Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: May 2016

Tuesday, May 31, 2016

Stefan Molyneux’s Libertarian Myths on the Great Depression

These myths can be seen in the video below of Stefan Molyneux’s interview of Lawrence W. Reed on the Great Depression.

A quick point that struck me: both seem oblivious to the fact that Keynesian economists do not advocate tax increases in a recession or depression. This doesn’t inspire much confidence in the quality of the analysis.

In what follows, I am using a Post Keynesian economic analysis to critique the economic theory underlying the discussion in this video, which seems to be some version of Austrian economics.

But let’s break down the libertarian propaganda and nonsense:

(1) yes, it is true that the Federal Reverse helped to blow the US asset bubble in the stock market in the 1920s by loose monetary policy, and to that extent helped cause the crisis.

But this was all in the context of a poorly regulated financial sector, and the truth is that asset bubbles are also endemic to laissez faire capitalism even in the absence of central banks. To see this, just look at the asset bubbles in America in the 19th century when (for most of the century) no US central bank existed. For example, devastating manufacturing recessions happened in the 19th century after US asset bubbles and financial crises, as in the 1870s and 1890s (e.g., see here).

Or take a look at Australia in the 1880s and 1890s, where a very poorly regulated financial sector and foreign capital inflow caused a massive asset bubble and financial crisis, which then induced a severe depression in the 1890s (here and here). Australia had no central bank at this time, was on a gold standard, and had virtually no banking regulation.

The more laissez faire capitalism is, the more prone to destabilising debt-financed asset bubbles and economic crises it is. The solution is not abolishing central banks (which are absolutely necessary for stabilising the fractional reserve banking system), but vigorous financial regulation to choke off the flow of credit to asset speculators on the secondary financial asset and secondary real asset markets.

Central banks and effective financial regulation largely cured capitalism of destabilising asset bubbles in the golden age of Keynesianism from the 1940s to the 1970s, and provided a degree of banking stability that can be seen here.

(2) Molyneux and Reed push the discredited Wicksellian loanable funds model of investment, which has long been used by Austrians in a crude form (for loanable funds see here). You cannot accurately model the level of aggregate investment in a capitalist society by the loanable funds model, which is hopelessly flawed by the empirical irrelevance of the natural rate of interest and complicating role of uncertainty and business expectations. The neoclassical version of the natural rate requires the Efficient Markets Hypothesis (EHM), which is a theory that belongs in Cloud Cuckoo Land (here).

The role of interest rates in determining investment is overrated at the best of times, and in times of crisis grossly overrated to the point of absurdity (see the devastating empirical evidence here).

Underlying this libertarian theology is the belief that fractional reserve banking and credit money are somehow alien to and fraudulent violations of laissez faire capitalism, which is total nonsense.

(3) Molyneux pushes some vulgar version of Austrian Business Cycle Theory (ABCT), but that theory can easily be totally debunked (see here, here, here, here, here).

(4) at 7.00, we get the typical libertarian nonsense about the US recession of 1920–1921, which is completely debunked here.

(5) Reed, quite laughably, admits that the liquidationist solution of Austrian economics (letting the money supply collapse) to the Great Depression was a bad idea, and proceeds to blame the Federal Reserve from 1929 to 1933 for letting the money supply collapse: so here the Fed is blamed for not engaging in evil intervention!

(6) Molyneux’s ranting (from 13.20 onwards) about central banks giving “free money” is rubbish. The banks created massive private debt (with an endogenous money accommodating their demand for reserves), not free money.

(7) Reed plunges into all sorts of libertarian myths about Herbert Hoover. The Smoot Hawley tariff was not a major cause of America’s Great Depression. Certainly, it hurt other countries, but one cannot invoke this as a fundamental cause of America’s depression.

Fundamentally, the fall in export demand caused by the Smoot Hawley tariff was offset by a rise in domestic demand, so that, as Temin argues, the net contractionary effect on the US domestic economy was probably small (Temin 1989: 46).

While Hoover did intervene in the economy in certain ways, this intervention was not the cause of the Great Depression either.

It is indeed true that Hoover was not, strictly speaking, a liquidationist, and attempted to fight the onset of the Great Depression with a number of limited interventions, but these were all ridiculously feeble and too small given the scale of the GDP collapse.

Some of Hoover’s actions was positively harmful, and clearly not in line with Keynesian economics:

(1) In fiscal year 1930, Hoover actually ran a federal budget surplus, not a deficit. Federal policy was contractionary in this fiscal year.

(2) The Federal Reserve raised the discount rate in 1931.

(3) In fiscal year 1933, total federal spending was cut in relation to fiscal year 1932. Hoover introduced the Revenue Act of 1932 (June 6) which increased taxes across the board and applied to fiscal year 1932 and subsequent years. These were contractionary measures, and these two policies are the very antithesis of Keynesian stimulus.

Regarding Hoover’s idea of maintaining high wages, he was not simply forcing this policy on huge numbers of unwilling corporate leaders: first, it was mostly a voluntary policy and, secondly, the idea had permeated the corporatist thinking of many business people in the 1920s.

Many influential industrialists actually supported it; Hoover was basically articulating an influential opinion they already held, and whatever harm it did as prices fell, one must blame the private sector just as much as Hoover (see here).

On Hoover, see here, here, here, here, here, here, here.

(8) That claim that the Depression was “prolonged” under Roosevelt from 1933 to 1937 (before Roosevelt’s turn to austerity) is nonsense. Under Roosevelt real GDP growth rates recovered to a very great extent.

Here is real GNP in billions of chained 2005 Dollars from U.S. Department of Commerce data:

Year | GNP* | Growth Rate
1929 | $984.60
1930 | $900.00 | -8.59%
1931 | $840.70 | -6.58%
1932 | $730.50 | -13.10%
1933 | $720.30 | -1.39%
1934 | $797.70 | 10.74%
1935 | $868.90 | 8.92%
1936 | $981.10 | 12.91%
1937 | $1032.50 | 5.23%
1938 | $997.40 | -3.39%
1939 | $1077.80 | 8.06%
1940 | $1170.80 | 8.62%
* Billions of chained 2005 Dollars

http://wikiposit.org/a?uid=FRED.GNPCA

In reality, the average annual real GDP growth rate from 1934 to 1940 was 6.511%, the second highest average growth rate ever seen amongst all coherent and historically relevant periods in modern American history here.

We can see the very significant fall in unemployment under Roosevelt here. When Roosevelt turned to budget balancing and austerity in 1937–1938, the US plunged back into recession and sharply rising unemployment. This blatantly contradicts Austrian and libertarian myths about the benefits of austerity.

(9) It is true that there were destructive aspects to the New Deal, such as the National Industrial Recovery Act (NIRA), which even John Maynard Keynes condemned (see here). But it is important to remember the thinking behind some of these New Deal Programs: America’s price system had become grossly distorted by the disparity between relatively inflexible cost-based mark-up prices and the collapse of flexprices (often in primary industries). See this post here. As Keynes argued, the National Industrial Recovery Act (NIRA) should never have been done, and agricultural prices increased by stimulus of aggregate demand (perhaps even with temporary subsidies to farmers as well).

(10) The Wagner Act (or National Labor Relations Act of 1935) was not a fundamental cause of the US recession of 1937 to 1938, which was caused by Roosevelt’s budget balancing, austerity, monetary tightening and Roosevelt’s tax hikes of 1936 to 1937, namely, the undistributed profits tax (March 1936), and Social Security payroll tax (1937).

(11) Unsurprisingly, Molyneux and Reed never bother to look outside the United States at depression history. Those nations that recovered from the Great Depression or its aftermath rapidly and successfully – New Zealand, Japan and Germany – used large-scale Keynesian fiscal stimulus:

“Keynesian Stimulus in New Zealand: 1936–1938,” September 23, 2011.

“Takahashi Korekiyo and Fiscal Stimulus in Japan in the 1930s,” August 27, 2011.

“Fiscal Stimulus in Germany 1933–1936,” September 3, 2011.

But of course this doesn’t fit the libertarian narrative.

Nor is the disastrous failure of austerity in 1930s Austria or Weimar Germany mentioned:

“Liquidationism and early 1930s Germany: Not a Good Mix!, August 15, 2014.

“Keynesianism could probably have prevented World War II,” January 15, 2016.

“Mises and the Great Depression in Austria,” May 12, 2014.

(12) The recovery in the US economy by 1940 was very real, despite the implied nonsense in his video that no recovery occurred, even if it was not complete.

Furthermore, there was a sense in which the Second World War did aid and complete the recovery as described here, but the war was hardly necessary for this.

(13) regarding the post-WWII boom in America, a number of Keynesian economists did not predict long-term unemployment or stagnation after the post-war correction, contrary to Reed (see here and here), and even Paul Samuelson’s views on the post-WWII economy have been reduced to a caricature by libertarians (see here).

Moreover, government interventions did prevent US mass unemployment by means of the G.I. Bill of 1944.

BIBLIOGRAPHY
Temin, P. 1989. Lessons from the Great Depression, MIT Press, Cambridge, Mass.

Monday, May 30, 2016

Will Trump make a play for Bernie Voters?

Serious question in light of this:

Note well: the question is not whether Trump will actually do anything after he is elected to raise minimum wages (excuse me while I laugh… because I would be genuinely astonished if he did), but whether, once he’s the official Republican party candidate, he will be smart enough to make a play for all those angry Bernie Bros who hate Hillary, the Democratic establishment and neoliberalism by presenting himself as pro-working class and as anti-neoliberal – at the same time without making his Republican base angry.

He recently said he wants to turn the Republican party into a “workers’ party” (see here and here). Is this part of a long-term strategy?

Did he chicken out of the proposed Trump versus Bernie Sanders debate as part of this strategy?

So can he do it? Well, to do so will require that all those Bernie people need to, say, hear more of the “old” Donald Trump who was actually in favour of some kind of single payer health care system (yes, as he really was in the past).

Even as recently as last year, he was making noises about something that sounds suspiciously like much more government involvement in health care provision:

Would Tony Benn have backed Brexit? You Bet!

Sunday, May 29, 2016

Pat Buchanan on Trump again

In the video below and in his analysis here.

Pat Buchanan, whatever the faults of his Paleoconservatism and no doubt you can find plenty of them, “gets it” in a way that most left-wing people do not. Buchanan understands perfectly well the catastrophe of globalisation and neoliberalism. But he also understands, more or less, the disaster of extreme cultural Postmodernist leftism and its bastard offshoots.

I hate to break it to people on the left, and it may be a terrible truth to face, but he’s essentially right on certain core issues here.

What does America’s mainstream left have to offer white middle class and white working class people? Answer: toxic neoliberalism, mass unemployment, stagnant real wages, extreme political correctness, poisonous identity politics, and hysterical regressive left insanity that demonises white people – especially white heterosexual men – as the most evil people in history.

Are you really surprised that many of them are voting for Trump? And, umm, take a look at Trump’s rhetoric here and here. He wants to turn the Republican party into a “workers’ party”? Really?

The trouble is that Trump – while he certainly rejects core aspects of neoliberalism and cultural leftism – still has certain terrible neoliberal economic ideas (e.g., deregulation), and he is a wildcard.

As I have said many times (as for example here), the left could probably win over considerable numbers of angry people voting for Trump and triumph once again in politics, if only it reformed itself.

It just needs to (1) ditch regressive cultural leftism, (2) have a sensible immigration policy, (3) go big on economic issues like providing full employment and the disaster of neoliberalism, and (4) stop the bizarre, vicious hostility to white people.

I strongly doubt there is really much mass support amongst left-wing voters for regressive left nonsense anyway, certainly given the way many people often just reflexively vote for the left or right because it is a tribal thing. It is the swing voters you have to attract. Maybe Hillary will do that this time, but a victory of more neoliberalism and cultural leftism will produce Republican candidates far worse than Trump in future years.

Saturday, May 28, 2016

On the Value of Work in a Social Democracy

A career and a job where one does economically and socially useful work is an important part of any successful, healthy and wealthy society. But more than this, it gives people an identity through the job that they have and a social dignity lacking in long-term unemployment.

There are of course a lot of difficult, boring, dirty and sometimes dangerous jobs that have to be done, but a technologically advanced society like ours can use its inventive genius to create more and better machines and automation to do these jobs, so that human beings aren’t forced to do them.

But not all jobs are like the ones described above. For many people, their jobs – while often challenging or requiring hard work – are nevertheless safe, interesting, rewarding, and sometimes enjoyable. Some people are lucky enough to have jobs they absolutely love.

A really decent society run on social democratic principles would provide full employment and not leave people on welfare to become a deskilled, demoralised, dependent and depressed class of people, some of whom descend into irresponsible hedonism and drug abuse.

And there is certainly something to be said for the principle that people should not be allowed to simply live off welfare for years on end as long-term unemployed, but not as in the vicious and victim-blaming right-wing hysteria of libertarians or neoliberals – the latter having increasingly imposed a vicious, disgusting and punitive welfare system over the past 30 years.

The whole point of a society run on social democratic and Keynesian principles of full employment is precisely: we shouldn’t even need a big welfare bill for people of working age, because by means of (1) macroeconomic management of the private sector and (2) government employment programs at decent wages, there would only be a small body of unemployed anyway (essentially people in seasonal and frictional unemployment).

To achieve this today would require not just fiscal policy to create jobs in the private sector but government employment programs to find and create economically and socially useful work, e.g., in public infrastructure development, housing, social services, etc. That of course requires much more government planning than we currently have and perhaps ditching parts of the current welfare system (except for people who cannot work) for a system where people not employed in the private sector are provided with work at better and decent wage rates in public sector jobs. Private sector jobs probably do need to pay more, as in MMT-style job guarantee programs, but even in recruitment and distribution of people between the sectors more planning probably has its virtues too.

One could have a universal basic income under such a system, but everybody who is fit for work should be provided with a job appropriate for them and their skills to obtain income above the universal basic income. Such a system in, say, the United States would, I strongly suspect, start to do something substantive to fix the social problems of the African American community and white working classes too.

In that respect, a social democratic and, for that matter, old-fashioned socialist system is certainly not about shoving the human race onto welfare or the dole, but it is about bettering the human condition through a system that really does value work and employment and provides it for its citizens, as compared with a dysfunctional laissez faire capitalism that repeatedly fails to provide full employment.

In that respect, there is also something to be said for this Marxist take on this subject, even though I would shun the doctrinaire aspects of Marxism and reject a command economy. But, as the author says, it is true that there are some people who do not wish to work, and:

“Socialism is not about putting everyone on the dole, but putting everyone to work, doing work with dignity, respect, honor, satisfaction, and human fulfillment. Not everyone wants to work. Not everyone wants to be a civilized human being. Those who don't want to work, those who want to be predators, they will feel the hammer of the state, hard enough to satisfy any authoritarian.”
http://barefootbum.blogspot.com/2016/03/a-rant-on-socialism-authoritarianism.html

I wouldn’t go that far, however. The “hammer of the state” is a bit too much for me, unless the people in question are criminals. But a sensible punitive demand that people – especially young men – should not be lazy and irresponsible work-shy hedonists is not objectionable by any means.

Now today, while there is plenty of manual labour and unskilled labour that could be done under such a system even in the first world nations, there is also a very great deal of economically and socially useful work that can be done by intellectuals trained at universities, e.g., in the natural sciences, engineering, medical science, neuroscience, computer science, and the more useful social sciences.

Above all, governments in the Western world could also begin to employ people in much larger programs to start really helping with Third World development, e.g., health care, public infrastructure, disease control, education, etc. Promoting Third World development by allowing a space for independent economic development, import substitution industrialisation, utterly reformed international institutions and direct assistance by Western labour would be far better than the current system of neoliberalism.

It is undoubtedly true that as technological development soars, automation, robots and artificial intelligence will make it more and more difficult to find work for people of value, but nevertheless economically and socially useful work will still be of great value, even if the working day and working week will probably shrink as compared with today.

Friday, May 27, 2016

Philip Mirowski on Neoliberalism

In this article here:

Philip Mirowski, “This is Water, or is it the Neoliberal Thought Collective?,” Naked Capitalism, May 26, 2016.

There is a lot to digest here, and some good analysis.

Here is the killer insight on the more doctrinaire versions of neoliberalism:

“Hayek realized that the great democratic masses might not accept the imposition of the New Neoliberal Order from above; especially in a democracy, neoliberal gains might be quickly reversed at the ballot box. Hayek often complained that the socialists thought they knew what was best for the masses, often absent their consent, but in this regard, effectively, the neoliberals were no different. The one place where Hayek and the NTC diverged from Polanyi was that they could never ever allow that the blowback from markets could ever be considered a ‘natural’ response of the masses. At various points, Hayek would blame the recalcitrance of the populace to ‘market reforms’ on the scurrilous class of intellectuals, or on the self-interest of the politicians, or even upon the fundamental ignorance of the populace about the consequences of their preferences. But, contrary to Polanyi, they took that pushback into account. Polanyi, so besotted with the trope that opposition to encroachment of the market was ‘natural’, never entertained the notion that it, too, could be manipulated. The eventual solution favored by the bulk of the neoliberal thought collective was to render democracy so hamstrung and ossified that it would never prove capable of neutralizing neoliberal market structures erected by the strong state. Their strong state had to come cladded with strong defenses against the will of the governed. ‘I doubt whether a functioning market has ever newly arisen under an unlimited democracy, and it seems likely that unlimited democracy will destroy it where it has grown up.’ This became the watchword of the later Hayek, of Bruno Leoni, of James Buchanan and the Virginia public choice school, of the ‘Washington consensus’, and the architects of the WTO and the European Union and the independence of central banks.”
Philip Mirowski, “This is Water, or is it the Neoliberal Thought Collective?,” Naked Capitalism, May 26, 2016.

That is an excellent summary of the historical tendency of modern neoliberalism, because – once disastrous neoliberal programs fail and as things get worse and worse – in a democracy you get an angry, resentful and rebellious electorate who will start voting for anti-free market parties.

These days neoliberalism, as practised by governments, has degenerated into an open crony capitalism and corporate tyranny that is effectively trying to dismantle democracy by means of so-called “free trade” agreements like the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP).

And, with respect to Hayek, we also have his weird interview with the Chilean newspaper El Mercurio in 1981:

“[A]s long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally, I prefer a liberal dictator to democratic government lacking in liberalism. My personal impression. . . is that in Chile . . . we will witness a transition from a dictatorial government to a liberal government . . . during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement.”
El Mercurio, p. D8-D9, 12 April, 1981.
http://rationalwiki.org/wiki/Friedrich_August_von_Hayek#Support_for_Pinochet

To return to Mirowski’s argument, the point that Neoliberalism isn’t monolithic is well taken: it is divided into all sorts of streams, where there are different definitions of what “freedom” even is, and Neoliberalism is undoubtedly a type of political movement too.

But I don’t think Philip Mirowski has properly defined what he means by “Classical liberalism.”

If we mean the general political and economic program of 19th century Classical liberalism, this was different even from most streams of modern Neoliberalism which even Mirowski seems to admit.

By the 1940s/1950s, for example, Austrians like Ludwig von Mises were the last aging dinosaurs of 19th century Classical liberalism.

But here’s the thing: the emerging Neoliberal movement (which was itself heterogeneous) was despised by Ludwig von Mises, who regarded these early neoliberals as being too interventionist.

See this video:

I think it is also a mistake to see the modern Austrians as part of neoliberalism. It is true that the Austrian school in the 1920s to the 1930s was heavily influenced by neoclassical theory.

But the modern Rothbardian anarcho-capitalists and Misesians aren’t neoliberals. The Misesians are old-fashioned 19th century Classical liberals. The Rothbardian anarcho-capitalists are bizarre, utopian free market cultists (who, strangely, also have a decidedly anti-free market bias in their mistaken opposition to fractional reserve banking).

It is true that Hayek provided an intellectual inspiration for modern neoliberalism in his political writings and ideas on knowledge and prices, but his practical policy ideas in later years – such as, for example, his crackpot ideas on money and banking – have not been taken seriously by modern Neoliberal ideologues.

Today most modern Austrian economics is a train wreck of absurdity and has degenerated into a cult like Marxism. But there was, however, one stream of Austrian theory that is of interest: the thought of Ludwig Lachmann, who, if anything, was closer to G. L. S. Shackle than other Austrians.

However, I see no modern Austrians anywhere who have carried on Lachmann’s insights into economics, and this is not really surprising because Lachmann’s theories – if seriously developed and combined with a sensible pragmatism about government – would probably morph into a type of Post Keynesianism.

Mirowski states that “Keynes was the exemplary Classical Liberal of the interwar period.” This is a bizarrely untrue statement. Keynes was a progressive liberal, and came to reject the economic doctrines of Classical Liberalism. This can be seen in Keynes’ book The End of Laissez-Faire (1926).

Even late 1920s British Liberalism had departed far from its Classical Liberal origins. For example, when Lloyd George became leader of liberal party for the 1929 general election, he proposed a large program of what we now call Keynesian stimulus to solve Britain’s problem of high unemployment after the disastrous return to the gold standard. At this time, Keynes was an economic adviser to the Liberal party and helped design that program. That program can hardly be described as Classical Liberalism.

Not even Keynes’ essay “Am I a Liberal?” (1925) refutes this. The Liberalism with which Keynes identifies himself here was very much the progressive liberalism that had diverged from its 19th century ancestor.

By 1939, in an interview with the leftist British journalist Kingsley Martin (1897–1969), Keynes seemed quite comfortable with defending what he called “liberal socialism”:

“The question is whether we are prepared to move out of the nineteenth-century laissez faire state into an era of liberal socialism, by which I mean a system where we can act as an organized community for common purposes and to promote social and economic justice, whilst respecting and protecting the individual—his freedom of choice, his faith, his mind and its expression, his enterprise and his property.” (Moggridge 1982: 500 = Keynes and Martin 1939: 123).

This political vision has long parted company with Classical liberalism.

There is a final point about Post Keynesianism. Mirowski states that “Post-Keynesians and other heterodox factions seem not to grasp that effective political mobilization requires a thoroughgoing alternative to the neoliberal definition of what a market is, comprehension of how diverse markets work, and appreciation for what it means to participate in a market society.” I find that baffling given that any good reading of Post Keynesian literature reveals that this is precisely what Post Keynesians are engaged in.

Nor do I see “[e]ndless denunciations of ‘capitalism’” within Post Keynesianism either, which if anything is a trait of vulgar Marxism. On the contrary, the line I usually see is that Post Keynesianism is the right empirical description of how capitalism actually works and that Post Keynesian economic theory is what is required to make capitalism work properly.

As for the political side of things, I wouldn’t doubt a new and forceful alternative to Neoliberalism is necessary. But an ideology that invokes and takes up Post Keynesian theory and economic policy recommendations isn’t even necessarily committed to being left-wing politically, though admittedly it is probably more likely to be so.

But I can imagine a socially conservative movement hostile to the socially and culturally destructive aspects of capitalism and the extremism of the modern cultural left taking up the economic ideas of Post Keynesianism and shunning modern Neoliberalism. Or non-dogmatic Keynesian Marxists could adopt it. Or progressive liberals.

Given the way that the modern Postmodernist and cultural left is destroying itself by its sheer insanity and toxic obsession with rotten ideas, it is not even clear at this point whether the left could even provide a serious and popular political alternative to Neoliberalism.

BIBLIOGRAPHY
Moggridge, D. E. (ed.). 1982. The Collected Writings of John Maynard Keynes. Volume 21. Macmillan, London.

Moggridge, D. E. 1992. Maynard Keynes: An Economist’s Biography. Routledge, London.

Thursday, May 26, 2016

Trump bashes Neocon Warmongers – Again

He already called them out on the 2003 Iraq catastrophe. He even said “Bush lied, people died.” He’s distanced himself from their extreme foreign policy.

And now Trump savages arch-neocon Bill Kristol in the video below. I’m kind of struck by the way Trump’s fans seem dumbstruck by his abuse of Kristol, however, as though they don’t quite know how to react...

But you can bet Trump won’t get any credit from the US left for saying what is essentially correct about Kristol.

Philip Pilkington Interview on his Forthcoming Book The Reformation in Economics

Philip Pilkington is interviewed on his Forthcoming Book The Reformation in Economics (due out in October) here.

Trouble Brewing

On multiple levels, in both the Third World and the developed world.

It doesn’t have to be a catastrophe, however, since Western governments can implement a large-scale industrial policy to bring back manufacturing and reverse the trend of de-industrialisation.

The mass unemployment that will result must be solved by government programs to create socially and economically useful work for decent wages, and maintenance of aggregate demand by fiscal policy.

Wednesday, May 25, 2016

Dave Rubin interviews Tino Sanandaji

I know I have my share of Swedish readers from blogger stats and assume that many of these people are left-wing, so I am curious to know what they think of Tino Sanandaji’s assessment of what has gone wrong in Sweden in the last 30 years. I am unclear on precisely what Tino Sanandaji’s economics are, but I assume he is some kind of neoclassical.

Nevertheless, I have to say that it all sounds depressingly familiar to me: a Swedish left taken over by Postmodernists and bourgeois cultural leftists who have betrayed any sensible left-wing take on economics and whose views are poisoned by cultural relativism, political correctness and extremist multiculturalism. This is a tragedy for a great country like Sweden with its history of social democracy.

Tuesday, May 24, 2016

Debunking Austrian Economics 101 (Updated)

I have updated my “Debunking Austrian Economics 101” post below. Many new posts are now included, such as, for example, against Austrian price theory, the Rothbardian view of fractional reserve banking, and Austrian apriorism.

I have yet to see any substantive Austrian engagement with the Post Keynesian critique of their theories, and this is not really that surprising, since any moderately well-read person with a knowledge of Post Keynesian economics – informed by economic history and some decent background in analytic philosophy – could crush the Austrian cultists in debate without breaking a sweat.

Please note that not all the posts actually debunk Austrian theories, as some are merely descriptive, and allow the reader to understand what the Austrians believe. Some posts examine the history of the school. A few posts are even constructive in that Post Keynesians and some Austrians can agree on certain points (such as the posts on Ludwig Lachmann).

In my view, a useful division of modern Austrians would be as follows:

(1) The Anarcho-capitalists
E.g., Murray Rothbard, Hans-Hermann Hoppe and Jörg Guido Hülsmann;

(2) The minimal state/classical liberal Austrians in the tradition of Mises
This variety often supports praxeology and utilitarianism;

(3) Hayek’s economics, with a minimal state, and with an empirical (or Popperian) approach to economic method, in place of praxeology;

(4) Moderate subjectivist Austrians
E.g., Israel Kirzner and Roger Garrison;

(5) Radical subjectivists like Ludwig M. Lachmann (1906–1990), and Austrians influenced by him.

Debunking Austrian Economics 101

The links are organised into the following sections:

(1) The History, Classification, and Subgroups of Austrian Economics
(2) Debunking Austrian Apriorism and Praxeology
(3) Ludwig Lachmann and Radical Subjectivism
(4) Against the Pure Time Preference Theory of Interest Rates
(5) Against Say’s Law
(6) Austrians and the Concept of Uncertainty
(7) Against the Austrian Theory of Money
(8) Against Mises’s Regression Theorem
(9) Against the Austrian View of Deflation
(10) Against the Austrian Theory of Inflation
(11) Austrian and GDP
(12) Against Vulgar Austrians
(13) Hayek’s Bigotry and Support for Authoritarianism Exposed
(14) Hayek’s Interventionism
(15) Austrian Myths on Government Debt
(16) Questionable or Failed Austrian Predictions
(17) Against Free Trade / Law of Ricardian Association
(18) Against Austrian Interpretations of the Great Depression
(19) Austrian Myths about the 19th century Gold Standard Era
(20) Austrians Misrepresent the Post-1945 Boom in America
(21) Against Rothbard
(22) Against Ron Paul
(23) Austrian Myths about Ancient Rome
(24) Austrian Misrepresentations of Keynesianism
(25) Austrian Misrepresentations of Modern Monetary Theory
(26) Austrians and Equilibrium Theory
(27) Debunking Austrian Ethical Theories
(28) Mises and Fascism
(29) Keynes and Hayek
(30) Debunking the Austrians on the Recession of 1920–1921
(31) Fractional Reserve Banking is not Fraud (against the Rothbardians)
(32) Against the Austrian Business Cycle Theory (ABCT)
(33) The Socialist Calculation Debate
(34) Against the Austrian Theory of Prices
(35) Free Bankers misunderstand Hayek’s Liquidationism
(36) Against Misesian Economic Coordination and Calculation
(37) Against Free Banking
(38) Against Robert Murphy
(39) Keynesian versus Austrian Debate
(40) Against Rothbardian Notions of Justice
(41) Probability Theory
(42) Mises and Freudian Pseudoscience
(43) Austrians and Prediction
(44) Austrians and Open Borders
(45) Against Privatised Roads
(46) Mises on War

Social Democracy for the 21st Century: A Realist Alternative to the Modern Left