Krugman, Keynes, and the Uncited Austrians

Business Cycles
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Apparently, Paul Krugman has never read the work of Ludwig von Mises and F.A. Hayek. Chortling on The New York Times blog, he yammers away in this manner:

Many of the comments to my Austrian economics post are of the form “Well, of course employment rises when investment is expanding, and falls when the investment is falling — in the first case the economy is booming while in the second it’s slumping.”

As I tried to explain, however, that’s assuming the conclusion; there’s no “of course” about it. Why do periods when the economy is investing more correspond to booms, while periods when it’s investing less correspond to slumps? That’s easy to understand in Keynesian terms — but the whole Austrian claim is that they’re an alternative to Keynesianism. Yet I have never seen a clear explanation of this central point.

There are books that deal with this by Hayek, Mises and others. Why doesn’t Krugman reference them, rather than drone on about the quality (or lack thereof) of his blog commenters?

I could, at this point, dredge up those Hayekian and Misesian pearls. But, for the moment, I feel challenged by Krugman’s apparent requirement that bloggers spin this stuff anew, so I’ll give my shot at an answer to his challenge, without referencing any of the Austrian classics. They are there for all to read. But it’s always a good experiment to see how one thinks through this on one’s feet.

Problem is, Krugman’s challenge seems fairly obvious. I need a handicap. So I’ve downed three shots of anisette, and am on my fourth. Can I answer Krugman drunk?

I think so.

Reading his post, I see that the question should be reformulated: Why is it when investment picks up, so does employment? …

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Age Must Be Catching Up With Paul Volcker

(Austrian) Economics, Democracy, Humor, Vulgar Politics
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There’s no shame in Paul Volcker’s being confused. It’s common for men his age (82) to slip into an afternoon slumber and wake up discombobulated — it can take a little while to reorient. And that’s when the memory is working well; but, let’s face it, an elderly man’s memory isn’t always fully functional. So that’s why I think it’s only fair to cut the Chairman of the President’s Economic Recovery Advisory Board some slack for his comments yesterday when he announced that taxes were likely to rise in order to “tame” the deficit:

The United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax, White House adviser Paul Volcker said on Tuesday. Volcker, answering a question from the audience at a New York Historical Society event, said the value-added tax “was not as toxic an idea” as it has been in the past and also said a carbon or other energy-related tax may become necessary.

Though he acknowledged that both were still unpopular ideas, he said getting entitlement costs and the U.S. budget deficit under control may require such moves. “If at the end of the day we need to raise taxes, we should raise taxes,” he said.

See, he has to be confused because my memory still works really, really well, and I remember this from the campaign:

Old “joke”: Know how you can tell if a politician is lying?

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Night Always Follows Day

(Austrian) Economics, Statism
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Logical Fallacy or Inevitability?

There’s an inevitability to the march of totalitarian economic control which Austrian School Economists have warned about repeatedly. There’s a tipping point which exists when a state interferes in an economy beyond which a state will invariably enact the same destructive policies which have collapsed the economies of other states which engaged in similar folly. This folly consists of practices such as debasing the currency, running up massive deficits and debt, and excessively regulating economic activity. (Note, of course, that for us anarchists all state regulation of economic activity is excessive; but, for my purposes here, we can limit the purview to the stifling, bureaucratic interferences like housing acts, forced lending to “sub-prime” borrowers, GSEs, mandates by the FDA and FTC and other three-letter economy-killers, etc.) What happens is simply this:

  1. Some economic “injustice” or “inequity” or “imbalance” (it almost always starts with those keywords, so be on the lookout) exists and is too upsetting to be tolerated.
  2. The state is used to enforce justice/equity/balance.
  3. These attempts to overthrow the laws of economics succeed only in creating new problems (“unintended consequences”) which then require further state action to attempt to alleviate.
  4. A slippery slope comes into play at this point, with each new state interference into the market creating new problems until everything the Austrian School economists warned of comes to pass.

So it should come as no surprise to anyone who’s been paying attention that the state is now making it very difficult (and painful) for people to escape the country with their assets (link goes to Zero Hedge) :

…

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