We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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Samizdata quote of the day It’s like a parallel universe out there. Politicians, newspaper journalists and television presenters are running around like headless chickens with no clue as to how to deal with the economic crisis. But the truth is out there.
Things are quite different from the recession of the 1970’s, which coincided with my discovery of libertarianism and Austrian School economics. Back then one had to be extraordinarily lucky to come across the likes of Mises, Hayek and Rothbard. Now correct explanations of why the crisis arose are just a few clicks away.
– David Farrer
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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Yes, but no-one is going to read them because the sites they are on are not in the public consciousness. Ordinary people get their news from the online offshoots of their usual MSM sources and these sources are notorious for not linking out to other sources of news. Especially those that disagree with them.
Sorry but I don’t see there being that much a wider dissemination of libertarian and free market ideas simply because these ideas are on the internet. Expecting this to happen is like putting the ingredients of your dinner on a plate and expecting it to prepare and cook itself.
I think you’re missing the point, Mandrill. It doesn’t matter whether the ideas of Mises, Hayek, Rothbard, et al, are in the public consciouness. What matters is that “politicians, newspaper journalists and television presenters”, i.e., persons whose job it is to dig deeper into things than the general public, have access to them. The fact that these people are “running around like headless chickens with no clue as to how to deal with the economic crisis” is the problem, because they have ready access to real solutions but refuse to either look for them or follow the teachings of the masters. That is the real disgrace.
Cheer up- the fact that their running around like headless chickens increases the chance that some of them will be receptive to new (to them) ideas- as it indicates they’re not convinced of their own stock answers. And the existance of the internet makes those ideas way easier to find than in the days when you had to chance on them in a bookshop. There’s a long way to go but progress is definitely possible and more likely than a generation ago.
My, my, you really are an optimist, aren’t you Pat?
I think you’re presuming a fact not in evidence.
Mandrill I am one of the darkest people you are likely to have contact with – I see the worst in people and in situations. However, even I think you are partly wrong on this.
When (for example) leading libertarians get a interviewed on, for example, the Glenn Beck show (watched by millions) most days, how can even I claim “no one knows what to click for”. Even people without cable or sat (or without a radio?) can turn on ABC and see John Stossel – and if they follow up what he says……..
Or say they go into a bookstore – and see Thomas Woods “Meltdown” on the shelf (and they will in non crazy parts of the United States).
Of course there are countries where libertarians have little access to radio, television and the book stores – and Britain is one of them.
But the United States is not.
Of course the deck is loaded in favour of the enemy – but it less loaded every day. As their newspapers go bankrupt and their television stations lose market share.
You can win – you really can.
Well, this comes back to the previous thread discussion about whether people are stupid or ignorant, and it’s neither, it’s that people don’t want to know what we consider to be correct.
And there’s the point that you can’t prove that Austrian economics is right and Keynesian or Chicago are wrong. Indeed, when on this very website a while back I suggested that such a proof may be possible I was hit with a hail of derision and even a reference to Lyapunov Exponents, which was frankly uncalled for. Even libertarians and free marketeers don’t seem to believe you can actually prove that free market economics has some advantage over other forms, so it comes down to “read this thing, it’s really convincing, and then you’ll believe” and that’s totally fecking useless, isn’t it?
So anyway, they don’t read what we read because they don’t want the answers it gives in the form it gives them. If your self- or class-interest is in the expansion of government, what use is a belief system predicated on the opposite? None.
You may as well ask why religious people haven’t read all the atheist stuff on the internets, or vice versa.
“…correct explanations of why the crisis arose are just a few clicks away.”
Right. And incorrect ones, and irrelevant ones. We still need intelligent politicians, and they’re as scarce as ever.
Pat writes:
Case in point.
Whether Austrian economics can be “proved” right or not, I leave to wiser heads than mine. But the fact that folks basing themselves on principles of such economics, as well as on libertarian principles, were able to foresee the current financial debacle speaks volumes. If someone like Peter Schiff, for example, is right time and time again while the other talking heads were all proven wrong, I want what he’s smoking! And even if the Austrians are incorrect, the glaring fact is that those in charge were blatantly caught with their pants down, and yet what do our glorious leaders do? Put the same clowns back in charge, this time with evern MORE money!
As Benjamin Richards put it recently on mises.org(Link)
And figuring out which theory is correct is only one stage (though an important one) of solving the problem. Politicians love Keynesianism because it gives them carte blanche to do what they love most: spend other people’s money and appear to be doing something. In addition, as Richards points out above, and as Herbert Spencer wrote in “The Man Versus the State”, government or political action has a momentum of its own: “We’ve already done this, why don’t we do that?”, leading to ever increasing coercion and decreasing liberty (Spencer called it “slavery” and that was over 100 years ago!).
Recent appearances of the “crisis-as-opportunity trope”(Link) are highly revealing, considering similar words were used right after the attacks in New York in 2001.
I leave the last word to von Mises(Link), writing in 1951:
Excellent post, Marc. Thank you.
Marc, the thing is, you’re preaching to the converted. You don’t need to convince anybody here. The problem is that the people with the hands on the levers are the ones whose minds need to be changed, and they aren’t going to change their minds en masse because it is not in their self interest to do so. To repeat my earlier analogy, it’s like atheists hoping that all the churches will look calmly at the evidence, admit that God doesn’t exist, and close the churches down. It ain’t gonna happen. A priest has no self-interest in ascertaining the truth of whether God exists. His interests are served in a particular narrative- the God exists one. It’s not that priests are all stupid, or ignorant, or liars who really know that God doesn’t exist. They believe what they believe because people tend to do that. It’s no use hoping to change the minds of our rulers. We need to find a way to do an end run around them instead.
And, there’s another thing. The Austrian narrative is right in predicting crashes, but that doesn’t prove it right in itself, since many theories predict crashes- for instance the leftie “selfish capitalist exploiter” theory predicts crashes as well. And speaking personally here, I’m going to be a contrarian and say, the Austrian narrative has a credibility deficit.
In general Austrians, when talking about market crashes, use the Von Mises time preference explanation, which in a nutshell says that central bank credit expansion causes malinvestment. Well, that’s certainly true, but it’s not a complete answer. It looks more incomplete when you turn it around to say “without central bank credit expansion, there would be no malinvestment”, which is what Austrians/libertarians effectively argue and, well, that’s obviously a load of old cobblers.
I think part of the problem is that all economists tend to talk about these things in terms of very conservative markets. You get examples about old fashioned products in given examples- too much investment in shoes and not enough in shirts, kind of thing- and this seems to me to be a similar implicit worldview to the planner type economists, all talking about this understandable, predictable marketplace of shoes and shirts, or grain and cabbages. But the point about the free market is it is speculative (“greedy speculators”) and the most speculative parts of it are inherently those dealing with new products, not musty old stuff like shoes and shirts[1]. And once you start speculating, regardless of whether it’s your own gold money or central bank fiat, you start risking malinvestment and crashes. And that is because when you’re speculating, nobody knows what is malinvestment and what isn’t malinvestment until a whole load of speculators have lost their shirts. Or shoes.
So we see malinvestment (with hindsight) often after some revolutionary new product or technology arises- railways (boom, bust), dot coms (boom, bust) or a financial product like derivatives (KERRASH!). The new product looked like something to get into, lots of people did, the market gets massively oversubscribed and then the bottom falls out of it. You’re not going to avoid that without stopping progress altogether and taking out the unknown unknowns. Every new business, come to that, is a little boom and often they lead to a little bust (the business fails). Lots of them play follow the leader and all go down together, you’ve got a big bust or a crash. You’re going to have that whether you’re paying in inflationary fiat or dungeons and dragons gold pieces.
So, while we can reasonably say that credit expansion exacerbates the problem by increasing the size of the boom and sustaining it excessively, the libertarian/austrian claim that booms are exclusively caused by credit expansion and distortion of time preference, and the effective implication that removal of fiat inflationary credit would eradicate booms and busts, doesn’t hold up, in my opinion. It’s overstating the case, and thus unconvincing to statists who can point to boom and bust after boom and bust throughout history.
I said once before here- we need to learn to love our booms and our busts, because whatever sort of free market we ever have, it will boom and bust. It’s no use trying to pretend “we” can fix it with our magic Austrian Economics. We can’t. Nobody can. It’s a chaotic system, and we need to learn to live with that.
Just MHO, of course.
[1] Though a new design of shoe or style of shirt is undpredictable too- again, when we use examples of shoes or shirts we are tricked into thinking of these things as standard products rather than products with a huge range of designs, at the whim of fashion, new materials, etc.
Really?
Ian B,
You don’t need to convince anybody here.
Oh yes you do. That there is a ‘right’ answer is very far from clear, let alone what it is. My principal reason for having a libertarian orientation is inherent skepticism about eternal verities in human affairs. I would prefer a choice of policy and the possibility of change if something else looks more attractive from time to time.
Ian B, Perry,
It’s pretty clear some libertarians and free marketeers do believe they can “prove that free market economics has some advantage over other forms”. However we should distinguish between free market economics, free market policies, and free markets themselves, and we need to be conscious of the question, Advantage for what? The most fervent advocates of this or that Rule of Rules, seldom are. ‘Libertarians’ are often as given to rigidity as authoritarians in adherence to abstract formulae. As I’ve frequently written before, I like free markets because I value their freedom, and that potential for diversity and change which gives reality to free choice instantly and over time.
The ‘market’ bit is a consequence of the capacity for exchange. There is always a market, exhibiting typical market behaviours, where such capacity, however fettered and conditioned, exists. Free-marketeers are often merely those who affirm that fact, and anti-marketeers those who wish to deny it.
What ought to interest us is the ‘free’ bit. How free can we be? Really.
Yes, Perry. I was genuinely surprised by the hostility I received at the suggestion that mathematical proof is possible.
Ian B
Good post, but a couple of things you are missing that come to mind:
1. It’s the clusters of businesses failing that is defined as the bust. This can only occur due to a swift and significant change in consumer preferences, natural disasters or central bank induced booms followed by inevitable bust. It’s the last one that is a problem and that creates the cycles. The first two are ad hoc and generally unpredictable and of much less of an impact and I don’t think the Austrian school is attempting to explain these.
2. The booms that you mention were largely made up of the new money funnelled from the Fed (and so not out of real savings) and capital intensive (eg mortgages), so I think it is justifiable to say that that activity would not have happened anywhere near the extent it did without central bank help.
And to make it in their self interest the fact that they are doing it completely wrong has be brought to the forefront of public consciousness, which brings me back my previous point.
Absurd as it might sound I sincerely believe that it is far easier to change the mind of the public than it is to change the mind of those in power, ensconced as they are in their ivory towers. This is not to say that it is not still very difficult with the tools we have at hand , ie. the intenet.
Sam, that was precisely what I was being sceptical about, which was why I drew attention to the dynamics of market product change; it’s not that I “missed” something as such, it’s that I disagree. Talking about consumer preferences implies again a kind of static market of shoes, shirts and cabbages, and people deciding of a sudden that shirts are more fashionable than cabbages. But booms and busts, I was suggesting, tend to be tied to new products; railways, dot coms or derivatives in my example, and the boom starts when nobody knows what customer preferences are or how this thing is going to work out in the long run. Taking the two more recognisably consumer products; railway transportation and websites, in each case considerable investment was made on pure guesswork as to what the long term market would look like; you don’t really know who’s going to use your railway until you’ve spent millions building it and running it a while- the dot com boom was predicated on a hypothesis that the key to success would be massive initial investment to gain market prominence and be the one sector leader left standing when your competitors fell by the wayside.
So while we may say that deliberate credit expansion helped supply funding for the overinvestment in erroneous business models, the fundamental error was only visible in hindsight. The dot com boom would have busted if the money had all come from hoarded gold and coins in piggy banks.
I’m thus suggesting that it is debatable whether there is a “business cycle” at all; it bothers me that that implies some underlying oscillation, like a sine wave. I appreciate that that is what ABC is basically saying- credit expansion, then contraction, then expansion etc, but I’m basically agreeing that those expansions feed into the boom, and the contraction is a consequence of the bust, but ultimately the driving force is the unpredictability of new products and market sectors. In a nutshell, derivatives looked like a good idea to a lot of people right up to the point where they found they weren’t.
Or if you take the tech boom again, most everybody fell by the wayside, but Amazon was left standing. The only way you can stop booms and busts on all scales (yes, I’m suggesting a fractal model here, and it’s just the big variations we call “booms” and “busts”) is to stop market innovation.
This has developed into a very interesting thread; thanks to everyone for the thoughtful posts.
Guy touched on something important when he asked “Advantage for what?”. We (and by that I mean most of the denizens of this blog, being of a libertarian persuasion) subscribe to Lord Acton’s maxim: “Liberty is not the means to a higher political end. It is itself the highest political end.” We tend to take it as a given that maximizing economic growth should be fundamental objective of society. However, it seems clear (to me, anyway) that those who currently have their hands on the levers of power don’t share that mindset. To them, individual freedom is messy, unmanageable and, ultimately, scary; economic growth is only useful up to a point, and must be channelled and directed toward what they believe is the larger good. (Maintenance of personal power is also a motivator, of course.) In a favorite word on this site, our metacontexts are very different. So when we say that Austrian School economics is “right” or Keynesian economics is “wrong”, that’s only true given our (shared) view of desired objectives. It is not true from the point of view of the statists.
Which brings us back to the quote in Brian’s original post: it really is “a parallel universe out there.” And there don’t appear to be many points of intersection.
This has developed into a very interesting thread; thanks to everyone for the thoughtful posts.
Guy touched on something important when he asked “Advantage for what?”. We (and by that I mean most of the denizens of this blog, being of a libertarian persuasion) subscribe to Lord Acton’s maxim: “Liberty is not the means to a higher political end. It is itself the highest political end.” We tend to take it as a given that maximizing economic growth should be fundamental objective of society. However, it seems clear (to me, anyway) that those who currently have their hands on the levers of power don’t share that mindset. To them, individual freedom is messy, unmanageable and, ultimately, scary; economic growth is only useful up to a point, and must be channelled and directed toward what they believe is the larger good. (Maintenance of personal power is also a motivator, of course.) In a favorite word on this site, our metacontexts are very different. So when we say that Austrian School economics is “right” or Keynesian economics is “wrong”, that’s only true given our (shared) view of desired objectives. It is not true from the point of view of the statists.
Which brings us back to the quote in Brian’s original post: it really is “a parallel universe out there.” And there don’t appear to be many points of intersection.
“Well, this comes back to the previous thread discussion about whether people are stupid or ignorant, and it’s neither, it’s that people don’t want to know what we consider to be correct.”
That’s bigotry, which is a unique problem in itself.
“And there’s the point that you can’t prove that Austrian economics is right and Keynesian or Chicago are wrong.”
{snicker} Behold the impotence of utilitarian outlook, ladies and gentlemen.
Look: the point should always be that freedom is the value in all this.
So, as someone who has been long since – and most thankfully – dead, put it: What To Do?
I was responding to Laird. Apparently Billy has managed to upset the bot with the B word?
Alisa, if I knew what to do I’d be rich. Or Emperor.
(Who’s the quote from? Vonnegut?)
Laird: I translated the title more literally than the accepted version.
Nice touch, Alisa.