the poor? Don't you know that the 'rich' have ways to protect themselves from confiscatory taxation and will avoid attempts to rob them? But by doing so they will reduce their economic activities, decrease job creation and make more people poorer.

That is: "borrow" from whomever has enough money to tax to solve a liquidity problem among the poor.

You mean steal, not borrow. The money taken will never be given back so let us call a spade a spade.

This is supposed to at least largely be repaid by taxes on the increased production spurred by employing the unemployed.

Keynesians are not connected to reality, are they? For the record, when you tax wealth creation you will not create more jobs but create more unemployment. For a perfect example look at the Great Depression. Hoover ran massive deficits and enacted one of the greatest peace time tax increases in American History. It did not work and neither did the continuation of his policies by FDR. Contrast this with Harding's action of cutting taxes and government spending, which created a sharp contraction that allowed the market to clear malinvestments and set the stage for an economic expansion.

But the justification for such an act is still based on two premises:
1. the premise that the government has the right to redistribute wealth for the good of a society.


It does not have that right. While it has the power to do so most of the activities undertaken by the government are not permitted by the constitution.

 
At 9/29/2010 6:32 PM, Blogger VangelV said...

Entitlement programs are largely financed by payroll taxes.

Unfunded liabilities stand at more than $60 trillion so there has to be an increase of taxes or a reduction in future benefits.

 
At 9/29/2010 7:14 PM, Blogger Ron H. said...

"Don't the poor, by definition, always have a liquidity problem?"

Craig, it seems like a strange use of the term "liquidity" to me, but perhaps Sean believes they are poor because they have stupidly misallocated their funds and have only illiquid assets and no cash to pay the bills.

 
At 9/30/2010 10:23 AM, Blogger Sean said...

Ron H., Craig,

Re:
Don't the poor always have a liquidity problem?

The key assumption is that if the poor have any more access to money, they will spend it. And the money they spend will be on something for which there is a real demand. That's why they call it stimulus: the dependency is that what the poor spend their money on will not be "wasteful".

 
At 9/30/2010 10:46 AM, Blogger Sean said...

VangeIV,

If it could provide a positive return then the government does not need to build it because private investors will.
Investors won't spend money on something because it is valuable: they will spend money on something because they believe someone who has money will pay them for it in the future. In a depressed environment, they won't invest because they don't think consumers exist that are willing to spend. And unless a critical mass of investment occurs, they are right: they will lose out. This is a case where game theory is against growth: you're in the wrong end of a Nash equilibrium.

...But by doing so they will reduce their economic activities, decrease job creation and make more people poorer.
If those with money were willing to spend or invest, that would be true. But if not, then the poor have nothing to lose from the conflict.

You mean steal, not borrow. The money taken will never be given back so let us call a spade a spade.
In many cases, yes. But not always. If stimulus actually does work, a good portion of the benefit of economic growth actually goes to those already in decent shape. So at least some of the money is indirectly paid back. I am always in favor of calling a spade a spade.

Keynesians are not connected to reality, are they? ...
I've seen analysis showing exactly the oppose, as well, from liberal sources. You can say people like Krugman are wrong, and they may be. But they are neither liars nor stupid. Let's just say, I have some skepticism yet on this interpretation of events.


For the record, when you tax wealth creation you will not create more jobs but create more unemployment.
Absolutely true. However, the idea that taxing property is necessarily "wealth creation" is a conservative fallacy. Both because not all property holdings are derived from wealth creation, and because consumption and useful investment do not scale linearly with property holdings.

It does not have that right.
A reasonable position, although I don't fully agree with it. I have a long discussion in another thread on the derivation of "rights" and the pragmatic interest of the rich in income redistribution. But this certainly enters the territory of deep philosophy.

 
At 9/30/2010 3:44 PM, Blogger VangelV said...

Investors won't spend money on something because it is valuable: they will spend money on something because they believe someone who has money will pay them for it in the future. In a depressed environment, they won't invest because they don't think consumers exist that are willing to spend.

Why do we need to waste resources by building something that does not provide a return? Since when is wasting resources a virtue that is good for society and taxpayers?

And unless a critical mass of investment occurs, they are right: they will lose out. This is a case where game theory is against growth: you're in the wrong end of a Nash equilibrium.

Let us keep then nonsense out of this. An investment either makes sense or it does not. If it does there is no evidence to suggest that government is more capable of making it than private individuals. If it does not make sense then we should not waste resources on it.

If those with money were willing to spend or invest, that would be true. But if not, then the poor have nothing to lose from the conflict.

Of course they do. If you discourage capital formation by declaring war on the productive class you will have fewer jobs being created.

In many cases, yes. But not always.

No, theft is theft in all cases.

If stimulus actually does work, a good portion of the benefit of economic growth actually goes to those already in decent shape. So at least some of the money is indirectly paid back. I am always in favor of calling a spade a spade.

Then you have a problem with your understanding of ethics and economics. When you take $1K from someone and that allows them to get something that they value at $10 you are stealing. Period. End of story. You can't justify theft by assuming that some people may get some of their money back.

I've seen analysis showing exactly the oppose, as well, from liberal sources. You can say people like Krugman are wrong, and they may be. But they are neither liars nor stupid. Let's just say, I have some skepticism yet on this interpretation of events.

Krugman is either a liar or an idiot because he refuses to learn from events and admit that the Keynesian prescription has gone badly wrong. I don't know about you but I am tired of excuses that claim that if only taxes were higher and government meddled more things would be better or of claims that a highly regulated economy experienced a market failure.

 
At 9/30/2010 3:50 PM, Blogger VangelV said...

However, the idea that taxing property is necessarily "wealth creation" is a conservative fallacy.

Taxing property is theft, not wealth creation. Even the incompetents on the right understand that.

Both because not all property holdings are derived from wealth creation, and because consumption and useful investment do not scale linearly with property holdings.

Where exactly does property come from then? Do we walk around and find gold nuggets on the ground? Most people I know earned what they have or inherited what they have from people who earned it. The government or you lefties have no moral claim on that property and have no right to decide how it will be used.

A reasonable position, although I don't fully agree with it. I have a long discussion in another thread on the derivation of "rights" and the pragmatic interest of the rich in income redistribution. But this certainly enters the territory of deep philosophy.

It is not that deep. We either derive our rights from our humanity (or Creator for the religious among us) and create governments to protect those rights or have no rights other than those granted by the ruling class. I maintain that Jefferson and the Founding Fathers were right. You obviously have doubts or you would not be advocating the use of force to take from people what belongs to them.

 
At 9/30/2010 4:18 PM, Blogger Ron H. said...

"If stimulus actually does work, a good portion of the benefit of economic growth actually goes to those already in decent shape. So at least some of the money is indirectly paid back."

Sean, what does this even mean? That it's OK to steal money from people because they may get a chance later to earn some of it back? I can't believe you really think so.

Let me second the recommended reading list that W.E. Heasley gave you. If you give those books careful consideration, as I believe you will, You may find your views changed and expanded somewhat. If you then come back here and reread your comments on this thread I think you will find them to be somewhat simplistic and naive.

In an earlier comment on this thread you said:

"The money comes from inflation: that is, the devaluation of savings. Whoever has money to save is who pays."

Think about what you're saying: Do you really believe that anyone who is able to defer consumption must have more than they deserve? Who gets to decide that? Consider that some of those "savers" might be people with modest incomes, perhaps even your own parents, who have set aside a nest egg during their productive years to provide for a comfortable retirement. Here you come, recommending inflating that savings away, and thereby creating the very poor you think deserve help. Perhaps those retirees will have some of their own money handed back to them by government as some form of welfare. It seems to me that what you see as a problem in need of correcting would be smaller without your solution.

When you finish reading the books on Heasley's reading list and find yourself thirsting for more on different viewpoints from the ones you hold now, I would recommend something by Henry Hazlitt. Perhaps Economics In One Lesson as an introduction to Hazlitt, and then, if you are really willing to test your faith, try The Failure of the New Economics in which Hazlitt deconstructs Keynes' "General Theory" almost line by line, and points out many inconsistencies and fallacies that may not at first be obvious.

While no one disputes that Keynes was a brilliant mathematician, and we can stand in awe of his beautiful and complex formulas and constructs as they leap from the pages at us and we hold them in our minds, when those theories are actually applied to a real world populated by real human beings, we find that they don't quite fit. What Keynes lacked was a good understanding of human nature.

 
At 9/30/2010 4:26 PM, Blogger Ron H. said...

"If stimulus actually does work, a good portion of the benefit of economic growth actually goes to those already in decent shape. So at least some of the money is indirectly paid back."

Sean, what does this even mean? That it's OK to steal money from people because they may get a chance later to earn some of it back? I can't believe you really think so.

Let me second the recommended reading list that W.E. Heasley gave you. If you give those books careful consideration, as I believe you will, You may find your views changed and expanded somewhat. If you then come back here and reread your comments on this thread I think you will find them to be somewhat simplistic and naive.

In an earlier comment on this thread you said:

"The money comes from inflation: that is, the devaluation of savings. Whoever has money to save is who pays."

Think about what you're saying: Do you really believe that anyone who is able to defer consumption must have more than they deserve? Who gets to decide that? Consider that some of those "savers" might be people with modest incomes, perhaps even your own parents, who have set aside a nest egg during their productive years to provide for a comfortable retirement. Here you come, recommending inflating that savings away, and thereby creating the very poor you think deserve help. Perhaps those retirees will have some of their own money handed back to them by government as some form of welfare. It seems to me that what you see as a problem in need of correcting would be smaller without your solution.
(continued)

 
At 9/30/2010 4:27 PM, Blogger Ron H. said...

(continued)

When you finish reading the books on Heasley's reading list and find yourself thirsting for more on different viewpoints from the ones you hold now, I would recommend something by Henry Hazlitt. Perhaps Economics In One Lesson as an introduction to Hazlitt, and then, if you are really willing to test your faith, try The Failure of the New Economics in which Hazlitt deconstructs Keynes' "General Theory" almost line by line, and points out many inconsistencies and fallacies that may not at first be obvious.

While no one disputes that Keynes was a brilliant mathematician, and we can stand in awe of his beautiful and complex formulas and constructs as they leap from the pages at us and we hold them in our minds, when those theories are actually applied to a real world populated by real human beings, we find that they don't quite fit. What Keynes lacked was a good understanding of human nature.

 
At 9/30/2010 4:45 PM, Blogger Sean said...

Ron H.,

Sean, what does this even mean? That it's OK to steal money from people because they may get a chance later to earn some of it back? I can't believe you really think so.
No, if you believe it's stealing, it's wrong. But if you believe it's a warranted action, then the negative effect is less than you might think.

Thank you for the list. I'm not really willing to go out and buy all those, but I will certainly be on the look out for them in libraries. I'll probably even pony up for one or two. :)

 
At 9/30/2010 4:57 PM, Blogger Sean said...

VangeIV,

Let us keep then nonsense out of this. An investment either makes sense or it does not.
Is it beyond belief that an investment might make sense in one economic climate and not another? Is it beyond belief that it actually matters how many people show up to the party?
It won't make any bad investment good, of course.

Of course they do. If you discourage capital formation by declaring war on the productive class you will have fewer jobs being created.
Did you miss my point or ignore it? Any dampening effect on capital formation is on a percentage basis: it is dependent on the amount of it is actually occurring.

Most people I know earned what they have or inherited what they have from people who earned it.
Money can come from wealth creation, rent-seeking, various forms of arbitrage, gambling, or some combination of the bunch. You might be surprised at how important the latter are, and how little recognized they are by those participating in them.

. We either derive our rights from our humanity (or Creator for the religious among us) and create governments to protect those rights or have no rights other than those granted by the ruling class.
I don't buy it. I think that rights are simply a form of contract. You and I agree you own something, therefore it becomes so. "Natural rights" are just a recognition that, as humans, there are multiple rights that we are predisposed to establish. Government is simply one common establisher and guarantor of those rights for mutual benefit. If you don't accept that establishment, you become an outlaw, a necessary step for government to safeguard the benefits of the social contract.

 
At 9/30/2010 7:43 PM, Blogger VangelV said...

While no one disputes that Keynes was a brilliant mathematician, and we can stand in awe of his beautiful and complex formulas and constructs as they leap from the pages at us and we hold them in our minds, when those theories are actually applied to a real world populated by real human beings, we find that they don't quite fit. What Keynes lacked was a good understanding of human nature.

Hayek said that Keynes was intelligent but not a very clear thinker and clearly not a very good economist. His was a superficial approach to economics where he made something up, lost interest when it was clear that his thinking was inadequate, and moved on to something else. You may have enjoyed a drink with him but he would have been a terrible professor for anyone who was interested in learning.

 
At 9/30/2010 8:07 PM, Blogger VangelV said...

No, if you believe it's stealing, it's wrong. But if you believe it's a warranted action, then the negative effect is less than you might think.

So in your view theft is warranted action without a major negative effect. Aren't moral principles supposed to be more rigid than that?

Thank you for the list. I'm not really willing to go out and buy all those, but I will certainly be on the look out for them in libraries. I'll probably even pony up for one or two. :)

You can get some of the texts for free by going to the links below and downloading the version (PDF or e-Book) that you want.

http://tinyurl.com/282g7yt

http://tinyurl.com/2ak9oww

http://tinyurl.com/37jzryh

http://tinyurl.com/2cv9wqh

http://tinyurl.com/28rqeg4

Or you can go to the link below and choose from among hundreds of other books that you can download for free.

http://tinyurl.com/2dcv8gf

 
At 9/30/2010 8:21 PM, Blogger Sean said...

VangeIV,


So in your view theft is warranted action without a major negative effect.
You seriously got that from what I said? Of course not. I'm just leaving open the possibility that taxes in the name of redistribution of wealth are not theft, and might also be warranted.


You can get some of the texts for free by going to the links below and downloading the version (PDF or e-Book) that you want.
Thank you. I'll check them out.

 
At 9/30/2010 8:23 PM, Blogger VangelV said...

Is it beyond belief that an investment might make sense in one economic climate and not another?

No it isn't. That is why you are supposed to invest only when it makes sense to do so. If it makes no sense when you invest you are misallocating resources that are more useful for other purposes or at other times.

Is it beyond belief that it actually matters how many people show up to the party?

No. If people do not show up to support an investment it should not be made.

It won't make any bad investment good, of course.

Correct. That is why you don't want to make investments to meet political goals. It leads to bad investments because bureaucrats do not have to respond to economic incentives and even if they wished to they could not because in a hampered market they would have no market prices to guide them.

Did you miss my point or ignore it? Any dampening effect on capital formation is on a percentage basis: it is dependent on the amount of it is actually occurring.

I have no idea what you are saying. History shows us that regime uncertainty and class warfare leads to a reduction of investment and job losses, which is the opposite of what you are trying to accomplish.

Money can come from wealth creation, rent-seeking, various forms of arbitrage, gambling, or some combination of the bunch. You might be surprised at how important the latter are, and how little recognized they are by those participating in them.

I am not surprised at all. I retired at 41 because found out that I could make a great deal more money from arbitrage and mispricing opportunities than I could by working. But I am under no delusion that when I make money from such activities I am creating wealth for society. Societal wealth is only created when investors like me invest in capital goods that are used for the production of new goods and services. Such investment is made by people who have savings and those people will not make those investments when the government threatens to increase their taxes because there is less incentive to take the investment risks.

 
At 9/30/2010 8:29 PM, Blogger VangelV said...

I don't buy it. I think that rights are simply a form of contract. You and I agree you own something, therefore it becomes so.

So what you are saying is that your house is not yours unless I agree that it is?

"Natural rights" are just a recognition that, as humans, there are multiple rights that we are predisposed to establish. Government is simply one common establisher and guarantor of those rights for mutual benefit.

The idea of natural rights is not compatible with the claim that government establishes those rights. If rights come from governments then they are not natural rights.

If you don't accept that establishment, you become an outlaw, a necessary step for government to safeguard the benefits of the social contract.

That is always the line of the totalitarian. Well, I suggest that you have it wrong and bring your attention to the words that were written by your third president.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness....

It seems that your founders did not believe as you do that government gives men rights but that governments are put in place to protect those rights. The distinction is a very large one and which interpretation is accepted determines whether men are free or serfs.

 
At 9/30/2010 9:12 PM, Blogger Ron H. said...

"No, if you believe it's stealing, it's wrong. But if you believe it's a warranted action, then the negative effect is less than you might think."

Wow! Relativism in its purest form. Very useful if you wish to be on all sides of a discussion at once. The downside is that the conversation is reduced to a mere academic discussion, or perhaps even a word game, with no real meaning or conclusion.

Do you actually have any principles you would like to defend , or is everything relative?

I see that based on your response to VangelV, you believe that we only have those rights granted by the ruling class. Based on that and other responses, let me add this book to your reading list.

I'm sure that as you say, some of these books are available at your local library. I only point to Amazon because it's easy, and you can even "look inside" some of them there.

 
At 9/30/2010 10:22 PM, Blogger Sean said...

Ron H,

The downside is that the conversation is reduced to a mere academic discussion, or perhaps even a word game, with no real meaning or conclusion.
And that's exactly how debate should work, in my opinion. Lay out all the self-consistent and logical options.... and then choose.

Do you actually have any principles you would like to defend , or is everything relative?
I don't the people here very well. I find that when people are exposed to opposing positions, they start shutting off their brains. VangeIV seems like a smart guy, but as he senses I don't agree with him, he's starting to respond to what he thinks I said rather than listening. I try to delay that process: I learn more, and so do the people I converse with.
I do have convictions, but I don't think the best way to defend them is to immediately parade them around in potentially hostile territory. Better to show people I respect their understandings (and I do) first and relate my understandings to theirs. And I do like to see all sides of an issue: I don't think that contradicts with taking a side.

I see that based on your response to VangelV, you believe that we only have those rights granted by the ruling class.
Rights are part of the social contract, but the "ruling class" generally lacks sufficient power to define them. Rights are established and maintained by the consent of the people as a whole. It does so happen that humans are fairly united in their basic understanding of how we should treat one another.

 
At 9/30/2010 10:35 PM, Blogger VangelV said...

You seriously got that from what I said? Of course not. I'm just leaving open the possibility that taxes in the name of redistribution of wealth are not theft, and might also be warranted.

Calling a dog a cat will not make it catch mice. Theft is theft no matter what you call it.

Ron H:

I'm sure that as you say, some of these books are available at your local library. I only point to Amazon because it's easy, and you can even "look inside" some of them there.


My library system does not have many books that advocate Austrian Economics or individual liberty. When I offered to donate a number of books by Mises and Rothbard I was told that there was no interest by the bureaucrats who make the decisions because they wanted more popular and mainstream material. When I pointed out that the library system seemed to have room for explicit gay porn (DVD of the movie Shortbus) I was told that I had to be more tolerant of other views.

Relativism is the norm, not the exception.

 
At 9/30/2010 10:40 PM, Blogger Sean said...

VangeIV,

As far as rights go, I'm hitting problems in terminology.

When I say government establishes rights, I mean they codify the expectations of the people into something more binding. After all, you may think your house is yours, but what happens if someone shows up with guns and takes it? In some parts of Africa, maybe nothing. In America, you have recourse.

The founders believed that the rights they were codifying came from God (I have a trouble reconciling that with the fact they were largely Deists). I say they come from the expectations of the people. I do believe in God, and I find the idea of contractual morality very biblical: where else the need for a covenant?

If we disagree on the ownership of my house, it's status is: in dispute. If we disagree, but we agree on the means by which the dispute can be established (title, government support, etc), then I have the means to back my claim. But we all have a pretty common understanding of what ownership is and the means for its legitimacy. So if you said, "No, that house is mine" you would be wrong. But only because the societal contract is clear and strongly established.

 
At 10/01/2010 7:32 AM, Blogger VangelV said...

When I say government establishes rights, I mean they codify the expectations of the people into something more binding. After all, you may think your house is yours, but what happens if someone shows up with guns and takes it? In some parts of Africa, maybe nothing. In America, you have recourse.

I was very clear when I quoted Jefferson. We have natural rights which include the right to life, liberty, and property. Governments are put into place to protect those rights.

This presents a problem for your side of the argument. If your neighbour Tom has no right to come and take your house away or demand 45% of your income he does not obtain that right by getting a few more people to agree that you should give up your house or 45% of your income.

The founders believed that the rights they were codifying came from God (I have a trouble reconciling that with the fact they were largely Deists). I say they come from the expectations of the people. I do believe in God, and I find the idea of contractual morality very biblical: where else the need for a covenant?

There is no problem because Deists believe in God, just not the Christian version of it. Aquinas also had no problem arguing that even if God did not exist men would still have natural rights by virtue of their humanity. The only legitimate role of government is to protect the rights that men already have, not to violate them by granting other rights.

If we disagree on the ownership of my house, it's status is: in dispute. If we disagree, but we agree on the means by which the dispute can be established (title, government support, etc), then I have the means to back my claim. But we all have a pretty common understanding of what ownership is and the means for its legitimacy. So if you said, "No, that house is mine" you would be wrong. But only because the societal contract is clear and strongly established.

You just made a great case that we do not even need government because private law can do the job just as well. David Friedman would be proud. Add that to your list of free downloads because it is essential reading for those that have trouble understanding the issue clearly.

http://www.daviddfriedman.com/The_Machinery_of_Freedom_.pdf

 
At 10/01/2010 8:34 AM, Blogger Sean said...

VangeIV,

If your neighbor Tom has no right to come and take your house away or demand 45% of your income he does not obtain that right by getting a few more people to agree that you should give up your house or 45% of your income.
Ah, but that's a prescriptive statement. In a purely descriptive sense, if a mob arises to take your house, you're not getting it back. Any reasonable model must comprehend what actually happens in the world.


The only legitimate role of government is to protect the rights that men already have, not to violate them by granting other rights.
That's a common philosophy, but I can find no compelling logical basis for it. People develop principles out of pragmatism and then are foolish enough to believe the principles are laws of nature.


Aquinas also had no problem arguing that even if God did not exist men would still have natural rights by virtue of their humanity.
Aquinas was brilliant, but like a lot of the scholars of his time, wasn't able to list and check all of his assumptions. What does it mean to be human? We have a lot more tools to answer that question now.

You just made a great case that we do not even need government because private law can do the job just as well
Sure, if enough people buy into it to make it stick.

 
At 10/01/2010 9:43 AM, Blogger VangelV said...

Ah, but that's a prescriptive statement. In a purely descriptive sense, if a mob arises to take your house, you're not getting it back. Any reasonable model must comprehend what actually happens in the world.

In a society that respects property rights a mob cannot come to your house to take it away and keep it from you. The individuals who make up that mob would wind up in jail and would compensate you for any damage done to you.

What you are saying is that because there are states that do not respect property rights we should accept the fact that our own governments do not. As such we should be content that the government allows us to live as serfs rather than do further harm to us. Well, people who value freedom disagree.

Here is a simple thing that you can do. Go to http://www.theadvocates.org/quiz and take a minute or two to answer the ten questions. Submit your answers and see where you stand. Because or your arguments it is my guess that if answer the questions honestly you will likely fall in either the Statist or the Left (Liberal) quadrant. To understand where I come from it may help you that I scored 100% for both social and economic liberty. That makes me the most extreme of Libertarians and would put me in the company of David Freedman, Lew Rockwell, Rothbard, Mises, Hayek and you with Krugman and Keynes.

That's a common philosophy, but I can find no compelling logical basis for it. People develop principles out of pragmatism and then are foolish enough to believe the principles are laws of nature.

The basis is natural rights. And let us be clear that 'pragmatism' should never be able to trample over principles unless those principles are rejected as flawed.

Aquinas was brilliant, but like a lot of the scholars of his time, wasn't able to list and check all of his assumptions. What does it mean to be human? We have a lot more tools to answer that question now.

Aquinas is not being opposed by scientists but by muddled thinkers like Krugman and the socialists on the left and the national socialists on the right. Neither side has been able to refute Aquinas.

Sure, if enough people buy into it to make it stick.

Your authoritarian supporting relativism is showing. Principles do not depend on how many people believe in them but on the soundness of their foundations.

 
At 10/01/2010 10:51 AM, Blogger Ron H. said...

"As far as rights go, I'm hitting problems in terminology."

You certainly are! Like here:

"The founders believed that the rights they were codifying came from God (I have a trouble reconciling that with the fact they were largely Deists)."

Do you know what a 'Deist' is?

Also you might consider another word in place of 'codify'. The Founders didn't establish any individual rights, nor does the Constitution. It 'acknowledges and confirms' rights, and forbids government to interfere with them.

Words are important.

 
At 10/01/2010 11:20 AM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 10/01/2010 11:29 AM, Blogger Ron H. said...

VangelV, too bad about your library system. It doesn't sound very useful.

By the way thanks for the links to online reading. I had forgotten about the Mises catalog.

 
At 10/01/2010 11:45 AM, Blogger Sean said...

VangeIV,


My results:
Your PERSONAL issues Score is 80%
Your ECONOMIC issues Score is 50%
According to your answers, the political group that agrees with you most is... CENTRIST

What you are saying is that because there are states that do not respect property rights we should accept the fact that our own governments do not.
I said nothing of the kind, and I don't understand how you could think otherwise. Because there are states that do not respect property rights, and because the understanding of which specific rights exits vary from country to country (although with some commonality), it makes sense that the full definition of rights is less natural and self-evident than the founders claimed. Further establishment and defense is required. Government is the common agent to fill that role.

The common understanding of property rights and personal freedoms in this country is very effective, and we should cherish those rights and freedoms. We should not confuse them for natural law.

Principles do not depend on how many people believe in them but on the soundness of their foundations.
I'm not arguing that. However, "principles" fall into two categories: descriptions of basic natural relationships, and heuristics. Morality is the latter: the best known means to the end of humans happily sharing the same world without killing each other. Religion only adds another party to the relationship: God. My understanding of rights, which I solidified after reading Ayn Rand, is that they are an agreed restriction on human behavior to meet the ends of a moral existence.
This understanding is clean, it's logical, it works, and it doesn't rely on a mystical stamp of approval. In these respects, it is unlike the concept of natural rights you describe.

 
At 10/01/2010 11:48 AM, Blogger Sean said...

Ron H.,

What I've been told a Deist is is one who sees God in nature: in the elegant design of a principles-based universe. I suppose natural rights are at least philosophically compatible with that.

Words are important.
Yes, and I apologize for my imperfection in their use.

 
At 10/01/2010 2:57 PM, Blogger VangelV said...

I said nothing of the kind, and I don't understand how you could think otherwise.

Try reading what you wrote before you post it and you will understand why others could think what they do.

Because there are states that do not respect property rights, and because the understanding of which specific rights exits vary from country to country (although with some commonality), it makes sense that the full definition of rights is less natural and self-evident than the founders claimed.

Here is a perfect example of your muddled thinking. Rights are either natural by way of our humanity or granted by a ruling elite. Period. End of story. You have to pick what you believe and support it.

Further establishment and defense is required. Government is the common agent to fill that role.

But a central government does not provide security any better than the private sector any more than it handles postal delivery or education. Friedman explains--in the book that I referenced--private security services can do a far better job than government. He brings up a perfect example with the Woolridge qoute, "A man who wants protection will fire patrolmen who waste their time harassing minorities. . . . No private policeman has ever spent many hours at a restroom peephole in hopes of apprehending deviates."

The common understanding of property rights and personal freedoms in this country is very effective, and we should cherish those rights and freedoms. We should not confuse them for natural law.

That is the problem; there is no 'common understanding' in your country at all. You have the majority in the supreme court ruling that it is all right for a town to take your house away and give it to a private developer who will put the land to private use even if you do not wish to sell. You have the 'understanding' that the police can enter your home any time without due cause or due process and shoot your dog or your pregnant wife if they feel threatened when they break in in the middle of the night.

You may argue many things but cannot seriously claim that there is a common understanding about property rights. (Just ask the tea party people who have had enough with the political elite.)

My understanding of rights, which I solidified after reading Ayn Rand, is that they are an agreed restriction on human behavior to meet the ends of a moral existence.

I suggest that you read Rand again. She made it clear that she believed that all rights came from the one fundamental right, a man’s right to his own life. She also made it clear that your rights impose no obligations on others except to abstain from violating them. This view does not consider the government's use of its monopoly on force to regulate voluntary social and economic transactions as legitimate.

For a person who has claimed to have read Rand you don't seem to have learned much about what she stood for. If you read her again you will find he making the point that without property rights all other rights are useless, including the right to life.

This understanding is clean, it's logical, it works, and it doesn't rely on a mystical stamp of approval. In these respects, it is unlike the concept of natural rights you describe.

I suggest that you read Rand because she does not make any argument that disagrees with Aquinas' or the Founders' views of natural rights.

 
At 10/01/2010 3:23 PM, Blogger VangelV said...

VangelV, too bad about your library system. It doesn't sound very usefull.

It is sad. There is only one book by Mises and none by Rothbard. If you look for Hayek you will find only three titles for F.A. Hayek but twelve for Selma Hayek.

by the way thanks to the links to online reading. I had forgotten about the Mises catalog.

Let me make a recommendation if you don't mind. If you have an i-tunes account search for Paul Cantor and go to the iTunesU page when the answers pop up. Click on Commerce and Culture and download the podcasts. Begin with the Economic Basis of Culture and go on from there in order. If you are at all curious you will find the lectures fascinating and entertaining. I have friends in the Film and Entertainment industry that were shocked at how much more they learned in the lectures than they did in all of their courses and just how much sense Cantor makes.

If you don't use iTunes go to the Media page at the Mises site and look at the Cantor contributions.

By the way, I could not recommend the Cantor essay, Hyperinflation and Hyperreality: Thomas Mann in Light of Austrian Economics, highly enough. Cantor is also a writer of a number of books that I found very interesting. I am particularly interested in his Straussian interpretations of Shakespeare's plays. He has the best critique of Hamlet that I have ever read.

 
At 10/01/2010 3:43 PM, Blogger Sean said...

VangeIV,

Try reading what you wrote before you post it and you will understand why others could think what they do.
I understand my style can be confusing to others. I'm not quite sure why that is: a difference in perspective? But I read what I wrote again, and at worst it's incomplete. Ironically, my reading comprehension and interpretation has always tested in the exceptional range.


Here is a perfect example of your muddled thinking. Rights are either natural by way of our humanity or granted by a ruling elite. Period. End of story. You have to pick what you believe and support it.
And you call my thinking muddled! I need do nothing of the kind. I know why those stances are flawed. I don't see a flaw in my own.


But a central government does not provide security any better than the private sector...
This is a wild tangent. I just said government commonly fulfills the function, and that's true. I didn't say the government was the only way to fill the function. Sheesh.


You may argue many things but cannot seriously claim that there is a common understanding about property rights.
I think these exceptions are on the margin, but even if they are not, they solidify my point against the position of rights being natural law. If they were, wouldn't their understanding be... self-evident?


If you read her again you will find he making the point that without property rights all other rights are useless, including the right to life.
I understand that very well. But Rand's derivation is incomplete, and her beliefs rest upon flawed understandings of human nature. She helped clarify my thinking: that doesn't mean I agree with her.

I suggest that you read Rand because she does not make any argument that disagrees with Aquinas' or the Founders' views of natural rights.
No, she doesn't. In fact, she doesn't argue for them very well at all.
Rand did make the important point that if you try to define more "rights", then someone has to pony up for them. She used that as an argument against their existence, but did not understand that the same applied to property rights. Apparently you don't either.

 
At 10/01/2010 4:18 PM, Blogger VangelV said...

I understand my style can be confusing to others. I'm not quite sure why that is: a difference in perspective? But I read what I wrote again, and at worst it's incomplete. Ironically, my reading comprehension and interpretation has always tested in the exceptional range.

It isn't your 'style.' It is your relativism and inability to see that you sometimes argue for incompatible positions.

And you call my thinking muddled! I need do nothing of the kind. I know why those stances are flawed. I don't see a flaw in my own.

Yes, your thinking is muddled. If rights come from governments than you don't have any naturally and you are little more than a slave at the mercy of a ruling elite. If we have natural rights and institute governments to protect those rights than governments do not have the authority to take them away from you. It is that simple.

This is a wild tangent. I just said government commonly fulfills the function, and that's true. I didn't say the government was the only way to fill the function. Sheesh.

But it doesn't fulfill that function. Governments have killed hundreds of millions of people in wars and police actions over the past century and continue to kill people today.

I think these exceptions are on the margin, but even if they are not, they solidify my point against the position of rights being natural law. If they were, wouldn't their understanding be... self-evident?

They are self evident. But the ruling class benefits from arguing otherwise because it needs confusion to rob and enslave citizens as it does now.

I understand that very well. But Rand's derivation is incomplete, and her beliefs rest upon flawed understandings of human nature. She helped clarify my thinking: that doesn't mean I agree with her.

There you go again. First you suggest that your understanding of rights came after reading Ayn Rand and came up with a conclusion that was the opposite of the one that she held. Now you say that you do not agree with her. That creates a vacuum in the support for your claims again. How convenient given that you have been unable to offer any.

Rand did make the important point that if you try to define more "rights", then someone has to pony up for them. She used that as an argument against their existence, but did not understand that the same applied to property rights. Apparently you don't either.

This shows your utter ignorance of the subject. Rand argued against the notion of 'positive rights.' She pointed out that your right to life means the right to take part in actions necessary to extend and enjoy your own life. You cannot be coerced, compelled, or restrained by anyone unless you initiate force on others or their property or commit fraud. She did not believe in the 'positive' rights of the progressive movement because if you have the right to health care (to pick one item) then others can be forced to provide it to you.

Try reading about positive versus negative rights.

 
At 10/01/2010 5:38 PM, Blogger Sean said...

VangeIV,

It isn't your 'style.' It is your relativism and inability to see that you sometimes argue for incompatible positions.
You can call me a relativist if you like, except that I do recognize that moral system A can be measurably better than moral system B, a notion not common to relativists.


If rights come from governments than you don't have any naturally and you are little more than a slave at the mercy of a ruling elite. If we have natural rights and institute governments to protect those rights than governments do not have the authority to take them away from you. It is that simple.
My position is closer to saying you don't have any naturally. My disagreement is that "ruling elites" have as much power as you say they do. Government occurs only by the consent of the governed.

How convenient given that you have been unable to offer any.
If you didn't see any argument, you've been sleeping at the switch. If you've simply rejected them, that's another matter. You certainly haven't effectively countered them.

I agree that bringing up someone that I disagree with for the purpose of using one argument out of context, that I didn't even state up front, was worse than confusing. I apologize.

Try reading about positive versus negative rights.
I understand the concept. Property ownership may not be a "positive right", but it still can require a costly restriction on the behavior of others. The notion that it doesn't only holds true if all property is created by its owner or bequeathed to its owner by its creator. Or if there are guaranteed to be enough free resources for any human to be self-sufficient. In the absence of those conditions, a person can at least theoretically be in the position of being forced to starve because of their acquiescence to the concept of property rights. That's the extreme case only, of course. Ayn Rand recognized this case ("Can you spell cat?"), and deemed it an unimportant rarity. I however, think it illustrates that property ownership is not a moral absolute.

 
At 10/01/2010 7:08 PM, Blogger VangelV said...

You can call me a relativist if you like, except that I do recognize that moral system A can be measurably better than moral system B, a notion not common to relativists.

Your arguments show that you are a relativist. That is what some of us have been telling you all along but you keep refusing to see the light.

My position is closer to saying you don't have any naturally. My disagreement is that "ruling elites" have as much power as you say they do. Government occurs only by the consent of the governed.

That is not true. What you have is a ruling elite that makes up two parties, the Stupid Party on the left and the Evil Party on the right. They trade power but not much changes as government grows huge and accrued liabilities and debt keep exploding.

If you didn't see any argument, you've been sleeping at the switch. If you've simply rejected them, that's another matter. You certainly haven't effectively countered them.

You have shown that you have no idea what you are talking about and that you have misinterpreted what you believe others have taught you.

I understand the concept. Property ownership may not be a "positive right", but it still can require a costly restriction on the behavior of others.

Your confusion is showing. The fact that you own a house does not impose a costly restriction on others, who have the opportunity to purchase their own homes if they wish or to buy yours from you.

The notion that it doesn't only holds true if all property is created by its owner or bequeathed to its owner by its creator. Or if there are guaranteed to be enough free resources for any human to be self-sufficient.

Self-sufficient? We are as wealthy as we are today because we all specialize and are not self sufficient. People who grow their own food, make their own clothes, or make their own shelter may be self-sufficient but they are very poor.

In the absence of those conditions, a person can at least theoretically be in the position of being forced to starve because of their acquiescence to the concept of property rights.

You ever hear of getting a job? Or asking for charity?

That's the extreme case only, of course. Ayn Rand recognized this case ("Can you spell cat?"), and deemed it an unimportant rarity. I however, think it illustrates that property ownership is not a moral absolute.

But it is because without the right to property you have no right to life. How do you pursue a living if someone else can claim the efforts of your labours? And unlike your extremely rare scenario, mine isn't. Most of the countries that rejected the idea of property rights have wound up with a population where starvation, malnutrition, and violence are quite common. In fact, as Rand pointed out, millions have died because of it. So why exactly do you support such systems again?

 
At 10/01/2010 9:18 PM, Blogger Sean said...

VangeIV,

That is not true. What you have is a ruling elite that makes up two parties, the Stupid Party on the left and the Evil Party on the right.
Not arguing that point. :) But just as Adam Smith postulated the the wage of the poor will be what they can afford to live on, I think it makes sense the rights the people refuse to live without they will get.

You have shown that you have no idea what you are talking about
Tsk, tsk. Impolite and wrong. I have some reading to do, but I am hardly stupid. some things I know: your unwillingness to accept them does not make them wrong.

Self-sufficient?...
Wild tangent not contradicting my point...

You ever hear of getting a job? Or asking for charity?
In the common case, this works. But that case is not guaranteed.

But it is because without the right to property you have no right to life.
Oh, BS. Have you ever heard of a vow of poverty. Next.


So why exactly do you support such systems again?
I don't. I support property rights vehemently. But they are not absolute. How can you ridicule my thinking when you everything for you is so black and white? I can introduce no subtlety or nuance without your flying off the handle.

 
At 10/01/2010 10:23 PM, Blogger VangelV said...

But just as Adam Smith postulated the the wage of the poor will be what they can afford to live on, I think it makes sense the rights the people refuse to live without they will get.

First, many of America's 'poor' live better than the middle classes of other nations. They certainly work a lot less for what they get. Second, if you are arguing that people will try to get as much as they can from others I will not disagree. My point isn't that politicians will not buy votes by using the earnings of the productive class but that they have no moral right to do so and (as the man said) that doing so will only work until the government runs out of other people's money. You are at that point already and the nation and the currency are on the edge ready to slide into the abyss.

Tsk, tsk. Impolite and wrong. I have some reading to do, but I am hardly stupid. some things I know: your unwillingness to accept them does not make them wrong.

I have never said that you are stupid. Actually, if you were stupid you would know it and your bad ideas would not be as dangerous because you would be less confident of them.

My point is that you need to read. It makes sense to figure out the difference between negative and positive rights and to understand some of the contradictions that you have written.

Wild tangent not contradicting my point...

It is not a tangent. As I wrote above your desire for self sufficiency is foolish because our increased standard of living came from specialization. People are better off doing what they are best at and trading that with others who are also doing what they are best at.

In the common case, this works. But that case is not guaranteed.

In a free society you need a job to eat. If you don't have a job then you need to ask for charity. There are lots of jobs around for those that want to do them. If one has marketable skill sets and is willing to work hard then there is no problem making a living unless one is a degenerate gambler, an addict, or lives well beyond one's means.

Oh, BS. Have you ever heard of a vow of poverty. Next.

You need the right to property in order to make a living. As I said, when people can come off the street and take what you have there is no incentive to accumulate any capital. When you were reading Rand you should have paid attention because she said it often enough.

I don't. I support property rights vehemently. But they are not absolute.

Then you don't support property rights. When someone can come in and take what you have you have no property rights. As I said, your thinking is muddled and you make far too many contradictory claims because you are too confused to make sense.

 
At 10/01/2010 11:12 PM, Blogger Ron H. said...

"It is sad. There is only one book by Mises and none by Rothbard. If you look for Hayek you will find only three titles for F.A. Hayek but twelve for Selma Hayek."

Hmm. You may be better off than I am. Mine has 0 Mises,
0 Rothbard, 1 F. A. Hayek and 8 Salma Hayek.

Maybe that's not so bad. At least Salma is pleasant to look at, while Friedrich is not.

Thanks for the reading suggestions, I will try out some Cantor.

It occurs to me that 4 or 5 years ago I had never heard of either Mises or Rothbard, and I would have struggled to identify FA Hayek, but knew quite a bit about Salma. I didn't own a copy of the US Declaration of Independence or Constitution, and had never written to any of my federal or state representatives or senators. In fact, I couldn't have named them.

I have this strange idea: it's just possible that in the year 2110, when school children open their history books to study 21st century US history, They will find that after 100 years of dozing while their country was dragged slowly toward a great abyss by statists and collectivists of evil intent, the American people were shaken awake by a great hero named Barack Hussein Obama. This man tilted the slippery slope so sharply that the people were jolted awake screaming. They then rose up in great anger, and took back their country. They threw out all the Progressives they had elected, shrank the Federal Government to the size of a pea, reinstated the Constitution as the law of the land.and nullified all unconstitutional laws.

A few years later, the works of J. M. Keynes were re-cataloged and relocated to the fiction shelves.

 
At 10/02/2010 11:37 PM, Blogger VangelV said...

It occurs to me that 4 or 5 years ago I had never heard of either Mises or Rothbard, and I would have struggled to identify FA Hayek, but knew quite a bit about Salma. I didn't own a copy of the US Declaration of Independence or Constitution, and had never written to any of my federal or state representatives or senators. In fact, I couldn't have named them.

I really discovered Mises and Rothbard while I was working in China. At one banquet I participated in one of the weirdest debates of my life. The argument was about health care. My coworkers took one side and two of the Chinese were on the other. The Chinese were arguing for a free market system while my coworkers were pushing the Canadian and British system. The Belgian rep for Airbus was rolling in the isle with laughter at the absurdity of what he was observing.

The two Chinese were economists who were huge fans of Mises' work and even bigger fans of Rothbard. One of them asked me to pick up a copy of an English translation of Mises', The Theory of Money and Credit for him because he had lent his out and it never got back. He had an original German first edition plus Chinese translations of almost everything else that Mises had written.

While I knew of the Austrian school from my readings, I was never exposed to it in my formal education. Once I began to read Hayek, Mises, and Rothbard I rejected all the crap that I was taught by the Keynesians and monetarists in my formal education.

I have kept in touch with the Chinese economists since I left the country. One died in a plane crash in Africa. The other is doing business all around the globe, mostly in agricultural commodities, energy, and metals. He is still waiting for the day that his government discloses to the world that it has offset all of its treasury holding with USD denominated debt held by its commodity producing and real estate companies. After that happens the dollar will be toast and its days as the primary reserve currency will be over.

 

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