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Wednesday, November 2, 2011

Jerry O’Driscoll on Chicago and Vienna

Jerry O’Driscoll has an interesting post here on the differences he sees between the Austrian school and Chicago school:
Jerry O’Driscoll, “Chicago and Vienna,” ThinkMarkets, October 30, 2011.
Of course, the Chicago school actually includes a number of different strands in economic thought, and one of the most interesting was the interwar school of the 1920s and 1930s, as follows:
First Chicago School of 1920–1945

Frank H. Knight (1885–1972)
Jacob Viner (1892–1970)
Henry C. Schultz (1893–1938)
Paul H. Douglas (1892–1976)
Oskar Lange (1904–1965)
Henry C. Simons (1899–1946)
Lloyd W. Mints (1888–).
For a short introduction to the Chicago School, see here (and for the Austrian school see here). A peculiar exception to the general free market temper of the interwar Chicago school was the market socialist Oskar Lange, who became a professor in 1938.

Jerry O’Driscoll makes the fascinating point that some viewed the interwar Chicago school as “leftwing” and some members of it were “‘Keynesian’ on fiscal policy before Keynes.” This should be related to Milton Friedman’s own description of the differences between the views of the London School of Economics (as influenced by Hayek) and the Chicago school on the depression of the 1930s:
“Lerner had been trained at the London School of Economics where the dominant view was that the depression was an inevitable result of the proceeding boom; that it was deepened by the attempts to prevent prices and wages from falling and firms from going bankrupt; that the monetary authorities had brought on the depression by inflationary policies before the crash and had prolonged it .... The intellectual climate at Chicago had been wholly different from that at the LSE. My teachers regarded the depression as largely the product of misguided government policy. They blamed the monetary and fiscal authorities for permitting banks to fail and the quantity of deposits to decline. Far from preaching the necessity of letting deflation and bankruptcy run their course, they issued repeated calls for government action to stem the deflation. There was nothing in these views to repel a student, or to make Keynes attractive. On the contrary, so far as policy was concerned, Keynes had nothing to offer those of us who had sat at the feet of Simons, Mints, Knight, and Viner.” (Friedman as quoted in Skidelsky 1992: 379).
Skidelsky also notes that Jacob Viner’s review of Keynes’s General Theory was on the whole constructive (more so than that of Frank Knight), even if differences remained (Skidelsky 1992: 378).

BIBLIOGRAPHY

Boettke, Peter J. “Austrian School of Economics,” Concise Encyclopedia of Economics (2nd edition).
http://www.econlib.org/library/Enc/AustrianSchoolofEconomics.html

Friedman, M. 1998. Two Lucky People: Memoirs, University of Chicago Press, Chicago and London.

Skidelsky, R. J. A. 1992. John Maynard Keynes: The Economist as Saviour, 1920–1937 (vol. 2), Macmillan, London.

93 comments:

  1. http://www.newyorker.com/online/blogs/johncassidy/2011/11/wynne-godley-eurosceptics.html

    Jon Cassidy discusses Wynne Godley, in the context of the euro-crisis

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  2. Murray Rothbard unravels Milton Friedman:

    http://www.lewrockwell.com/rothbard/rothbard43.html

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  3. That is interesting about Oskar Lange. I have read some of Lange's later works on planning, but not his more famous work on market socialism and the socialist calculation debate.

    Not to get too far off topic, but where do Post-Keynesians fall on economic calculation? While it would seem as though the Austrians have definitely won that debate I have two comments:

    First, the implications of market superiority are sometimes taken too far, as Austrians often apply the same critique of Soviet-style central planning to practically all forms of state intervention, which seems too broad as there are large differences between, say, Keynesian social democracy and Soviet communism.

    Second, is it possible that advances in computer technology may make some forms of planning more feasible in the future?

    Thanks.

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  4. "Not to get too far off topic, but where do Post-Keynesians fall on economic calculation? "

    Regarding economic calculation as applied to the planned economy, it is obvious that it is perfectly possible for planned economies to work, depending on the competence of the planners and resources available.

    The US, UK and Canada and Australia had highly successful planned economies during the Second World War, for example.

    The communist planning systems in third world nations were often extremely brutal but soem of them did achieve some strong economic development. The Soviet Union went from a third world economy to a superpower with significant industrial development capable of defeating Nazi germany. In other cases these planned economies were failures: in the case of China's Great Leap Forward, owing to gross incompetence, it was a catastrophe.

    The point is that a planning system is not going to necessarily maximise consumer utility preferences. Planners make the decisions on what to produce and consume.

    Posr Keynesians do not, however, support these types of planned economies.

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  5. From the link on the Chicago School:

    "In an age when empiricism ruled most of American economics, Knight and Viner set up the economics department at Chicago as a bastion of counter-institutionalism and, as such, the department soon acquired something of a "siege" mentality."

    This kind of siege mentality is far too common among nearly every heterodox group of economists and sometimes even among mainstream orthodoxy as well. If people outside their group disagree with them, then those outsiders are all sworn enemies against knowledge and truth, while they are the last bastion minority protecting against them.

    For example, Paul Krugman often writes in his blog that we are currently in a Dark Age of Macroeconomics, even though our stock of empirical evidence, macroeconomic research, and understanding of political economy is greater than ever. I am sure he understands it, but he regards wide differences in opinion among economists to be a sign of retrograde hordes of barbarians out to destroy the Old True Macroeconomics.

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  6. John

    is it possible that advances in computer technology may make some forms of planning more feasible in the future?

    According to Austrians, no, because consumer value scales are ordinal rather than cardinal, so we can't calculate, even if brain scanning technology was ever able to retrieve them in the future. Keynesians on the other hand can obviously calculate whatever and wherever even on abacus, central planning is no problem, you just have to pick good Keynesians as economy tsars, ie those of the particular strand that the Keynesian guy that you talk to at the moment belongs to. In fact, forget about all the other guys.

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  7. There is not much difficulty in planning the production of certain goods - say, public goods - where demand for them remains the same over long periods of time or increases in a clear way by, say, x% as population grows, like health care and so on.

    Planning the production of consumer goods - especially fashionable consumer goods - is different, as tastes, preferences and fashions change, sometimes quickly. The production of those things is best left to the private sector.

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  8. The US, UK and Canada and Australia had highly successful planned economies during the Second World War, for example.

    Yeah, good stats all around those days, no unemployment, high munitions manufacture, happy memories :) Keynesians can always make your stats look gooooood, on paper that is.

    The Soviet Union went from a third world economy to a superpower with significant industrial development capable of defeating Nazi germany.

    Nazi Germany, a free market paradise, defeated by Soviet Union, and Soviet Union alone. Now we know!

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  9. There is not much difficulty in planning the production of certain goods - say, public goods - where demand for them remains the same over long periods of time or increases in a clear way by, say, x% as population grows, like health care and so on.

    Unless, God forbid, medical advances raised or lowered the demand. That would only screw Keynesian abacus-based calculations, with their neat percentages and all. Fortunatelly collectivists have come up with FDA to protect us from that too.

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  10. "Nazi Germany, a free market paradise, defeated by Soviet Union, and Soviet Union alone."

    Total garbage. I didn't say that.

    This is what is called a straw man fallacy. The stock in trade of libertarians.

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  11. "Unless, God forbid, medical advances raised or lowered the demand."

    In which case, the state can expand its health care spending (or the relevant parts of it) to meet demand, as in fact happens in many countries anyway.

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  12. See http://en.wikipedia.org/wiki/Lend-Lease, for a non-keynesian version of history.

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  13. You might want to actually take a peak at some history before appealing to lend lease as the biggest reason the Soviet Union defeated Germany.

    Of course, with that said, LK did not deny its importance to the war effort so all you've left us with is a hilariously flimsy straw man.

    "Yeah, good stats all around those days, no unemployment, high munitions manufacture, happy memories :) Keynesians can always make your stats look gooooood, on paper that is."

    Anon, have you considered starting your own blog? Here you are making up an argument in your head and debunking it all the same. With your own blog you wouldn't need this one anymore!

    LK was merely noting the historical incidence of this period not calling it good or evil. Try again.

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  14. Regarding economic calculation as applied to the planned economy, it is obvious that it is perfectly possible for planned economies to work, depending on the competence of the planners and resources available.

    Utter garbage. Mises refuted that myth. He showed that in planned economies there is no price system for the means of production. Economic calculation becomes IMPOSSIBLE.

    The US, UK and Canada and Australia had highly successful planned economies during the Second World War, for example.

    Those weren't planned economies. The government did not own all the means of production. They operated in a market setting, which had private property of means of production and thus prices for means of production. The economies did not collapse because the governments could observe market prices.

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  15. The communist planning systems in third world nations were often extremely brutal but soem of them did achieve some strong economic development. The Soviet Union went from a third world economy to a superpower with significant industrial development capable of defeating Nazi germany.

    At the cost of 40 million Soviet lives, and only because they were given MASSIVE subsidies from western countries. They couldn't even produce enough food for themselves. Western countries apologetic to communism (US, Canada, Australia, Europe) supported the Soviet Union economically for decades. Not only the subsidies, but by providing the Soviet government with market prices for commodities and thus the requisite information that allowed the Soviet government to engage in SOME crude form of economic calculation.

    Your conception of history is totally off.

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  16. Anonymous, it is quite clear that governments provide health care better than the private sector. Superior care, at lower cost. I do agree that some tend to underspend, to be too efficient, like the UK. And in the USA, as inefficient & ineffective privatized health care has become more & more a machine for to siphon public money, the pace of medical innovation has slowed down, e.g. with more copycat drugs but less genuinely new ones. With medical journals and research corrupted & less reliable.

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  17. "Western countries apologetic to communism (US, Canada, Australia, Europe) supported the Soviet Union economically for decades."

    You mean they sold products to the Soviet union? Cite some evidence of these alleged subsidies outside WWII (that is, money or goods given free of charge).

    As in most of the time, you are speaking rubbish.

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  18. > The US, UK and Canada and Australia had
    > highly successful planned economies during
    > the Second World War, for example.

    Those weren't planned economies. The government did not own all the means of production. They operated in a market setting,


    Of course, they did not own all the means of production. They did, however, plan a great deal of production, particulalry in war materiel. You don't have to own all means of production to exercise ocntrol over a large part of it.

    So now the WWII command economy in the US was not a moderate planned economy at all? You not even willing to say that?

    "Utter garbage. Mises refuted that myth. He showed that in planned economies there is no price system for the means of production. "

    (1) Mises showed that a command economy could not work under any circumstances!

    (2) The Soviet Union worked for decades, with substantial economic growth.

    (3) Anyone who can asserts (1), while aware of (2) is an idiot.

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  19. You mean they sold products to the Soviet union? Cite some evidence of these alleged subsidies outside WWII (that is, money or goods given free of charge).

    You see? You're totally clueless about history and you're only making arguments about history that promote your prejudicial narrative that "socialism should work."

    Massive supplies of grain were sent for free or on government guaranteed credit that was never intended to be repaid.

    Even the grain purchases made by the Soviet Union depended on Western countries, which guaranteed investments made in the production of natural resources and in the construction of factories.

    Such investments were the foundation of most of the exports of the Soviet Union and thus of their ability to obtain funds with which to make purchases from abroad. In the
    absence of this Western aid, a series of famines — the necessary consequence of the massive inefficiencies of socialism — would have led to emigration out of the cities and
    resettlement of practically the whole of the surviving population on farms.

    This western aid went on for decades, especially after WW2. There are so many sources and references for this that it would take a whole year to collect them all. Instead of showing you every single reference, I will just provide a few.

    This one from 1989, just before the Soviet Union ended, when it was at its productive peak:

    http://articles.chicagotribune.com/1989-05-03/news/8904090306_1_subsidized-wheat-largest-grain-importer-wheat-products

    And one from 1972, when Nixon made an agreement with the Soviet government whereby the Soviets would buy ALL of the US surplus wheat at below market prices, meaning subsidies/charity, which many people today unfortunately refer to as "the great grain robbery", as if the Soviets robbed the US taxpayers:

    http://en.wikipedia.org/wiki/Great_grain_robbery

    The US is just one western country whose government subsidized wheat exports to the Soviet Union (meaning charity at the US taxpayers' expense). There are many more, which I am sure you can verify yourself if you weren't so busy trying to advance an agenda that the Soviet economy was somehow productive and not totally impoverished like it actually was.

    As in most of the time, you are speaking rubbish.

    Is that what you are now calling the patient, devastating, systematic refutations of all your bullshit? Did you like the latest smackdown of your economically illiterate monetary crank 4 part nonsense over at Anderson's blog?:

    http://krugman-in-wonderland.blogspot.com/2011/11/lure-of-inflation.html

    LOL

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  20. Of course, they did not own all the means of production. They did, however, plan a great deal of production, particulalry in war materiel.

    First, if a government were to engage in a "great deal" of producing weapons of war, that is not a planned economy. A planned economy would be the former USSR, North Korea, former communist China, etc. A government that increases its debt and spending in order to finance a war effort does NOT make that economy a planned economy. It makes it, well, kind of what the US economy looks like now.

    Second, to say that the economies were "successful" is utter garbage.

    In the worst years of the Great Depression, 75% of the US labor force were employed, but everyone who was working could buy anything he wanted commensurate with his earnings. During WW2 however, no one could buy a new car, or a new house, or a new major appliance of any kind. The government simply banned their production outright.

    Furthermore, many of the most common, everyday
    goods simply became unobtainable or obtainable only with great difficulty, like gas, rubber tired, chocolate, gum, meat, nylon, sugar, etc, etc. The few goods that were available were of terrible quality too. People knew the difference between "prewar quality" and "wartime quality."

    You see, the problem with you Keynesians is that you look at only superficialities, like "GDP" and "employment", neither of which give a clear picture as to the real standard of living of people.

    You don't have to own all means of production to exercise ocntrol over a large part of it.

    Banning the production of many civilian goods, and controlling the production of weapons of war, is not an example of a planned economy.

    So now the WWII command economy in the US was not a moderate planned economy at all? You not even willing to say that?

    There were price controls, there was a moratorium on the production of many civilian goods, and there was government control over production of weapons. Call it what you want, but that isn't a planned economy.

    (1) Mises showed that a command economy could not work under any circumstances!

    (2) The Soviet Union worked for decades, with substantial economic growth.

    (3) Anyone who can asserts (1), while aware of (2) is an idiot.

    (1) Mises showed that a command economy could not work.

    (2) The Soviet Union did not work. It was chronically impoverished, and required constant foreign assistance, even though it could observe market prices for means of production due to there being capitalism elsewhere, and yet even with all this help, charity-wise and economic calculation-wise, it was still impoverished and it still collapsed.

    (3) Mises was right that socialism cannot work as a universal system, and anyone who denies his arguments is an idiot.

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  21. "Those weren't planned economies. The government did not own all the means of production. They operated in a market setting, which had private property of means of production and thus prices for means of production."

    UGH. So on the one hand, the war economy with its government direction of production, pricing, and consumption was *not* central planning. On the other hand, medicare, protections for labor unions, and environmental regulation are all socialism!


    "The Soviet Union worked for decades, with substantial economic growth."

    I'm mostly in agreement with LK on this thread, but it bears keeping in mind that the Soviet Union "worked" during the period that it maintained a policy of terror. That seems like an important qualification.

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  22. Calcagus:

    Anonymous, it is quite clear that governments provide health care better than the private sector.

    It's the exact opposite, both in theory and in practice.

    Superior care, at lower cost.

    The costs are far higher. You are conflating the US "private" healthcare system as being a free market. Clearly you're not doing your research, because it's not a free market at all, not by a long shot. The whole medical profession is a government created oligopoly. There's price controls, there's regulations up the wazoo. The government makes healthcare MORE expensive, not less expensive. Look at the history of healthcare in the US. Research the "lodges" of the early 20th century providing free market healthcare at super low cost, and how they pissed off the AMA doctors, who then demanded that all doctors be licensed by the government and come under the control of the government, in order to stop competition, which then resulted in increasing prices and AMA doctors making more money. Of course, they did this under a banner of "for the public good."

    Then consider the disastrous policy during WW2 where by the price-control authorities declared that while wages were subject to controls, employer-financed medical insurance for employees was not.

    After the war, this was extended to a huge chunk of the rest of the population by the demands of politically connected labor unions, which most nonunion employers were obviously coerced into meeting lest their employees seek to utilize government force as well.

    The growth of this insurance was exacerbated by the tax code, whereby employer contributions to their employee's medical insurance was tax exempt, while the same compensation in wages was not.

    You do not have any empirical data of a private healthcare system, so that means you MUST be arguing from theory. But economic theory has shown that a free market tends to result in lower prices and higher quality.

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  23. "And one from 1972, when Nixon made an agreement with the Soviet government whereby the Soviets would buy ALL of the US surplus wheat at below market prices, meaning subsidies/charity, which many people today unfortunately refer to as "the great grain robbery", as if the Soviets robbed the US taxpayers:"

    That was owing to a Soviet crop failure from a natural variation in climate etc in 1972 and 1975. That is not what happened in normal circumstances when crop yields were not affected by dought.

    Your claim was that the Soviet economy was being supported only by endless Western "subsidies" after WWII. That is rubbish.

    In fact, the West had implemented a trade embargo agianst the Soviet Union and the communist bloc after WWII.

    Some obvious points:

    Soviet foreign trade played only a minor role in the Soviet economy. In 1985, for example, exports and imports each accounted for only 4 percent of the Soviet gross national product. The Soviet Union maintained this low level because it could draw upon a large energy and raw material base, and because it historically had pursued a policy of self-sufficiency. ... The Soviet Union conducted the bulk of its foreign economic activities with communist countries, particularly those of Eastern Europe. In 1988 Soviet trade with socialist countries amounted to 62 percent of total Soviet foreign trade. Between 1965 and 1988, trade with the Third World made up a steady 10 to 15 percent of the Soviet Union's foreign trade. Trade with the industrialized West, especially the United States, fluctuated, influenced by political relations between East and West, as well as by the Soviet Union's short-term needs. In the 1970s, during the period of détente, trade with the West gained in importance at the expense of trade with socialist countries. In the early and mid-1980s, when relations between the superpowers were poor, however, Soviet trade with the West decreased in favor of increased integration with Eastern Europe."

    http://en.wikipedia.org/wiki/Foreign_trade_of_the_Soviet_Union

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  24. "This one from 1989, just before the Soviet Union ended, when it was at its productive peak:"

    I don't deny the Soviet economy problems that emerged from the mid-1970s, and certainly those that occurred in the 19080s.

    My original point was that Soviet economic development - particulary in heavy industry - was substantial for a long period of time, from the 1920s to 1970s.

    The country had a large resourtce base, and essential self-sufficiency in energy like oil, natural gas, and coal, as well as in other minerals.

    The industry development allowed them to defeat Nazi Germany. Yes, they got help from the West. They also produced a great deal of their own war materiel from their industrial base.

    One example:

    "
    “Although nearly half the population and the great industrial region of the Donets remained under German occupation, the Soviets still found men for new armies and vastly increased war production. They defeated the Germans at Stalingrad almost entirely through their own efforts and would probably have won the same victory if they had received no assistance at all. However, by the end of 1942, American lend-lease aid began arriving in sufficient quantity to be noticed, especially in field telephone wire and boots for the Russian infantry. The Americans could offer the Soviets very few arms through 1942, either because American production was too small or because Americans arms were not needed in Russia. For example, the Sherman tank was not available until 1942 when the Russians were already producing their own equally good or better T-34/85. Except in aircraft, American arms and weapons systems never made any large contributions to victory in Russia. But American aid in other categories began to arrive in abundance during 1943, increasing the tempo of Soviet offensives.”


    The Second World War: Europe and the Mediterranean, p. 143.

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  25. Nerdy McGee:

    UGH. So on the one hand, the war economy with its government direction of production, pricing, and consumption was *not* central planning. On the other hand, medicare, protections for labor unions, and environmental regulation are all socialism!

    My position is that medicare, labor legislation, environmental regulations, are socialiST policies, as opposed to capitalist policies.

    Government controlling production of weapons of war is a socialiST policy as well.

    Socialism IMO refers to the ideology, and in the US, it is a mixed economy. There are both socialist and capitalist policies.

    "The Soviet Union worked for decades, with substantial economic growth."

    I'm mostly in agreement with LK on this thread

    Agreement with what? He's said nothing correct.

    but it bears keeping in mind that the Soviet Union "worked" during the period that it maintained a policy of terror. That seems like an important qualification.

    Understatement of the millennium. There's hope for you.

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  26. "The Soviet Union did not work. It was chronically impoverished, and required constant foreign assistance, "

    It if did not "work" - was incapable of producing output - it would never have won the war against the majority of Nazi Germany's army.

    Since it was a third world country in 1918, of course it was poor and imporished by Western standards, in relative terms. However, its per capita GNP and GNP rose very considerable down to the 1970s, as Western economists have estimated.

    Your claim that it need "constant foreign assistance" is total rubbish, typical of your ignorant idiocy.

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  27. Prize for muddle-headedness:

    Socialism IMO refers to the ideology, and in the US, it is a mixed economy. There are both socialist and capitalist policies.

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  28. That was owing to a Soviet crop failure from a natural variation in climate etc in 1972 and 1975. That is not what happened in normal circumstances when crop yields were not affected by dought.

    This is a consequence of central planning failure. When such events occur in capitalism, if there is a drought in one area, then there will be a shortage in that area an that will tend to drive the price up in the local area, which will then make it profitable to import the commodity from elsewhere into that area, thus eliminating the shortage in that area.

    But the price system in the Soviet Union did not exist. Profit making was illegal. So the government had no way to know how much was needed, where, and in what quantities.

    The Soviet government and its socialists apologists ALWAYS blamed the weather and everything else under the Sun, because they didn't want to blame themselves or socialism.

    And what about all the other times that the USSR was given subsidized grains and other commodities? Aliens? Stars? Everything but socialism!

    Your claim was that the Soviet economy was being supported only by endless Western "subsidies" after WWII. That is rubbish.

    Straw man. I said that they were supported by western economies. I didn't say only western economies, and I didn't say "endless". You're clearly is desperate retreat mode, because you need to set up a straw man because you can't argue against the fact. It's documented proof. There's no point in denying it, regardless of how devastating it is to your worldview.

    Notice how you completely ignored the instances of subsidies that you couldn't immediately chalk up to bad weather? LOL

    In fact, the West had implemented a trade embargo agianst the Soviet Union and the communist bloc after WWII.

    They did no such thing when it comes to vital foodstuffs, and capital for investing in producing raw materials.

    Soviet foreign trade played only a minor role in the Soviet economy. In 1985, for example, exports and imports each accounted for only 4 percent of the Soviet gross national product.

    And here comes the Wikipedia cut and paste job. Yeah, I read the same passage. That Wikipedia article is clearly written by a biased idiot, because it's dripping with defensive and apologetic rhetoric.

    Even Reagan sent subsidized US grains to feed the starving Soviets:

    http://articles.latimes.com/1986-08-01/news/mn-19174_1_soviet-union

    Australia was in on the action as well:

    http://articles.chicagotribune.com/1986-08-13/news/8602280432_1_grain-sales-subsidized-grain-export-enhancement-program

    You're rewriting history in a desperate attempt to salvage AN UNWORKABLE SYSTEM.

    I cannot believe that you are actually defending Soviet communism. You're totally clueless.

    It doesn't matter what size the subsidies represented as a percentage of reported GDP.

    The Soviet Union couldn't feed themselves without help from outside CAPITALIST countries.

    Sorry if that makes you mad. LOL

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  29. "Even Reagan sent subsidized US grains to feed the starving Soviets:

    http://articles.latimes.com/1986-08-01/news/mn-19174_1_soviet-union"


    LOL:

    "The President has made a decision today to allow grain to be sold to the Soviet Union at current world market prices in sufficient quantities to fulfill the terms of the U.S.-Soviet long-term grain agreement. "

    Since the Soviets were clearly paying at current world market prices, they clearly could have bought elsewhere at the same price. That article doesn't even prove what you say.

    Furthermore, I have already said above quite clearly that the Soviet Union started to have serious economic problems after the 1970s. These examples are not refuting what I have said of the earlier period.

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  30. > That was owing to a Soviet crop failure
    > from a natural variation in climate etc in
    > 1972 and 1975. That is not what happened in
    > normal circumstances when crop yields were
    > not affected by dought.

    This is a consequence of central planning failure


    That says it all: drought is a consequence of a central planning failure.

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  31. "I cannot believe that you are actually defending Soviet communism."

    Again, utter strawman rubbish.

    I have made it clear here and elsewhere that I do not support or advocate communist command economies.

    I am merely relating empirical facts about the Soviet system, just as it is an empircal fact the Western nations in WWII had successful moderate command economies.

    That does not mean I advocate war or communism.

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  32. While discussing wartime industrial policies of United States, Canada, and Soviet Union, to what extent should we discount the fact that North America and Russia are large, resource-rich regions with populations relatively low compared to their large geographical size?

    Land and other resources were clearly not at a premia here, so authorities could certainly worry less about economizing and rationing of scarce or strained resources.

    When we think of successful wartime economies, geographically smaller states are never mentioned. But then again, the smaller states were neutral parties to World War 2.

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  33. Since the Soviets were clearly paying at current world market prices, they clearly could have bought elsewhere at the same price. That article doesn't even prove what you say.

    The reason why it was subsidized is due to fact that the current market price was not paid in full by the Soviets. It was in part subsidized by the US taxpayers.

    http://articles.latimes.com/1986-07-26/news/mn-7_1_soviet-union

    Furthermore, I have already said above quite clearly that the Soviet Union started to have serious economic problems after the 1970s. These examples are not refuting what I have said of the earlier period.

    They had serious problems since 1917.

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  34. That says it all: drought is a consequence of a central planning failure.

    LOL, no, it is the fact that the Soviet's price system was crippled due to it being communist that what made them incapable of dealing with changing weather. I didn't say that communism caused the weather to change.

    In capitalism, when there is an area that goes through a shortage, the price system and the profit motive kick in and enable a redistribution of resources to the area that most need them. The greater the shortage, the higher the price, and the more profitable it is to import into that area, thus eliminating the shortage.

    This is economics 101 that seems to have gone over your head, because you're too busy straw manning people in the hopes that you don't have to deal with the actual arguments being presented.

    I am merely relating empirical facts about the Soviet system, just as it is an empircal fact the Western nations in WWII had successful moderate command economies.

    LOL at your retreating to now claiming that US, Canada, etc were "moderately planned", whereas before you said they were planned.

    And the empirical facts refute you. You keep denying that the USSR received western subsidies, when the empirical facts show that they did, and if it wasn't for these foreign subsidies, the number of people who would have starved to death would have been even greater than it was WITH the foreign aid.

    http://articles.latimes.com/1990-12-03/news/mn-4223_1_soviet-union

    There are so many examples like this that makes what you're doing intellectual dishonesty.

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  35. "The reason why it was subsidized is due to fact that the current market price was not paid in full by the Soviets. "

    Note:

    "The President has made a decision today to allow grain to be sold to the Soviet Union at current world market prices in sufficient quantities to fulfill the terms of the U.S.-Soviet long-term grain agreement. "

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  36. "The President has made a decision today to allow grain to be sold to the Soviet Union at current world market prices in sufficient quantities to fulfill the terms of the U.S.-Soviet long-term grain agreement. "

    Note:

    "Secretary of State George P. Shultz, in a direct challenge to Senate Majority Leader Bob Dole (R-Kan.), began a last-minute campaign Friday to block legislation that would permit the Soviet Union and China to buy U.S. grain at cut-rate prices with American taxpayers making up the difference."

    "Congress last year adopted legislation authorizing subsidized grain sales to markets where other countries are selling grain at below world market prices. The measure was aimed primarily at subsidized grain marketing programs of the European Common Market."

    "Australia, which does not routinely subsidize agricultural exports, has complained that it would be unable to compete with bargain-priced U.S. grain."

    http://articles.latimes.com/1986-07-26/news/mn-7_1_soviet-union

    ReplyDelete
  37. "In capitalism, when there is an area that goes through a shortage, the price system and the profit motive kick in and enable a redistribution of resources to the area that most need them."

    Idiot. The redistribution of resources to the area that most needed them also happened in the Soviet system.

    ReplyDelete
  38. More:

    http://www.nytimes.com/1989/05/03/business/subsidy-on-wheat-for-soviet-sales-approved-by-bush.html?pagewanted=all&src=pm

    and here:

    http://research.stlouisfed.org/publications/review/73/10/Russian_Oct1973.pdf

    "The wheat export subsidy programs began in 1949 as a result of U.S. obligations under the International Wheat Agreement. At that time, 42 nations agreed to trade a specified amount of wheat, under a negotiated schedule of minimum and maximum prices. Since the negotiated prices were lower than U.S. support prices to domestic wheat farmers, the exports required heavy subsidies. During the first four years of the program, subsidies averaged about 62 cents per bushel and required a Government input of $546 million. Before its
    suspension in late 1972, the program had incurred a total subsidy cost of about $4.3 billion for the export of about 10.5
    billion bushels of wheat."

    ReplyDelete
  39. "Reagan's subsidy covered up to $4.4 million wheat ... he increased the farm subsidy from $12 to $15 per metric ton to boast Soviet purchases .... Even with the subsidy of $15 per ton, US wheat prices remained above market prices."

    http://books.google.com.au/books?id=nSe0gs-YaTkC&pg=PA1081&dq=1986+grain+sales+soviet+union&hl=en&ei=LcazTtXvIa_FmQWu7Oi-Aw&sa=X&oi=book_result&ct=result&resnum=4&ved=0CEIQ6AEwAw#v=onepage&q=1986%20grain%20sales%20soviet%20union&f=false

    ReplyDelete
  40. "The wheat export subsidy programs began in 1949 as a result of U.S. obligations under the International Wheat Agreement." ...

    That the US - like many, many nations - had a program of domestic agircultural subsidies and buffer stocks is not in doubt. They didn't implement that program in the 1940s (at the height of the Cold war) for the benefit of the Soviet Union, you idiot.

    ReplyDelete
  41. Europe also subsidized their domestic commodity producers to help the USSR:

    http://books.google.com.au/books?id=1cVjTTew6YcC&pg=PA311&dq=grain+sales+soviet+union&hl=en&ei=ycmzTpOSMoXm0QGW4vzMBA&sa=X&oi=book_result&ct=result&resnum=4&ved=0CEQQ6AEwAw#v=onepage&q=grain%20sales%20soviet%20union&f=false

    Keep backpeddling, LOL

    ReplyDelete
  42. More subsidized wheat to the USSR:

    http://books.google.com.au/books?id=6iIVlyCq_eEC&pg=PA112&dq=grain+sales+soviet+union&hl=en&ei=ycmzTpOSMoXm0QGW4vzMBA&sa=X&oi=book_result&ct=result&resnum=3&ved=0CEAQ6AEwAg#v=onepage&q=grain%20sales%20soviet%20union&f=false

    ReplyDelete
  43. Furthermore, Carter implemented a grain embargo against the Soviet Union in 1980.

    The Soviets just purchased from other nations.

    http://books.google.com.au/books?id=rUdmyzkw9q4C&pg=PA296&dq=US+embargo+against+soviet+union&hl=en&ei=58mzToGUKc7ImAXgvuHxAw&sa=X&oi=book_result&ct=result&resnum=8&ved=0CE0Q6AEwBw#v=onepage&q=US%20embargo%20against%20soviet%20union&f=false

    ReplyDelete
  44. When the US government subsidizes domestic grain manufacturers, what that does it enable the domestic firms to sell their grain at lower prices than they otherwise would have sold them at. That is a US taxpayer subsidy to help the Soviet communists feed their people.

    ReplyDelete
  45. Furthermore, Carter implemented a grain embargo against the Soviet Union in 1980.

    That was short. It was lifted soon after.

    I am sure more Soviets starved to death because of it.

    ReplyDelete
  46. "Europe also subsidized their domestic commodity producers to help the USSR:"

    Rubbish. That book you cite doesn't say that at all. It says:

    "The European community had since 1980 expanded its subsidized wheat exports to the Soviet Union substantially".

    That is, they had a pre-existing system of agricultural subisides as EC policy long befores this, and just allowed larger sales of grain to the Soviet Union from 1980.

    Totally different thing from what you have said.

    ReplyDelete
  47. "More subsidized wheat to the USSR:"

    That link is simply discussing the purchasing of 1971-1972, which you have already mentioned above.

    ReplyDelete
  48. When Carter put a ban on wheat sales, Canada's wheat sales to the USSR shot up due to "four consecutive bad harvests":

    http://books.google.com.au/books?id=8FZOuENBKpsC&pg=PA40&dq=grain+sales+soviet+union&hl=en&ei=ycmzTpOSMoXm0QGW4vzMBA&sa=X&oi=book_result&ct=result&resnum=10&ved=0CGEQ6AEwCQ#v=onepage&q=grain%20sales%20soviet%20union&f=false

    ReplyDelete
  49. It's not necessary that Europe purposefully helped the USSR. Economically, functionally, that's what they did through selling subsidized wheat to the Soviets.

    In economics, it's actions that matter, not people's intentions.

    ReplyDelete
  50. In other words, because the US government has been subsidizing US farmers for decades, and because the US government sold "surplus" subsidized commodities to the USSR since at least WW2, it means that the USSR was a constant beneficiary of US taxpayer subsidized commodities at prices that would have been higher had there been no subsidies. This means that the USSR has in receivership of "cheap" commodities from the US for decades, which prevented mass starvation and flight from the cities. If the Soviets had to produce grain themselves, or buy grain at higher unsubsidized prices, then even MORE Soviet people would have starved to death.

    You're worried about intentions, but intentions are irrelevant in economic science.

    ReplyDelete
  51. Anyway, this is your original statement:

    "At the cost of 40 million Soviet lives, and only because they were given MASSIVE subsidies from western countries. They couldn't even produce enough food for themselves. Western countries apologetic to communism (US, Canada, Australia, Europe) supported the Soviet Union economically for decades."

    (1) The Soviet Union did not receive "MASSIVE subsidies from western countries."

    The purchasing of subsidized grain after 1971 does not constitute "MASSIVE subsidies from western countries." Any number of capitalist countries (say, Hong Kong) require food imports - that is not necessarily a sign that their economies do not "work".

    (2) The Russian empire and then the Soviet Union was a major grain exporter right
    down to the 1960s.

    http://books.google.com.au/books?id=Yu8NAAAAQAAJ&pg=PA53&dq=%22Soviet+union%22+exporter+grain&hl=en&ei=-s2zTqLpF8THmAXm0LHiAw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDcQ6AEwAA#v=onepage&q=%22Soviet%20union%22%20exporter%20grain&f=false

    (3) By the 1980s the Soviet State only needed about 20% of its total consumption of grain to be imported.

    http://books.google.com.au/books?id=Yu8NAAAAQAAJ&pg=PA54&dq=%22dependent+for+over+20%25%22&hl=en&ei=FM-zTvTfGMvomAXas7z0Aw&sa=X&oi=book_result&ct=result&resnum=1&sqi=2&ved=0CC0Q6AEwAA#v=onepage&q=%22dependent%20for%20over%2020%25%22&f=false

    When the US cut off grain exports, as in 1980, the Soviets were still able to buy from other markets.

    (4) You say

    "Western countries apologetic to communism (US, Canada, Australia, Europe) supported the Soviet Union economically for decades."

    This is an idiotic statement. Plenty of states hostile to communism have nevertheless allowed trade with communist nations. These nations sold exports to the Soviet Union for money. That is trade at work.

    As a libertarian you have no ethical objections to nations trading.

    What was the alternative? Restricting trade, and letting the ordinary people in the Soviet Union - the ordinary victims of its authoritarian system - suffer food shortages?

    ReplyDelete
  52. In other words, because the US government has been subsidizing US farmers for decades, and because the US government sold "surplus" subsidized commodities to the USSR since at least WW2, it means that the USSR was a constant beneficiary of US taxpayer subsidized commodities at prices that would have been higher had there been no subsidies. This means that the USSR has in receivership of "cheap" commodities from the US for decades, which prevented mass starvation and flight from the cities.

    You are an ignorant idiot.

    (1) The Russian empire and then the Soviet Union was a major grain exporter right
    down to the 1960s.

    http://books.google.com.au/books?id=Yu8NAAAAQAAJ&pg=PA53&dq=%22Soviet+union%22+exporter+grain&hl=en&ei=-s2zTqLpF8THmAXm0LHiAw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDcQ6AEwAA#v=onepage&q=%22Soviet%20union%22%20exporter%20grain&f=false

    (2) While after 1971, the Soviet Union was importing grain, what you say applies ALL nations that have benefited from US subsidies and agricultural policy, such as ones with quite free market systems:

    "In other words, because the US government has been subsidizing US farmers for decades, and because the US government sold "surplus" subsidized commodities to the Third world nations since at least WW2, it means that the Third world nations were a constant beneficiary of US taxpayer subsidized commodities at prices that would have been higher had there been no subsidies. This means that Third world nations were in receivership of "cheap" commodities from the US for decades, which prevented mass starvation and flight from the cities."

    Shock! Horror! International trade - even trade in subsidized grain has prevented starvation in many nations, even ones where agriculture is not run by communists but privately!!

    You are laughable, your points a joke, and your ignorance as deep as can be.

    ReplyDelete
  53. The soviet system worked, like most systems, for a while until it fell under the control of a corrupt elite where it turned rapidly into a totalitarian regime where dissenting voices were crushed and the elite obtained more than their fair share of resource.

    Change 'soviet system' to 'US capitalist' system and the sentence remains true.

    ReplyDelete
  54. (1) The Soviet Union did not receive "MASSIVE subsidies from western countries."

    Yes, they did. They received massive subsidies totalling tens of billions of dollars worth.

    (2) The Russian empire and then the Soviet Union was a major grain exporter right
    down to the 1960s.


    For decades prior to WW1. They weren't communist then. And the "by the 1960s" comment, it is referring to the USSR's (small) net export position with eastern Europe.

    Notice how in table 4.1, exports barely moved in over 20 years.

    (3) By the 1980s the Soviet State only needed about 20% of its total consumption of grain to be imported.

    Which saved the lives of people who would have otherwise starved to death, in addition to those that were already starving to death.

    This is an idiotic statement. Plenty of states hostile to communism have nevertheless allowed trade with communist nations. These nations sold exports to the Soviet Union for money. That is trade at work.

    I agree that statement is idiotic. Governments first stole money from producers, then subsidized other producers, then used force to coerce producers into trading with some people but not others.

    As a libertarian you have no ethical objections to nations trading.

    I think it should be obvious that when governments "trade," they "trade" with stolen property.

    What was the alternative? Restricting trade, and letting the ordinary people in the Soviet Union - the ordinary victims of its authoritarian system - suffer food shortages?

    Not restricting trade. Restricting the theft of the US taxpayer to help finance murderous tyrants who can't run whole economies.

    The existence of tyrants in the world does not justify sacrificing innocent people to help the victims of the tyrants. That ethic is morally repugnant.

    Governments by their nature cannot take part in the market process of free trade. They violate private property rights.

    ReplyDelete
  55. ">(2) The Russian empire and then the Soviet
    > Union was a major grain exporter right
    > down to the 1960s.

    For decades prior to WW1.


    You are a liar. The grain exports continued under communism.

    They weren't communist then.

    Red herring.

    And the "by the 1960s" comment, it is referring to the USSR's (small) net export position with eastern Europe."

    You are a liar. That book states quite clearly that even after the 1917 grain exports remained crucial to Soviet trade, earning it export dollars from the West.

    In the 1960s the Soviet Union had a grain surplus it was exporting to countries, not just to Eastern Europe, but to Egypt, Finland and the UK.

    There is virtually nothing you say that should be taken seriously.

    ReplyDelete
  56. Neil:

    The soviet system worked, like most systems, for a while until it fell under the control of a corrupt elite where it turned rapidly into a totalitarian regime where dissenting voices were crushed and the elite obtained more than their fair share of resource.

    The USSR started and stayed tyrannical up until probably Gorbechov. Lenin, Stalin, Kruschev, were all murderous tyrants.

    Change 'soviet system' to 'US capitalist' system and the sentence remains true.

    The US started tyrannical as well, but far less so than the USSR. The same seed of immorality inherent in the Soviet system from the get go was also present in the US system, namely, the onset of statism. States tend to grow until there is no freedom left. Then a revolution takes place, replaced by either another state, or no state. If it's another state, the same cycle will repeat.

    The latest round of Democracy has lasted around 100 years. It lasted something like 200 years in ancient Greece, but social change was slower at that time.

    Social democracy is unsustainable, and it too will eventually collapse. It's already starting to collapse in Europe. More democracy cannot solve the problems there.

    ReplyDelete
  57. The exports to Finland and Egypt were miniscule, especially by the early 1970s.

    Notice the decline in exports and increase in exports as the Soviet system continually deteriorated.

    I mean no change to exports in 20 years? That's including population growth. That's decline, not even stagnation.

    ReplyDelete
  58. "The USSR started and stayed tyrannical up until probably Gorbechov. Lenin, Stalin, Kruschev, were all murderous tyrants."

    Correct.

    (1) The immorality and evil of the communist system in not in doubt.

    (2) The question whether a planned economy can work, or in particular whether the Soviet system produced goods and expand that production over the years down to the 1970s is a different question.

    One can point out that the Soviet system worked in sense (2), and acknowledge that it was brutal, repressive, murderous and often (as in the case of Stalin's collectivistaion of agriculture) characterised by evil and gross stupidity withoot contradiction. Nor does it mean that you advocate or support any such system.

    ReplyDelete
  59. "The USSR started and stayed tyrannical up until probably Gorbechov. Lenin, Stalin, Kruschev, were all murderous tyrants."

    Correct.

    (1) The immorality and evil of the communist system is not in doubt.

    (2) The question whether a planned economy can work, or in particular whether the Soviet system produced goods and expanded that production over the years down to the 1970s is a different question.

    One can, without contradiction, simply point out that the Soviet system worked in sense (2), and acknowledge that it was brutal, repressive, murderous and often (as in the case of Stalin's collectivistaion of agriculture) characterised by evil and gross stupidity. Nor does it mean that you advocate or support any such system.

    Other planning systems/command economies as in the Western WWII command economies in the US or UK worked even better without the authoritarianism or repression. Post-WWII Japan has had an extraordinary measure industrial planning via their industrial policy, but was a liberal democracy.

    Command economies or planning of parts of a nation's economy do not require communism or Marxism or totalitarianism.

    ReplyDelete
  60. Pete

    Aslong as you refer to anything the govt does as "stealing" you are a crank.

    I dont care how many books you've read or how sharp your memory of every Mises quote, your simply a crank.

    If you wish to discuss how govts can best serve their citizens (and NO its not by removing them selves from all private activities) then that is a worthwhile discussion, otherwise your just a loudmouth crank who should mostly be ignored.

    ReplyDelete
  61. LK & other interested parties,

    If you're interested in an elaborate look at the Soviet economy, you might want to consider checking out Robert C. Allen's Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution.

    ReplyDelete
  62. That book is very interesting.

    I note on p. 191, he explores the possible reasons for the Soviet economic problems from the 1970s, such as

    (1) end of the labour surplus
    (2) depletion of resources in European Russia where extraction costs were not high, and the shift to other regions were extraction costs were much higher
    (3) inadequte incentives for firms to minimize costs
    (4) failures of R&D
    (5) the arms race with the US caused overinvestment in the military by shifting R&D from civilian research to military research, cutting the rate of technical progress

    On pp. 201-202, Allen shows how expansion of Soviet steel production with productivity gains worked when they followed the same type of industrial policy as Japan, but experienced serious problems when they changed policy.

    On p. 203, there a good analysis of why resource extraction was cheap before the 1970s and more costly afterwards when extraction shifted to places like Siberia.

    ReplyDelete
  63. "The soviet system worked, like most systems, for a while until it fell under the control of a corrupt elite where it turned rapidly into a totalitarian regime where dissenting voices were crushed and the elite obtained more than their fair share of resource."

    The Soviet system was under the control of an arrogant and violent elite from the very beginning, and a corrupt one from the mid-twenties or so. Dissenting voices were always crushed. The similarity they shared with our current elites was the capacity to stick their head in the sand and ignore disasters that resulted from their ineptitude.

    "depletion of resources in European Russia where extraction costs were not high, and the shift to other regions were extraction costs were much higher"

    They should have read more Ricardo!

    ReplyDelete
  64. (2) The question whether a planned economy can work, or in particular whether the Soviet system produced goods and expand that production over the years down to the 1970s is a different question.

    I thought the question was the empirical performance of the Soviet system from its inception to its collapse. But I'm glad that you admit that you have only been using the Soviet system as a means, intellectually dishonestly I might add, to justify your actual conclusion, which is that "socialism should work."

    Mises proved that socialism cannot work, because there is no price system for the means of production, making economic calculation impossible. Hence, should any socialist country exist within a greater sphere of capitalist countries, that socialist country can depend on the capitalist countries, both intellectually (by observing the prices in overseas markets, thus being able to economically calculate to some crude degree within their own borders), and economically (by depending on overseas production of basic foodstuffs like grains because local production is so incredibly inefficient).

    One can, without contradiction, simply point out that the Soviet system worked in sense (2), and acknowledge that it was brutal, repressive, murderous and often (as in the case of Stalin's collectivistaion of agriculture) characterised by evil and gross stupidity. Nor does it mean that you advocate or support any such system.

    But that is begging the question and stacking the deck. You're DEFINING "working" as whatever you believe happened in the Soviet system, namely that "production expanded down to the 1970s."

    Production can only expand in socialism at the expense of human life. That is the price that is paid. Yes, a socialist government could potentially expand production by working slaves until they're dead, not giving a shit if they starve or whatever. But as table 4.1 makes clear, exports didn't expand for 20 years from the 1950s to the 1970s, and then things got even worse from there.

    If THAT is the standard of what constitutes "efficient production", then it's obvious you're only trying to advance an agenda totally devoid of facts.

    Other planning systems/command economies as in the Western WWII command economies in the US or UK worked even better without the authoritarianism or repression. Post-WWII Japan has had an extraordinary measure industrial planning via their industrial policy, but was a liberal democracy.

    Japan lifted many economic controls post-WW2. The authorities liberalized the market from what was once a monarchical-feudalist system. What you call "extraordinary measure industrial planning" was in fact a movement away from more planning, towards less planning.

    Command economies or planning of parts of a nation's economy do not require communism or Marxism or totalitarianism.

    Command economies is socialism. Planning parts of the economy is what every country in the world has today, with catastrophic effects.

    ReplyDelete
  65. Greg:

    Aslong as you refer to taxation as anything but stealing you are a crank.

    I dont care how many books you've read or how sharp your memory of every Marx quote, you're simply a crank.

    If you wish to discuss how individuals calling themselves governments can stop screwing everyone else not considered government (and YES it is by removing them selves from all governmental activities) then that is a worthwhile discussion, otherwise you're just a loudmouth crank who should mostly be ignored.

    And learn how to spell "you're."

    ReplyDelete
  66. "[a] socialist country can depend on the capitalist countries, both intellectually (by observing the prices in overseas markets, thus being able to economically calculate to some crude degree within their own borders"

    Garbage. Observing the prices of commodities in some other countries does not tell you the scarcity or relative abundance of relevant commodities in your own nation, if it were a command eocnomy. You would look at scarcity/relative abundance in your own country.

    ReplyDelete
  67. "Japan lifted many economic controls post-WW2. ...

    True. And red herring.

    What you call "extraordinary measure industrial planning" was in fact a movement away from more planning, towards less planning.

    Garbage. Japan had a very interventionist industrial policy after WWII.

    http://en.wikipedia.org/wiki/Japanese_post-war_economic_miracle

    ReplyDelete
  68. "If THAT is the standard of what constitutes "efficient production", then it's obvious you're only trying to advance an agenda totally devoid of facts."

    Straw man.
    I did not say that all Soviet production was "efficient production".

    The question was whether its command economy produced commodities, raised output by productivity gains and raised Soviet GNP. It clearly did so right to the 1970s.

    ReplyDelete
  69. So have we forgotten the part where Russia had a principally agrarian economy at the time of its revolution and nevertheless managed to beat us into space?

    That doesn't sound like something that should happen in a system incapable of production and/or innovation.

    ReplyDelete
  70. Jan said:
    It always funny to read the Austrian schooars
    simplified antagonism against all sort of planning and their narrow view of the concept
    but as Ernest Mandel once wrote:

    "We have been using the term ‘planning’. But the concept itself needs
    to be more precisely defined. Planning is not equivalent to ‘perfect’
    allocation of resources, nor ‘scientific’ allocation, nor even ‘more
    humane’ allocation. It simply means ‘direct’ allocation, ex ante. As such,
    it is the opposite of market allocation, which is ex post. These are the
    two basic ways of allocating resources, and they are fundamentally
    different from each other—even if they can on occasion be combined
    in precarious and hybrid transitional forms, which will not be automatically self-reproducing. Essentially they have a different internal logic.
    They generate distinct laws of motion. They diffuse divergent motivations among producers and organizers of production, and find
    expression in discrepant social values.
    Both basic kinds of labour allocation have existed on the widest possible
    scale throughout history. Both are therefore quite ‘feasible’. Both have
    also been applied in the most variegated fashions, and with most diverse
    results. You can have ‘despotic’ planning and ‘democratic’ planning
    (those who deny the latter have never looked at a pre-colonial Bantu
    village). You can have ‘rational’ planning and ‘irrational’ planning. You
    can have planning based on routine, custom, tradition, magic, religion,
    ignorance—planning rules by rain-makers, shamans, fakirs and illiterates
    of all kinds. Worst of all, you can have planning directed by generals;
    for every army is based on an a priori allocation of resources. You can
    likewise have planning organized in a semi-rational way by technocrats
    or, at the highest level of scientific intelligence, by workers and disinterested specialists. But, whatever their forms, all of these involve direct
    a priori allocation of resources (including labour) through the deliberate
    choice of some social body. At the opposite pole is resource allocation
    through objective market laws that a posteriori counteract or correct
    previously fragmented decisions taken by private bodies, separately or
    autonomously from each other.
    Similarly, market economies in the sense of ex post allocations of
    resources have historically existed in the most variegated forms. In
    principle, there could be market economies with ‘perfect’ free competition: though in practice this has hardly ever been realized. There can
    be market economies skewed by the dominance of powerful monopolies
    able to control large sectors of activity and so to fix prices over long
    periods. Markets can coexist with drastic forms of autocracy and
    despotism—as they did under eighteenth-century absolutism, nineteenthcentury tsarism, not to speak of various sorts of military junta or fascist
    dictatorship in the twentieth century. But they can also be combined
    with advanced forms of parliamentary democracy, as they have been in
    the latter half of this century—if in less than twenty countries out of
    the one hundred and fifty or so that comprise the capitalist world.
    Market economies may worsen the misery of broad masses, by an
    absolute lowering of their standard of living, as they did in most
    countries of the West for much of the eighteenth and nineteenth
    centuries, in Eastern Europe extending far into the twentieth century,
    and as they still do for at least half—if not more—of the inhabitants of
    the Southern hemisphere" Ernest Mandel-In Defence of Socialist Planning

    ReplyDelete
  71. Pete,

    And learn how to spell "you're."

    When the US government subsidizes domestic grain manufacturers, what that does it enable the domestic firms to sell their grain at lower prices than they otherwise would have sold them at.

    How about you learn to spell "is," and not end sentences with prepositions. See, we can all play that petty game.

    ReplyDelete
  72. Ahhh so now Pete resorts to retorts equivalent to " I know you are so what am I" (sticks tongue out)

    sheeeesh

    ReplyDelete
  73. "Japan lifted many economic controls post-WW2. ...

    True.

    That is what made them grow rapidly, in conjunction with a high savings rate.

    Japan had a very interventionist industrial policy after WWII.

    Pay attention. I didn't say there was no intervention. I said that Japan moved away from more planning, towards less planning.

    I did not say that all Soviet production was "efficient production".

    I didn't say you said it was efficient production.

    The question was whether its command economy produced commodities, raised output by productivity gains and raised Soviet GNP. It clearly did so right to the 1970s.

    No, that is not the question. Nobody denied that production qua production took place. Nobody denied that production increased at the expense of human life.

    ReplyDelete
  74. "Nobody denied that production increased at the expense of human life."

    That exact same can be said about 19th century capitalism, with its abysmal social support and harsh conditions.

    ReplyDelete
  75. Jan said: Austrian school in general want to go back to a Gold standard and abandon Central banking.A even whorship the Guilded Age of Robberbarons in the USA.
    But Gold is a volatile commodity, which it is, and that "leads to a volatile economy', which it has, also said gold had an "inelastic supply", which led to deflation when the economy grew faster than the gold supply the gold standard wasn't discontinued for no reason, its many limitations were unnecessarily restrictive and overly risky going backwards to a gold standard is much like going back to using horses and buggies.
    But the Federal reserve has prevented any depressions for almost 80 years and prevented panics for 100 years;but here's what it was like before the fed brought at least some stability to US economy: Panic of 1797, Panic of 1819, Panic of 1825, Panic of 1837, Panic of 1847, Panic of 1857, Panic of 1866, Black Friday (1869), Panic of 1873, Panic of 1884, Panic of 1890, Panic of 1893, Panic of 1896, Panic of 1901, Panic of 1907, Panic of 1910-1911.If this what Austrian school have to come up with as an ideal economy,it don´t surprice me they almost absent in academia and in general seen as cranks!

    ReplyDelete
  76. The booms and panics of 19th century were not caused by gold standard, but by governments that allowed banks to issue more paper money than they had gold reserves. 19th century business cycle was basically of same fractional reserve banking type we have today. For example, here's Rothbard's Panic of 1819:
    http://mises.org/rothbard/panic1819.pdf
    Please actually read some Austrian stuff first before you go back to simplistic labels and ignorance. I mean, at least give it a shot, you may actually understand it.

    ReplyDelete
  77. "but by governments that allowed banks to issue more paper money than they had gold reserves."

    You are saying that governments should have intervened to ban fractional reserve banking? That would be nothing but a vicious, violent violation of private freedom:

    http://socialdemocracy21stcentury.blogspot.com/2011/10/if-fractional-reserve-banking-is.html

    Voluntary FRB is in no sense fraud.

    ReplyDelete
  78. LK, yes fractional reserve banking is a fraud (ie a deceit, check webster definition) if you lead people to believe that a bank can pay out its all deposits while it can't. Unless I guess you combine this with force, that is delegalize private money, then government fractional reserve banking becomes a simple robbery.

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  79. (1) the fact the FR bank could not repay all its clients at the same time is clear from the contract you sign when you give your money to the bank as a mutuum loan.

    (2) the fact that the bank pays you not the same money, but money to an equal amount from its reserves, money from sale of financial assets or money it has borrowed is also clear.

    This is not fraud: it is free contract.

    Insurance companies would also be incapable of paying all their clients claims if the disaster was big enough, which is well known. Yet insuance is not fraud. Nor is FRB.

    Like most anti-FR banking libertarians, you are talking nonsense.

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  80. (1) Really? I had quite a few bank accounts in my life and I don't recall being informed in any way that my doposits may _not_ be repayed. I have double checked but don't see it in my current bank account contract. Would you have an example?

    (2) 100% reserve banking does not require "same" money deposited and withdrawn, so I'm not sure what does that have to do with anything.

    Free contract is when you don't use force to limit options to one type of money.

    Insurance companies do not create money, what are you talking about?

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  81. "Really? I had quite a few bank accounts in my life and I don't recall being informed in any way that my deposits may _not_ be repayed."

    (1) This is either explicit or implicit in the contract. Jesus, would kind of idiot thinks that a bank would never fail? The essence of banking is take money as a mutuum and lend it out. That is inherently risky, like any business investment.

    (2) "100% reserve banking does not require "same" money deposited and withdrawn, so I'm not sure what does that have to do with anything."

    FRB is not, and has never, been 100% reserve banking. FRB current/demand accounts are mutuum contracts:

    http://socialdemocracy21stcentury.blogspot.com/2011/10/more-historical-evidence-on-mutuum.html

    http://socialdemocracy21stcentury.blogspot.com/2011/09/mutuum-contract-in-american-law.html

    http://socialdemocracy21stcentury.blogspot.com/2011/10/what-british-law-says-about-fractional.html

    http://socialdemocracy21stcentury.blogspot.com/2011/10/rothbard-mangles-legal-history-of.html

    (3) "Free contract is when you don't use force to limit options to one type of money."

    Sorry. If you sign a contract freely to accept only one type of money, it IS free contract.

    (4) "Insurance companies do not create money, what are you talking about? "

    If your objection to FRB is that it is "fraud" because the bank cannot pay out all its clients at the same time, elementary logic means that insurance is fraud for the same reason.

    The fact that you now retreat to the "money creation" objection, and provide no defense of your orginal argument suggests to me you have been defeated on that point.

    I have had this argument with libertarian cultists before many times, and in time they are all reduced to blathering nosense. You are well on the road to that state.

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  82. (1) Implicit, yeah. And no education of the masses in that regard whatsoever. A fraud right there.

    (2) Right, so I'm asking, what does your "same" money "argument" has to do with anything.

    (3) Sorry-Joe-either-you-sign-it-or-leave-the-country "free" contract. "Free", the keynesian way.

    (4) FRB is a fraud because a bank cannot pay out all its clients at the same time because the bank creates money (yes, sometimes you need to connect some dots to understand anything). FRB is a fraud not just because a bank can go bankrupt, any company can go bankrupt. However, in FRB, on top of the legitimate bankruptcy, a bank can go bankrupt because it is involved in a large massive fraud, government licensed fraud, of money creation.

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  83. " I don't recall being informed in any way that my doposits may _not_ be repayed."

    You need to have a word with your bank then.

    In the UK I get this on the bottom of every bank statement.

    "We are covered by the Financial Services Compensation Scheme (FSCS). The FSCS can pay compensation to depositors if a bank is unable to meet its financial obligations. Most depositors [...] are covered by the scheme..."

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  84. "However, in FRB, on top of the legitimate bankruptcy, a bank can go bankrupt because it is involved in a large massive fraud, government licensed fraud, of money creation. "

    There is no fraud. It is free contract. The private sector at work in voluntary business transactions.

    People in the past were free to accept fiduciary media created by FR banking or reject them.

    You are clearly an evil, collectivist, hater of private freedom. It's no business of yours if parties in the community wish to freely use and accept FR bank notes/fiduciary media as a means of payment/medium of exchange, just as it is no business of yours if they wish to use bills of exchange.

    You're clearly just another socialist do-gooder, wishing to use violence against private businessmen and their clients.

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  85. Neil, does it also happen to say that FSCS is unable to pay compensation to depositors if even more than a few banks are unable to meet their obligations? See, you have just been defrauded.

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  86. "Neil, does it also happen to say that FSCS is unable to pay compensation to depositors if even more than a few banks are unable to meet their obligations"

    In reality, the central bank of any nation could guarantee the deposits of all its banks in its domestic curreny, irrespective of what money is in any deposit insurance fund. So even here you are wrong.

    What kind of fool complains that central banks can create money at will, yet cannot see that they could easily maintain the solvency of that whole system with that very power?

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  87. People in the past were free to accept fiduciary media created by FR banking or reject them.

    Why don't you nationalize, say, IT industry. People would be "free" to buy government laptops or reject them. See the fradulent sophistry you use to defend FRB? You change freedom of choice between alternative goods into accept/reject binary option of one single good produced by government monopoly and lead people to believe you offer freedom all the same. Fraud at its best.

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  88. The issue of modern fiat currency is of course indeed a different one. Modern fiat currencies and legal tender laws are justified on consequentalist ethics.

    This latest comment also requires that you cannot say that FRB per se is fraud when there is no fiat currency involved. In other words, pre-1930s FRB must have been non-fraudulent.

    This means that all you are really objecting to is modern fiat currency and legal tender laws.

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  89. What kind of fool complains that central banks can create money at will, yet cannot see that they could easily maintain the solvency of that whole system with that very power?

    Finally, money printing, lol :)Solvency via fraud. Printing money = inflation tax. Does it say in your bank contract that your deposit's real worth may be decreased by government money printing at will?

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  90. "Solvency via fraud

    Question-begging rubbish.

    "Printing money = inflation tax."

    Whether inflation occurs depends on many factors.

    "Does it say in your bank contract that your deposit's real worth may be decreased by government money printing at will? "

    An influx of money via a capital account coudl cause inflation too, just because something might be inflationary is no argument for banning it. If it were, then all internatational capital account movements would be immoral, because they might be inflationary.

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  91. Of course pre-1930s FRB was fradulent. Fiat or not, that's secondary. In fact, personally I'm all for fiat government money, if government wants to have its money, sure, why not, fiat or not fiat.

    Evils are government money monopoly and FRB in any form, government or private, gold or fiat, doesn't matter.

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  92. Jan said :Thanks Lord Keynes for explain the essence of Fractional Banking System for the loons!
    I felt it was no more to say!Excellent!And thanks for an excellent blog!My best regards!

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  93. http://www.guardian.co.uk/world/2011/nov/07/koch-brothers-database-2012-election
    www.youtube.com/watch?v=PJMm6j9enq0

    ReplyDelete