How many ironies can one life have. I now find myself as an anti-drugs campaigner when the evidence of the harm that mind-altering drugs is so open and shut you have to be brain damaged not to understand it. Alas, many of those who support legalisation may well be of this brain-damaged variety.
As reported by the government’s National Institute on Drug Abuse, adolescent use of marijuana does something that alcohol does not; it causes permanent brain damage, including lowering of I.Q.
No reason not to think that’s possibly also true of adults.
UPDATE: Here’s more non-news along the same lines. This is from Howie Carr in the Boston Herald:
Marijuana makes you stupid.
Nobody wants to acknowledge the obvious fact, but that’s what this whole legalization debate is all about. That’s why most of the candidates for governor, of both parties, have come out against legalization, even if they have to obfuscate why they’re opposed to the Colorado-ization of Massachusetts.
After all, the pols can’t offend that pivotal ganja-American voting bloc, assuming they can remember to vote in November.
What a voting bloc the Democrats are constructing. It may not work for society as a whole, but as long as they remember to vote should work wonders, at least for them.
Following the discussion on L’offre crée même la demande, which are the words the French President used last week to indicate that economic policy will now follow more classical directions, and in particular adopt Say’s Law as the guide to policy, I have pulled this posting out of storage which was put up in December 2012. Having just watched the video again, I am even more astonished than I was then how accurate this is as a representation of the underlying ideas. But central to understanding Say’s Law is to understand that it is a macro concept related to how an economy works, rather than being a micro concept about individuals. In spite of everything you might have learned in a conventional economics course, Say’s Law was the foundation for understanding the classical theory of the cycle. If you want to know what causes recessions and then how to deal with them, you must understand Say’s Law.
My book, Say’s Law and the Keynesian Revolution, has been turned into a movie! John Papola, the genius behind the Keynes-Hayek Rap, has now done a movie on Say’s Law, the fundamental principle of the pre-Keynesian theory of the business cycle. Before Keynes, they knew you could have recessions but they also knew that the one thing that could never be the cause of recessions was a deficiency of demand. Too little demand relative to potential supply was a symptom, not a cause. Today all macroeconomics proclaims demand deficiency as the problem itself that must be cured. Therefore we have had one stimulus after another followed by one economic catastrophe after another. In Australia there’s the mining industry and nothing else to drive the economy forward.
To help you understand the video, here are a few bits of background to catch the full flavour of just how beautifully done this is.
John Maynard Keynes introduced the notion of aggregate demand into economic theory. Before he published his General Theory of Employment, Interest and Money in 1936, demand deficiency as a cause of recession was literally and with no exaggeration seen as a fallacy. Today, of course, his macroeconomics is the mainstream and when recessions occur the first thought in everyone’s mind is to restore demand.
Keynes took the idea of demand deficiency from Thomas Robert Malthus, a nineteenth economist who published his Principles of Political Economy in 1821. Keynes was reading Malthus’s letters to Ricardo in October 1932 which was the specific reason that he would eventually write a book on demand deficiency as the cause of recession. The entire economics fraternity refuses to accept this obvious bit of inspiration since it would make Keynes’s claims to originality not quite as honest as the great man would have liked us all to believe. But since there is general consensus that Keynes formed the idea of demand deficiency in late 1932 and there is no question whatsoever that Keynes was reading Malthus in late 1932, there is equally no doubt that the standard story as peddled by Keynes is utterly untrue.
Say’s Law, which does not get mentioned by name in the video, was called the Law of Markets during classical times. The principle was given the name Say’s Law in the 1920s but it was Jean-Baptiste Say in France and James Mill in England who together are responsible for the initial crafting of this bedrock proposition. But as a very good first approximation to its meaning, there is only a rolling momentary credit to the best short statement which was given by David Ricardo in a letter to Malthus in 1821. There he wrote:
Men err in their productions, there is no deficiency of demand.
Ricardo was trying to explain to Malthus that the recessions that followed the ending of the Napoleonic Wars in 1815 were not due to there being too much saving and therefore too little spending. It was not even spending that mattered. What had gone wrong, the same thing that is the cause of all recessions, is that the goods and services produced did not match the specific demands that people with incomes had. There were therefore unsold goods and services, but not because there was too little spending and too much saving, but because businesses had produced one set of goods (housing in the US to take the most recent example of recession) that could not be sold at prices which covered their costs. The structure of production was wrong which would inevitably, as it always does, affect credit markets as defaults became legion.
The notion that recessions were caused by not enough spending, either in 1821 or in 2012, is ridiculous. There is never a deficiency of demand, only a deficiency of purchasing power. And this is the last element you need to understand the plot of the video. What gives someone purchasing power – what makes individuals within an economy able to buy more – is more production. Producing saleable products – rising productivity – is the only means by which economies can grow and therefore, beneath it all, as Friedrich Hayek explains, there must be more investment in capital (actual productive assets not money) and more innovation which improves the technology embodied in the capital. An economy is driven by supply, never demand.
That is the message of the video. It is a piece of genius that so much can be so cleverly condensed into just over four minutes. But if you wish to understand the point, these are the things you need to know. And if you wish to know even more, there is my book as well.
A professor stood before his philosophy class and had some items in front of him. When the class began, he wordlessly picked up a very large and empty mayonnaise jar and proceeded to fill it with golf balls. He then asked the students if the jar was full. They agreed that it was. The professor then picked up a box of pebbles and poured them into the jar. He shook the jar lightly. The pebbles roll ed into the open areas between the golf balls. He then asked the students again if the jar was full. They agreed it was. The professor next picked up a box of sand and poured it into the jar. Of course, the sand filled up everything else. He asked once more if the jar was full.. The students responded with a unanimous ‘yes.’ The professor then produced two Beers from under the table and poured the entire contents into the jar effectively filling the empty space between the sand.The students laughed.. ‘Now,’ said the professor as the laughter subsided, ‘I want you to recognize that this jar represents your life. The golf balls are the important things—-your family, your children, your health, your friends and your favorite passions—-and if everything else was lost and only they remained, your life would still be full. The pebbles are the other things that matter like your job, your house and your car.. The sand is everything else—-the small stuff. ‘If you put the sand into the jar first,’ he continued, ‘there is no room for the pebbles or the golf balls. The same goes for life. If you spend all your time and energy on the small stuff you will never have room for the things that are important to you. Pay attention to the things that are critical to your happiness. Spend time with your children. Spend time with your parents. Visit with grandparents. Take your spouse out to dinner. Play another 18. There will always be time to clean the house and mow the lawn. Take care of the golf balls first—-the things that really matter. Set your priorities. The rest is just sand. One of the students raised her hand and inquired what the Beer represented. The professor smiled and said, ‘I’m glad you asked.’ The Beer just shows you that no matter how full your life may seem, there’s always room for a couple of Beers with a friend.
The Australian Financial Review here in Australia published an article of mine last week, “What Say’s Law has to say about the financial crisis” which may be why they chose to publish Wolfgang Munchau’s “The Real Scandal is France’s Stagnant Thinking” from your pages. The meaning and significance of Say’s Law within economies that are trying to shed their Keynesian past and work their way through recession to recovery is simply an unknown as Munchau’s article demonstrates. I have written at enormous length on Say’s Law, even spoke at a symposium in Istanbul on the work of Alberto Alesina where at the end of my presentation, Alesina said to the entire room, “I agree with everything you say”. I will attach a copy of this article which was published in 2012.
I cannot emphasise this enough. The General Theory was written to show that Say’s Law was wrong. Economic theory has therefore, since 1936, rejected Say’s Law and continues to accept that economies are driven forward by demand. But because of my understanding of Say’s Law, it was obvious to me from the start that the stimulus packages introduced in 2009 would lead to disaster and things have unfolded almost exactly as I wrote they would at the time. I have published a book on Say’s Law itself, Say’s Law and the Keynesian Revolution (Elgar 1998); edited a collection of articles on Say’s Law, each article having been written for this collection, Two Hundred Years of Say’s Law (Elgar 2003); and I have edited a five volume set of readings on Say’s Law, Critical Assessments of Jean-Baptiste Say (Routledge 2000). I also gave the Ludwig von Mises Lecture to the Mises Institute in 2010 and a video of the presentation is attached.
My frustrations with the poverty of Keynesian theory, which has led our economies into one catastrophe after another, is enormous. Say’s Law seems so archaic because it seems to go back to 1803, but the term only emerged in 1921 only a few years before Keynes wrote The General Theory. It is not some musty old long-ago and rightly-forgotten piece of theory like the labour theory of value. It is, instead, the very core concept needed if one is to understand how an economy works and why it goes into recession from time to time.
I am writing to ask for space on your pages, in the same way that they were offered to me in the pages of the Financial Review, to try to explain the actual meaning of Say’s Law, why reducing public spending is so absolutely necessary today and why a Keynesian stimulus can never possibly work. It can be any length you like and I can have it to you within 24 hours.
Last week, we heard another Frenchman, President François Hollande, proclaiming: “L’offre crée même la demande”, which translates as ‘supply actually creates its own demand’. If you want to look for the real political scandal in France today, it is not the sight of the president in a motorcycle helmet about to sneak into a Parisian apartment building. It is that official economic thinking in Paris has not progressed in 211 years.
If you want to understand the financial crisis and the subsequent recession, Say’s Law is of no help whatsoever.
What does this guy know? The Socialist President of France, who more than anything else would have liked to spend the French economy into recovery, having personally experienced the consequences of trying to use Keynesian economic policies, has concluded that economies are not driven by demand. That the writer of this article knows no better is just par for the course. All he knows is Keynes, and wrong or right, one stimulus-generated economic catastrophe after another, on he goes. But at least Hollande has finally understood what needs to be known and has embraced Say’s Law as best he understands it.
You may be sure Hollande did not do this lightly. This awareness has come as the result of the bitter fruits of experience. The stimulus packages of 2009 are today’s debt and dying economies. There will be no recovery until demand is again constituted by actual value adding supply. The article tries to explain the significance of the shift towards thinking in terms of Say’s Law, tries to explain what’s wrong with Say’s Law but discusses nothing with anything resembling economic content, and ends with this:
The third significance lies in the fact that the new consensus spans the entire mainstream political spectrum. If you live on the European continent and if you have a problem with Say’s Law, the only political parties that cater to you are the extreme left or the extreme right.
The problem remains that while they are all trying to walk away from Keynes there are no longer any guideposts on what to do since no economics text, with only a single exception that I know of, will explain the actual meaning of Say’s Law, the classical theory of the cycle and what needs to be done to generate a recovery when the economy is in recession.
Reply to a Question Asked: Stateless, free and happy asked this:
Steve, I have a simple question: Why is there only one textbook on the subject (your book)?.
The market place for ideas works rather well. So, a good idea will gain currency and there should be more than one textbook.
Can we infer that the market for ideas assigns little value in this idea and hence you are left in the wilderness?
Dear Stateless, F&H
This is a question I have also asked myself. And while the simple answer is that it goes against the overwhelming judgment of all mainstream opinion today, that only puts the same question but in a different way. And the problem I have encountered time and again is that to understand the very essence of Say’s Law all you have to do is understand that there is no such force in an economy as aggregate demand, and therefore demand cannot exist without supply, is such a difficult concept that hardly anyone can grasp it. I learned Say’s Law from John Stuart Mill and he complained that in his own time it was difficult to keep this idea straight, and at the time classical theory was the mainstream, I can only wonder that hardly anyone gets it today. But it’s worse. Keynes made acceptance of Say’s Law the equivalent of the flat earth society so that to this day no respectable economist would be caught dead saying that Say’s Law was valid. It is professional death for an economist. But because no one can lay a glove on the arguments I use, and since they are in 100% accord with the views of John Stuart Mill, I have been left this tiny patch of economic theory to keep for myself. But since no one aside from myself will ever admit they agree with Mill’s Fourth Proposition on Capital – “demand for commodities is not demand for labour” – and that is Say’s Law in seven words. If you understand what those words are trying to explain, and therefore understand that the stimulus could not possibly have led to higher growth and more jobs, then you too can be shunned by economists and your papers ignored. But Mill was right and I have done no more than repeat what he tried to explain. Where the odd part is is that I am the first person to do this since 1876.
These are “Quotes of the Day” from Hotair discussing the use of grass. There are a few such quotes at the link, more than just the three found here. First this, which includes a quote from Rand Paul:
In June, Rand [Paul] attempted to split the difference, saying, “I don’t really believe in prison sentences for these minor, nonviolent drug offenses, but I’m not willing to go all the way to say it is a good idea either. I think people who use marijuana all the time lose IQ points; I think they lose their drive to show up for work.”…
The debate sets up a clash between two pillars of the Republican identity: morality and liberty. “They’re going to come in conflict with each other, for sure,” said Megyesy. “It’s going to be growing pains now as the Republican Party looks for its next breath of life. It’s really hard for them to say, ‘Oh, we would uphold federal law when it comes to marijuana, but push back on federal law on gun control or healthcare.’ I think there’s a big inconsistency there.”…
And then:
[T]here seems to be consensus that pot use will increase markedly, an outcome few are cheering. The logic is pretty simple: “Legalization reduces prices. Cannabis use responds to price. Therefore legalization will increase use,” Kleiman said. “Moreover, legalization improves access and reduces stigma and risk. That should encourage still more use. A 50-percent increase in use seems like a reasonable lower bound.” Both Sabet and Kleiman also spoke in grim terms about the emergence, somewhere down the road, of a marijuana industry that may well begin to act like the tobacco lobby used to, pouring money into weakening regulation and questioning science.
There was way too much giddiness in the media about the first day of legal pot selling in Colorado. Instead of all the happy talk, I think it’s time for some sober discussion and a strong dose of education about the addiction risks of smoking marijuana — particularly among young people. It may start out as a party, but it often ends up as something much, much worse.
With the grace of God, I’ve been clean and sober for over 18 years — a recovery experience that still has me going to a lot of 12-step meetings. And I hear time and again from young people coming into the rooms to get sober how pot smoking led to harder drugs such as cocaine and heroin. Now, this is anecdotal, and I am not an expert. And I will say that many people can control alcohol or pot or other drugs. But I am not one of them. And I am not alone.
Talk to virtually any professional drug counselor, and they will warn that pot is a gateway drug.
And finally this, which is the most positive among the quotes found:
I spent too many nights dealing with the stupidity and struggles of stoned bandmates in their early teens to want to follow that path. And while I dare not engage on the “gateway drug” argument, I can tell you that too many of my bandmates who smoked pot in their teens moved on to coke, acid, pills, and occasionally heroin later in life. I spent many nights dealing with their struggles, many hours helping with them through rehab, too many early mornings in emergency rooms, and in one tragic case, too many nights mourning the loss of a dear friend. But I am sure all of these life experiences with friends and acquaintances over 30 years pales in comparison of the education of kick-starting a bong in Mom’s basement while cranking up “Do You Feel Like We Do.”
But I remain defiant in my ignorance.
Unlike alcohol, pot rarely makes you an angry stoner. Unlike coke, pot rarely makes you bankrupt. And unlike heroin, pot rarely makes you dead. Nope. In my three decades or so around a multitude of pot smokers, I have found that all too often, pot just makes you dumb.
Civilsation as we know it is always ending. But some endings look worse than others and we are in such a new world that it is hard not to be pessimistic. What is needed to keep things turning over are disappearing at an astounding rate. This is from Victor Davis Hanson in a post he titles, The Last Generation of the West and the Thin Strand of Civilization. There have been forecasts like this before, and maybe this too will pass. But it seems to me as well that we are entering a new more barbarous world about which it is hard to be optimistic. This is how it ends, that is, this is how the article ends. You can then go back and read it all for yourself from the beginning.
What do I mean about the “thinning strand of civilization”?
A shrinking percentage of our population feeds us, finds our energy, protects us, and builds things we count on. They get up each morning to do these things, in part in quest for the good life, in part out of a sense of social obligation and basic humanity, in part because they know they will die if idle and thrive only when busy, and in part simply because “they like it.”
We can stack the deck against them with ever higher taxes, ever more regulations, ever more obligations to others, and they may well continue. But not if we also damn them as the “1%” and call them the agents of inequality and the fat cats who did not build what they built or who profited when they should not have.
You cannot expect the military to protect us, and then continually order it to reflect every aspect of postmodern American sensitivity in a risky premodern world. Filing a lawsuit to divert a river’s water to the sea during a drought is a lot easier and cleaner than welding together well-casings at sea. Last week, an off-duty armed correctional officer in Fresno intervened in a wild carjacking, shooting and killing the gang-member killer and thus limiting his carnage to one death and two woundings rather than five or six killings — at the very moment Harvey Weinstein — of guns-blazing Kill Bill and Pulp Fiction fame and profits — promised to destroy the NRA. These contrasts say everything about the premodern, the postmodern and the innocent who pay the tab in-between.
Each day when I drive to work I try to look at the surrounding communities, and count how many are working and how many of the able-bodied are not. I listen to the car radio and tally up how many stories, both in their subject matter and method of presentation, seem to preserve civilization, or how many seem to tear it down. I try to assess how many drivers stay between the lines, how many weave while texting or zoom in and out of traffic at 90mph or honk and flip off drivers.
Today, as the reader can note from the tone of this apocalyptic essay, civilization seemed to be losing.
And not a whit less momentous is this, which opens an article titled, The Humanities and Us:
In 2011, the University of California at Los Angeles decimated its English major. Such a development may seem insignificant, compared with, say, the federal takeover of health care. It is not. What happened at UCLA is part of a momentous shift in our culture that bears on our relationship to the past—and to civilization itself.
Until 2011, students majoring in English at UCLA had to take one course in Chaucer, two in Shakespeare, and one in Milton—the cornerstones of English literature. Following a revolt of the junior faculty, however, during which it was announced that Shakespeare was part of the “Empire,” UCLA junked these individual author requirements and replaced them with a mandate that all English majors take a total of three courses in the following four areas: Gender, Race, Ethnicity, Disability, and Sexuality Studies; Imperial, Transnational, and Postcolonial Studies; genre studies, interdisciplinary studies, and critical theory; or creative writing. In other words, the UCLA faculty was now officially indifferent as to whether an English major had ever read a word of Chaucer, Milton, or Shakespeare, but was determined to expose students, according to the course catalog, to “alternative rubrics of gender, sexuality, race, and class.”
Are these not barbarians? They are, and if they are, then we all are. What will pull us back from the edge this time? More high tech than before but a Dark Age coming all the same.
Look at these three, icons of the right, none of whom have a thing they are willing to say about against the legalisation of grass. Perhaps the negatives are to come at a later stage but in the meantime they say nothing and behave as if they are sky high and might even actually be sky high. That I now think they are morons will just have to be how it is. The polls show 55-45 split for and against legalisation across the US. Who that 45% is and what their arguments are you would find it very difficult to discover.
Getting things done is firstly knowing what you want to do and then doing whatever it takes to get them done.
Our new government has shown that so far as illegal migrants are concerned, where there’s a will there’s a way, or at least that’s been the case up until now and hopefully into the future. You really can stop the boats. But more importantly, it shows that if you are determined to find solutions, solutions that will work, you are more than half way towards solving the problem.
Would that I could say the same about the economy. I suppose we will eventually get a commission of audit report, around a year or perhaps more after the last election. But seriously, did we need a commission of audit to make a song and dance about the idiocies of Labor and the mess they made? Before the election there was something. Since then there has been hardly a word. And my question is why the Government has not gone in as hard on the economic side as it has on stopping the boats.
In The Australia today, there is a story on page 2 mentioned on the front page where it says:
Tony Abbott has made it clear that this will be the year in which he focuses on, and commits to economic management as never before.
On that same front page there is an actual story, that is also on the front page of the AFR, in which Bill Shorten “promises to fight for jobs in ‘middle ground’.” The AFR story is that “Shorten offers reform help”.
Why is Bill Shorten on the front pages about fixing the economy and not Tony Abbott or Joe Hockey? Where’s the plan, the strategy, the determination to fix things up?
I know it’s not the done thing to turn over these neutral public servants who run the various departments, but give me a break. These people pushed the stimulus and public spending because that is what their judgment told them was the right thing to do. Why are they still there? Why is their judgment still the primary advice the Government gets? There is not a chance in the world that they have changed their minds about the ruinous strategies they followed and therefore there is equally not a chance that they are capable of offering the advice that will bring the kinds of full scale recovery we had under John Howard and Peter Costello.
So here’s my advice. Get people at the top of our various economic agencies of government who really want balanced budgets and lower public outlays in the same way that Scott Morrison wants to stop the boats. It will make all the difference.
Pakistani asylum seeker, Fazal Qadir, 28, said he had set sail from an island off Java on January 5 bound for Christmas Island with 56 people from Pakistan, Afghanistan, Bangladesh, Iran, Iraq and Palestine on board, along with an Indonesian captain and one crew member. There was one woman with a 20-month-old toddler.
After about three or four days at sea, he said the group was spotted by an Australian aeroplane flying overhead. The boat was already leaking.
“We were very happy [when we saw them] because we thought when the boat went into the water, then they must receive us,” Mr Qadir said.
All of the people on board already knew of other vessels which had been returned to Indonesia, so were determined to be rescued rather than escorted back. One passenger took a piece of wood and prised open the hole that was already in the hull. Others rocked the boat.
When it foundered, two Australian speedboats reached them and the 12 navy personnel on board told the asylum seekers to cling to the side. The toddler was provided with a life jacket, Mr Qadir said.
The group were subsequently loaded aboard the HMAS Stuart before being transferred to a Customs and Border Protection boat. Conditions were just terrible, according to Qadir:
“The navy and Customs would not give us a phone.”
Oh no! Then came the final Australian treachery:
Mr Qadir said a small orange boat with a weather canopy was tied to the back of the Customs ship. They were told to board it because it would ferry them to Christmas Island.
At the last minute, though, a Customs officer came on board, tossed the asylum seekers a four-page document in a range of languages, and returned to the large ship, which sailed away.
The document, dated December 2013, reads: “You only have enough fuel to reach land in Indonesia. You do not have enough fuel to continue your voyage to Australia.
“The master of your vessel is now responsible for your safety. You must co-operate with the master and not act in a manner that risks your safety. You are responsible for your own actions. Your vessel is not equipped for a voyage to Australia. It is not safe to continue your voyage to Australia …”
The men said they were dropped very close to Indonesia. It took only three hours to reach shore.
Job done. Naturally, Fairfax and the ABC are outraged.
Law of Markets 